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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, 1999
OR
|_|TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: (1-13888)
UCAR INTERNATIONAL INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 06-1385548
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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Suite 1100, 3102 West End Avenue 37203
Nashville, Tennessee (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 760-8227
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED:
Common stock, par value New York Stock Exchange
$.01 per share
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant'S knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
As of March 1, 2000, 45,119,788 shares of common stock were outstanding. The
aggregate market value of the outstanding common stock as of March 1, 2000
(based upon the closing sale price of the common stock on the New York Stock
Exchange on such date) held by non-affiliates of the registrant was $694
million.
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DOCUMENTS INCORPORATED BY REFERENCE
The information required under Part III is incorporated by reference from
the UCAR International Inc. Proxy Statement for the Annual Meeting of
Stockholders to be held on May 9, 2000, which will be filed on or about March
31, 2000.
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TABLE OF CONTENTS
PAGE
PRELIMINARY NOTES............................................................1
IMPORTANT TERMS...........................................................1
PRESENTATION OF FINANCIAL, MARKET AND LEGAL DATA..........................2
PART I.......................................................................4
ITEM 1. BUSINESS..........................................................4
INTRODUCTION..............................................................4
RISK FACTORS.............................................................11
CORPORATE HISTORY........................................................16
MARKETS AND INDUSTRY OVERVIEW............................................25
MANUFACTURING PROCESSES..................................................30
PRODUCTS.................................................................33
RAW MATERIALS AND SUPPLIERS..............................................34
ITEM 2. PROPERTIES.......................................................41
ITEM 3. LEGAL PROCEEDINGS..................................................
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................
PART II.......................................................................
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.............................................................
MARKET INFORMATION.........................................................
DIVIDEND AND STOCK REPURCHASE POLICIES AND RESTRICTIONS....................
RECENT SALES OF UNREGISTERED SECURITIES....................................
ITEM 6. SELECTED FINANCIAL DATA............................................
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS...............................................
GENERAL....................................................................
RESULTS OF OPERATIONS......................................................
EFFECTS OF INFLATION......................................................
EFFECTS OF CHANGES IN CURRENCY EXCHANGE RATES..............................
LIQUIDITY AND CAPITAL RESOURCES............................................
RESTRICTIONS ON DIVIDENDS AND STOCK REPURCHASES............................
ACCOUNTING CHANGES.........................................................
ASSESSMENT OF THE EURO.....................................................
COSTS RELATING TO PROTECTION OF THE ENVIRONMENT............................
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS......
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.............................................142
PART III...................................................................143
ITEMS 10 TO 13 (INCLUSIVE...............................................143
EXECUTIVE OFFICERS AND DIRECTORS........................................143
PART IV146
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K...................................................146
SIGNATURE..................................................................151
EXHIBIT INDEX..............................................................153
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PRELIMINARY NOTES
IMPORTANT TERMS
We use the following terms to identify various companies or groups of
companies, markets or other matters. These terms help to simplify the
presentation of information in this Report.
UCAR refers to UCAR International Inc. only. UCAR is an independent
corporation and our public parent company. UCAR is the issuer of the
publicly traded common stock covered by this Report.
UCAR GLOBAL refers to UCAR Global Enterprises Inc. only. UCAR Global a
direct wholly owned subsidiary of UCAR and the direct or indirect holding
company for all of our operating subsidiaries. UCAR Global was the issuer of our
outstanding 12% senior subordinated notes due 2005 (the "SUBORDINATED NOTES")
and was the primary borrower under our senior secured bank credit facilities
(the "EXISTING BANK FACILITIES").
UCAR FINANCE refers to UCAR Finance Inc. only. UCAR Finance is a direct
wholly owned finance subsidiary of UCAR and the borrower under our senior
secured credit facilities (the "NEW SENIOR FACILITIES").
UCAR GRAPH-TECH refers to UCAR Graph-Tech Inc. only. UCAR Graph-Tech is our
wholly owned subsidiary engaged in the development, manufacture and sale of
flexible graphite.
CARBONE SAVOIE refers to Carbone Savoie S.A.S. only. Carbone Savoie is a 70%
owned subsidiary engaged, along with one of our wholly owned subsidiaries, in
the development, manufacture and sale of graphite and carbon cathodes.
SUBSIDIARIES refer to those companies which, at the relevant time, were
majority owned or wholly owned directly or indirectly by UCAR or its
predecessors to the extent that those predecessors activities related to the
carbon and graphite business. All of UCAR's subsidiaries have been wholly owned
(with de minimis exceptions in the case of certain foreign subsidiaries) from at
least January 1, 1996 through December 31, 1999, except for:
o our Russian subsidiary, which was acquired in late 1996 and early 1997
and has been wholly owned since then,
o our German subsidiary, which was acquired in early 1997 and 70% owned
until early 1999, when it became wholly owned in order to facilitate
the cessation of its manufacturing operations,
o Carbone Savoie, which was acquired in early 1997 and has been 70%
owned since then, and
o our South African subsidiary, which was 50% owned until April 1997,
when it became wholly owned.
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WE, US or OUR refers collectively to UCAR and its subsidiaries and
predecessors described above, or if the context so requires, UCAR, UCAR Global
or UCAR Finance, individually.
HOME MARKETS refer to North America, Western Europe, Brazil and South
Africa. We have major manufacturing facilities located in each of these markets,
and these are our largest markets. All other markets are called "EXPORT
MARKETS."
FREE TRADING MARKETS refer:
o in the case of graphite electrodes, flexible graphite and graphite
specialties industries, to the entire world, excluding China, and
o in the case of cathodes, and carbon specialties, to the entire world
excluding China and the former Soviet Union.
We sometimes use this term when describing markets for various products because
information about excluded markets is believed to be unreliable or not readily
available. We believe that China is generally a net importer of graphite
electrodes.
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%. We use the equity method to account for 50% or
less owned interests, and we do not restate financial information for periods
prior to the acquisition of subsidiaries. This means that, prior to April 1997,
financial information for our South African subsidiary is only reflected on the
single line in the Consolidated Financial Statements entitled "UCAR share of net
income from company carried at equity." For the same reason, the financial
information for our German subsidiary and Carbone Savoie is consolidated, since
their acquisitions, on each line of the Consolidated Financial Statements and
the equity of the other 30% owners (until early 1999, in the case of our German
subsidiary) in those subsidiaries is reflected on the lines entitled "minority
stockholders' equity in consolidated entities" and "minority stockholders' share
of income."
Unless otherwise stated, when we refer to "EBITDA" we mean operating profit
(loss), plus depreciation, amortization, impairment losses on long-lived assets,
inventory write-down, and that portion of restructuring charges applicable to
non-cash asset write-offs. The amount of restructuring charges applicable to
non-cash asset write-offs was $22 million for 1995 and $29 million for 1998.
There was a restructuring credit of $6 million in 1999. We believe that EBITDA
is generally accepted as providing useful information regarding a company's
ability to incur and service debt. EBITDA should not be considered in isolation
or as a substitute for net income, cash flows from continuing operations or
other consolidated income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity. Our method for calculating EBITDA may not be
comparable to methods used by other companies and is not the same as the method
for calculating EBITDA under the New Senior Facilities.
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References to cost in the context of our low-cost producer strategy do not
include the unusual charges identified in the Consolidated Financial Statements
on the lines entitled "antitrust investigations and related lawsuits and
claims," "restructuring charge (credit)," "impairment loss on long-lived Russian
assets," "impairment loss on long-lived graphite specialties assets,"
"write-down of graphite specialties inventory" or "securities class action and
stockholder derivative lawsuits," the impact of accounting changes, or the
impact of expenses incurred in connection with lawsuits initiated by us.
Unless otherwise noted, all cost savings and reductions are estimates based
on a comparison to costs in 1998 or the 1998 fourth quarter (annualized) and on
the assumption that net sales and other operating conditions remain the same in
1999, 2000, 2001, 2002 and thereafter as they were in 1998.
Neither any statements in this Report nor any charge taken by us relating to
any legal proceedings constitute an admission as to any wrongdoing or liability.
Market data relating to the steel industry has been derived from
publications by the International Iron and Steel Institute and other industry
sources as well as our own estimates. Market data relating to the fuel cell
industry has been derived from publications by securities analysts relating to
"BALLARD POWER SYSTEMS LTD.", other industry sources and public filings, press
releases and other public documents of Ballard as well as our own estimates.
Market and market share data relating to the graphite and carbon industry as
well as cost information relating to our competitors has been derived from the
sources described above and public filings, press releases and other public
documents of our competitors as well as our own estimates.
Unless otherwise noted, when we refer to dollars we mean U.S. dollars.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
We are the world's largest manufacturer of high quality graphite and carbon
electrodes and cathodes as well as flexible graphite. We have a global business,
selling our products in over 80 countries and owning 15 manufacturing facilities
located in Brazil, France, Italy, Mexico, Russia, Spain, South Africa and the
United States.
We operate in two business segments:
o graphite electrodes, which had net sales of $562 million and gross
profit of $196 million in 1999, and
o graphite and carbon products, which had net sales of $269 million
and gross profit of $62 million in 1999.
We generated $212 million of EBITDA in 1999.
GRAPHITE ELECTRODE BUSINESS SEGMENT. Graphite electrodes, our principal
products, are consumed primarily in the production of steel in electric arc
furnaces, the steelmaking technology used by all "mini-mills." Steel produced in
electric arc furnaces, which constitutes the growth sector of the steel
industry, has grown at an annual trendline rate of about 4% for more than 30
years. Graphite electrodes are also used for refining steel in ladle furnaces
and in other smelting processes. Graphite electrodes accounted for about 72% of
our net sales in 1997, 69% in 1998 and 68% in 1999.
GRAPHITE AND CARBON PRODUCTS BUSINESS SEGMENT. This segment includes carbon
electrodes, graphite and carbon cathodes, flexible graphite, graphite
specialties and carbon specialties.
Carbon electrodes are used primarily in the production of silicon metal,
which is used in the manufacture of aluminum. Carbon electrodes accounted for
about 5% of our net sales in each of 1997, 1998 and 1999.
Graphite and carbon cathodes are both used as lining for furnaces that smelt
aluminum. Cathodes accounted for about 8% of our net sales in 1997, 10% in 1998
and 11% in 1999.
Flexible graphite is used in gasket and other sealing applications primarily
for internal combustion engines, pipe flanges and chemical and petrochemical
industry process equipment. Flexible graphite is a natural graphite-based
product, while most of our other products are petroleum coke based products. We
are developing applications for advanced natural graphite materials in the fuel
cell, heat management, fire protection and energy management industries.
Flexible graphite accounted for about 3% of our net sales in 1997, 4% in 1998
and 1999.
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Our other graphite and carbon products accounted for about 12% of our net
sales in each of 1997, 1998 and 1999. In addition to the steel and metals
industries, we sell these products to the semiconductor, automotive and
aerospace industries.
INDUSTRY OVERVIEW. We estimate that the worldwide market for graphite and
carbon products served by us was about $4 billion in 1999. Customers for our
products are located in virtually every industrialized country in the world.
Electrodes act as conductors of electricity in a furnace, generating
sufficient heat to melt scrap metal or other raw materials used to produce
steel, silicon metal or other metals. The electrodes are gradually consumed in
the course of that production.
Graphite electrodes are used primarily in the production of steel in an
electric arc furnace. On average, in a typical electric arc furnace producing
steel, one electrode must be replaced every eight to ten operating hours.
Graphite electrodes are currently the only products available that have the high
levels of electrical conductivity and the capability of sustaining the high
levels of heat required in an electric arc furnace producing steel. Demand for
graphite electrodes is directly related to the amount and efficiency of electric
arc furnace steel production. We estimate that, on average, the cost of graphite
electrodes represents about 3% of the cost of producing steel in a typical
electric arc furnace.
Electric arc furnace steel production has, for many years, been the growth
sector of the steel industry. It grew from about 14% of total steel production
in 1970 to about 34% in 1999. Electric arc furnace steel production has
historically exhibited less cyclicality than total steel production. It has
experienced only three downturns since 1976.
Over the past two decades, electric arc furnace steelmaking has become more
efficient. This improved efficiency has resulted in a decrease in the quantity
of graphite electrodes consumed per metric ton of steel produced (known as
"SPECIFIC CONSUMPTION"). During the period from the early 1990's through late
1997, increased levels of electric arc furnace steel production more than offset
the decrease in specific consumption. This resulted in increased demand for
graphite electrodes.
During 1997 through 1999, we estimate that an aggregate of about 53 million
metric tons of net new electric arc furnace steelmaking capacity was added
worldwide. We estimate that about 18 million metric tons of that net new
capacity was added in 1999. Further, we believe that a portion of the net new
capacity added in the last three years has not yet become fully operational. We
are aware of about 44 million metric tons of announced net new electric arc
furnace steelmaking production capacity that is scheduled to be added in 2000
through 2002.
Throughout 1998 and continuing into the 1999 first quarter, steel
production, including steel produced in electric arc furnaces, declined as a
result of adverse global and regional economic conditions. As a result, demand
for graphite electrodes declined. Due to the continued strength of the U.S. and
European economies and the beginning of recovery in other areas of the global
economy, we believe that, in the 1999 second quarter, worldwide electric arc
furnace steel production began to gradually increase. We are benefiting from
that increase. Our volume of
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graphite electrodes sold has gradually increased. We believe that graphite
electrode industry fundamentals support our long-term strategy and the beginning
of recovery in pricing worldwide.
Presently, there is one other global manufacturer and nine other regional
or local manufacturers of graphite electrodes in the free trading markets. There
have been no significant entrants in the manufacture of graphite electrodes
since 1950. We believe that it is unlikely that new "greenfield" graphite
electrode manufacturing facilities will be built during the next several years
due to, among other things, the relatively high cost of building a new facility.
Further, we believe that it is unlikely that there will be significant new
entrants in the manufacture of these products during the next several years due
to, among other things, the need for extensive manufacturing process know-how as
well as that high cost.
We believe that the graphite electrode manufacturing capacity utilization
rate in the free trading markets was about 91% in 1997, about 85% in 1998 and
about 87% in 1999. Since September 1998, we have reduced our annual graphite
electrode manufacturing capacity by about 30,000 metric tons. We believe that
this reduction represented about 4% of estimated graphite electrode
manufacturing capacity in the free trading markets. Since September 1998, two of
our competitors have reduced their annual graphite electrode manufacturing
capacity. Their announced reductions total more than 28,000 metric tons. As a
result of these reductions, we believe that, if graphite electrode demand
returned to 1997 levels, the current graphite electrode manufacturing capacity
utilization rate in the free trading markets would be at least 95%.
In 1998 and 1999, demand and prices for most of our other products was
adversely affected by the same global and regional economic conditions which
affected graphite electrodes. Currently on the whole, demand for most of our
other products is relatively stable. Pricing for most of those products has,
however, not yet strengthened.
OUR STRENGTHS.
LARGEST MARKET SHARES. We have the largest share of the free trading markets
in all of our major product lines. We believe that, in 1999, our share of the
free trading markets was:
o about 29% in graphite electrodes,
o about 37% in carbon electrodes,
o about 30% in graphite and carbon cathodes, and
o about 35% in flexible graphite.
NEW MANAGEMENT TEAM. Over the past two years, there has been a substantial
change in our management team. We have a new chairman of the board and chief
executive officer, a new chief financial officer, a new chief information
officer, a new controller and a new treasurer. There are also four new members
of UCAR's Board of Directors. We believe that our current management team
enables us to capture the benefits of both new perspectives as well as vast
experience in our industry.
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We have adopted new incentive compensation programs which reward management
for improvements in our financial performance. These include a cash bonus plan
which focuses on targets relating to such matters as improvements in return on
invested capital, earnings per share and operating cash flow (before fines and
settlements), achievement of cost savings and achievement of key initiatives in
such areas as safety, product quality, productivity and efficiency, product
development, divestitures, acquisitions and strategic alliances.
LOW COST PRODUCER OF HIGH QUALITY PRODUCTS. We have in the past implemented,
and we currently are implementing, successful restructuring and reengineering
plans and projects. These plans and projects have increased automation, improved
operating efficiency and reduced costs, while at the same time improving product
and service quality. We believe that our cost structure for manufacturing
graphite electrodes and cathodes is currently the lowest among the major
producers in the industry.
GLOBAL MANUFACTURING BASE. We have three graphite electrode manufacturing
facilities located in Europe, two in the United States and one each in Mexico,
Brazil and South Africa. We have three cathode manufacturing facilities, one in
Europe, one in Brazil and the other in the United States. We believe that our
multiple fully integrated state-of-the-art facilities in diverse geographic
regions provide us with significant operational flexibility. Among other things,
we are able to incrementally adjust our graphite electrode and cathode
manufacturing capacity utilization rate, as well as related costs, to
accommodate anticipated changes in global sales volume and to shift graphite
electrode and cathode manufacturing to regions where changes in currency
exchange rates provide cost advantages. We believe that our global manufacturing
base helps to minimize risks associated with dependence on any single economic
region.
EXCEPTIONAL CUSTOMER SERVICE. To assist customers to maximize their
production and minimize their costs, we employ about 60 engineers who provide
technical service to customers globally in, among other things, all areas of
electric arc furnace design and operation, electrode specification and use, and
related matters. We believe that we have more technical service engineers
located in more countries than any of our competitors. In addition, we employ a
global direct sales force, which operates from more than 20 sales offices.
Carbone Savoie has its own dedicated sales and technical service groups that
work closely with the sales and technical service groups of our strategic
partner in the cathode business, Aluminium Pechiney S.A., to maximize use of
their respective products and technologies in the aluminum industry.
DIVERSIFIED CUSTOMER BASE. We sell our products in virtually every
industrialized country in the world. Sales of our products outside the United
States accounted for more than two-thirds of our net sales in 1999. In 1999,
five of our ten largest customers were based in Europe, two were in Africa, and
one was in each of the United States, Mexico and Brazil. No single customer or
group of affiliated customers accounted for more than 4% of our net sales in
1999.
PRODUCT INNOVATION AND PROCESS IMPROVEMENTS. We conduct, at our two
dedicated technology centers and our manufacturing facilities throughout the
world, a focused technology program to develop new related products and expand
applications for existing products as well as improve product quality and
manufacturing processes. This program is conducted both independently and in
conjunction with suppliers, customers, strategic partners and others. About
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100 of our technical professionals are directly involved in this program. Their
activities are integrated with the efforts of over 100 engineers at our
manufacturing facilities who are focused on improving manufacturing processes.
Carbone Savoie operates one of our technology centers, which is dedicated to
cathodes and employs about 20 of our professionals.
OUR BUSINESS STRATEGIES. Our strategic goal is to be the best global low
cost manufacturer and customer service-driven company with the best product
performance in the graphite and carbon industry by pursuing the following
strategies.
REDUCE COSTS AND IMPROVE OPERATING EFFICIENCIES AND PRODUCT QUALITY;
RESTRUCTURE GRAPHITE SPECIALTIES BUSINESS. We are focusing significant efforts
on reducing costs and improving product and service quality and manufacturing
and operating processes, while seeking to maximize free cash flow, reduce
leverage and maintain and enhance gross margins.
UCAR's Board of Directors adopted a global restructuring and rationalization
plan in September 1998, and we launched new initiatives to enhance the plan in
October 1999. We believe that the plan is the most aggressive major cost
reduction plan currently being implemented in the graphite and carbon industry.
The plan generated cost savings at an annualized run rate of about $72 million
by the end of 1999. We estimate that the plan will generate cost savings at an
annualized run rate of about $112 million by the end of 2000, about $145 million
by the end of 2001 and about $165 million by the end of 2002 and thereafter.
The original plan included plant rationalization, plant cost reduction and
overhead cost reduction. The plant rationalization phase of the plan involved
the closure of our higher cost manufacturing facilities in Canada and Germany
and the downsizing of our graphite electrode manufacturing facilities in Russia.
The overhead cost reduction phase of the plan included relocation of our
corporate headquarters to Nashville, Tennessee.
We believe that the cost savings under the original plan have enabled us to
strengthen our competitiveness. We also believe, however, that we must continue
to generate additional cost savings to achieve the ultimate objectives of our
low cost manufacturing strategy. Accordingly, in October 1999, we launched new
initiatives to add $30 million of cost savings to the original plan by the end
of 2002. Further, we completed a global benchmarking study during the 1999 third
quarter that identified opportunities for performance improvements in certain
key global administrative and transaction processing functions. These
opportunities should allow for achievement of our target of reducing selling and
administrative expenses from 11% of net sales in 1998 to 8% of net sales by the
end of 2002. We are also evaluating every aspect of our supply chain
performance. Our targets include decreasing inventories, as measured against
inventory levels and based on production levels for the 1999 first nine months
(annualized), by over 20%, or to about $180 million, and reducing our cash cycle
time by about one-third by the end of 2002.
We are seeking to improve product quality at the same time that we are
seeking to reduce costs. We have set specific goals for product quality
improvements, focusing on use of superior raw materials, technology and six
sigma manufacturing capabilities.
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In the 2000 first quarter, in response to economic conditions adversely
affecting demand for graphite specialties and the profitability of our graphite
specialties business, we announced that we would restructure that business. The
business accounted for about 9% of our net sales in 1999. The restructuring will
include elimination of low profitability product lines, rationalization of
operations to generate cost savings and improve profitability for the remaining
product lines, and use of graphite specialties technology to develop new and
expand existing niche markets. We expect to complete the restructuring by the
end of the 2001 first quarter.
POWER OF ONE BUSINESS TRANSFORMATION INITIATIVE. In support of our strategy,
we have launched a global business transformation initiative entitled POWER OF
ONE. POWER OF ONE is a coordinated global self-assessment and business process
transformation initiative driving one consistent theme throughout our
organization: "becoming the best!" We expect the initiative to accelerate
development and implementation of business opportunities and to develop
leadership skills more broadly within all management levels as well as support
our efforts to reduce cost, improve efficiencies, shorten cycle times and
achieve "best in class" performance.
DEVELOP STRATEGIC ALLIANCES AND GROWTH OPPORTUNITIES. We are pursuing
strategic alliances that enhance or compliment our existing or related
businesses. Strategic alliances may be in the form of joint venture, licensing,
supply or other arrangements that leverage our strengths to achieve additional
company-wide cost savings and to increase net sales, margins, cash flow and
earnings in graphite electrode and other existing product lines and in related
new product lines. We are also studying a number of financial options to create
more value for our stockholders over the near term from our flexible graphite
business.
Our relationship with Aluminium Pechiney S.A. in the cathode business is
an example of a successful strategic alliance. Aluminium Pechiney S.A. is
not only a strategic partner but is also a significant customer under a long
term supply contract.
In the 1999 third quarter, we entered into an exclusive product development
collaboration agreement and an exclusive long term supply agreement with Ballard
Power Systems. Ballard is the world's leader in the development and
commercialization of proton exchange membrane ("PEM") fuel cells. Fuel cells are
devices that generate electricity through an environmentally clean chemical
process as an alternative to internal combustion engines and other fossil fuel
based energy sources. Industry sources expect wide commercialization of fuel
cells to occur early in this decade. We have been actively working with Ballard
for the past seven years in developing flexible graphite based material for use
in flow field plates, which are essential elements of PEM fuel cells. We expect
substantial growth in net sales of our flexible graphite beginning in 2003.
DEVELOP AND EXPAND NEW AND EXISTING PROFITABLE TECHNOLOGIES. We are
currently focusing our technological development efforts in several key areas in
order to develop new related products and expand applications for our existing
products, which we believe will enhance our profitability.
DEBT RECAPITALIZATION. In February 2000, we completed a debt
recapitalization. We obtained the New Senior Facilities, which consist of a $300
million, six year tranche A term loan
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facility, a $350 million, eight year tranche B term loan facility and a $250
million, six year revolving credit facility. The tranche A and revolving
facilities are dollar/euro dual currency facilities. We used the net proceeds of
the New Senior Facilities to repay about $490 million of debt under our prior
senior secured term loan facilities, to call all $200 million of our outstanding
12% senior subordinated notes due 2005 for redemption at a redemption price of
104.5% of the principal amount redeemed, plus accrued interest, to replace the
outstanding borrowings under our prior revolving credit facility and to repay
certain other debt.
The debt recapitalization:
o lowers our average interest rate (at current market interest rate
levels) by about 200 basis points (equivalent to a reduction of annual
interest expense by about $15 million at current debt levels),
o extends the average maturities of our debt,
o enables us to repay our debt without penalty or premium, and
o increases our ability to repurchase common stock, make acquisitions and
pursue strategic initiatives.
LITIGATION AGAINST OUR FORMER PARENT COMPANIES INITIATED BY US. In February
2000, we commenced a lawsuit against our former parents, Mitsubishi Corporation
("MITSUBISHI") and Union Carbide Corporation ("UNION CARBIDE"). The other
defendants are Mitsubishi International Corporation, a U.S. subsidiary of
Mitsubishi, and two of the respective representatives of Mitsubishi and Union
Carbide who served on UCAR's Board of Directors at the time of our leveraged
equity recapitalization in January 1995 ("1995 EQUITY RECAPITALIZATION"). In the
lawsuit, we allege, among other things, that certain payments made to our former
parents in connection with the 1995 Equity Recapitalization were unlawful under
the General Corporation Law of the State of Delaware, that our former parents
were unjustly enriched by receipts from their investments in UCAR and that our
former parents aided and abetted 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 in damages,
including interest.
ANTITRUST LITIGATION AGAINST US. Since 1997, we have been served with
subpoenas, search warrants and information requests by antitrust authorities in
the United States, the European Union and elsewhere in connection with antitrust
investigations. In addition, civil antitrust lawsuits have been commenced and
threatened against us and other producers and distributors of graphite and
carbon electrodes in the United States and elsewhere. We recorded a charge
against results of operations for 1997 in the amount of $340 million as a
reserve for estimated potential liabilities and expenses in connection with
antitrust investigations and related lawsuits and claims.
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In April 1998, UCAR pled guilty to a one-count charge of violating U.S.
federal antitrust laws in connection with the sale of graphite electrodes and
was sentenced to pay a fine in the aggregate amount of $110 million, payable in
six annual installments (the "DOJ FINE"). In March 1999, our Canadian subsidiary
pled guilty to a one-count charge of violating Canadian antitrust laws in
connection with the sale of graphite electrodes and was sentenced to pay a fine
of Cdn. $11 million. We have settled virtually all of the graphite electrode
antitrust claims by steelmakers in the United States and Canada as well as
antitrust claims by certain other customers. None of the settlement or plea
agreements in connection with antitrust investigations or related lawsuits or
claims contain restrictions on future prices of our graphite electrodes. We are
continuing to cooperate with the antitrust authority in the European Union in
its on-going investigation. In the aggregate, the fines and settlements are
within the amounts we used for purposes of evaluating the $340 million reserve.
Actual liabilities and expenses could be materially higher than such charge. The
guilty pleas make it more difficult to defend against other investigations,
lawsuits and claims.
RISK FACTORS
Investors in the common stock should consider carefully the following
factors in addition to other information included in this Report.
WE ARE DEPENDENT ON THE GLOBAL STEEL AND OTHER METALS INDUSTRIES AND OUR
RESULTS OF OPERATIONS MAY DETERIORATE DURING GLOBAL AND REGIONAL ECONOMIC
DOWNTURNS. Our principal products, graphite electrodes, are sold primarily to
the electric arc furnace steel production industry. Many of our other products
are sold primarily to other metals industries. These are global basic
industries, and customers in these industries are located in virtually every
industrialized country in the world. As a result, our customers are affected by
changes in global and regional economic conditions. This, in turn, affects
demand for and, to a lesser extent, prices of our products. Accordingly, we are
directly affected by changes in global and regional economic conditions.
As a result of global and regional economic conditions, demand for and
prices of graphite electrodes and some of our other products declined in 1998
and early 1999. These circumstances reduced our net sales and net income. Demand
began to recover later in 1999. We cannot assure you that this recovery will
continue.
We cannot assure you that the electric arc furnace steel industry will
continue to be the growth sector of the steel industry or that other industries
served by us will experience continued stability or growth or recover from
current economic conditions affecting them, as the case may be. Accordingly, we
cannot assure you that there will be stability or growth in demand for or prices
of graphite electrodes or our other products. An adverse change in global or
certain regional economic conditions could materially adversely affect us.
OUR FINANCIAL CONDITION COULD SUFFER IF WE EXPERIENCE UNANTICIPATED COSTS AS
A RESULT OF ANTITRUST INVESTIGATIONS, LAWSUITS AND CLAIMS. Since 1997, we have
been subject to antitrust investigations, lawsuits and claims. We recorded a
charge of $340 million against results of operations for 1997 as a reserve for
estimated potential liabilities and expenses in connection
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with antitrust investigations and related lawsuits and claims. To date, the
fines and settlements in connection with antitrust investigations, lawsuits and
claims have been within the amounts used by us to evaluate the $340 million
charge. We cannot assure you that remaining liabilities and expenses in
connection with antitrust investigations and related lawsuits and claims will
not materially exceed the remaining balance of such reserve.
WE ARE HIGHLY LEVERAGED AND OUR SUBSTANTIAL DEBT AND OTHER OBLIGATIONS COULD
LIMIT OUR FINANCIAL RESOURCES, OPERATIONS AND ABILITY TO COMPETE AND MAY MAKE US
MORE VULNERABLE TO ADVERSE ECONOMIC EVENTS. We are highly leveraged. We also
have substantial obligations in connection with antitrust investigations,
lawsuits and claims. At December 31, 1999, we had total debt of $722 million,
and a stockholders' deficit of $293 million. A majority of our debt has variable
interest rates. We are dependent on our revolving credit facility for liquidity.
Our high leverage and these obligations could have important consequences,
including the following:
o 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, joint ventures,
stock repurchases or other general corporate purposes, may be impaired
in the future,
o a substantial portion of our cash flow from operations must be dedicated
to debt service and payment of these obligations, thereby reducing the
funds available to us for other purposes,
o an increase in interest rates could result in an increase in the portion
of our cash flow from operations dedicated to servicing our debt in lieu
of other purposes,
o we may have substantially more leverage and obligations in connection
with antitrust investigations, lawsuits and claims than certain of our
competitors, which may place us at a competitive disadvantage, and
o our leverage and these obligations may hinder our ability to adjust
rapidly to changing market conditions or other events, and our
substantial leverage and these obligations makes us more vulnerable to
insolvency, bankruptcy or other adverse consequences in the event of a
downturn in general or certain regional economic conditions or our
business or in the event that these obligations are greater 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
certain factors beyond our control such as, among other things, changes in
global and regional economic conditions, developments in antitrust
investigations, lawsuits and claims involving us, changes in our industry,
changes in interest or currency exchange rates, and inflation in raw material,
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
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become due, we could be forced to reduce or delay capital expenditures, sell
assets or businesses, limit or discontinue, temporarily or permanently, business
plans, activities 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
obligations as they become due or otherwise.
WE HAVE RESTRICTIVE SECURED DEBT COVENANTS WHICH COULD SIGNIFICANTLY AFFECT
THE WAY IN WHICH WE CONDUCT OUR BUSINESS. The New Senior Facilities contain a
number of covenants that, among other things, significantly restrict our ability
to dispose of assets, incur additional indebtedness, repay or refinance other
indebtedness or amend other debt instruments, create liens on assets, enter into
leases, make investments or acquisitions, engage in mergers or consolidations,
make capital expenditures or engage in certain transactions with subsidiaries
and affiliates and otherwise restrict corporate activities. We are also required
to comply with specified financial ratios and tests, including minimum interest
coverage and maximum leverage ratios. In addition, we cannot borrow under our
new revolving credit facility if the aggregate amount of our payments made
(excluding certain imputed interest) and additional reserves created in
connection with antitrust, securities and stockholder derivative investigations,
lawsuits and claims exceed $340 million by more than $130 million (which $130
million is reduced by the amount of certain debt incurred by us that is not
incurred under the New Senior Facilities). Further, most of our assets are
pledged to secure repayment of the New Senior Facilities.
We are currently in compliance with the covenants contained in the New
Senior Facilities. However, our ability to continue to comply may be affected by
events beyond our control as described above. The breach of any of these
covenants could result in a default under the New Senior Facilities, which would
permit the senior lenders to declare all amounts thereunder immediately due. It
would also permit them to terminate their commitments to extend credit under our
revolving credit facility. This would have an immediate material adverse effect
on our liquidity. If we were unable to repay our indebtedness to the senior
lenders, the senior lenders could proceed against the collateral securing the
New Senior Facilities.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH OPERATIONS IN MULTIPLE COUNTRIES. As
a result of our international operations, we are subject to risks associated
with operating in multiple countries, including:
o currency devaluations and fluctuations in currency exchange rates,
o imposition of or increases in custom duties and other tariffs,
o imposition of or increases in currency exchange controls, including
imposition of or increases in limitations on conversion of various
currencies into dollars or euros or remittance of dividends, interest or
principal payments other payments by subsidiaries,
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o imposition of or increases in revenue, income or earnings taxes and
withholding and other taxes on remittances and other payments by
subsidiaries,
o high inflation and hyperinflation in certain countries,
o imposition or increases in investment restrictions and other
restrictions or requirements by non-U.S. governments, and
o in the case of operations in Russia, nationalization and other risks
which could result from a change in government 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.
OUR RESULTS OF OPERATIONS FOR ANY QUARTER ARE NOT NECESSARILY INDICATIVE OF
OUR RESULTS OF OPERATIONS FOR A FULL YEAR OR OTHERWISE. Our sales of graphite
electrodes and other products fluctuate from quarter to quarter due to such
factors as changes in global and regional 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. These factors tend
to affect our quarterly as well as annual results of operations. In addition,
during the period prior to the effective date of a price increase, customers
tend to buy additional quantities of graphite electrodes at the then lower
pricing (known as "CUSTOMER BUY-INS"), which add to our net sales during that
period. During the period following the effective date of a price increase,
customers tend to use those additional quantities before placing further orders,
which reduces our net sales during that period. Accordingly, results of
operations for any quarter are not necessarily indicative of the results of
operations for a full year or otherwise.
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 is based primarily on price, product quality and customer service.
Graphite electrodes, in particular, are subject to rigorous price competition.
Price increases by us or price reductions by our competitors, decisions by us
with respect to maintaining profit margins rather than market share, 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 could prevent
implementation of price increases or could require price reductions or increased
spending on research and development, marketing and sales that could adversely
affect our results of operations, cash flows or financial condition.
IMPLEMENTATION OF FINANCIAL OPTIONS FOR UCAR GRAPH-TECH, OR ADDITIONAL
STRATEGIC ALLIANCES FOR OTHER BUSINESSES, MAY NOT BE SUCCESSFULLY COMPLETED. We
cannot assure you that we will complete implementation of any financial options
for UCAR Graph-Tech or any additional strategic alliances for any of our other
businesses. Further, we cannot assure you as to the timing or terms of, or net
proceeds from, any transaction that may be completed.
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WE MAY NOT BE SUCCESSFUL IN THE LITIGATION AGAINST OUR FORMER PARENTS
INITIATED BY US. We have initiated litigation against our former parents.
Successful prosecution of this litigation is subject to risks, including:
o failure to successfully defend against motions to dismiss and other
procedural motions prior to trial,
o failure to successfully establish our theories of liability and damages
or otherwise prove our claims at trial,
o successful assertion by the defendants of substantive defenses to
liability at trial or on appeal, and
o successful assertion by the defendants of counterclaims or cross claims
at trial or on appeal.
We cannot assure you as to the ultimate outcome of the litigation, including the
possibility, timing or amount of any 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 possibility, timing or amount of any settlement
or the legal expenses to be incurred by us or as to the effect of the lawsuit on
management's focus and time available for our on-going operations.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH MANUFACTURING OPERATIONS. As a
result of our manufacturing operations, we are subject to risks relating to
environmental and occupational health and safety liabilities and requirements,
labor disputes and similar matters. We cannot assure you that such risks will
not have a material adverse affect on us in the future.
THERE ARE PROVISIONS IN SOME OF OUR IMPORTANT DOCUMENTS WHICH COULD HAVE THE
EFFECT OF PREVENTING A CHANGE IN CONTROL OF UCAR. UCAR's Certificate of
Incorporation and By-Laws contain provisions concerning voting, issuance of
preferred stock, removal of officers and directors and other matters which may
have the effect of discouraging, delaying or preventing a change in control of
UCAR. In addition, UCAR's Board of Directors has adopted a stockholder rights
plan which may have the same effect. Further, the New Senior Facilities restrict
certain events which would constitute a change in control and provide that
certain events which would constitute a change in control would also constitute
an event of default. We cannot assure you that we will have the financial
resources necessary to repay the New Senior Facilities upon the occurrence of
such an event of default.
THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WHICH COULD VARY
SIGNIFICANTLY FROM ACTUAL EVENTS OR CIRCUMSTANCES DUE TO VARIOUS FACTORS. This
Report contains forward looking statements. In addition, from time to time, we
or our representatives have made or may make forward looking statements orally
or in writing. These include statements about such matters as future production
of steel in electric arc furnaces, future prices and volumes of and demand for
graphite electrodes and other products, future operational and financial
performance of various businesses, strategic plans and cost savings programs,
impacts of regional and global economic conditions, divestiture, joint venture,
operating, global integration, tax planning, financial and
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capital projects, investigations, lawsuits and claims as well as related
expenses, consulting fees and related projects, and future costs, cost savings
and reductions, margins and earnings. The words "will," "may," "plan,"
"estimate," "project," "believe," "anticipate," "intend," "expect" and similar
expressions identify some of these statements.
Actual future events and circumstances (including future performance,
results and trends) could differ materially from those set forth in these
statements due to various factors. These factors include:
o the possibility that global or regional economic conditions may not
improve or may worsen,
o the possibility that announced or anticipated additions to capacity for
producing steel in electric arc furnaces or announced or anticipated
reductions in graphite electrode manufacturing capacity may not occur,
o the possibility that increased production of steel in electric arc
furnaces may not result in increased demand for or price or volume
stability or increases for graphite electrodes,
o the occurrence of unanticipated events or circumstances relating to
pending antitrust investigations, lawsuits or claims,
o the commencement of investigations or lawsuits relating to the same
subject matter of these pending investigations or lawsuits,
o the possibility that the lawsuit against our former parents initiated by
us could be dismissed or settled, our theories of liabilities or damages
could be rejected, material counter claims could be asserted against us,
legal expenses and distraction of management could be greater than
anticipated or unanticipated events may occur,
o the possibility of delays in or failure to achieve commercialization of
PEM fuel cells or to achieve successful development of next generation
flexible graphite-based flow field plates used in PEM fuel cells, the
possibility of delays in or failure to achieve successful development
and commercialization of other new or improved products, the
possibility of delays in meeting or failure to meet targeted
development objectives and the possible inability to fund and
successfully complete expansion of manufacturing capacity to meet
growth in demand for our products, if any,
o the occurrence of unanticipated events or circumstances relating to
strategic or other plans, cost savings programs, or divestiture, joint
venture, operational, capital, global integration, tax planning,
financial or other projects, and
o changes in interest or currency exchange rates, changes in capital
markets, changes in competitive conditions, changes in inflation
affecting our raw material, energy or other costs, technological
developments by others, and other risks and uncertainties, including
those described or incorporated by reference in this Report.
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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.
CORPORATE HISTORY
GENERAL. Our business was founded in 1886 by National Carbon Company. In
1917, National Carbon Company, along with Union Carbide Company and three other
companies, combined to form a new corporation named Union Carbide and Carbon
Company, now known as Union Carbide Corporation. National Carbon Company became
the Carbon Products Division of Union Carbide. In 1989, Union Carbide realigned
each of its worldwide businesses into separate subsidiaries. As part of the
realignment, the business of the Carbon Products Division was separated from
Union Carbide's other businesses and became owned by us. We remained wholly
owned by Union Carbide. In 1991, Union Carbide sold 50% of our common equity
held by it to Mitsubishi for $232.5 million. At that time, we had total debt of
$297 million that we had assumed from Union Carbide. That debt consisted of $209
million of long term debt, $4 million of payments due within one year on long
term debt and $84 million of short term debt. In other words, treating each
parent as responsible for 50% of our debt, Union Carbide received and Mitsubishi
paid $381 million.
In January 1995, we consummated the 1995 Equity Recapitalization pursuant to
an agreement among Union Carbide, Mitsubishi, UCAR and a corporation affiliated
with Blackstone Capital Partners II Merchant Banking Fund L.P. and its
affiliates (collectively, "BLACKSTONE"). In the 1995 Equity Recapitalization:
o UCAR issued common stock representing about 75% of the then outstanding
common stock to Blackstone, an affiliate of Chase Manhattan Bank and
certain members of management for $203 million,
o UCAR Global and certain of its foreign subsidiaries borrowed $585 million
under senior secured credit facilities arranged through Chase Manhattan
Bank,
o UCAR Global issued $375 million of 12% senior subordinated notes due
2005,
o UCAR repaid about $250 million of then existing indebtedness,
o UCAR repurchased all of our common equity then held by Mitsubishi for
$406 million,
o UCAR paid to Union Carbide a cash dividend of $347 million on our common
equity then held by Union Carbide, which common equity was converted into
about 25% of the common stock outstanding after the 1995 Equity
Recapitalization, and
o certain members of management received restricted stock matching a
portion of the common stock purchased by them and options to purchase up
to an aggregate of about
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12% of the common stock outstanding after the 1995 Equity
Recapitalization on a fully diluted basis, subject to certain vesting
requirements.
In addition, in the 1995 Equity Recapitalization, we transferred all of our
operating subsidiaries to UCAR Global or subsidiaries of UCAR Global. UCAR
currently has no material assets other than common stock of each of UCAR Global
and UCAR Finance and intercompany debt owed to it.
In August 1995, UCAR completed an initial public offering of common stock.
In connection with the offering, UCAR sold common stock representing 22% of the
common stock outstanding after the offering for net proceeds of $227 million and
Union Carbide sold all of the common stock then owned by it for net proceeds of
$199 million. UCAR Global used net proceeds received by UCAR to redeem $175
million aggregate principal amount of 12% senior subordinated notes due 2005 at
a redemption price equal to 110% of the aggregate principal amount redeemed,
plus accrued interest of $4 million. We used the balance of the net proceeds
received by UCAR for general corporate purposes and to reduce other outstanding
indebtedness.
In October 1995, we refinanced the senior secured credit facilities obtained
in connection with the 1995 Equity Recapitalization with the Existing Credit
Facilities that had more favorable interest rates and covenants.
In March 1996, Blackstone, an affiliate of Chase Manhattan Bank and certain
members of management sold shares of common stock in a secondary public
offering. After the offering, Blackstone owned about 20% of the then outstanding
common stock.
In February 1997, UCAR's Board of Directors authorized a program which, as
amended in December 1997, authorized the repurchase of up to $200 million of
common stock at prevailing prices from time to time in the open market or
otherwise depending on market conditions and other factors, without any
established minimum or maximum time period or number of shares. UCAR purchased
an aggregate of $92 million of common stock (including common stock repurchased
from Blackstone as described below) under this program. The last repurchase was
made in 1997. We may reactivate this program at any time.
In March 1997, the Existing Credit Facilities were amended to reduce
interest rates, increase the amount available under our revolving credit
facility to $250 million and change covenants to allow more flexibility in uses
of free cash flow.
In April 1997, Blackstone sold about 14% of the then outstanding common
stock in a secondary public offering. Concurrently with the offering, we
repurchased 1,300,000 shares of common stock from Blackstone for $48 million.
This repurchase constituted part of the stock repurchase program described
above. After the offering and the repurchase, Blackstone ceased to be a
principal stockholder of UCAR.
Since June 1997, we have been served with subpoenas, search warrants,
information requests, complaints and petitions in the United States, the
European Union and elsewhere in connection with antitrust investigations,
lawsuits and claims and stockholder derivative and securities class action
lawsuits. We have resolved the investigations in the United States and
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Canada, and most of those lawsuits, as they relate to us. In addition, we have
substantially changed our management team.
RESTRUCTURING, RE-ENGINEERING AND OTHER PROJECTS. We have implemented
several successful restructuring and re-engineering projects since the
mid-1980s. These projects have eliminated work, improved operating efficiency
and reduced costs.
As part of our global restructuring and rationalization plan initially
announced in September 1998 and new initiatives to enhance the plan launched in
October 1999, we have been implementing projects to rationalize our plants,
improve operating efficiency of our remaining plants and generate cost savings.
We believe that the plan is the most aggressive major cost reduction plan
currently being implemented in the graphite and carbon industry. To support the
plan and other cost reduction efforts as well as efficiency and product quality
improvement efforts, we have launched a global business transformation
initiative entitled the POWER OF ONE. In February 2000, we announced that we
would restructure our graphite specialties business to generate cost savings and
improve profitability for its remaining product lines. We expect to complete the
restructuring by the end of the first quarter 2001.
ACQUISITION OF MINORITY INTERESTS AND INTEREST IN JOINT VENTURE Affiliate.
In 1995 and 1996, we acquired substantially all of the shares of our then
54%-owned Brazilian subsidiary that were owned by public shareholders in Brazil
for an aggregate purchase price of $55 million, plus expenses. In April 1997, we
acquired the outstanding shares of our then 50%-owned South African affiliate
from our then joint venture partner in South Africa. The purchase price was $75
million, plus expenses. We believe that these acquisitions have enabled us to
better integrate worldwide operations, to recognize production efficiencies at
various manufacturing facilities, to lower average company wide cost of sales
and to better capture and manage cash flow from operations of these
subsidiaries.
ACQUISITIONS IN RUSSIA AND GERMANY. In late 1996, late 1997 and early 1998,
we acquired substantially all of the equity of our Russian subsidiary. The
aggregate investment was $57 million, plus expenses. In February 1997, through a
newly formed 70%-owned German subsidiary, we acquired the graphite electrode
business of Elektrokohle Lichtenberg AG., based in Berlin, Germany. The
aggregate purchase price paid by our German subsidiary for the acquired assets
was $15 million, plus expenses. We purchased the remaining 30% ownership in 1999
to facilitate the closure of its manufacturing operations.
We acquired our Russian and German subsidiaries to expand geographically.
While we have been a supplier to Eastern Europe for over 25 years, we believed
that these acquisitions would increase our market penetration in Eastern Europe,
Russia and the other countries of the former Soviet Union, and the Middle East.
In addition, many of the electric arc furnace steel producers in these markets
consume lower quality graphite electrodes. Accordingly, sales by these two
subsidiaries of their lower quality electrodes would generally be additive to
sales made by our other subsidiaries, which continued to export ultra-high-power
graphite electrodes to their existing customer base in these regions.
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The market for graphite electrodes in these regions has not grown as rapidly
as we expected at the time of these acquisitions due primarily to global and
regional economic conditions. In addition, beginning about August 1998, Russian
economic conditions deteriorated critically. Those conditions have not yet
substantially improved. In response, as part of our global restructuring and
rationalization plan as initially announced in September 1998, we closed the
manufacturing operations of our German subsidiary and downsized the
manufacturing operations of our Russian subsidiary. Our Russian subsidiary now
has capacity to finish the manufacturing of about 10,000 metric tons of
electrodes annually. It is being supplied with partially manufactured electrodes
primarily by our Spanish subsidiary.
ACQUISITION OF ADDITIONAL CATHODE PRODUCT MANUFACTURING OPERATIONS. In
January 1997, we acquired 70% of the outstanding shares of Carbone Savoie,
previously a wholly owned subsidiary of Pechiney S.A. The purchase price was $33
million, plus expenses. Carbone Savoie has facilities in Notre Dame and
Venissieux, France. As a result of the acquisition, we are the largest
manufacturer of cathodes in the free trading markets and we are allied with
Aluminium Pechiney S.A. Aluminium Pechiney S.A. is one of the world's leading
producers of aluminum and the leading supplier of smelting technology to the
aluminum industry. We are using that smelting technology and our graphite
technology and expertise in high temperature industrial applications to develop
further improvements in graphite cathodes. We believe that graphite cathode
allow for substantial improvement in process efficiency. Graphite cathodes are
used by Aluminium Pechiney S.A. in its own plants and will be marketed to its
licensees as well as to third parties.
CLOSURE OF CANADIAN MANUFACTURING OPERATIONS. As part of our global
restructuring and rationalization plan, we permanently closed our manufacturing
operations in Welland, Canada. These operations had capacity to manufacture
about 23,000 metric tons of graphite electrodes annually as well as carbon and
graphite cathodes. Cathodes continue to be manufactured in North America at our
facility in Columbia, Tennessee. We completed the closure in the 1999 second
quarter.
STRATEGIC ALLIANCE IN THE FUEL CELL INDUSTRY. In the 1999 third quarter, we
entered into an exclusive product development collaboration agreement and an
exclusive long term supply agreement with Ballard, the world's leader in the
development and commercialization of PEM fuel cells. This strategic alliance
relates to the development and use of flexible graphite-based material in flow
field plates. Flow field plates are essential elements of PEM fuel cells.
DEBT RECAPITALIZATION. In February 2000, we completed a debt
recapitalization. We obtained the New Senior Facilities and used the net
proceeds to repay our prior long term debt and certain other debt.
BUSINESS STRATEGIES
We have the largest share of the free trading markets in all of our major
product lines. We believe that our average cost of sales of graphite electrodes
is currently the lowest among major producers in our industry. In addition to
our large market share and position as a low-cost producer of high quality
products, we believe that our strengths include our new management
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team, our global manufacturing base which includes multiple low cost locations
and fully integrated state-of-the-art facilities, our exceptional customer
technical service, our diversified customer base and our product innovation and
process improvement capabilities.
Our strategic goal is to be the best global low cost manufacturer and
customer service- driven company with the best product performance in the
graphite and carbon industry. We are focused on improving operating
efficiencies, improving product quality and technical and commercial customer
service, developing strategic alliances and growth opportunities, and developing
and expanding new and existing profitable technologies. We seek to be the lowest
cost supplier in our industry and to use that to our competitive advantage.
Accordingly, we focus significant efforts on reducing costs, maximizing free
cash flow, reducing leverage and maintaining and enhancing gross margins. We
seek to use our strategies and build on our strengths to leverage earnings
growth within existing product lines and through new product innovation and
penetration of related new and niche markets.
REDUCE COSTS AND IMPROVE OPERATING EFFICIENCIES. UCAR's Board of Directors
adopted a global restructuring and rationalization plan in September 1998, and
we launched new initiatives to enhance the plan in October 1999. The plan is
intended to enhance stockholder value by focusing on optimizing margins,
maximizing free cash flow, generating growth in earnings and strengthening
competitiveness through operating and overhead cost reduction and plant
rationalization. The plan is also intended, over the long term, to strengthen
our position as a low cost supplier to the steel and metals industries and, over
the near term, to respond to global and regional economic conditions that have
been adversely impacting our customers. We believe that the plan is the most
aggressive major cost reduction plan currently being implemented in the graphite
and carbon industry.
We believe that the cost savings under the plan have enabled us to
strengthen our competitiveness. We also believe, however, that we must continue
and enhance our focus on cost savings to achieve the ultimate objectives of the
plan. Accordingly, in October 1999, based on an extensive analysis of our
manufacturing, operating and organizational processes, we announced and launched
new initiatives to add further targeted cost savings to the original plan by the
end of 2002.
The key elements of the original plan consisted of:
o Rationalization of manufacturing operations, including closure of higher
cost operations in Berlin, Germany and Welland, Canada and downsizing of
operations in Vyazma, Russia.
o Centralization and consolidation of administrative functions, including
relocation of our corporate headquarters to Nashville, Tennessee, and
centralization of our European administrative activities at our new
European headquarters in Lausanne, Switzerland.
o Implementation of more than 120 identified cost reduction projects in
our operating facilities.
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Our Berlin facility ceased operations in October 1998. Our Welland facility
ceased production in April 1999. The Welland facility had capacity to
manufacture about 23,000 metric tons of graphite electrodes annually as well as
carbon and graphite cathodes. Graphite electrode production previously sourced
from the closed facilities is now being sourced from our lowest cost facilities,
which are located in Mexico and South Africa. Cathodes will continue to be
manufactured in North America at our facility in Columbia, Tennessee. The annual
graphite electrode manufacturing capacity of our Vyazma facility has been
reduced from about 17,000 metric tons in early 1997 to about 10,000 metric tons
at the end of 1998. Likewise, the number of employees at our Vyazma facility has
been reduced from about 1,200 to about 600. These plant rationalization
activities were completed on or ahead of schedule. In addition, the relocation
of our corporate headquarters to Nashville, Tennessee was completed during the
1999 first quarter, ahead of schedule, and the centralization of our European
administrative activities at our new European headquarters in Lausanne,
Switzerland was substantially completed by the end of 1999, on schedule. About
366 positions, in addition to those at our Vyazma facility, have been eliminated
pursuant to the original plan.
Our new initiatives include increasing the number of identified cost
reduction projects in our operating facilities to more than 230. A few of our
more significant cost reduction projects include improving the power supply at
our facility in Monterrey, Mexico, improving the furnaces in our graphite
electrode and cathode manufacturing facilities in Caserta, Italy and Notre Dame
France, and upgrading the acid treatment equipment in our flexible graphite
manufacturing facility in Cleveland, Ohio. Several of the new identified
projects are expected to result in additional benefits in terms of product
quality and supply chain improvements. Other projects relate to such areas as
energy conservation, raw material substitution, yield improvement, reduction in
labor by automation, maintenance savings and reduction in plant administration.
We are also evaluating every aspect of our supply chain performance for further
improvements, including realignment and standardization of critical business
processes, standardization of enterprise wide systems, and improvement of
information technology infrastructure and interfaces with trading partners. Our
targets include decreasing inventories, as measured against inventory levels and
based on production levels for the 1999 first nine months (annualized), by over
20%, to about $180 million, and reducing our cash cycle time by about one-third
by the end of 2002.
Further, we completed a global benchmarking study during the 1999 third
quarter that identified performance levels of certain key global administrative
and transaction processing functions. This study has identified opportunities
for performance improvement and cost savings that should allow for the
achievement of our target of reducing selling and administrative expenses from
11% of net sales in 1998 to 8% of net sales by the end of 2002. Based on the
study, work processes are being redesigned to, among other things, seek to
improve shared services for better global efficiencies and standardize
enterprise wide resource planning systems.
The plan generated cost savings at an annualized run rate of about $72
million by the end of 1999. We estimate that the plan will generate cost savings
at an annualized run rate of about $112 million by the end of 2000, about $145
million by the end of 2001 and about $165 million by the end of 2002 and
thereafter. For 1999, our goal was to achieve annual cost savings of $64
million. We achieved cost savings of $73 million, consisting of $33 million in
graphite electrode
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cost of sales and $8 million of savings in graphite and carbon product cost of
sales as well as $32 million of savings in overhead and taxes.
In addition, since 1997, we have undertaken, with the assistance of
consultants, various projects to further integrate global operations. Costs
associated with these projects aggregated about $18 million over a two-year
period ending mid-1999. We also estimate that, under current conditions, these
projects will have a pay-back period of two years ending 2000.
We are seeking to improve product quality at the same time that we are
seeking to reduce costs. We have set specific goals for product quality
improvements, focusing on use of superior raw materials, technology and six
sigma manufacturing capabilities.
RESTRUCTURING OUR GRAPHITE SPECIALTIES BUSINESS. During 1999 and into the
2000 first quarter, our graphite specialties business experienced significant
adverse change due to a decline in demand for graphite specialties, particularly
from certain segments of the semiconductor industry, growth in supply due to
expansion by other producers, a decline in prices for graphite specialties, and
delays in bringing new or improved products to market. The assets and inventory
of this business are located primarily at our plant in Clarksburg, West
Virginia. It accounted for about 9% of our net sales in 1999. In February 2000,
we announced that we would restructure the business. The key elements of the
restructuring consist of elimination of low profitability product lines,
rationalization of operations to generate cost savings and improve profitability
of remaining product lines, and use of graphite special technology to develop
new and expand existing niche markets. We expect the restructuring to generate
cost savings at an annual run rate of $7 million by the end of 2001. We expect
to complete the restructuring by the end of the 2001 first quarter.
POWER OF ONE BUSINESS TRANSFORMATION INITIATIVE. In support of our strategy,
we have launched a global business transformation initiative entitled POWER OF
ONE. POWER OF ONE is a coordinated global self-assessment and business process
rationalization and transformation initiative driving one consistent theme
throughout our organization: "becoming the best." We expect the initiative to
accelerate development and implementation of business opportunities and develop
leadership skills more broadly within all management levels as well as support
our efforts to reduce costs and working capital needs, improve efficiencies and
product quality, shorten cycle times and achieve "best in class" performance.
The initiative is also designed to assure the successful completion of our
previously announced cost reduction activities. The initiative will require an
investment of $5 million in 2000 and $20 million to $25 million over the three
years ending 2002. We believe, however, that most of this investment will be
funded from cost savings expected to be realized.
The initiative has mobilized our workforce towards reassessing every aspect
of the way we do business. This pursuit of "best in class" performance has
already challenged and empowered our workforce, identified
"business-to-business" opportunities with both existing and potentially new
trading partners, and established targets for improving quality, speed and
efficiency across our extended enterprise.
The POWER OF ONE initiative is company-wide and involves all levels of our
workforce.
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Strategically guided by management, POWER OF ONE teams quickly
self-assessed our existing critical business processes through a comprehensive
benchmarking exercise that compared our practices against the best global
manufacturing enterprises. This exercise provided the direction for identifying
opportunities for improvement and determining priorities.
The concept of "business-to-business" has become critically important to us.
The POWER OF ONE initiative assesses our core business processes through strong
collaboration with all of our critical trading partners: our customers,
suppliers and strategic partners. POWER OF ONE also extends across our other
critical management processes, including financial, human resources, and
knowledge and technology management. Through the initiative, new global policies
and procedures are under development. We are reevaluating and redefining global
processes, roles and responsibilities, and enabling technologies so that we can
leverage POWER OF ONE for our global extended enterprise.
DEVELOP STRATEGIC ALLIANCES AND GROWTH OPPORTUNITIES. We are pursuing
strategic alliances that enhance or complement our existing or related
businesses. Strategic alliances may be in the form of joint venture, licensing,
supply or other arrangements that leverage our strengths to achieve additional
company-wide cost savings and to increase net sales, margins, cash flow and
earnings growth in graphite electrode and other existing product lines and in
related new product lines.
Our relationship with Aluminium Pechiney S.A. in the cathode business is
an example of a successful strategic alliance. Aluminium Pechiney S.A. is
not only a strategic partner but is also a significant customer under a long
term supply contract.
In the 1999 third quarter, we entered into an exclusive product development
collaboration agreement and an exclusive long-term supply agreement with
Ballard, the world's leader in the development and commercialization of PEM fuel
cells. Fuel cells are devices that generate electricity through an
environmentally clean chemical process as an alternative to internal combustion
engines and other fossil fuel based energy sources. Industry sources expect wide
commercialization of fuel cells to occur early in this decade, particularly as
countries around the world deal with environmental problems created from other
sources of energy. These industry sources estimate that the market for fuel
cells is currently around $40 million and will grow to $10 billion over this
decade. The market is being driven by advances in fuel cell technology, growth
in worldwide power demand and deregulation of power utilities as well as
environmental issues. Potential fuel cell applications include cars and other
vehicles, power plants, generators, cellular phones and computers.
We have been actively working with Ballard for the past 7 years in
developing flexible graphite based material for use as flow field plates, which
are essential elements of PEM fuel cells. During the collaboration period, we
and Ballard have agreed to cooperate with each other, exclusively, in the
research and development of flow field plates using flexible graphite, including
next generation flow field plates. The agreements, which are expected to
continue at least through most of this decade, contain customary product pricing
and delivery, technology ownership and licensing, termination and other
provisions. We expect substantial growth in net sales of our flexible graphite
beginning in 2003. We believe that we will be able to support that
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growth with our existing manufacturing capacity and, if necessary, incremental
expansion of capacity.
In the 1999 third quarter, we transferred our flexible graphite business to
a newly formed, wholly owned subsidiary, UCAR Graph-Tech. UCAR Graph-Tech is
engaged in the business of developing, manufacturing and selling technologically
advanced and highly engineered natural graphite materials to meet needs in the
fuel cell, heat management, fire protection, sealing and other industries. We
intend to expand this business through internal growth, acquisitions and
strategic customer partnerships. We are also evaluating a number of financial
options to create more value for our stockholders over the near term from this
business.
Other current areas of focus include various portions of our graphite and
carbon specialties business. In addition, we are focusing on establishing an
alliance in the petroleum coke industry. Petroleum coke is the principal raw
material used by us.
DEVELOP AND EXPAND NEW AND EXISTING PROFITABLE TECHNOLOGIES. We are
currently focusing our technological development efforts in several key areas in
order to develop new related products and expand applications for our existing
products, which we believe will enhance our profitability.
Two areas of current focus are further quality improvements in supersize
graphite electrodes and in graphite cathodes. Supersize electrodes are used in
the modern high powered, larger electric arc furnaces which constitute the
majority of newly built furnaces. Graphite cathodes can be used instead of
carbon cathodes in smelting aluminum. Use of graphite cathodes allows for
substantial improvements in process efficiency. We believe that the market for
supersize graphite electrodes represents a growth sector of the graphite
electrode business and that the market for graphite cathodes represents a growth
sector of the cathode business. There are about three other manufacturers of
supersize graphite electrodes and one other manufacturer of graphite cathodes in
the world.
We are developing applications for advanced natural graphite materials to
meet heat shielding, dissipation and other management needs, fire retardant and
protection needs, flow field and other chemical reaction management needs, and
energy management needs in the semiconductor, transportation, textile, fuel
cell, electrical, electronic and other industries.
Other areas of focus include expanding the use of carbon refractories (one
of our carbon specialties) in submerged arc furnace lining applications and
developing new applications for our flexible graphite. We are also focusing our
efforts on expanding the use of electrode-based electric arc furnaces for
smelting of nonferrous materials. We believe that this represents a significant
opportunity to expand the market for our technological strengths in
high-temperature materials processing applications.
MARKETS AND INDUSTRY OVERVIEW
We estimate that, in 1999, the worldwide market for graphite and carbon
products served by us was about $4 billion. These products are sold primarily to
customers in the steel, silicon
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metal, ferronickel, thermal phosphorous,
titanium dioxide, aluminum and other metal industries. Customers in these
industries are located in virtually every industrialized country in the world.
USE OF GRAPHITE ELECTRODES IN ELECTRIC ARC FURNACES. There are two
primary technologies for steelmaking:
o basic oxygen furnace steel production, and
o electric arc furnace steel production.
Electric arc furnace steelmakers are called "market mills" or "mini-mills"
because of their smaller capacity as compared to basic oxygen furnace
steelmakers. Graphite electrodes are used primarily in electric arc furnace
steel production. They are also used to refine steel in ladle furnaces and in
other smelting processes such as production of titanium dioxide.
Electrodes act as conductors of electricity into the furnace, generating
sufficient heat to melt scrap metal, iron ore or other raw materials used to
produce steel, silicon metal or other metals. The electrodes are gradually
consumed in the course of that production. Graphite electrodes are used
primarily in the production of steel in an electric arc furnace. These electric
arc furnaces 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.
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 for electric arc furnace steel production. We
estimate that, on average, the cost of graphite electrodes represents about 3%
of the cost of producing steel in a typical electric arc furnace.
HISTORICAL GROWTH OF ELECTRIC ARC FURNACE STEEL PRODUCTION AND RECENT
DEVELOPMENTS. Electric arc furnace steel production has, for many years, been
the growth sector of the steel industry. There are currently in excess of 2,000
electric arc furnaces operating worldwide. Worldwide electric arc furnace steel
production grew from about 90 million metric tons (about 14% of total steel
production) in 1970 to about 268 million metric tons (about 34% of total steel
production) in 1999. We estimate that steelmakers worldwide added net new
electric arc furnace
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steel production capacity of about 16 million metric tons
in 1997, about 19 million metric tons in 1998 and about 18 million metric tons
in 1999.
Electric arc furnace steel production has historically exhibited less
cyclicality than total steel production. Worldwide electric arc furnace steel
production had experienced only two downturns from 1976 through 1997, each of
which lasted about a year. As a result of conditions generally affecting
economies in the Asia/Pacific region and ultimately, in differing degrees,
economies worldwide, a third downturn began in late 1997 and continued at least
into the 1999 first quarter. Electric arc furnace steel production declined from
about 271 million metric tons in 1997 (about 34% of total steel production) to
about 264 million metric tons in 1998 (about 34% of total steel production). As
a result of the continued strength in the U.S. and European economies and the
beginning of recovery in other areas of the global economy, we believe that
worldwide electric arc furnace steel production began to gradually recover from
the most recent downturn in the 1999 second quarter. Electric arc furnace steel
production increased slightly to about 268 million metric tons (about 34% of
total steel production) in 1999. The following table illustrates the growth in
electric arc furnace steel production.
WORLDWIDE STEEL PRODUCTION IN ELECTRIC ARC FURNACES
(In millions of metric tons)
[BAR CHART]
RELATIONSHIP BETWEEN GRAPHITE ELECTRODE DEMAND AND ELECTRIC ARC FURNACE
STEEL PRODUCTION. We believe that the worldwide growth in electric arc furnace
steel production has been due primarily to improvements in the cost
effectiveness and operating efficiency of electric arc furnace steelmaking. We
believe that growth has also been due to the fact that, as a result of recent
technical advances, electric arc furnace steelmakers are capable of producing
nearly all of the product lines available from basic oxygen furnace steelmakers.
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Developments in electric arc furnace steelmaking that we believe improved
cost effectiveness and operating efficiency over the past two decades include:
o changes in equipment design and production processes stemming from the
now largely completed conversion of furnaces from a refractory lined
system to a water cooled system, which sharply reduce specific
consumption,
o use of higher quality scrap metals and other raw materials, and
o improvements in the size, strength and quality of graphite electrodes
(including those developed by us).
This improved efficiency resulted in a decrease in specific consumption. We
estimate that specific consumption declined from about 6.4 kilograms of graphite
electrodes per metric ton of steel produced in 1974 to about 2.5 kilograms per
metric ton in 1999. From 1992 through late 1997, increased levels of electric
arc furnace steel production more than offset the decrease in specific
consumption. This resulted in increased demand for graphite electrodes. We
believe that, on average, as the costs (relative to the benefits) increase for
electric arc furnace steelmakers to achieve significant further efficiencies in
electric arc furnace graphite electrode consumption, the decline in specific
consumption will continue at a more gradual pace. We further believe that the
rate of decline in the future will be impacted by the addition of new electric
arc furnace steelmaking capacity. To the extent that this new capacity replaces
old capacity, it has the effect of reducing industrywide specific consumption
due to the efficiency of new electric arc furnaces. To the extent this new
capacity increases industrywide electric arc furnace steel production capacity
and that capacity is utilized, it creates additional demand for graphite
electrodes.
PRODUCTION CAPACITY AND PRICING. From the mid-1980s through the early 1990s,
in response to downward pressure on pricing due to excessive production capacity
and declining specific consumption, there was a consolidation in the number of
graphite electrode producers and a reduction in graphite electrode manufacturing
capacity in the free trading markets.
Beginning in late 1997 and continuing at least into the 1999 first quarter,
global and regional economic conditions adversely impacted steel production,
including steel produced in electric arc furnaces. As a result, demand for
graphite electrodes declined in 1998 and in the 1999 first quarter. It began to
gradually increase in the 1999 second quarter due to a gradual recovery in
global and regional economic conditions. We believe that the graphite electrode
manufacturing capacity utilization rate in the free trading markets was about
91% in 1997, about 85% in 1998 and about 87% in 1999.
In response to the adverse global and regional economic conditions, as part
of our global restructuring and rationalization plan initially announced in
September 1998, we reduced our annual graphite electrode manufacturing capacity
by about 30,000 metric tons. We believe that these reductions represented about
4% of estimated graphite electrode manufacturing capacity in the free trading
markets. We are not aware of any construction of new graphite electrode
manufacturing facilities anywhere in the free trading markets. Since September
1998, two of our
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competitors have reduced their annual graphite electrode
manufacturing capacity. Their announced reductions total more than 28,000 metric
tons. As a result of these reductions, we believe that, if graphite electrode
demand returned to 1997 levels, the current graphite electrode manufacturing
capacity utilization rate in the free trading markets would be at least 95%.
From 1992 through late 1997, there was a significant improvement in pricing
of graphite electrodes in the free trading markets. There has been downward
market pressure on graphite electrode pricing since mid-1998. None of the
settlement or plea agreements in connection with antitrust investigations or
related lawsuits or claims contain restrictions on future prices of our graphite
electrodes.
OUR GRAPHITE ELECTRODE MARKET SHARE. We estimate that about two-thirds of
the electric arc furnace steelmakers in the free trading markets and about 85%
of the electric arc furnace steelmakers in the home markets purchased all or a
portion of their graphite electrodes from us in 1999. We further estimate that
we supplied about 39% of all graphite electrodes purchased in the home markets
and about 29% of those purchased in the free trading markets in 1999. Sales of
graphite electrodes in the home markets accounted for about 80% of our net sales
of graphite electrodes in 1999. We estimate that the market for graphite
electrodes was about $2.7 billion worldwide and about $2.1 billion in the free
trading markets in 1999.
We estimate that, in 1999, sales in the United States accounted for about
22% of our total net sales of graphite electrodes and we sold graphite
electrodes in over 80 countries, with no other country accounting for more than
15% of our total net sales of graphite electrodes.
OUTLOOK FOR GRAPHITE ELECTRODES. During 1997 through 1999, we estimate that
an aggregate of about 53 million metric tons of net new electric arc furnace
steelmaking capacity was added worldwide. We estimate that about 18 million
metric tons of that net new capacity was added in 1999. Further, we believe that
a portion of the net new capacity added in the last three years has not yet
become fully operational. We are aware of about 44 million metric tons of
announced net new electric arc furnace production capacity that is scheduled to
be added in 2000 through 2002. This includes those announced additions to
capacity which had been scheduled to be added in 1999 or earlier, but were
delayed. It excludes those that have been cancelled.
Notwithstanding the growth in capacity, as a result of global and regional
economic conditions, steel production, including steel produced in electric arc
furnaces, declined throughout 1998 and into the 1999 first quarter. As a result,
demand for graphite electrodes declined.
Due to the continued strength of the U.S. and European economies and the
beginning of recovery in other areas of the global economy, we believe that, in
the 1999 second quarter, worldwide electric arc furnace steel production began
to gradually increase. We are benefiting from that increase. Our volume of
graphite electrodes sold has gradually increased each quarter during 1999. In
the aggregate, our volume increased by 17% in the 1999 fourth quarter as
compared to the 1999 first quarter, effectively returning to the 1998 second
quarter level. We believe that graphite electrode industry fundamentals support
our long term strategy and the beginning of recovery in pricing worldwide. If
future global economic conditions over the long
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term are similar to those of the
past two decades, we believe that worldwide production of steel in electric arc
furnaces will continue to grow over the long term at its historical trendline
annual growth rate of 4% and that, as a result, worldwide demand for graphite
electrodes and the volume of graphite electrodes sold (in metric tons) will grow
over the long term at an average annual rate of 1% to 2%.
CARBON ELECTRODES. Carbon electrodes are used primarily to produce silicon
metal, which is used in the manufacture of aluminum. Carbon electrodes are used
and consumed in a manner similar to that of graphite electrodes, although at
lower temperatures and with different consumption rates. We estimate that demand
for carbon electrodes in the free trading markets was about 69,000 metric tons
in 1997, about 63,000 metric tons in 1998 and about 60,000 metric tons in 1999.
We believe that the decline was due primarily to the impact of global and
regional economic conditions on worldwide production of silicon metal. As a
result of the beginning of recovery in global and regional economic conditions,
we believe that demand for carbon electrodes is beginning to gradually improve.
We estimate that we sold about 37% of the carbon electrodes purchased in the
free trading markets in 1999. We estimate that the worldwide market for carbon
electrodes was about $120 million in 1999. We are the only major manufacturer of
carbon electrodes in North and South America.
CATHODES. Cathodes consist primarily of blocks used as lining for furnaces
used to smelt aluminum. In a typical smelting furnace operating at a typical
rate and efficiency of production, the cathodes must be replaced every 5 to 8
years. As a result of the acquisition of Carbone Savoie, we are the largest
manufacturer of cathodes in the free trading markets and we are allied with
Aluminium Pechiney S.A. Aluminium Pechiney S.A. is one of the world's leading
producers of aluminum and the leading supplier of smelting technology to the
aluminum industry. We are using that smelting technology 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) allow a substantial improvement in process
efficiency. There are only three producers of graphite cathodes in the world.
We estimate that we sold about 30% of the carbon and graphite cathodes sold
in the free trading markets in 1999. We estimate that the worldwide market for
graphite and carbon cathodes was about $230 million in 1999. We believe that
demand for cathodes in the free trading markets will grow over the long term at
an average annual growth rate of about 2% to 3%, similar to the long term growth
rate of the aluminum industry. We also believe that the demand for graphite
cathodes will exceed that of carbon cathodes as new smelting furnaces are built
and existing smelting furnaces are converted from carbon cathodes to graphite
cathodes. Over the past three years, the market for graphite cathodes has grown
from about 15% to about 25% of the total market for cathodes in the free trading
markets. We believe that the market for graphite cathodes will continue to grow
over the next several years at a comparable rate.
FLEXIBLE GRAPHITE. Flexible graphite is used in gasket and other sealing
applications primarily for internal combustion engines, pipe flanges and
chemical and petrochemical industry
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process equipment. Flexible graphite is a natural graphite-based product, while
most of our other products are petroleum coke-based products. The volume of
flexible graphite sold has grown at an average annual rate of about 10% over the
past ten years, due primarily to demand for a high quality sealing material to
replace asbestos. We believe that growth for these uses will continue, at a more
moderate pace, over the next several years. We estimate that we sold about 35%
of the flexible graphite purchased in the free trading markets in 1999. We
estimate that the worldwide market for flexible graphite was about $85 million
in 1999.
We are developing applications for advanced natural graphite materials in
the fuel cell, heat management and fire protection industries. We believe that
the market for flexible graphite in the fuel cell industry could exceed $2
billion by 2010.
OTHER PRODUCTS. Our other products include carbon specialties, graphite
specialties and composite tooling. Our graphite and carbon specialties are used
in the metals, chemicals, transportation, energy, semiconductor and aerospace
industries. Demand for graphite specialties has been weak in 1999 and into the
2000 first quarter. We believe, however, that demand for carbon specialties,
particularly from the chemical and aluminum industries, and demand for
refractories and composite tooling will continue to grow over the long term at
their average annual historical growth rate of about 4% to 5%.
MANUFACTURING PROCESSES
The manufacture of a graphite electrode takes, on average, about two months.
Graphite electrodes range in size from three inches to 30 inches in diameter and
two feet to nine feet in length and weigh between 20 pounds and 4,800 pounds
(2.2 metric tons).
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 which we developed, the rebaked electrodes are
heated in longitudinal electric resistance furnaces at about
5,000 degrees Fahrenheit to restructure the carbon to its
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characteristically crystalline form, graphite. After this
process, the electrodes are gradually cooled, cleaned,
inspected and sample-tested.
MACHINING: After graphitizing, the electrodes are machined to comply with
international specifications governing outside diameters,
overall lengths and joint details.Tapered sockets are machine-
threaded at each end of the electrode to permit the joining of
electrodes in columns by means of correspondingly double-
tapered machine-threaded graphite nipples.
Carbon electrodes (which can be up to 55 inches in diameter) and graphite
and carbon cathodes are manufactured by a comparable process (excluding, in the
case of carbon electrodes and cathodes, impregnation and graphitization).
Graphite and carbon specialties are made by a process similar to the process for
manufacturing electrodes but using different mixtures of raw materials and
different processing time periods. Flexible graphite is made from mined natural
graphite flake that is acid treated, heat treated and rolled into sheets of
desired thickness and width. We 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.
The closure of our manufacturing operations in Canada and Germany and the
downsizing of our manufacturing operations in Russia reduced our graphite
electrode manufacturing capacity by about 11%. We now have the capacity to
manufacture about 245,000 metric tons of graphite electrodes annually. We have
the capacity to manufacture about 30,000 metric tons of carbon electrodes
annually and about 40,000 metric tons of cathodes annually. The following table
sets forth certain information regarding our sales volumes:
FOR THE YEAR ENDED DECEMBER 31,
1997 1998 1999
---- ---- ----
(Metric tons)
Volume of graphite electrodes sold(a)..... 250,000 211,000 206,000
Volume of carbon electrodes sold.......... 28,000 25,000 22,000
Volume of cathodes sold(b)................ 31,000 33,000 31,000
- -------------------
(a) Includes graphite electrodes sold by our South African subsidiary both
before and after its acquisition in April 1997. The assets, liabilities,
results of operations and cash flows of our South African subsidiary are
not consolidated in the Consolidated Financial Statements before that
date.
(b) Includes cathodes sold by Carbone Savoie both before and after its
acquisition in January 1997. The assets, liabilities, results of
operations and cash flows of Carbone Savoie are not consolidated in the
Consolidated Financial Statements before that date.
We operate 15 manufacturing facilities and three machine shops located in
Brazil, France, Italy, Mexico, Russia, South Africa, Spain, the United Kingdom
and the United States. Graphite
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electrodes are manufactured in each country
(other than the United Kingdom) in which we have a manufacturing facility.
Carbon electrodes are manufactured in the United States. Graphite and carbon
cathodes are manufactured in Brazil, France and the United States. Graphite and
carbon specialties are manufactured in France and the United States. Flexible
graphite is manufactured in the United States.
We believe that our multiple fully integrated state-of-the-art manufacturing
facilities in diverse geographic regions provide us with significant operational
flexibility. We use robotics and statistical process controls in manufacturing
processes and have a total quality control program that involves significant
in-house training. We utilize sophisticated "pipeline" manufacturing and
logistical systems at most of our electrode and cathode manufacturing
facilities. These controls, programs and systems have improved product quality,
reduced waste in the manufacturing process, resulted in more efficient
utilization of manufacturing personnel and equipment, improved efficiency in
customer order processing and reduced inventory requirements. We have installed
at some of these facilities and intend to install at our other graphite
electrode and cathode manufacturing facilities proprietary process technology to
further reduce manufacturing cycle times, increase cost efficiency and improve
coordination between production scheduling and forecast sales.
Through our restructuring and re-engineering projects and plans, we have
sought to modularize our graphite electrode and graphite and carbon cathode
manufacturing capacity. This enables us to seek to incrementally adjust capacity
in use, as well as related costs, to accommodate anticipated changes in global
sales volume. We believe that our modular facilities, together with the diverse
worldwide locations of our manufacturing operations, enable us to shift
manufacturing to regions whose changes or currency exchange rates provide cost
advantages. In addition, generally we seek to manage our manufacturing
operations on a global basis, allocating production among our worldwide
manufacturing facilities to minimize the number of products made at each
facility and to maximize capacity utilization at as many of our facilities as
possible. This enables us to, among other things, seek to minimize our fixed
costs per ton produced. We also believe that our global manufacturing base helps
us to minimize risks associated with dependence on any single economic region.
We believe that we have adequate existing permanent graphite and carbon
electrode and cathode manufacturing capacity to meet any increased demand over
the near term. Under current conditions, we are able to incrementally add new
permanent graphite electrode manufacturing capacity (up to about 15% to 20% of
our existing capacity), primarily through "de-bottlenecking" at existing
facilities, when and as required, at an estimated initial investment of less
than $500 per annual metric ton produced.
Major maintenance at our facilities is conducted on an ongoing basis.
Manufacturing operations at any facility may be subject to curtailment due to
new laws or regulations, changes in interpretations of existing laws or
regulations or changes in governmental enforcement policies.
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PRODUCTS
GRAPHITE ELECTRODES. Our principal products are graphite electrodes.
Graphite electrodes are consumed primarily in the production of steel in
electric arc furnaces. They are also used to refine steel in ladle furnaces
and in other smelting processes.
Electric arc furnace steel production requires significant heat (as high as
5,000 degrees Fahrenheit, which we believe is the hottest operating temperature
in any industrial or commercial manufacturing process worldwide) to melt scrap
metal, iron ore or other raw materials. That heat is generated by graphite
electrodes as electricity (as much as 150,000 amps) passes through them and
creates an electric arc between the graphite electrodes and the raw materials.
The graphite electrodes arc gradually consumed in the production process.
We believe that we provide the broadest range of sizes in graphite
electrodes and that the quality of our graphite electrodes is competitive with
or better than that of comparable products of any other major manufacturer. We
also believe that there are presently no commercially viable substitutes for
graphite electrodes in electric arc furnace steelmaking.
OTHER GRAPHITE AND CARBON PRODUCTS. We manufacture carbon electrodes. Carbon
electrodes are consumed primarily in the production of silicon metal and also in
the production of ferronickel and thermal phosphorous. The production of these
materials involves processes similar to the production of steel in electric arc
furnaces, but at lower temperatures.
We manufacture carbon and graphite cathodes. Cathodes consist primarily of
blocks used as liners for, and acting as conductors of electricity in, aluminum
smelting furnaces.
We manufacture flexible graphite which is used in gasket and other sealing
applications primarily for internal combustion engines, pipe flanges and process
equipment used in the chemical and petrochemical industries. It is also used as
packing for valves. Flexible graphite is subject to ongoing product development
that results in product improvements that tend to generate higher margins.
We manufacture graphite and carbon specialties for use in the metals,
chemicals, transportation, energy, semiconductor and aerospace industries. Our
carbon specialties consist primarily of carbon refractories that are used as
lining for blast furnaces. They also include pastes that are used as fillers
between cathode blocks and between refractory bricks. Our graphite specialties
consist primarily of isomolded, molded and extruded graphite shapes sold to
specialty machine shops and end users for machining and, to a lesser extent,
superfine grain products sold primarily to the semiconductor industry and molds,
insulation substrates and other machined products. Most of these machined
products are manufactured for specific applications or to meet customer
specifications. In connection with restructuring our graphite specialties
business, we intend to eliminate some of these products. In addition, we
manufacture composite tooling, which is tooling made from graphite blocks.
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RAW MATERIALS AND SUPPLIERS
Our primary raw materials 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, graphite
cathodes and graphite specialties are calcined petroleum cokes (needle coke for
electrodes and regular grade cokes for cathodes and specialties), coal tar pitch
and petroleum pitch. The primary raw materials for carbon electrodes, carbon
cathodes and carbon specialties are calcined anthracite coal and coal tar pitch
and, in some instances, a petroleum coke-based material. We also use graphite
fines in the manufacture of some of our non-electrode products. Graphite fines
are waste products from the machining of graphite electrodes.
The primary raw material for flexible graphite is natural graphite flake,
which must be acid treated before further processing. We are the only
manufacturer of flexible graphite who acid treats graphite flakes. Other
manufacturers purchase flakes which have been acid treated by third parties. We
believe our acid treating process gives us a competitive advantage in terms of
process efficiency, product quality and product innovation. Over the past 10
years, we have been able to reduce our raw materials costs (as well as
processing and production costs) per pound due to improvements in technology (as
well as process efficiency).
We purchase our raw materials from a variety of sources, typically under
annual purchase contracts. We purchase petroleum needle coke from all of the
major suppliers under annual purchase contracts that are part of longer term
understandings on price. We believe that the quality of our raw materials on the
whole is competitive with or better than those available to our major
competitors and that, under current conditions, our raw materials are available
in adequate quantities at market prices. Since all of our products (other than
flexible graphite) use the same primary raw materials, we believe that we are
able to purchase raw materials on a more cost efficient basis than some of our
competitors with more limited product lines and production volumes. Electric
power or natural gas used in manufacturing processes is purchased from local
suppliers under short-term contracts or in the spot market.
The availability and price of raw materials and energy may be subject to
curtailment or change due to limitations which may be imposed under new
legislation or governmental regulations, suppliers' allocations to meet the
demands of other purchasers during periods of shortage (including, in the case
of energy suppliers, shortages arising due to extended cold weather),
interruptions in production by suppliers, and market and other events and
conditions. Over the past several years, we have mitigated the effect of raw
material and energy price increases on our results of operations through a
combination of improved operating efficiency, permanent on-going cost savings
and, prior to 1998, passing such price increases on to customers. We cannot
assure you, however, that such measures will successfully mitigate future
increases in the price of raw materials or energy. In the 1999 fourth quarter
and the 2000 first quarter, there was a substantial increase in the worldwide
market price of oil, which could affect the price of petroleum coke. A
substantial increase in raw material or energy prices, which cannot be mitigated
or passed on to customers, or a continued interruption in supply, particularly
in the supply of petroleum coke, would have a material adverse effect on us.
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SALES AND CUSTOMER SERVICE
We have a global business with a diversified customer base. We sell our
products in virtually every industrialized country in the world. Sales of our
products to customers outside the United States accounted for more than
two-thirds of our net sales in 1999. Our customer base includes both steelmakers
and non-steelmakers. In 1999, four of our ten largest customers were purchasers
of non-graphite electrode products or purchasers of graphite electrodes for
non-steelmaking purposes. In 1999, five of our ten largest customers were based
in Europe, two were in Africa, and one was in each of the United States, Mexico
and Brazil. No single customer group of affiliated customers accounted for more
than 4% of our net sales in 1999.
Our products are sold primarily by our direct sales force, which operates
from more than 20 sales offices located in the United States, Europe and other
home markets as well as export markets. Our direct sales force is supported by
our customer technical service personnel, and, to a lesser extent, by
independent sales agents, most of whom have worked with us for many years, in
various countries outside the home markets.
We have had, for many years, a strong commitment to provide a high level of
technical service to customers, which supports our sales activities and which
seeks to assist customers to maximize their production and minimize their costs.
We employ about 60 engineers based at our facilities in the United States,
Europe and other home markets to provide technical service to customers globally
in, among other things, all areas of electric arc furnace design and operation,
electrode specification and use and related matters. This technical service
includes periodically monitoring certain customers' electric arc furnace
efficiency levels. We believe that we have more technical service engineers
located in more countries than any of our competitors.
Our sales and service groups include those dedicated to cathodes who are
employed by Carbone Savoie. Carbone Savoie's sales and service groups work
closely with those of Aluminium Pechiney S.A. to maximize use of their
respective products and technologies.
RESEARCH AND DEVELOPMENT
We have two dedicated technology centers, one based in United States and the
other in France . We conduct, at those centers and our manufacturing facilities
throughout the world, a focused technology program to develop new related
products and expand applications for existing products as well as improve
product quality and manufacturing processes. This program is conducted both
independently and in conjunction with suppliers, customers, strategic partners
and others. About 100 of our technical professionals are directly involved in
this program. Their activities are integrated with the efforts of over 100
engineers at our manufacturing facilities who are focused on improving
manufacturing processes. One of our technology centers is dedicated to cathodes
and operated by Carbone Savoie. It employs about 20 of our professionals.
Developments by us include larger and stronger electrodes, new chemical
additives to enhance raw materials used in the manufacture of graphite
electrodes, proprietary technology used in the manufacture of advanced natural
graphite materials such as our proprietary acid treating process,
environmentally benign cold pastes used with cathodes and refractories, and
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proprietary hot press technology used in the manufacture of carbon refractories.
We have received recognition for the high quality of our products under several
programs around the world and have been awarded preferred or certified supplier
status by many major steel and other manufacturing companies. In addition, we
were selected from among all of the major producers of natural graphite
materials in the world for the opportunity to enter into an exclusive long term
product development collaboration agreement with Ballard relating to PEM fuel
cells. We believe that our selection was due to, among other things, the high
quality of our development efforts. In January 2000, Ballard unveiled its most
recent fuel cell stack, the Mark 900. Our flexible graphite is a key component.
Two areas of current focus are further quality improvements in supersize
graphite electrodes and in graphite cathodes. Supersize electrodes are used in
the modern high powered, larger electric arc furnaces that constitute the
majority of newly built furnaces. Graphite cathodes can be used instead of
carbon cathodes in smelting aluminum. Use of graphite cathodes allows for
substantial improvements in process efficiency. We believe that the market for
supersize graphite electrodes and graphite cathodes represent growth sectors of
the graphite electrode and cathode businesses. There are about three other
manufacturers of supersize graphite electrodes and one other manufacturer of
graphite cathodes in the world.
Other areas of focus include expanding the use of carbon refractories (one
of our carbon specialties) in submerged arc furnace lining applications and
developing new applications for our flexible graphite. We are also focusing our
efforts on expanding the use of electrode-based electric arc furnaces for
smelting of nonferrous materials. We believe that this represents a significant
opportunity to expand the market for our technological strengths in
high-temperature materials processing applications.
We are developing applications for advanced natural graphite materials to
meet heat shielding, dissipation and other management needs, fire retardant and
protection needs, flow field plate and other chemical reaction needs, and energy
management needs in the semiconductor, transportation, textile, fuel cell and
other industries.
Our research and development expenses (other than certain expenses at our
manufacturing facilities, which are included in cost of sales) were $9 million
in 1997, 1998 and 1999.
DISTRIBUTION
Our customers generally seek to negotiate electrode prices and anticipated
volumes on an annual basis. Our customers then generally place orders for
electrodes three to six months prior to the specified delivery date. Such orders
are cancelable by the customer. Therefore, we manufacture electrodes and seek to
manage electrode inventory levels to meet rolling sales forecasts. We generally
seek to maintain an appropriately low level of finished electrode inventories,
taking into account these factors and the length of electrode manufacturing
cycles. Other products are generally manufactured or fabricated to meet customer
orders. Accordingly, inventory levels will vary with demand for these finished
products. Recently, we have entered into a long term supply contract with
Ballard for use of flexible graphite in flow field plates
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in PEM fuel cells and with purchasers of carbon electrodes. We may, from time to
time in the future, enter into long term supply contracts with purchasers of our
other products.
Finished products are generally stored at our manufacturing facilities. We
ship our finished products to customers primarily by truck and ship, using "just
in time" techniques where practicable.
Proximity of manufacturing facilities to customers can provide a competitive
advantage in terms of cost of delivery of electrodes, cathodes and other large
or heavy products to customers. The significance of these costs is affected by
fluctuations in 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 we are generally better positioned in terms of
such proximity than our major competitors to supply graphite electrodes and
graphite and carbon cathodes to the free trading markets.
INTELLECTUAL PROPERTY
We own or have obtained licenses to various domestic and foreign patents,
patent applications and trademarks related to our products, processes and
business. These patents expire at various times over the next 20 years. These
patents and patent applications in the aggregate are important to our
competitive position and growth opportunities, particularly in connection with
our flexible graphite business. We do not believe, however that a single patent
or patent application is material to us.
The tradename and trademark UCAR are owned by Union Carbide and licensed to
us on a royalty-free basis under a license expiring in 2015. This 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 tradename and trademark CARBONE SAVOIE are
owned by Carbone Savoie and used in connection with cathodes manufactured by it.
It is a registered trademark in Europe. We own various tradenames and trademarks
used in our flexible graphite business. Several of them are registered in the
United States and elsewhere. These tradenames and trademarks are, together, the
only ones which are material to us.
We have know-how and proprietary information which is important to our
competitive position and growth opportunities. We seek to protect our know-how
and proprietary information, as we believe appropriate, through written
confidentiality and restricted use agreements with employees, consultants and
others and various operating and other procedures.
We cannot assure you that protection for our intellectual property under our
patents and our measures to protect know-how and proprietary information will be
effective or that our use of intellectual property does not infringe the rights
of others.
COMPETITION
Competition in the graphite and carbon industry is based primarily on price,
product quality and customer service.
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GRAPHITE ELECTRODES. There is one other global manufacturer and nine other
regional or local manufacturers of graphite electrodes in the free trading
markets. We believe that we are the largest manufacturer in the world and SGL
Carbon AG (whose plants are located in North America and Europe) is the second
largest. We estimate that we supplied about 39% of the graphite electrodes
purchased in the home markets and about 29% of those purchased in the free
trading markets in 1999. Other manufacturers of graphite electrodes include: The
Carbide/Graphite Group, Inc. (whose plants are located in the United States);
and four manufacturers in Japan (one of whom, Showa Denko Carbon, Inc., has a
plant located in the United States). There are also government-controlled and
independent graphite electrode manufacturers in China. China is the only country
that is not in the free trading markets with respect to graphite electrodes. The
manufacturers in China generally provide less reliable delivery and produce
lower quality products (with higher rates of breakage and specific consumption)
for use in China and in countries which are its traditional trading partners.
China and those partners are generally net importers of graphite electrodes.
The 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 December 1998, the U.S. subsidiary of
SGL Carbon AG commenced a proceeding for reorganization under Chapter 11 of the
U.S. Bankruptcy Code. This proceeding was dismissed in March 2000 on the grounds
that it was not commenced in good faith. It is possible that other competitors
could commence similar proceedings. It is also possible that, as a result of
these proceedings or the increased debt or costs mentioned above, one or more of
our competitors could divest graphite electrode manufacturing facilities. This
could increase the number or change the capabilities of our competitors. It is
not uncommon for companies subject to such proceedings to enjoy, at least
temporarily, a cost advantage as compared to their competitors. This advantage
may enable them to compete more aggressively on price.
In addition to the external circumstances described above, our competitive
position in the industry could be impacted by internal circumstances. These
include decisions by us with respect to maintaining profit margins rather than
market share or other competitive or market strategies.
All of the circumstances described above could adversely affect our market
share or results of operations. They could also affect our ability to institute
price increases or compel us to reduce prices or increase spending on research
and development or marketing and sales, all of which could adversely affect us.
OTHER GRAPHITE AND CARBON PRODUCTS. There are two significant manufacturers
of carbon electrodes in the world (excluding the government-controlled and
independent manufacturers in the non-free trading markets).
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We believe that we are the largest and SGL Carbon AG is the second largest.
We estimate that we supplied about 37% of the carbon electrodes purchased in the
free trading markets in 1999.
There are eight manufacturers of cathodes in the world (excluding the
government-controlled and independent manufacturers in the non-free trading
markets). We believe that we are the largest and SGL Carbon AG is the second
largest. We estimate that we supplied about 30% of the cathodes purchased in the
free trading markets in 1999.
There are about 10 manufacturers of flexible graphite in the world. We
believe that we are the largest and SGL Carbon AG is the second largest. We
estimate that we supplied about 35% of the flexible graphite purchased in the
free trading markets in 1999.
With respect to our other products, we compete with other graphite and
carbon product manufacturers as well as manufacturers of non-graphite or carbon
products used for similar purposes.
OTHER COMPETITIVE FACTORS. The manufacture of high quality graphite and
carbon products is a mature, capital intensive business which requires extensive
process know-how developed over years of experience working with the various raw
materials and with raw material suppliers, furnace manufacturers and steel,
aluminum or other metal producers or other end users (including working on the
specific applications for finished electrodes and cathodes). It also requires
high quality raw material sources and a developed energy supply infrastructure.
There have been no significant new entrants in the manufacture of graphite
electrodes since 1950. We believe that it is unlikely that new "greenfield"
graphite electrode manufacturing facilities will be built during the next
several years due to, among other things, the relatively high cost of building a
new facility. Accordingly, while we cannot assure you that such will be the
case, we believe that it is unlikely that there will be significant new entrants
in the manufacture of these products during the next several years due to, among
other things, the need for extensive manufacturing process know-how as well as
that high cost.
ENVIRONMENTAL MATTERS
Since the 1970s, a wide variety of federal, state, local and foreign laws
and regulations relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances and wastes have
been adopted. These laws and regulations (and the enforcement thereof) are
periodically changed. We are subject to many of these laws and regulations. We
have experienced some level of regulatory scrutiny at most of our current and
former facilities, have been required to take remedial action and have incurred
related costs in the past and may experience further regulatory scrutiny, be
required to take further remedial action and incur additional costs in the
future. Although this has not been the case in the past, these costs could have
a material adverse effect on us in the future.
The principal United States laws and regulations to which we are subject are
described below. The Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, the Safe Drinking Water Act and similar state or
local laws regulate air emissions, water discharges and hazardous waste
generation, treatment, storage, handling, transportation and disposal. The
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986
("SUPERFUND"), and similar state laws provide for responses to and liability for
releases of hazardous substances into the environment. The Toxic Substances
Control Act and related laws are designed to assess the risk of new products to
health and to the environment at early
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developmental stages. In addition, laws adopted or proposed in various states
impose or may impose, as the case may be, reporting or remediation requirements
if operations cease or property is transferred or sold.
Our manufacturing operations outside the United States are subject to the
laws and regulations of the countries in which those operations are conducted.
These laws and regulations primarily relate to pollution prevention and the
control of risks arising from industrial activities having high potential impact
on the environmental quality of the air, water and soil. Regulated activities
include, among other things: use of hazardous substances; packaging, labeling
and transportation of products; management and disposal of toxic wastes;
discharge of industrial and sanitary wastewater; and emissions to the air.
We believe that we are currently in material compliance with the federal,
state, local and foreign environmental laws and regulations to which we are
subject. We have received and continue periodically to receive notices from the
United States 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 PRPs relative contribution of hazardous substances to the site.
Based on information currently available to us, we believe that any potential
liability associated with being named a PRP will not have a material adverse
effect on us.
We have sold or closed a number of facilities that had solid waste
landfills. In the case of sold facilities, we have retained ownership of the
landfills. We have closed and subsequently monitored these landfills, and we
believe that we have done so in accordance with 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.
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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. We currently believe that
recovery under our insurance, if any, will not materially offset liabilities
that have or may become due in connection with antitrust investigations,
lawsuits or claims.
EMPLOYEES
At December 31, 1999, we had 4,404 employees, of which 1,988 were in Europe
(including Russia), 816 were in Mexico and Brazil, 397 were in South Africa, 9
were in Canada, 1,189 were in the United States and 5 were in the Asia/Pacific
region. At December 31, 1999, we had 3,030 hourly employees. Primarily as a
result of implementation of our global restructuring and rationalization plan,
we had 11% fewer employees at December 31, 1999 than at December 31, 1998.
At December 31, 1999, about 62% 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, 1999, about 2,324 employees, or
53% of our employees, were covered by agreements which expire, or are subject to
renegotiation, at various times during 2000 or the 2001 first quarter. We
believe that our relationships with our unions are satisfactory and that we will
be able to renew or extend our collective bargaining or similar agreements on
reasonable terms as they expire. 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. A prolonged work stoppage at any one of our
manufacturing facilities could have a material adverse effect on us.
Excluding our subsidiaries prior to the time when we acquired them, we have
not had any material work stoppages or strikes during the past decade.
ITEM 2. PROPERTIES
We operate the following facilities, which are owned or leased as indicated.
OWNED OR
LOCATION OF FACILITY PRIMARY USE LEASED
-------------------- ----------- --------
UNITED STATES
Irvine, California.... Machine Shop and Sales Office Leased
Niagara Falls, New York Coal Calcining Facility Owned
Cleveland, Ohio....... Flexible Graphite Manufacturing Facility Owned
and Sales Office
Parma, Ohio........... Technology Center Owned
Clarksville, Tennessee Electrode Manufacturing Facility and Owned
Sales Office
Columbia, Tennessee... Electrode and Cathode Manufacturing Owned
Facility and Sales Office
Nashville, Tennessee.. Corporate Headquarters and Sales Office Leased
Lawrenceburg, Tennessee Carbon Specialties Manufacturing Facility Owned
Clarksburg, West Virginia Graphite Specialties Manufacturing Owned
Facility and Sales Office
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EUROPEAN
Calais, France........ Electrode Manufacturing Facility Owned
Notre Dame, France.... Electrode and Graphite Specialties Owned
Manufacturing Facility and Sales Office
Notre Dame, France.... Cathode Manufacturing Facility and Sales Leased
Office
Rungis, France........ Sales Office and Administrative Office Leased
Venissieux, France.... Cathode Manufacturing Facility and Owned
Technology Center
Caserta, Italy........ Electrode Manufacturing Facility Owned
Malonno, Italy........ Machine Shop Owned
Milan, Italy.......... Administrative and Sales Office Leased
Moscow, Russia........ Sales Office Leased
Vyazma, Russia........ Electrode Manufacturing Facility Owned
Pamplona, Spain....... Electrode Manufacturing Facility and Owned
Sales Office
Lausanne, Switzerland(a) Sales Office and European Headquarters Owned
Sheffield, United Kingdom Machine Shop and Sales Office Owned
INTERNATIONAL
Salvador Bahia, Brazil Electrode and Cathode Manufacturing Owned
Facility
Sao Paulo, Brazil..... Sales Office Leased
Welland, Canada....... Sales Office Owned
Beijing, China........ Sales Office Leased
Hong Kong, China...... Sales Office Leased
Monterrey, Mexico..... Electrode Manufacturing Facility and Owned
Sales Office
Singapore............. Sales Office Leased
Meyerton, South Africa Electrode Manufacturing Facility and Owned
Sales Office
- -------------------
(a) Sales office and European headquarters are located in a leased facility in
Gland, Switzerland and will be moved to Lausanne, Switzerland in 2000.
We believe that our facilities, which are of varying ages and types of
construction, are in good condition, are suitable for our operations and
generally provide sufficient capacity to meet our requirements for the
foreseeable future. We do not own any other properties which are material to our
financial condition.
ITEM 3. LEGAL PROCEEDINGS
ANTITRUST INVESTIGATIONS. On June 5, 1997, we were served with subpoenas
issued by the United States District Court for the Eastern District of
Pennsylvania (the "DISTRICT COURT") to produce documents to a grand jury
convened by attorneys for the Antitrust Division of the U.S. Department of
Justice (the "DOJ") and a related search warrant in connection with a criminal
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investigation as to whether there has been any violation of U.S. federal
antitrust law by producers of graphite electrodes. Concurrently, representatives
of Directorate General -Competition of the Commission of the European
Communities, the antitrust enforcement authority of the European Union (the "EU
COMPETITION AUTHORITY"), visited offices of one of our French subsidiaries for
purposes of gathering information in connection with an investigation as to
whether there has been any violation of the antitrust law of the European
Community by those producers. In October 1997, we were served with subpoenas by
the DOJ to produce documents relating to, among other things, our carbon
electrode and bulk graphite businesses.
In December 1997, UCAR's Board of Directors appointed a special committee of
outside directors to exercise the power and authority of UCAR's Board of
Directors in connection with antitrust investigations and related lawsuits and
claims.
In April 1998, pursuant to a plea agreement between the DOJ and the Company,
the DOJ charged UCAR and unnamed co-conspirators with participating from at
least July 1992 until at least June 1997 in an international conspiracy
involving meetings and conversations in the Far East, Europe and the United
States resulting in agreements to fix prices and allocate market shares in the
United States and elsewhere, to restrict co-conspirators' capacity and to
restrict non-conspiring producers' access to manufacturing technology for
graphite electrodes. In addition, pursuant to the agreement, UCAR 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. The fine is payable in six annual
installments of $20 million, $15 million, $15 million, $18 million, $21 million
and $21 million, respectively, commencing July 23, 1998. The agreement was
approved by the District Court and, as a result, under the agreement, we will
not be subject to prosecution by the DOJ with respect to any other violations of
U.S. federal antitrust law occurring prior to April 1998. The payments due in
1998 and 1999 were timely made.
In January 2000, pursuant to a plea agreement with the DOJ, Robert P. Krass,
former Chairman of the Board, President and Chief Executive Officer, who retired
and resigned from all positions with us in March 1998, 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 a term of incarceration and payment
of a fine. In February 2000, pursuant to a plea agreement with the DOJ, Robert
J. Hart, former Senior Vice President and Chief Operating Officer, who retired
and resigned from all positions with us in March 1998, pled guilty to a similar
charge and was sentenced to a term of incarceration and payment of a fine. In
January 2000, George S. Schwegler, former Director, Export Sales Europe, was
indicted by the DOJ on similar charges. We do not intend to reimburse Messrs.
Krass and Hart for their fines or Mr. Schwegler for any costs or fines he may
incur as a result of such indictment.
In April 1998, the Canadian Competition Bureau (the "COMPETITION BUREAU")
commenced a criminal investigation as to whether there has been any violation of
Canadian antitrust law by producers of graphite electrodes. In March 1999,
pursuant to a plea agreement between our Canadian subsidiary and the Competition
Bureau, our Canadian subsidiary pled guilty to a one count charge of violating
Canadian antitrust law in connection with the sale of graphite electrodes and
was sentenced to pay a fine of Cdn. $11 million. The agreement was approved by
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the court and, as a result, under the agreement, we will not be subject to
prosecution by the Competition Bureau with respect to any other violations of
Canadian antitrust law occurring prior to the date of the agreement. The fine
was timely paid.
We became aware, in June 1998, that the Japanese antitrust enforcement
authority had commenced an investigation as to whether there has been any
violation of Japanese antitrust law by producers and distributors of graphite
electrodes. In addition, we became aware, in October 1999, that the Korean
antitrust authority had commenced an investigation as to whether there has been
a violation of Korean antitrust law by producers and distributors of graphite
electrodes. We have no facilities or employees in Japan or Korea. We believe
that, among other things, we have good defenses to any claim that we are subject
to the jurisdiction of either such authority. In March 1999, the Japanese
antitrust authority issued a warning letter to the four Japanese graphite
electrode producers. While the Japanese antitrust authority did not issue a
similar warning to us, the warning letter issued to the Japanese producers did
reference us as a member of an alleged cartel.
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. The statement does not set forth any proposed
fines or the impact which cooperation by us or other producers would have on
their respective fines, if any. The maximum fine for such a violation is ten
percent of a company's revenue during the year preceding the year in which the
fine is assessed. We believe that we have provided substantial cooperation to
the EU Competition Authority and are, therefore, entitled to a reduction in the
amount of any fine which would otherwise be assessed. We intend to vigorously
protect our interests in connection with such proceeding. We believe that
proceedings of this nature typically continue for about six to twelve months
before any fine is assessed. Any such assessment would be subject to appeal
before the Court of First Instance in Luxembourg, although the fine or
collateral security therefor would be payable about three months after such
assessment.
In January 2000, Mitsubishi was indicted by the DOJ on a one count charge of
violating U.S. federal antitrust law in connection with the sale of graphite
electrodes.
We are continuing to cooperate with the DOJ and the Competition Bureau in
their continuing investigations of other producers and distributors of graphite
electrodes. We are also cooperating with the EU Competition Authority in its
on-going investigation. In connection therewith, we have produced and are
producing documents and witnesses. It is possible that antitrust investigations
seeking, among other things, to impose fines and penalties could be initiated by
authorities in other jurisdictions.
The guilty pleas make it more difficult for us to defend against other
investigations as well as civil lawsuits and claims.
ANTITRUST LAWSUITS. In 1997, various producers of graphite electrodes
(including us) were served with complaints commencing various antitrust class
action lawsuits. Subsequently, the
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<PAGE>
complaints were either withdrawn without
prejudice to refile or consolidated into a single complaint in the District
Court (the "ANTITRUST CLASS ACTION LAWSUIT"). In the consolidated complaint to
the antitrust class action lawsuit, the plaintiffs allege that the defendants
violated U.S. federal antitrust law in connection with the sale of graphite
electrodes. In August 1998, the District Court certified a class of plaintiffs
consisting of all persons who purchased graphite electrodes in the U.S. (the
"CLASS") directly from the defendants during the period from July 1, 1992
through June 30, 1997 (the "CLASS PERIOD").
In 1998, various producers of graphite electrodes (including us), Union
Carbide and Mitsubishi were served with a complaint by Nucor Corporation and an
affiliate commencing a civil antitrust and fraudulent transfer lawsuit in the
District Court (the "NUCOR LAWSUIT"). In the complaint to the Nucor lawsuit, the
plaintiffs allege that the defendants violated U.S. federal antitrust law in
connection with the sale of graphite electrodes and that payments to Union
Carbide and Mitsubishi in connection with the 1995 Equity Recapitalization
violated applicable state fraudulent transfer laws. The complaint seeks, among
other things, an award of treble damages resulting from such alleged antitrust
violations and an order to have payments made by us to Union Carbide and
Mitsubishi in connection with the 1995 Equity Recapitalization declared to be
fraudulent conveyances and returned to us for purposes of enabling us to satisfy
any judgments resulting from such alleged antitrust violations.
In 1998 and 1999, various producers of graphite electrodes (including us)
were served by steelmakers in the U.S. and Canada with complaints and petitions
commencing eight separate civil antitrust lawsuits in various courts (the "OTHER
INITIAL LAWSUITS"). Such complaints and petitions allege that the defendants
violated U.S. federal, Texas or Canadian antitrust laws and Canadian conspiracy
law in connection with the sale of graphite electrodes.
In 1999, various producers of graphite electrodes (including us) were served
two complaints commencing two separate civil antitrust lawsuits in the District
Court (the "FOREIGN CUSTOMER LAWSUITS"). The first complaint was filed by 26
steelmakers and related parties, all but one of whom are located outside the
United States, and the second complaint was filed by 4 steelmakers, all of whom
are located outside the United States. In each complaint, the plaintiffs allege
that the defendants violated U.S. federal antitrust laws in connection with the
sale of graphite electrodes sold or sourced from the United States and those
sold and sourced outside the United States. The plaintiffs seek, among other
things, an award of treble damages resulting from such alleged antitrust
violations. We believe that we have strong defenses against claims alleging that
purchases of graphite electrodes outside the United States are actionable under
U.S. federal antitrust law.
All antitrust lawsuits against one producer of graphite electrodes, SGL
Carbon Corporation, the U.S. subsidiary of SGL Carbon AG, were stayed as a
result of the filing in December 1998 of a petition by SGL Carbon Corporation in
the United States District Court for the District of Delaware for reorganization
in a proceeding under Chapter 11 of the U.S. Bankruptcy Code. In December 1999,
the Third Circuit Court of Appeals ruled that the proceeding should be dismissed
because it was not filed in good faith. The proceeding was dismissed in March
2000.
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In November 1998, the distribution trustee for a company liquidated under
the U.S. Bankruptcy Code applied for an order from the U.S. District Court for
the District of Ohio to compel discovery from us to determine whether to
institute proceedings against us for alleged violations of U.S. federal
antitrust law in connection with the sale of carbon electrodes. The guilty pleas
described above do not relate to carbon electrodes. The application was
voluntarily withdrawn when we agreed to provide certain documents to the
distribution trustee. We and the distribution trustee subsequently entered into
an agreement tolling applicable statutes of limitations. Although no lawsuit
relating to such alleged violations has been commenced by the distribution
trustee, the distribution trustee has threatened to do so.
In December 1999, we and another producer of carbon electrodes were served
with a complaint by Globe Metallurgical, Inc. commencing a civil antitrust
lawsuit in the District Court (the "GLOBE LAWSUIT"). In the complaint, the
plaintiff alleges that the defendants violated U.S. federal antitrust law in
connection with the sale of carbon electrodes and seeks, among other things, an
award of treble damages resulting from such alleged violations
Certain customers who purchased graphite electrodes, carbon electrodes or
other products from us have threatened to commence antitrust lawsuits against us
in the United States or in other jurisdictions with respect to the subject
matter of the investigations and lawsuits described above.
Through the date hereof, except as described in the next paragraph, we have
settled all of the lawsuits described above, certain of the threatened civil
antitrust lawsuits and certain possible antitrust claims by certain other
customers who negotiated directly with us. The settlements cover virtually all
of the actual and potential claims against us (but not other defendants) by
customers in the United States and Canada arising out of alleged antitrust
violations occurring prior to the date of the respective settlements in
connection with the sale of graphite electrodes. 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 thereunder
have been timely made. Amounts due under the settlement of the antitrust class
action will increase if additional claims are filed by members of the class
(which includes purchasers of graphite electrodes who are located outside the
United States but who purchased graphite electrodes from one of our U.S.
subsidiaries) or if a purchaser of semi-graphitic electrodes is determined to be
a member of the class and such purchaser files a claim thereunder.
The foreign customer lawsuits and the Globe lawsuit have not been settled
and are still in their early stages. We have been vigorously defending against
these lawsuits as well as all threatened lawsuits and possible unasserted
claims, including those mentioned above. We may at any time, however, settle
these lawsuits as well as any threatened lawsuits and possible claims and are
actively negotiating settlements of certain of these lawsuits and claims.
It is possible that additional civil antitrust lawsuits seeking, among other
things, to recover damages could be commenced against us in the United States
and in other jurisdictions.
1997 ANTITRUST EARNINGS CHARGE. We recorded a pre-tax charge of $340 million
against results of operations for 1997 as a reserve for potential liabilities
and expenses in connection
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with antitrust investigations and related lawsuits and claims. The $340 million
reserve is calculated on a basis net of imputed interest on installment payments
of the DOJ fine. While actual liabilities and expenses (including settled
investigations, lawsuits and claims as well as the continuing investigations by
the EU Competition Authority and unsettled pending, threatened and possible
lawsuits and claims mentioned above) could be materially higher than $340
million, to the extent that these liabilities and expenses are reasonably
estimable, at March 1, 2000, such amount continues to represent our estimate of
these liabilities and expenses. In the aggregate, the fines, settlements and
expenses described above are within the amounts we used to evaluate the $340
million charge.
Through December 31, 1999, we have paid an aggregate of $209 million of
fines and net settlement and expense payments and $7 million of imputed
interest. At December 31, 1999, $131 million remains in the reserve and, based
on information known to us at March 1, 2000, the aggregate amount of remaining
committed payments for fines and settlements was about $79 million. The
aggregate amount of remaining committed payments for imputed interest was about
$13 million. About $26 million of the committed payments for fines and
settlements are due on or before December 31, 2000. Amounts due under the
settlement of the antitrust class action may be increased if additional claims
are filed by members of the class.
STOCKHOLDER DERIVATIVE LAWSUIT. In March 1998, UCAR was served with a
complaint commencing a stockholder derivative lawsuit in the Connecticut
Superior Court (Judicial District of Danbury). Certain former and current
officers and directors of UCAR were named as defendants. UCAR was named as a
nominal defendant. In the complaint, the plaintiff alleged that the defendants
breached their fiduciary duties in connection with alleged non-compliance us and
our employees with antitrust law. The plaintiff also alleged that certain of the
defendants sold common stock while in possession of materially adverse
non-public information relating to such non-compliance with antitrust laws. As
described below, in October 1999, UCAR and the individual defendants entered
into an agreement settling this lawsuit. The settlement received court approval
in December 1999, and the appeal period expired in January 2000.
SECURITIES CLASS ACTION LAWSUIT. In April and May 1998, UCAR was served with
complaints commencing securities class actions which were filed in the U.S.
District Court for the District of Connecticut. The complaints were consolidated
into a single complaint and the Florida State Board of Administration was
designated lead plaintiff. UCAR and certain former and current officers and
directors of UCAR were named as defendants. The class of plaintiffs consists of
all persons (other than the defendants) who purchased common stock during the
period from August 1995 through March 1998. In the consolidated complaint, the
lead plaintiff alleged that, during such period, the defendants violated U.S.
federal securities law in connection with purchases and sales of common stock by
making material misrepresentations and omissions regarding alleged violations of
antitrust law and sought, among other things, to recover damages resulting from
such alleged violations. As described below, in October 1999, UCAR and the
individual defendants entered into an agreement settling this lawsuit. The
settlement received court approval in January 2000, and the appeal period
expired in February 2000.
SETTLEMENT OF SECURITIES CLASS ACTION AND STOCKHOLDER DERIVATIVE LAWSUITS.
In October 1999, UCAR and the individual defendants entered into agreements
settling the securities class
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action and stockholder derivative lawsuits. Under the agreements, a total of
$40.5 million was contributed to escrow accounts for the benefit of former and
current stockholders who are members of the class of plaintiffs for whom the
securities class action was brought as well as plaintiffs' attorney's fees. We
contributed $11.0 million and the insurers under our directors and officers'
insurance policies at the time the lawsuits were filed contributed the balance
of $29.5 million. In addition, Mary B. Cranston, a new outside director
acceptable to both UCAR and the lead securities class action plaintiff, the
Florida State Board of Administration, the eighth largest state employees'
pension fund, has been added to UCAR's Board of Directors. We have incurred
about $2.0 million of unreimbursed expenses related to the lawsuits. These
expenses, together with the $11.0 million, were recorded as a one-time charge to
operations of $13.0 million in the 1999 third quarter.
OTHER PROCEEDINGS AGAINST US. In December 1999, the Supreme Court of Puerto
Rico dismissed the final outstanding appeal of the prior dismissals of lawsuits
by persons residing near our former facility in Yabucoa, Puerto Rico alleging
property damage and personal injury due to air emissions and noise from the
facility.
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 UCAR'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 are Mitsubishi International Corporation, a U.S. subsidiary
of Mitsubishi, and two of the respective representatives of Mitsubishi and Union
Carbide who served on UCAR's Board of Directors at the time of the 1995 Equity
Recapitalization, Hiroshi Kawamura and Robert D. Kennedy. Mr. Kennedy, who was
a director of UCAR 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 UCAR had
engaged in illegal graphite electrode price fixing activities and that any
determination of UCAR'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. Mitsubishi was indicted by the
DOJ in January 2000 for aiding and abetting those activities. In addition, we
allege that, in January 1995, UCAR did not have the statutory capital surplus
required to lawfully authorize the payments that UCAR made to its former
parents. We also allege that Mitsubishi and Union Carbide were unjustly enriched
by receipts from their investments in UCAR and that they knowingly induced or
actively and substantially assisted former senior management of UCAR to engage
in illegal graphite electrode price fixing activities in breach of their
fiduciary duties to UCAR.
Based on the allegations summarized above, we believe that Mitsubishi and
Union Carbide are liable for 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.
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Litigation such as this lawsuit is complex. We believe that our claims are
strong, and are confident about the ultimate outcome. Accordingly, we afforded
the defendants the opportunity to settle this lawsuit in advance of filing the
complaint in the interest of achieving a fair and expeditious resolution. We
currently intend to vigorously pursue this lawsuit to trial.
Complex litigation can be lengthy and expensive. We expect to incur between
$10 million and $20 million for legal expenses to pursue this lawsuit through
trial. These expenses will be accounted as operating expenses and will be
accrued as incurred. This lawsuit is in its earliest stages, the ultimate
outcome of litigation such as this lawsuit is subject to many uncertainties,
both substantive and procedural, including motions to dismiss, statute of
limitation and other defenses, and claims for indemnification and other
counterclaims. We may at any time settle this lawsuit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The common stock is listed on the NYSE under the trading symbol "UCR." The
closing sale price of the common stock was $17 13/16 on December 31, 1999, the
last trading day of our last fiscal year. The following table sets forth, for
the periods indicated, the high and low closing sales prices for the common
stock as reported by the NYSE:
HIGH LOW
1998:
First Quarter......................... $41 1/4 $27 1/2
Second Quarter........................ $35 1/8 $29
Third Quarter......................... $30 5/8 $12 1/4
Fourth Quarter........................ $20 7/16 $14 5/8
1999:
First Quarter......................... $19 1/2 $14 1/8
Second Quarter........................ $26 1/8 $13 3/4
Third Quarter......................... $28 1/16 $22 1/16
Fourth Quarter........................ $24 1/2 $15 7/8
As of March 1, 2000, there were 58 record holders of common stock. We
estimate that about 5,400 stockholders are represented by nominees.
The common stock is included in Standard & Poor's 400 Mid-Cap Index and the
Russell 2000 Index.
Effective August 7, 1998, UCAR adopted a Stockholder Rights Plan (the
"RIGHTS PLAN"). Under the Rights Plan, one preferred stock purchase right (a
"RIGHT") was distributed on September 21, 1998 to stockholders of record on
August 20, 1998 as a dividend on each share of common stock outstanding on the
record date. Each share of common stock issued after the record date is
accompanied by a Right.
When a Right becomes exercisable, it entitles the holder to buy one
one-thousandth of a share of a new series of preferred stock for $110. The
Rights are subject to adjustment upon the occurrence of certain dilutive events.
The Rights will become exercisable only when a person or group becomes the
beneficial owner of 15% or more of the outstanding shares of common stock or 10
days after a person or group announces a tender offer to acquire beneficial
ownership of 15% or more of the outstanding shares of common stock. No
certificates representing the Rights will be issued, and the Rights are not
transferable separately from the common stock, unless the Rights become
exercisable.
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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 UCAR is acquired after the Rights become exercisable, the Rights
will entitle those holders to buy the acquiring company's common shares at a
similar discount.
UCAR is entitled to redeem the Rights for one cent per Right prior to the
time when the Rights become exercisable. If not redeemed, the Rights will expire
on August 7, 2008. For stockholders who owned more than 15% of the outstanding
shares of common stock on August 7, 1998, the thresholds described above are
22.5% (and not 15%) of the outstanding shares of common stock.
The preferred stock issuable upon exercise of Rights consists of Series A
Junior Participating Preferred Stock, par value $.01 per share, of UCAR. In
general, each share of that preferred stock will be entitled to a minimum
preferential quarterly dividend payment equal to the greater of $10 per share or
1,000 times the quarterly dividend declared on the common stock, will be
entitled to a liquidation preference of $110,000 and will have 1,000 votes,
voting together with the common stock.
DIVIDEND AND STOCK REPURCHASE POLICIES AND RESTRICTIONS
It is the current policy of UCAR's Board of Directors to retain earnings to
finance 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 UCAR's Board of Directors and will be dependent upon our financial
condition, results of operations, cash requirements and future prospects, the
limitations contained in the New Senior Facilities and other factors deemed
relevant by UCAR's Board of Directors. We have a stock repurchase program and
may reactivate it at any time. We do not anticipate paying any cash dividends.
UCAR is a holding company that derives substantially all of its cash flow
from UCAR Global. Consequently, UCAR's ability to pay dividends or repurchase
common stock is dependent upon the earnings of UCAR Global and its subsidiaries
and the distribution of those earnings by UCAR Global to UCAR.
Under the New Senior Facilities, UCAR is permitted to pay dividends on and
repurchase common stock, and UCAR Global is permitted to pay dividends to UCAR
for those purposes, only in an aggregate amount of up to $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, UCAR Global is permitted to pay dividends to UCAR in respect of
UCAR's administrative fees and expenses and to fund payments in connection with
antitrust, securities and stockholder
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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 UCAR 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 $130 million (which $130 million is reduced
by the amount of certain debt incurred by us that is not incurred under the New
Senior Facilities). UCAR Global is also permitted to pay dividends to UCAR of up
to $15 million for the purpose of making an investment in UCAR Graph-Tech and
may also distribute the capital stock of UCAR Graph-Tech to UCAR.
RECENT SALES OF UNREGISTERED SECURITIES
In 1998 and 1999, UCAR sold an aggregate of 228,177 shares of common stock
to certain members of senior management under executive employee stock purchase
program adopted by UCAR's Board of Directors in September 1998. The shares were
sold for an aggregate of $3,631,251. These sales were exempt from registration
under Section 4(2) of the Securities Act of 1933 because the shares were sold in
transactions not involving any public offering.
Certain officers and other employees elected to defer compensation pursuant
to our compensation deferral program in 2000. To date, an aggregate of
$1,075,476 was deferred, payment of which will be based on the performance of
75,623 shares of common stock based on the market price of the common stock on
the date of deferral. Such transactions were exempt from registration under
Section 4(2) of the Securities Act of 1933 because the transactions did not
involve the public offering of securities.
ITEM 6. SELECTED FINANCIAL DATA
The following selected annual consolidated financial data (excluding the
"quantity of graphite electrodes sold") have been derived from the audited
Consolidated Financial Statements at the dates and for the periods indicated.
The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements at December
31, 1998 and 1999 and for each of the years in the three-year period ended
December 31, 1999 and the related notes thereto included elsewhere in this
Report.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(Dollars in millions, except per share data)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Net sales.............................................. $ 901 $ 948 $1,097 $ 947 $ 831
Gross profit........................................... 345 365 411 343 258
Selling, administrative and other expenses............. 115 90 115 103 86
Restructuring charges (credit)(a)...................... 30 - - 86 (6)
Impairment loss on long-lived Russian assets........... - - - 60 -
Impairment loss on long-lived
graphite specialties assets....................... - - - - 35
Antitrust investigations
and related lawsuits and claims(b)............. - - 340 - -
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FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(Dollars in millions, except per share data)
Securities class action and stockholder
derivative lawsuits................................. - - - - 13
Operating profit (loss)................................ 189 268 (58) 77 130
Interest expense....................................... 93 61 64 73 84
Income (loss) before extraordinary item ............... 25 145 (160) (30) 42
Extraordinary item, net of tax(c)...................... 37 - - 7 -
Net income (loss)...................................... (12) 145 (160) (37) 42
Earnings (loss) per common share:
Basic: Income (loss) before extraordinary
item....................................... $ 0.55 $3.15 $(3.49) $(0.66) $0.94
Net income (loss)............................ (0.26) 3.15 (3.49) (0.83) 0.94
===== ==== ===== ===== ====
Weighted average common shares
outstanding (IN THOUSANDS)................. 45,960 46,274 45,963 44,972 45,114
Diluted:Income (loss) before extraordinary
item....................................... $ 0.52 $3.00 $(3.49) $(0.66) $0.91
Net income (loss)............................ (0.24) 3.00 (3.49) (0.83) 0.91
===== ==== ===== ===== ====
Weighted average common shares
outstanding (IN THOUSANDS)................ 48,763 48,469 45,963 44,972 46,503
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.............................. $ 53 $ 95 $ 58 $ 58 $ 17
Total assets........................................... 904 1,017 1,262 1,137 933
Total debt............................................. 668 635 732 804 722
Stockholders' equity (deficit)......................... (141) 17 (227) (287) (293)
Working capital........................................ 215 263 94 203 105
OTHER DATA:
Gross profit margin................................... 38.3% 38.5% 37.5% 36.2% 31.0%
Operating profit (loss) margin........................ 21.0 28.3 (5.3) 8.1 15.6
Depreciation and amortization......................... $ 38 $ 36 $ 49 $ 51 $ 45
Capital expenditures.................................. 65 62 79 52 56
EBITDA (adjusted for non-cash restructuring
charges and impairment losses)(d)................... 249 304 (9) 217 212
Cash flow provided by (used in) operations......... 130 172 172 (29) 80
Cash flow used in investing activities........ (116) (104) (221) (31) (39)
Quantity of graphite electrodes sold
(THOUSANDS OF METRIC TONS)(e)(f).................... 217 205 242 211 206
</TABLE>
- ----------------------
(a) For 1995, represents costs recorded in connection with closing of graphite
electrode operations at Columbia, Tennessee. These costs consisted primarily
of write-offs of fixed assets and other shutdown costs. For 1998, represents
costs recorded in connection with closing graphite electrode operations in
Welland, Canada and Berlin, Germany and the consolidation of certain
corporate administrative offices. These costs consisted primarily of
severance, write-offs of fixed assets, and environmental and other shutdown
costs. For 1999, represents a net reduction in the estimate of shutdown
costs recorded in 1998.
(b) Represents estimated potential liabilities and expenses in connection with
antitrust investigations and related lawsuits and claims.
(c) The 1995 extraordinary item resulted from early extinguishment of debt in
connection with redemption of 12% senior subordinated notes due 2005 and a
refinancing of senior credit facilities. The 1998 extraordinary item
resulted from early extinguishment of debt in connection with refinancing of
the senior credit facilities.
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(d) EBITDA, for this purpose, means operating profit (loss), plus depreciation,
amortization, write-down of graphite specialties inventory, impairment
losses on long-lived assets and the portion of restructuring charges
applicable to non-cash asset write-offs. The amount of restructuring charges
applicable to non-cash asset write-offs was $22 million for 1995, $29
million for 1998 and $6 million credit in 1999. We believe that EBITDA is
generally accepted as providing useful information regarding a company's
ability to incur and service debt. EBITDA should not be considered in
isolation or as a substitute for net income, cash flows from continuing
operations or other consolidated income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity. Our method for calculating EBITDA
may not be comparable to that used by other companies or provided for in our
senior credit facilities.
(e) Excludes graphite electrodes sold by our South African subsidiary, before it
became wholly owned on April 21, 1997, of 27,000 metric tons in 1995, 26,000
metric tons in 1996 and 8,000 metric tons in 1997.
(f) Management believes the quantity of graphite electrodes sold in the 1997
fourth quarter was impacted by customer buy-ins in advance of price
increases effective in January 1998.
The following quarterly selected consolidated financial data have been
derived from the Consolidated Financial Statements for the periods indicated,
which have not been audited. The selected quarterly consolidated financial data
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements at December 31, 1998 and 1999 and for each of the years in
the three-year period ended December 31, 1999 and the related notes thereto
included elsewhere in this Report.
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(Dollars in millions, except per share data)
1998:
Net sales..................... $244 $248 $233 $222
Gross profit.................. 93 96 82 72
Net income (loss)(a) (b)...... 35 31 (113) 10
Basic income (loss) per share
before extraordinary item.... $0.77 $0.70 $(2.51) $0.39
Basic net income (loss) per
share........................ 0.77 0.70 (2.51) 0.22
==== ==== ====== ====
Diluted income (loss) per
share before extraordinary
item......................... $0.74 $0.67 $(2.51) $0.38
Diluted net income (loss) per
share........................ 0.74 0.67 (2.51) 0.22
==== ==== ====== ====
1999:
Net sales..................... $202 $211 $210 $208
Gross profit (d).............. 63 73 70 52
Net income (loss)(c)(d)....... 14 20 21 (13)
Basic net income (loss) per
share........................ $0.30 $0.45 $0.46 $(0.28)
Diluted net income (loss) per
share........................ 0.30 0.44 0.45 (0.28)
==== ==== ==== ======
------------------
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(a) The 1998 third quarter includes a restructuring charge of $86 million
recorded in connection with closing graphite electrode operations in
Welland, Canada and Berlin, Germany and the consolidation of certain
administrative offices and an impairment loss of $60 million associated with
our Russian operations.
(b) The 1998 fourth quarter includes an extraordinary pre-tax charge of $11
million ($7 million after tax) associated with early extinguishment of debt.
(c) The 1999 third quarter includes a restructuring credit of $6 million related
to lower net anticipated demolition costs resulting primarily from the
outsourcing of a majority of the planned demolition at our plant in Welland,
Canada and, to a lesser extent, lower severance and related costs. The 1999
third quarter also includes a $13 million charge for liabilities and
expenses in connection with settlement of securities class action and
stockholder derivative lawsuits.
(d) The 1999 fourth quarter includes an impairment loss of $35 million
associated with our long-lived graphite specialties assets and an inventory
write-down of $8 million associated with graphite specialty products.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
COMPANY BACKGROUND. In 1995, UCAR International Inc. ("UCAR" and, together
with its subsidiaries, "WE," "US" or "OUR") consummated a leveraged equity
recapitalization (the "1995 EQUITY RECAPITALIZATION"), an initial public
offering of common stock, a redemption of a portion of the subordinated notes
(the "SUBORDINATED NOTES") issued in connection with the 1995 Equity
Recapitalization and a refinancing of the senior credit facilities established
in connection with the 1995 Equity Recapitalization with new senior credit
facilities (the "EXISTING SENIOR FACILITIES").
In late 1996, late 1997 and early 1998, we acquired substantially all of the
equity of our Russian subsidiary. The aggregate investment was $57 million, plus
expenses. In January 1997, we acquired 70% of the outstanding shares of Carbone
Savoie S.A.S. ("CARBONE SAVOIE"), previously a wholly owned subsidiary of
Pechiney S.A. The purchase price was $33 million, plus expenses. Carbone Savoie
has facilities in Notre Dame and Venissieux, France. In February 1997, through a
newly formed 70%-owned German subsidiary, we acquired the graphite electrode
business of Elektrokohle Lichtenberg AG, based in Berlin, Germany. The aggregate
purchase price paid by our German subsidiary for the acquired assets was $15
million, plus expenses. In April 1997, we acquired the outstanding shares of our
then 50%-owned South African affiliate from our then joint venture partner in
South Africa. The purchase price was $75 million, plus expenses.
In 1997, we refinanced the Existing Senior Facilities and repurchased $92
million of common stock. We also initiated, with the assistance of consultants,
various projects to integrate global operations. The costs associated with these
projects aggregated about $18 million. We estimate that, under current
conditions, these projects will have a pay-back period of two years ending in
2000. Additionally, in 1997, UCAR's Board of Directors accelerated the vesting
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of outstanding performance stock options associated with 1998 performance
targets that resulted in a non-cash charge of $12 million.
BUSINESS STRENGTHS AND STRATEGIES. We are the world's largest manufacturer
of high quality graphite and carbon electrodes and cathodes as well as flexible
graphite. We have a global business, selling our products in more than 80
countries and owning 15 manufacturing facilities located on four continents. We
operate in two business segments: graphite electrodes, which are our principal
products; and graphite and carbon products, which include carbon electrodes,
graphite and carbon cathodes, flexible graphite, and graphite and carbon
specialties. Our graphite and carbon products business segment contributes about
one-third of our net sales.
Graphite electrodes are consumed primarily in the production of steel in
electric arc furnaces, the steelmaking technology used by all "mini-mills."
Mini-mills constitute the growth sector of the steel industry. Graphite
electrodes are also used for refining steel in ladle furnaces and in other
smelting processes. Carbon electrodes are used primarily in the production of
silicon metal, which is used in the manufacture of aluminum. Cathodes are used
as lining for furnaces that smelt aluminum. Flexible graphite, a material made
from natural graphite, is used in gaskets and for other sealing purposes. We are
developing applications for advanced natural graphite material in the fuel cell,
heat management and fire protection industries. In addition to the steel and
metals industries, we sell other graphite and carbon products to the
semiconductor, automotive, and aerospace industries.
We have the largest share of the free trading markets in all of our major
product lines. We believe that our average cost of sales of graphite electrodes
is currently the lowest among major producers in our industry. In addition to
our large market share and position as a low-cost producer of high quality
products, we believe our strengths include our new management team, our global
manufacturing base which includes multiple low cost locations and fully
integrated state-of-the-art facilities, our exceptional customer technical
service, our diversified customer base and our product innovation and process
improvement capabilities.
Our strategic goal is to be the best global low cost manufacturer and
customer service-driven company with the best product performance in the
graphite and carbon industry. We are focused on reducing costs and improving
operating efficiencies, improving product quality and technical and commercial
customer service, developing strategic alliances and growth opportunities, and
developing and expanding new and existing profitable technologies. We seek to be
the lowest cost supplier in our industry and to use that to our competitive
advantage. We seek to use our strategies and build on our strengths to leverage
earnings growth within existing product lines and through new product innovation
and penetration of related new and niche markets.
GLOBAL RESTRUCTURING AND RATIONALIZATION PLAN. UCAR's Board of Directors
adopted a global restructuring and rationalization plan in September 1998 and we
launched new initiatives to enhance the plan in October 1999. The plan is
intended to enhance stockholder value by focusing on optimizing margins,
maximizing free cash flow, generating growth in earnings and strengthening
competitiveness through operating and overhead cost reductions and plant
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rationalization. The plan is also intended, over the long term, to strengthen
our position as a low cost supplier to the steel and metals industries and, over
the near term, to respond to global economic conditions that have been adversely
impacting our customers. We believe that the plan is the most aggressive major
cost reduction plan currently being implemented in the graphite and carbon
industry.
The original plan included plant rationalization, plant cost reduction and
overhead cost reduction. The original plan resulted in a 1998 third quarter
restructuring charge of $86 million, of which $29 million was a non-cash charge.
We also recorded a 1998 third quarter impairment loss on long-lived Russian
assets of $60 million.
We achieved cost savings of over $73 million in 1999, exceeding our original
target of $64 million. We achieved savings of $41 million in cost of sales,
including $33 million in graphite electrode cost of sales and $8 million in
graphite and carbon product cost of sales, as well as savings of $32 million in
overhead and taxes. We reduced overhead by $17 million, or 17%, in 1999 as
compared to 1998.
As planned, we ceased manufacturing operations at our plant in Berlin,
Germany in 1998. Our Welland, Canada plant ceased production activities in April
1999. We completed, ahead of schedule, our consolidation of administrative
offices with the relocation of headquarter activities to Nashville, Tennessee
and European administration activities in our Swiss subsidiary. About 366
positions have been eliminated pursuant to those elements of the plan.
We believe that the cost savings under the plan have enabled us to
strengthen our competitiveness. We also believe that we must continue to enhance
our focus on cost savings to achieve the ultimate objectives of the plan.
Accordingly, in October 1999, we announced and launched new initiatives to add
$30 million of further targeted cost savings to the plan by the end of 2002. The
following table summarizes the new targets of the plan.
SUMMARY OF ENHANCED TARGETED COST SAVINGS AS MEASURED BY
YEAR END ANNUALIZED RUN RATES
(Dollars in millions)
COST ITEM 2000 2001 2002
--------- ---- ---- ----
Cost of sales (graphite electrodes)............. $ 59 $ 70 $ 75
Cost of sales (graphite and carbon products) ... 9 11 12
Total overhead (consisting of research and
development, selling, administrative and
other expenses and other income and expense). 25 32 37
Interest expense................................ 12 24 31
Provision for income taxes...................... 7 8 10
---- ----- ----
NEW SAVINGS TARGETS............................. $112 $145 $165
==== ==== ====
Original savings targets........................ $111 $135 $135
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Among other things, we increased the number of identified plant cost
reduction projects from the more than 120 originally identified to more than
230. Several of the new projects are expected to result in additional benefits
in terms of product quality. We are also evaluating every aspect of our supply
chain performance for further improvements, including realignment and
standardization of critical business processes, standardization of enterprise
wide systems, and improvement of information technology infrastructure and
interfaces with trading partners. Our targets include decreasing inventories, as
measured against inventory levels and based on production levels for the 1999
first nine months (annualized), by over 20%, to about $180 million, and reducing
our cash cycle time by about one-third.
Further, we completed a global benchmarking study during the 1999 third
quarter that identified opportunities for performance improvement and cost
savings in certain key global administrative and transaction processing
functions. These opportunities should allow for the achievement of our target of
reducing selling and administrative expenses from 11% of net sales in 1998 to 8%
of net sales by the end of 2002. Based on the study, work processes are being
redesigned to, among other things, seek to improve shared services for better
global efficiencies and standardize enterprise wide resource planning systems.
We have evaluated and continue to refine our debt, working and permanent
capital, and organizational structures to improve cash management and reduce tax
expense. The debt recapitalization we completed in February 2000, along with our
tax planning initiatives, should allow us to benefit from our existing and
anticipated tax credits, helping us to achieve our targeted effective average
annual tax rate of 25% over the four years ending 2002. The majority of the
savings expected from implementation of these opportunities are anticipated to
be realized during 2001 and 2002.
Our enhanced plan contemplates the reduction of gross debt to a target of
$550 million by the end of 2002 and a substantial reduction in annual interest
expense. Our ability to achieve this target and reduction could be affected
materially by such factors as changes in market interest rate levels, delays in
completing or failures to complete financing options for our flexible graphite
business or strategic alliances, joint ventures or acquisitions, changes in
strategic plans, or changes in conditions affecting us, our industry or our cost
saving, tax planning or other initiatives.
POWER OF ONE BUSINESS TRANSFORMATION INITIATIVE. In support of our strategy,
we have launched a global business transformation initiative entitled POWER OF
ONE. POWER OF ONE is a coordinated global self-assessment and business process
rationalization and transformation initiative driving one consistent theme
throughout our organization: "becoming the best." We expect the initiative to
accelerate development and implementation of business opportunities and develop
leadership skills more broadly within all management levels as well as support
our efforts to reduce costs and working capital needs, improve efficiencies and
product quality, shorten cycle times and achieve "best in class" performance.
The initiative will require an investment of $5 million in 2000 and $20 million
to $25 million over the three years ending 2002. We believe, however, that most
of this investment will be funded from cost savings expected to be realized.
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CHANGES AFFECTING OUR GRAPHITE SPECIALTIES BUSINESS. This business accounted
for about 9% of net sales in 1999. During late 1999, the graphite specialties
business experienced significant adverse change due to a decline in demand for
graphite specialties, particularly from certain segments of the semiconductor
industry, growth in supply due to expansion by other producers, a decline in
prices for graphite specialties, and delays in bringing new or improved products
to market. The assets and inventory of this business are located primarily at
our plant in Clarksburg, West Virginia. Since the future estimated undiscounted
cash flows expected to result from the use of these assets were below their
respective carrying amounts, in the 1999 fourth quarter, we recorded an
impairment loss of $35 million for the unrecoverable portion of these assets,
effectively writing down the carrying value of these assets to their estimated
fair value of $6 million, and an inventory write-down of $8 million to reduce
the carrying amount of the inventory to the lower of cost or market. Due to
these same factors, in February 2000, we announced that we would restructure the
business. The key elements of the restructuring consist of elimination of
certain product lines and rationalization of operations to reduce costs and
improve profitability of remaining product lines. Accordingly, in the 2000 first
quarter, we expect to record a restructuring charge of $8 million. The charge is
expected to consist of $6 million of cash expenditures and $2 million of
non-cash charges. We expect the restructuring to generate cost savings at an
annual run rate of $7 million by the end of 2001.
STRATEGIC ALLIANCES. We are pursuing strategic alliances that enhance or
complement our existing or related businesses. Alliances may be structured as
joint ventures, technology licensing, supply or other arrangements. Our
relationship with Pechiney S.A. in the cathode business is an example of a
successful strategic alliance. In the 1999 third quarter, we entered into
exclusive product development and long-term supply agreements with Ballard Power
Systems Ltd. relating to flexible graphite-based material for use in flow field
plates, which are essential elements of proton exchange membrane fuel cells. We
expect substantial growth in net sales of our flexible graphite business
beginning in 2003.
REFINANCING AND DEBT RECAPITALIZATION. In November 1998, the Existing Senior
Facilities were refinanced and the indenture governing the Subordinated Notes
(the "SUBORDINATED NOTE INDENTURE") was amended. In connection with the
refinancing, we obtained additional term debt of $210 million.
In February 2000, we completed a debt recapitalization. We obtained the new
senior credit facilities (the "NEW SENIOR FACILITIES"), which consist of a
/$300 million six year tranche A term loan facility, a $350 million eight
year tranche B term loan facility and a /$250 million six year revolving
credit facility. The tranche A and revolving facilities are dollar/euro dual
currency facilities. We used the net proceeds from the New Senior Facilities to
repay and terminate the Existing Senior Facilities, to call the Subordinated
Notes for redemption at a redemption price of 104.5% of the principal amount
redeemed, plus accrued interest, to replace the outstanding borrowings under our
prior revolving credit facility and to repay certain other debt. The debt
recapitalization lowers our average annual interest rate (at current market
interest rate levels) by about 200 basis points (equivalent to a reduction of
about $15 million in annual interest expense), extends the average maturities of
our debt, enables us to repay our debt without penalty or premium, and increases
our ability to repurchase common stock, make acquisitions and pursue strategic
initiatives.
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LITIGATION AGAINST OUR FORMER PARENT COMPANIES INITIATED BY US. In February
2000, we commenced a lawsuit against our former parents, Mitsubishi Corporation
("MITSUBISHI") and Union Carbide Corporation ("UNION CARBIDE"), Mitsubishi
International Corporation, a U.S. subsidiary of Mitsubishi, and two of the
respective representatives of Mitsubishi and Union Carbide who served on UCAR's
Board of Directors at the time of the 1995 Equity Recapitalization. In the
lawsuit we allege, among other things, that certain payments made to our former
parents in connection with the 1995 Equity Recapitalization were unlawful under
the General Corporation Law of the State of Delaware, that our former parents
were unjustly enriched by receipts from their investments in UCAR and that our
former parents aided and abetted 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 in damages,
including interest. We expect to incur $10 million to $20 million in legal
expenses to pursue this lawsuit through trial.
ANTITRUST LITIGATION AGAINST US. Since 1997, we have been served with
subpoenas, search warrants and information requests by antitrust authorities in
the United States, the European Union and elsewhere in connection with antitrust
investigations. In addition, civil antitrust lawsuits have been commenced and
threatened against us and other producers and distributors of graphite and
carbon electrodes in the United States and elsewhere. We recorded a charge
against results of operations for 1997 in the amount of $340 million as a
reserve for estimated potential liabilities and expenses in connection with
antitrust investigations and related lawsuits and claims. In April 1998, UCAR
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 fine
in the aggregate amount of $110 million, payable in six annual installments, of
which $91 million is treated as a fine and $19 million is treated as imputed
interest for accounting purposes. In March 1999, our Canadian subsidiary pled
guilty to a one-count charge of violating Canadian antitrust law in connection
with the sale of graphite electrodes and was sentenced to pay a fine of Cdn. $11
million. We have settled virtually all of the graphite electrode antitrust
claims by steelmakers in the United States and Canada as well as antitrust
claims by certain other customers. None of the settlement or plea agreements
contain restrictions on future prices of our graphite electrodes. We are
continuing to cooperate with the antitrust authority in the European Union in
its on-going investigation. Through December 31, 1999, we have paid an aggregate
of $209 million of fines and net settlement and expense payments and an
aggregate of $7 million of imputed interest. In the aggregate, the fines, and
net settlements and expenses are within the amounts we used for purposes of
evaluating the $340 million charge. Actual liabilities and expenses could be
materially higher than such charge. The guilty pleas make it more difficult to
defend against other investigations, lawsuits and claims. Our insurance has not
and will not materially offset liabilities which have or may become due in
connection with antitrust investigations or related lawsuits or claims.
UCAR had been named as a nominal defendant in a stockholder derivative
lawsuit and as a defendant in a securities class action lawsuit, each of which
was based, in part, on the subject matter of the antitrust investigations,
lawsuits and claims. In October 1999, UCAR and the other defendants settled
these lawsuits for an aggregate of $40.5 million, of which $11.0 million was
paid by us. These settlements have received court approval, and all appeal
periods have expired.
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We recorded a charge of $13 million, which includes $2
million of expenses, in the 1999 third quarter in connection with these
settlements.
GLOBAL ECONOMIC CONDITIONS. We are a global company and serve every
geographic market worldwide. Accordingly, we are impacted in varying degrees,
both positively and negatively, as country or regional conditions affecting the
markets for our products fluctuate.
In 1997, many of the markets for our products were experiencing strong
demand. In addition, the markets for our products in Western Europe began to
experience stronger demand as that region began to recover from the economic
downturn it had experienced in 1996. Conversely, an economic downturn began in
the Asia Pacific region. This downturn did not, however, materially affect the
markets for our products until 1998.
In 1998, the economic downturn in the Asia Pacific region directly or
indirectly affected most of the worldwide markets for our products. This
downturn directly affected demand for steel and other metals in the Asia Pacific
region. To the extent that certain regions (such as Eastern Europe, Africa,
South America and the Middle East) were major exporters of steel and other
metals to the Asia Pacific region, this downturn also affected demand for their
products. In some instances, those exporters sought to sell their products in
other regions (such as North America and Western Europe), thereby adversely
affecting demand for steel and other metals produced in those other regions. All
of these factors resulted in a reduction in global demand for and production of
steel and other metals. As a result, our customers sought to reduce their
inventories of supplies (such as inventories of electrodes) as well as reduce
their production rates. All of these circumstances adversely affected demand for
graphite electrodes and some of our other products. We experienced downward
pressure in certain markets on pricing of graphite electrodes and some of our
other products beginning in early 1998. These circumstances negatively impacted
our results of operations in 1998 and in the 1999 first quarter.
As a result of the continued strength of the U.S. and European economies and
the beginning of recovery in other areas of the global economy, we believe that,
in the 1999 second quarter, worldwide electric arc furnace steel production
began to gradually recover. Signs of recovery which we see include price
increases of various steel end products that we believe are being implemented,
operating rates of electric arc furnace steelmakers that we believe are
increasing and requests by a significant percentage of our graphite electrode
customers to enter into longer term (such as 12 month) as opposed to shorter
term (such as 3 to 4 month) supply contracts in order to "lock-in" current
graphite electrode prices before any possible price increase.
We are benefiting from that recovery. Our volume of graphite electrodes sold
in our home markets has gradually increased. By the 1999 third quarter, volume
had returned to the 1998 second quarter level. Our volume in the 1999 fourth
quarter exceeded our volume in the 1998 fourth quarter by 8%. However, we remain
cautious on improvements in our volume of graphite electrodes sold overall,
particularly in the export markets where prices are still depressed. Our average
graphite electrode prices have fallen about 15% since the 1998 second quarter,
with a much sharper decline in Europe and in our export markets. We believe,
however, that industry fundamentals support our long-term strategy.
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In 1998 and 1999, demand and prices for most of our other products were
adversely affected by the same global economic conditions that affected graphite
electrodes. Currently, demand for most of our other products is relatively
stable. In particular, we have seen steady demand for graphite cathodes from the
aluminum industry, and demand for flexible graphite has remained healthy. The
demand for graphite specialties, particularly from certain segments of the
semiconductor industry, and for certain products sold to the silicon metals
industry, has remained weak. Pricing for most products in our graphite and
carbon products business segment has not yet strengthened.
OUTLOOK. We believe that worldwide production of steel in electric arc
furnaces will continue to show steady recovery and growth. Demand for graphite
electrodes in the 2000 first quarter to date is about 10% higher than in the
1999 first quarter. Demand for the full year is expected to be strong. This
should result in an increase in graphite electrode manufacturing capacity
utilization rate. The strength of the dollar as compared to the euro and other
currencies in which we sell our products, as well as competitive pressures,
continue to adversely affect our graphite electrode prices. This could adversely
affect our earnings for a few more quarters.
We believe that on the whole demand and prices for most of our graphite and
carbon products will remain relatively steady in 2000, except for graphite
specialties. We expect gross margins of the graphite and carbon products segment
to decline slightly until the restructuring of our graphite specialties business
is completed. Following completion, we expect those margins to return to 1999
levels or better in 2001.
CURRENCY MATTERS. We incur manufacturing costs and sell our products in
multiple currencies. As a result, in general, our results of operations and
financial condition are affected by changes in currency exchange rates and by
inflation in countries with highly inflationary economies where we have
manufacturing facilities. To manage certain exposures to risks caused by changes
in currency exchange rates, we engage in hedging activities and use various
off-balance sheet financial investments. To account for translation of foreign
currencies into dollars for consolidation and reporting purposes, we record
foreign currency translation adjustments in accumulated other comprehensive
income (loss) as part of stockholders' equity in the Consolidated Balance
Sheets, except in the case of operations in highly inflationary economies (or
which predominantly use the dollar for their purchases and sales) where we
record foreign currency translation gains and losses as part of other (income)
expense, net in the Consolidated Statement of Operations. We also record foreign
currency transaction gains and losses as part of other (income) expense, net.
During 1999, many of the currencies in which we manufacture and sell our
products weakened against the dollar. The most significant change occurred in
Brazil, where the Brazilian currency devalued about 49% against the dollar
during 1999. In 1999, our stockholders' equity decreased by $48 million as a
result of cumulative translation adjustments, including $33 million associated
with our Brazilian subsidiary. In 1999, the net impact of currency changes
included in other (income) expense, net was a gain of $2 million.
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items in
the Consolidated Statements of Operations and the increase or decrease
(expressed as a percentage of such item in the comparable prior period) of such
items:
<TABLE>
<CAPTION>
PERCENTAGE
FOR THE YEAR ENDED INCREASE
DECEMBER 31, (DECREASE)
1997 1998 1999 1997 to 1998 1998 TO 1999
---- ---- ---- ------------ ------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Net sales..................................... $1,097 $947 $831 (14)% (12)%
Cost of sales................................. 686 604 573 (12) (5)
------- ----- ----- --- ----
Gross profit................................... 411 343 258 (17) (25)
Research and development....................... 9 9 9 0 0
Selling, administrative and other expenses..... 115 103 86 (10) (17)
Other (income) expense, net.................... 5 8 (9) N/M N/M
Restructuring charge (credit).................. -- 86 (6) N/M N/M
Impairment loss on long-lived Russian assets... -- 60 -- N/M N/M
Impairment loss on long-lived graphite
specialties assets.......................... -- -- 35 N/M N/M
Antitrust investigations
and related lawsuits and claims............. 340 -- -- N/M N/M
Securities class action
and stockholder derivative lawsuits......... -- -- 13 N/M N/M
Operating profit (loss)........................ (58) 77 130 N/M 169
</TABLE>
- ---------------------
N/M: Not Meaningful
The following table sets forth, for the periods indicated, the percentage of
net sales represented by certain items in the Consolidated Statements of
Operations:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net sales............................................... 100.0% 100.0% 100.0%
Cost of sales........................................... 62.5 63.8 69.0
------ ------ ------
Gross profit............................................ 37.5 36.2 31.0
Research and development................................ .8 1.0 1.1
Selling, administrative and other expenses.............. 10.5 10.9 10.3
Other (income) expenses, net............................ .5 .8 (1.1)
Restructuring charge (credit)........................... -- 9.1 (.7)
Impairment loss on long-lived Russian assets............ -- 6.3 --
Impairment loss on long-lived graphite
specialties assets................................. -- -- 4.2
Antitrust investigations
and related lawsuits and claims.................... 31.0 -- --
Securities class action
and stockholder derivative lawsuits................ -- -- 1.6
Operating profit (loss)................................. (5.3) 8.1 15.6
</TABLE>
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The following table sets forth, for the periods indicated, certain items in
the Consolidated Statements of Operations and certain information as to gross
profit margins related to our business segments:
<TABLE>
<CAPTION>
GRAPHITE ELECTRODE BUSINESS GRAPHITE AND CARBON
BUSINESS SEGMENT PRODUCTS BUSINESS SEGMENT
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1998 1999 1997 1998 1999
---- ---- ----- ---- ---- ----
(Dollars in millions) (Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Net sales..................................... $788 $652 $562 $309 $295 $269
Cost of sales................................. 479 405 366 207 199 207
----- ----- ---- ----- ----- -----
Gross profit.................................. 309 247 196 102 96 62
Gross profit margin........................... 39.2% 37.9% 34.9% 33.0% 32.5% 23.0%
</TABLE>
1999 COMPARED TO 1998. Net sales in 1999 were $831 million, a decrease of
$116 million, or 12%, from net sales in 1998 of $947 million. Gross profit in
1999 was $258 million, a decrease of $85 million, or 25%, from gross profit in
1998 of $343 million. Gross profit margin in 1999 was 31.0% of net sales as
compared to gross profit margin in 1998 of 36.2% of net sales. The decrease in
net sales and gross profit was primarily due to lower sales revenue per metric
ton and volumes, and the impact of currency exchange rate changes. The impact of
those factors was partially offset by lower cost of sales. The lower sales
revenue per metric ton and volumes were due primarily to changes in global
economic conditions that reduced demand for steel and other metals and changes
in industry conditions. This, in turn, reduced demand and price for many of our
products, particularly graphite electrodes. Lower cost of sales was primarily
due to cost savings under our global rationalization and restructuring plan,
partially offset by lower production levels which had the effect of increasing
the average fixed cost per ton produced. The decrease in gross profit margin was
primarily due to the fact that the percentage decrease in net sales was greater
than the percentage decrease in cost of sales.
GRAPHITE ELECTRODE BUSINESS SEGMENT. Net sales of graphite electrodes
decreased 14%, or $90 million, to $562 million in 1999 from $652 million in
1998. The decrease was primarily attributable to a decrease in average sales
revenue per metric ton. The average sales revenue per metric ton (in U.S.
dollars and net of changes in currency exchange rates) of our graphite
electrodes was $2,676 in 1999 as compared to $3,013 in 1998. The reduced average
sales revenue per metric ton represented about $74 million of the $90 million
decrease in net sales. The reduction in average sales revenue per metric ton was
partially due to the lowering of prices by our Brazilian subsidiary because of
competitive cost advantages resulting from the Brazilian currency devaluation,
which accounted for about $24 million of the $74 million decrease in net sales.
Other currency exchange rate changes, particularly with respect to the euro,
accounted for about $19 million of the $74 million decrease in net sales. The
balance of the $74 million decrease in net sales was largely attributable to
lower graphite electrode selling prices both in home and export markets and, to
a lesser extent, changes in product mix. The $16 million balance of the $90
million decrease in net sales was attributable to a reduction of 5,000 metric
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tons, or 2%, in the volume of graphite electrodes sold to 206,000 metric tons in
1999 from 211,000 metric tons in 1998.
Cost of sales for graphite electrodes decreased 10%, or $39 million, to
$366 million in 1999 from $405 million in 1998. Gross profit declined 21%, or
$51 million, to $196 million in 1999 from $247 million in 1998. Gross profit
margin for graphite electrodes decreased to 34.9% in 1999 from 37.9% in 1998.
The decrease in cost of sales was primarily due to lower volume and lower
average graphite electrode cost per metric ton. The average graphite electrode
cost per metric ton was $1,783 in 1999 as compared to $1,920 in 1998. The
reduction in average graphite electrode cost per metric ton was due to cost
savings under our global restructuring and rationalization plan. The impact of
the cost savings was partially offset by the lower production levels and work in
process inventory reduction efforts, both of which had the effect of increasing
the average fixed cost per ton produced. The decrease in gross profit margin was
primarily due to the fact that the percentage decrease in net sales was greater
than the percentage decrease in cost of sales.
GRAPHITE AND CARBON PRODUCTS BUSINESS SEGMENT. Net sales of graphite and
carbon products decreased 9%, or $26 million, to $269 million in 1999 from $295
million in 1998. The decrease was primarily due to global economic conditions
that resulted in lower demand for graphite specialties, particularly those sold
to certain segments of the semiconductor industry and, to a lesser extent, those
sold to the aerospace and aircraft industries, lower prices for graphite
specialties, and lower demand for carbon electrodes sold to the silicon metals
industry. Of the $26 million decrease in net sales, $18 million was attributable
to our graphite specialties business and the balance was primarily attributable
to a 12% decrease in net sales of carbon electrodes. The decrease in net sales
of carbon electrodes was due to a 12% decrease in our volume of carbon
electrodes sold. Net sales of cathodes sold to the aluminum industry were stable
in 1999 as compared to 1998. The impact of a 6% decrease in the volume of
cathodes sold was offset by the impact of changes in product mix. Our volume of
graphite cathodes sold, which have higher selling prices and gross margins than
carbon cathodes, doubled from 15% to 33% of all cathodes sold, while our volume
of carbon cathodes sold declined by 25%.
Cost of sales for graphite and carbon products increased 4%, or $8
million, to $207 million in 1999 from $199 million in 1998. The impact of an $8
million write-down of graphite specialties inventory and of cost per ton
increases resulting from changes in product mix and lower operating levels,
particularly at our graphite specialties and carbon electrode manufacturing
facilities, were partially offset by cost savings under our global
rationalization and restructuring plan. As a result of the changes described
above, gross profit declined 35%, or $34 million, to $62 million in 1999 from
$96 million in 1998. Gross profit margin for graphite and carbon products
decreased to 23.0% in 1999 from 32.5% in 1998. The decrease in gross profit
margin was due to the combination of the decrease in net sales and the increase
in cost of sales.
OPERATING PROFIT OF US AS A WHOLE. Operating profit was $130 million, or
15.6% of net sales, in 1999 as compared to $77 million, or 8.1% of net sales, in
1998. Operating profit in 1999 was impacted by a $35 million impairment loss on
long-lived graphite specialties assets, a
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$13 million charge for the settlement of securities class action and stockholder
derivative lawsuits, and a $6 million restructuring credit related to plant
closure activities. Operating profit in 1998 was impacted by an $86 million
restructuring charge and a $60 million impairment loss on long-lived Russian
assets. Excluding those charges, credit and impairment losses, operating profit
in 1999 was lower than in 1998 due to lower gross profit, partially offset by
lower selling, administrative and other expense and an improvement of $17
million in other (income) expense net.
Selling, administrative and other expense decreased $17 million, or 17%,
to $86 million in 1999 from $103 million in 1998, primarily due to lower
corporate administration expenses resulting from cost savings under our global
rationalization and restructuring plan and, to a lesser extent, a decrease of
about $3 million in variable compensation expense due to lower earnings.
Other (income) expense, net was income of $9 million in 1999 as compared
to expense of $8 million in 1998. The change was primarily due to a $10 million
reduction in consulting fees associated with projects that we initiated in 1997
to integrate worldwide operations, improve operating efficiencies and generate
earnings growth and a gain of $2 million on the sale of the assets of our spray
cooled systems business, partially offset by a $6 million reduction in interest
income due to a reduction in short-term investments.
OTHER ITEMS AFFECTING US AS A WHOLE. Interest expense increased to $84
million in 1999 from $73 million in 1998. The increase primarily resulted from
higher average annual interest rates. Our average outstanding total debt was
$782 million in 1999 as compared to $783 million in 1998. Our average annual
interest rate was 10.7% in 1999 as compared to 8.8% in 1998. These average
annual interest rates include imputed interest on the DOJ fine. The increase in
the average annual interest rate was due to an increase in the margin over LIBOR
which we paid under the Existing Senior Facilities as a result of the
refinancing completed in November 1998, partially offset by a decrease in LIBOR.
We incurred additional debt in 1998 and 1999 to finance a portion of the fines
and settlements paid in connection with antitrust, securities and stockholder
derivative investigations, lawsuits and claims.
Provision for income taxes was $1 million for 1999 as compared to $32
million for 1998. During 1999, the provision for income taxes reflected a 23%
effective rate, excluding the impact of the settlement of the securities class
action and stockholder derivative lawsuits, the impairment loss on long-lived
graphite specialties assets, the write-down of graphite specialties inventory
and the restructuring credit. This is lower than the U.S. federal income tax
rate of 35% primarily as a result of tax planning strategies, earnings
repatriation plans, tax settlements, reassessment of reserves, and earnings
resulting from consolidated entities with lower effective rates. For 1998, the
provision for income taxes reflected a 29% effective rate, excluding the impact
of the restructuring charge and the impairment loss on long-lived Russian
assets.
As a result of the changes described above, net income was $42 million in
1999, an increase of $79 million from a net loss of $37 million in 1998.
1998 COMPARED TO 1997. Net sales in 1998 were $947 million, a decrease of
$150 million, or 14%, from net sales in 1997 of $1,097 million. Gross profit in
1998 was $343 million, a
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decrease of $68 million, or 17%, from gross profit in 1997 of $411 million.
Gross profit margin in 1998 was 36.2% of net sales as compared to gross profit
margin in 1997 of 37.5% of net sales. These changes were due primarily to
changes in global economic conditions that reduced demand for steel and other
metals. This, in turn, reduced demand for most of our products, particularly
graphite electrodes.
GRAPHITE ELECTRODE BUSINESS SEGMENT. Net sales in 1998 were $652 million, a
decline of $136 million, or 17%, from net sales in 1997 of $788 million. The
majority of this decline, about $98 million, was due to lower volume of graphite
electrodes sold. Our volume of graphite electrodes sold declined 31,000 metric
tons to 211,000 metric tons in 1998 from 242,000 metric tons in 1997. The
average selling price (in U.S. dollars and net of changes in currency exchange
rates) declined $110 per metric ton to $3,013 per metric ton in 1998 from $3,123
per metric ton in 1997. The reduction in selling price was primarily due to the
stronger dollar in relation to the other currencies in which we sell graphite
electrodes. The adverse impact of the currency translation was about $34 million
in 1998.
Cost of sales declined $74 million, or 15%, to $405 million in 1998 from
$479 million in 1997. The reduction was due primarily to lower volume of
graphite electrodes sold. This decline in volume adversely affected our capacity
utilization rate, which typically has the effect of increasing cost of sales per
metric ton sold since the same fixed costs must be absorbed by a smaller
quantity of products.
As a result of the changes described above, gross profit declined $62
million, or 20%, to $247 million in 1998 from $309 million in 1997 and gross
profit margin decreased to 37.9% of net sales in 1998 from 39.2% of net sales in
1997.
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GRAPHITE AND CARBON PRODUCTS BUSINESS SEGMENT. Net sales in 1998 were $295
million, a decline of $14 million, or 5%, from net sales in 1997 of $309
million. The majority of this decline, about $13 million, was due to lower
volume of carbon refractories sold. Carbon refractories are used primarily as
lining for blast furnaces. Blast furnace linings last for several years and
demand for refractories fluctuates based on the cycle for lining replacements.
In addition, net sales of graphite specialties declined $7 million due to lower
demand from the semi-conductor, aerospace and aircraft industries. Net sales of
carbon electrodes declined $5 million due to lower volume of carbon electrodes
sold as a result of lower demand for silicon metals. These decreases were
partially offset by a $9 million increase in net sales of cathodes. This
increase was due to increased volume and prices of cathodes sold as a result of
increases in aluminum production and increases in demand for graphite cathodes
in lieu of carbon cathodes in certain smelting furnace relinings.
Cost of sales declined $8 million, or 4%, to $199 million in 1998 from $207
million in 1997. The decline was due primarily to lower overall volume of
products sold and, to a lesser extent, changes in product mix.
As a result of the changes described above, gross profit declined $6
million, or 6%, to $96 million in 1998 from $102 million in 1997 and gross
profit margin declined to 32.5% of net sales in 1998 from 33.0% of net sales in
1997.
OPERATING PROFIT FOR US AS A WHOLE. Operating profit in 1998 was $77 million
as compared to an operating loss in 1997 of $58 million.
Operating profit in 1998 was impacted primarily by restructuring charges of
$86 million and impairment loss on Russian assets of $60 million.
Operating profit in 1997 was impacted primarily by a charge of $340 million
for estimated potential liabilities and expenses in connection with antitrust
investigations and related lawsuits and claims.
Excluding those charges and impairment loss, operating profit would have
been $223 million in 1998 as compared to $282 million in 1997, a decrease of $59
million. In addition, operating profit as a percentage of net sales would have
been 24% in 1998 as compared to 26% in 1997. Excluding those charges and
impairment loss, the change in operating profit was primarily due to decreases
in gross profit.
Selling, administrative and other expenses decreased $12 million, or 10%, to
$103 million in 1998 from $115 million in 1997. The decrease was due to the
non-cash charge for accelerated vesting of outstanding performance stock options
of $12 million in 1997 which did not recur in 1998.
Other expense (net) was $8 million in 1998 as compared to $5 million in
1997. The increase was primarily due to consulting fees associated with projects
that we undertook to improve operating efficiency, integrate worldwide
operations and generate earnings growth. These fees totaled $9 million in 1998
as compared to $4 million in 1997. Interest income increased to $14 million in
1998 from $9 million in 1997, primarily because of higher average investment
levels in Brazil.
OTHER ITEMS AFFECTING US AS A WHOLE. Interest expense increased to $73
million in 1998 from $64 million in 1997. In 1998, the average outstanding total
debt balance was $783 million and the average annual interest rate was 8.8%
inclusive of imputed interest of $5 million on the non-interest-bearing $110
million antitrust fine payable to the DOJ in six annual installments. In 1997,
the average outstanding total debt balance was $726 million and the average
annual interest rate was 8.9%. We incurred additional debt to finance a portion
of the fines and settlements paid in connection with the antitrust
investigations and related lawsuits and claims.
Provision for income taxes was $32 million in 1998 as compared to $39
million in 1997. In 1998, the provision for income taxes was significantly
higher than the amount computed by applying the United States federal income tax
rate primarily due to the non-deductibility of the impairment loss, imputed
interest expense associated with the antitrust fine, limited deductibility of
certain antitrust settlements, foreign losses resulting from the restructuring
charge which provided no tax benefit, other taxes related to the restructuring
charge, and the generation of excess foreign tax credits where we consider
utilization unlikely. This was partially offset by foreign earnings taxed at
lower rates.
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EFFECTS OF INFLATION
In general, our results of operations and financial condition are affected
by the inflation in each country in which we have a manufacturing facility.
During 1997 through 1999, the effects of inflation on our cost of sales in the
United States and foreign countries (except for highly inflationary countries)
have been generally offset by a combination of improved operating efficiency,
permanent cost savings and, prior to 1998, increased prices for graphite
electrodes and certain of our other products. Accordingly, during 1997 through
1999, these effects have not been material to us. The cost of petroleum coke, a
principal raw material used by us, and natural gas, which is used by us in our
electrode, cathode and graphite specialties baking operations, may fluctuate
widely for various reasons, including fuel shortages and cold weather. Changes
in such costs were not material to us during 1997 through 1999. The worldwide
market price of oil increased significantly in late 1999 and early 2000. This
could impact the price of petroleum coke. We cannot assure that future increases
in our cost of sales or other expenses will not exceed the rate of inflation or
the amounts, if any, by which we may be able to increase prices for our
products.
We account for our non-U.S. subsidiaries under the provisions of Statement
of Financial Accounting Standards ("SFAS") 52, "Foreign Currency Translation."
Accordingly, their assets and liabilities are translated into dollars for
consolidation and reporting purposes. Foreign currency translation adjustments
are generally recorded as part of stockholders' equity and identified as
accumulated other comprehensive income (loss) in the Consolidated Balance
Sheets.
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. In general, the financial statements of these
foreign operations have been remeasured as described below as if the functional
currencies of their economic environments were the U.S. dollar and translation
gains and losses relating to operations in highly inflationary economies are
included in other (income) expense, net in the Consolidated Statements of
Operations rather than as part of stockholders' equity in the Consolidated
Balance Sheets.
In light of significant increases in inflation in Mexico, effective January
1, 1997, Mexico was considered to have a highly inflationary economy.
Accordingly, translation gains and losses for our Mexican operations were
included in the Consolidated Statements of Operations for 1997 and 1998. In
1999, we began to 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.
Brazil was considered to have a highly inflationary economy in 1997. We have
always considered Russia to have a highly inflationary economy. Accordingly,
translation gains and losses are included in the Consolidated Statements of
Operations for our Brazilian subsidiary in 1997, and for our Russian subsidiary
in 1997, 1998 and 1999.
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Foreign currency translation adjustments decreasing stockholders' equity
amounted to $14 million in 1997, $27 million in 1998 and $48 million in 1999,
including $33 million associated with our Brazilian subsidiary in 1999.
EFFECTS OF CHANGES IN CURRENCY EXCHANGE RATES
In general, our results of operations and financial condition are affected
by the changes in currency exchange rates affecting the currency of each country
in which we have a manufacturing facility. When the local currencies of foreign
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. We price
products manufactured at our facilities for sale in local and certain export
markets in local currencies. Accordingly, when the local currencies increase (or
decline) in value relative to the dollar, this has the effect of increasing (or
reducing) net sales. The result of these effects is to increase (or decrease)
operating profit and net income.
During 1997 through 1999, many of the currencies in which we manufacture and
sell our products weakened against the dollar. This adversely affected our net
sales and, to a lesser extent, benefited our cost of sales as reported in
dollars. In the case of net sales of graphite electrodes, the adverse impact was
$43 million in 1997, $34 million in 1998 and $19 million in 1999 (excluding $24
million in 1999 due to the lowering of prices by our Brazilian subsidiary
because of competitive cost advantages resulting from the Brazilian currency
devaluation). Through early 1998, we sought to mitigate these adverse impacts on
net sales by increasing local currency prices for some of our products in
various regions as circumstances permitted. We have not been able to do so since
then. We cannot predict changes in currency exchange rates in the future or
whether those changes will have positive or negative impacts on our net sales or
cost of sales. We cannot assure you that we would be able to mitigate any
adverse effects of such changes.
Since late 1998, the Brazilian economy has been subject to various economic
pressures. Inflation substantially increased and economic activity began to
decline. In 1999, the Brazilian currency substantially devalued. These
circumstances may affect other countries in South America. We have manufacturing
operations in Brazil, and these circumstances can be expected to impact us. They
may reduce demand for our products in Brazil or elsewhere in South America. They
may also reduce our costs in Brazil, which are paid in local currency. In
addition, they would increase our gross profit margin, since a significant
portion of the sales of our Brazilian subsidiary are denominated in dollars. We
cannot assure you, however, that these circumstances will not adversely affect
us.
To manage certain exposures to general economic and specific financial
market risks caused by changes in currency exchange rates, we use various
off-balance sheet financial instruments. The amount of currency exchange
contracts used by us to minimize these risks was $353 million at December 31,
1997, $484 million at December 31, 1998 and $233 million at December 31, 1999.
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Total outstanding dollar-denominated debt of our foreign subsidiaries
(excluding our Russian, Mexican and Swiss subsidiaries which used the dollar as
their functional currency) was $209 million at December 31, 1998 and $158
million at December 31, 1999. Changes in the currency exchange rates between the
dollar and the currencies in the countries in which these subsidiaries are
located result in foreign currency gains and losses that are reported in other
(income) expense, net in the Consolidated Statements of Operations. While
changes in currency exchange rates did not materially affect us in 1997 through
1999, we cannot assure you that such changes will not have a material adverse
effect on us in the future. Our foreign subsidiaries with dollar-denominated
debt have entered into foreign currency contracts to protect against changes in
currency exchange rates. The amount of such contracts was $214 million at
December 31, 1997, $209 million at December 31, 1998 and $129 million at
December 31, 1999. We believe that such contracts reduce our exposure to changes
in currency exchange rates related to such borrowings.
LIQUIDITY AND CAPITAL RESOURCES
Our sources of funds have consisted principally of invested capital, cash
flow from operations, and debt financing. Our uses of those funds (other than
for operations) have consisted principally of debt reduction and capital
expenditures and, in 1997, repurchases of common stock; in 1996 and 1997,
acquisition of controlling interests in various companies or businesses; and, in
1998 and 1999, payment of fines, liabilities and expenses in connection with
antitrust investigations, lawsuits and claims.
We are highly leveraged and have substantial obligations in connection with
antitrust investigations, lawsuits and claims. We had total debt of $722 million
and a stockholders' deficit of $293 million at December 31, 1999 as compared to
total debt of $804 million and a stockholders' deficit of $287 million at
December 31, 1998. Cash, cash equivalents and short-term investments were $20
million at December 31, 1999 as compared to $69 million at December 31, 1998.
Debt (net of cash, cash equivalents and short-term investments) was $702
million at December 31, 1999 as compared to $735 million at December 31, 1998.
OVERVIEW OF DEBT FINANCING. In connection with the 1995 Equity
Recapitalization, we obtained senior credit facilities which provided for
borrowings of up to $685 million, of which $585 million was used at that time.
We also issued $375 million of Subordinated Notes, $175 million of which were
redeemed in 1995. In October 1995, we replaced those senior credit facilities
with the Existing Senior Facilities, which had more favorable interest rates and
covenants. The Existing Senior Facilities initially provided for borrowings of
up to $620 million, of which $520 million was used at that time. In March 1997,
the Existing Senior Facilities were amended to reduce interest rates, increase
our revolving credit facility and change certain covenants to allow greater
flexibility.
In April 1998, we obtained a limited waiver of breaches, if any, of certain
covenants of the Existing Senior Facilities. We also agreed to amend certain
provisions of the Existing Senior Facilities. These amendments had the effect of
increasing interest rates paid by us. In addition,
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we were able to borrow an additional $35 million under our revolving credit
facility. Under the Subordinated Note Indenture, subject to certain exceptions,
we could not incur additional indebtedness if our adjusted coverage ratio was
less than certain specified ratios. In April 1998, as a result of the $340
million charge, our adjusted coverage ratio was less than those specified
ratios. As a result, under the Subordinated Note Indenture, we could not, with
limited exceptions, incur additional indebtedness (even under the Existing
Senior Facilities).
In November 1998, we refinanced the Existing Senior Facilities and amended
the Subordinated Note Indenture. The refinancing consisted of the addition of a
new $210 million senior secured term debt facility to the Existing Senior
Facilities and the amendment of the Existing Senior Facilities. Together, these
enabled us to incur additional debt in the refinancing and to have the ability
(subject to compliance with applicable covenants) to borrow under our revolving
credit facility.
In February 2000, we completed a debt recapitalization. We obtained the New
Senior Facilities and used the net proceeds to repay and terminate the Existing
Senior Facilities, to call the Subordinated Notes for redemption and to repay
certain other debt. Among other things, the debt recapitalization reduces our
average annual interest rate and extends the average maturities of our debt.
DEBT REDUCTION. As a result of our substantial leverage and the impacts of
global and regional economic conditions on our business, we have placed high
priority on efforts to manage cash and operations to reduce debt. During 1999,
excluding antitrust fines, net settlements and expense payments and
restructuring payments, we generated strong cash flow from operations of $179
million. Among other things, our inventory and other working capital reduction
efforts generated $51 million of cash flow in 1999. As a result, during 1999, we
reduced our total debt by more than $80 million and our net debt by more than
$30 million while paying off, at the same time, almost $100 million of antitrust
fines, net settlements and expense payments and restructuring payments.
CASH FLOW AND PLANS TO MANAGE LIQUIDITY. For at least the past five years,
we have 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 results in neutral or negative cash
flow from operations (after deducting cash used for capital expenditures and
excluding payments in connection with restructurings and investigations,
lawsuits and claims and payments of interest on the Subordinated Notes (which
have since been called for redemption)) due to various factors. These factors
include customer order patterns, customer buy-ins in advance of annual price
increases, and payment of variable compensation with respect to the immediately
preceding year. Typically, the other three quarters result in significant
positive cash flow from operations (after deducting cash used for capital
expenditures and excluding those payments). The third quarter tends to produce
relatively less positive cash flow primarily as a result of scheduled plant
shutdowns by our customers for vacations. We believe that 2000 will follow this
historical pattern.
To minimize interest expense, except for our Brazilian subsidiary prior to
mid-1999, we typically operate on a "zero-cash" basis. This means that we use,
and are dependent on, funds
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available under our revolving credit facility and monthly or quarterly cash flow
from operations as our primary sources of liquidity. We believe that our global
restructuring and rationalization plan, along with our POWER OF ONE initiative,
will, over the next one to two years, improve our cash flow from operations for
a given level of net sales. Among other things, we are seeking to improve cash
flow from operations in 2000 through improvements in production scheduling,
inventory management, cash management, and accounts payable and receivable
management. Improvements in cash flow from operations resulting from the plan
and that initiative are being partially offset by associated cash implementation
costs, while they are being implemented.
Our debt and obligations in connection with antitrust investigations,
lawsuits and claims could have a material impact on our liquidity. Cash flow
from operations services payment of 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 than expected.
Our ability to service our debt and meet these and other obligations as they
come 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 our industry, changes in global and
regional economic conditions and changes in interest and currency exchange
rates.
We cannot assure you that our cash flow from operations and capital
resources will be sufficient to enable us to meet our debt service and other
obligations when due. If we are unable to do so, we could be required to limit
or discontinue, temporarily or permanently, certain of our business plans,
activities or operations, reduce or delay certain capital expenditures, sell
certain of our assets or businesses, restructure or refinance some or all of our
debt or incur additional debt, or sell additional common stock or other
securities. We cannot assure you that we would be able to take any of such
actions on favorable terms or at all.
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, based on our expected cash flow from operations and existing capital
resources and taking into account our efforts to reduce costs, improve
efficiencies, generate growth and earnings and maximize funds available to meet
our debt service and other obligations, we will be able to manage our working
capital and cash flow to permit us to service our debt and meet our obligations
as they become due.
DESCRIPTION OF NEW SENIOR FACILITIES. On February 22, 2000, we completed a
debt recapitalization. We obtained the New Senior Facilities and used the net
proceeds to repay and terminate the Existing Senior Facilities, to call the
Subordinated Notes for redemption and to repay certain other debt.
The New Senior Facilities consist of:
o A Tranche A Facility providing for initial term loans of $138 million
and of 161 million (equivalent to $158 million at February 22, 2000)
to UCAR Finance Inc.
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("UCAR Finance"), a direct wholly owned special purpose finance
subsidiary of UCAR. The Tranche A Facility amortizes in quarterly
installments over six years, commencing June 30, 2000, with installments
ranging from about $2 million in 2000 to about $17 million in 2005, with
the final installment payable on December 31, 2005.
o A Tranche B Facility providing for initial term loans of $350 million to
UCAR Finance. The Tranche B Facility amortizes over eight years,
commencing June 30, 2000, with nominal quarterly installments during the
first six years, and quarterly installments of about $41 million in 2006
and 2007, with the final installment payable on December 31, 2007.
o A Revolving Facility providing for revolving and swingline loans to,
and the issuance of US dollar-denominated letters of credit for the
account of, UCAR Finance and certain of our other subsidiaries in an
aggregate principal and stated amount at any time not to exceed $250
million. 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 $130 million (which $130 million is
reduced by the amount of certain debt incurred by us that is not
incurred under the New Senior Facilities).
The Company is required to make mandatory prepayments in the amount of:
o Either 75% or 50% (depending on our leverage ratio, which is the ratio of
our adjusted net debt to our adjusted total EBITDA) of adjusted 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.
o 100% of the net proceeds of certain asset sales or incurrence of
certain indebtedness.
o 50% of the net proceeds of the issuance of any equity securities by
UCAR.
We may make voluntary prepayments under the New Senior Facilities. There is
no penalty or premium due in connection with prepayments (whether voluntary or
mandatory).
UCAR Finance makes secured and guaranteed intercompany loans of the net
proceeds of borrowings under the New Senior Facilities to UCAR Global's
subsidiaries. The obligations of UCAR Finance under the New Senior Facilities
are secured, with certain exceptions, by first priority security interests in
all of these intercompany loans (including the related security interests and
guarantees).
UCAR has unconditionally and irrevocably guaranteed the obligations of UCAR
Finance under the New Senior Facilities. This guarantee is secured, with certain
exceptions, by first
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priority security interests in all of the outstanding capital stock of UCAR
Global and UCAR Finance and all of the intercompany debt owed to UCAR.
UCAR, UCAR Global and each of UCAR Global's subsidiaries has guaranteed,
with certain exceptions, the obligations of UCAR Global's subsidiaries under the
intercompany loans, except that our U.S. subsidiaries have not guaranteed
obligations of our foreign subsidiaries.
The obligations of UCAR Global's subsidiaries under the intercompany loans
as well as these guarantees are secured, with certain exceptions, by first
priority security interests in substantially all of our assets, except that no
more than 65% of the capital stock or other equity interests in our foreign
subsidiaries held directly by our U.S. subsidiaries and no other foreign assets
secure obligations or guarantees of our U.S. subsidiaries.
The interest rates applicable to the Tranche A and Revolving Facilities are,
at our option, either leverage Euro LIBOR plus a margin ranging from 1.00% to
2.50% (depending on our leverage ratio) or the alternate base rate plus a margin
ranging from 0.00% to 1.50% (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 2.50% to 2.75% (depending on our leverage ratio) or the
alternate base rate plus a margin ranging from 1.50% to 2.00% (depending on our
leverage ratio). The alternate base rate is the higher of the prime rate
announced by Morgan Guaranty Trust Company of New York, or the federal funds
effective rate plus 0.50%. UCAR 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.
We enter into agreements with financial institutions, which are intended to
limit, or cap, our exposure to incurrence of additional interest expense due to
increases in variable interest rates. Use of these agreements is allowed with
the New Senior Facilities.
The New Senior Facilities contain a number of significant covenants that,
among other things, restrict our ability to sell assets, incur additional
indebtedness, repay or refinance other debt or amend other debt instruments,
create liens on assets, enter into leases, investments or acquisitions, engage
in mergers or consolidations, make capital expenditures, make dividend payments
to UCAR, pay intercompany debt owed to UCAR, engage in transactions with
affiliates, or pay dividends or make other restricted payments and that
otherwise restrict corporate activities. UCAR Global is, however, permitted to
pay dividends to UCAR of up to $15 million for the purpose of making an
investment in UCAR Graph-Tech and may also distribute the capital stock of UCAR
Graph-Tech to UCAR. In addition, we are required to comply with specified
minimum interest coverage and maximum leverage ratios, which became more
restrictive over time.
In addition to the failure to pay principal, interest and fees when due,
events of default under the New 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.
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<PAGE>
Under the New Senior Facilities, UCAR is permitted to pay dividends on, and
repurchase, common stock in an aggregate amount of up to $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.
UCAR Global is, however, also permitted to pay dividends to UCAR of up to $15
million for the purpose of making an investment in UCAR Graph-Tech and may also
distribute the capital stock of UCAR Graph-Tech to UCAR.
CASH FLOW PROVIDED BY OPERATING ACTIVITIES. Cash flow provided by operations
was $80 million in 1999 as compared to cash flow used in operations of $29
million in 1998. This improvement of $109 million resulted primarily from a
lower use of cash flow for working capital of approximately $111 million,
partially offset by lower net income (including non-cash items) of approximately
$3 million and a decreased use of cash associated with long term assets and
liabilities of $1 million.
Use of cash flow for working capital was $48 million in 1999, an improvement
of $111 million from a use of $159 million in 1998. The improvement occurred
despite the use of $64 million for payment of fines and net settlements and
expense payments in connection with antitrust investigations and related
lawsuits and claims (as compared to $142 million in 1998), the use of $12
million for settlement of the securities class action and stockholder derivative
lawsuits, and the use of $23 million for restructuring payments during 1999.
The working capital improvement was due primarily to reductions in the use
of cash of $60 million for inventories ($27 million use of cash in 1998 as
compared to $33 million source of cash in 1999), $38 million for payables and
accruals ($38 million use of cash in 1998 as compared to nil use of cash in
1999), and $4 million for prepaid expenses and other assets, partially offset by
an increase in the use of cash of $34 million for receivables ($49 million
source of cash in 1998 as compared to $15 million source of cash in 1999). These
improvements resulted primarily from improved cash and inventory management.
CASH FLOW USED IN INVESTING ACTIVITIES. We used $39 million of cash flow in
investing activities during 1999 as compared to $31 million during 1998. This
increase of $8 million was primarily due to an increase in cash used for capital
expenditures (net of a capital incentive grant) of $7 million and a reduction in
cash used in short term investments by our Brazilian subsidiary of $1 million.
Cash provided from the sale of assets was $9 million in both 1999 and 1998.
CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES. Cash flow used in
financing activities was $80 million in 1999 as compared to cash provided by
financing activities of $62 million in 1998. Financing activities from long-term
debt consisted of $62 million of net payments under the Existing Senior
Facilities (including the revolving credit facility) in 1999 as compared to $128
million of net borrowings in 1998. The net payments made in 1999 were
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<PAGE>
funded primarily through improved cash and inventory management and decreased
working capital requirements as compared to 1998. Net short-term debt reductions
were $18 million in 1999 as compared to $58 million in 1998. Net short-term debt
reductions were lower in 1999 due to lower short-term borrowings by our
Brazilian subsidiary and lower borrowings by other non-U.S. subsidiaries to meet
local cash needs.
RESTRICTIONS ON DIVIDENDS AND STOCK REPURCHASES
Under the New Senior Facilities, we are generally permitted to pay dividends
on common stock and repurchase common stock in an aggregate amount of up to
between $25 million and $50 million, depending on our leverage ratio and excess
cash flow.
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ACCOUNTING CHANGES
In 1998, we changed our method of accounting for the cost of certain U.S.
inventories from the last-in first-out method to the first-in first-out method.
We believe the new method to be preferable because it provides improved
consistency in accounting for worldwide inventories and avoids potential
distortion of future profits from anticipated decrements. The Consolidated
Financial Statements for all periods have been restated to reflect this change
in accordance with the requirements of Accounting Principles Board Opinion 20,
"Accounting Changes." The restatement did not have a material impact on
consolidated net income (loss) or related per share amounts in 1996, 1997 or
1998. The restatement had no cash flow impact.
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
This statement establishes accounting and reporting standards for derivative
instruments. This statement requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. We are currently evaluating the impact of SFAS
133 on our financial position, results of operations and cash flows.
YEAR 2000 ISSUE
The Year 2000 issue results from the fact that many computer programs were
written using two rather than four digits to define the applicable year. Any
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in processing
errors or miscalculations or failures causing disruptions of operations,
including, among other things, temporary inability to process transactions,
continue production or otherwise engage in normal business activities. We have
not experienced any such material errors, miscalculations or failures affecting
us or our critical suppliers, service providers or customers. The Company
estimates that it incurred an aggregate incremental cost of about $3 million for
internal and external services in connection with Year 2000 issues.
ASSESSMENT OF THE EURO
On January 1, 1999, eleven of the member countries of the European Union
established fixed conversion rates between their existing currencies (called
"LEGACY CURRENCIES") and one common currency called the euro. The euro trades on
currency exchanges and may be used in business transactions. Beginning in
January 2002, new euro-denominated currency will be issued and legacy currencies
will be withdrawn from circulation. Our subsidiaries affected by the euro
conversion are establishing plans to address issues raised by the euro currency
conversion. These issues include, among others, the need to adapt computer and
financial systems to accommodate euro-denominated transactions and the impact of
a common currency on pricing. We believe that, under current conditions, the
conversion of legacy currencies into the euro will not have a material adverse
affect on us.
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COSTS RELATING TO PROTECTION OF THE ENVIRONMENT
We have been and are subject to increasingly stringent environmental
protection laws and regulations. In addition, we have an on-going commitment to
rigorous internal environmental protection standards. The following table sets
forth certain information regarding environmental expenses and capital
expenditures. Our capital expenditures were much higher in 1997 than subsequent
years due to the one-time installation of air pollution and wastewater
equipment.
FOR THE YEAR ENDED DECEMBER 31,
1997 1998 1999
---- ---- ----
(Dollars in millions)
Expenses relating to environmental
protection.................................. $14 $12 $13
Capital expenditures related to environmental
protection.................................. 15 8 4
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are exposed to market risks primarily from changes in interest rates and
currency exchange rates. To manage our exposure to these changes, we routinely
enter into various transactions that have been authorized according to
documented policies and procedures. We do not use derivatives for trading
purposes or to generate income, and we never use leveraged derivatives.
Our exposure to changes in interest rates results primarily from floating
rate long-term debt tied to LIBOR or euro LIBOR. We enter into agreements with
financial institutions which are intended to limit, or cap, our exposure to
incurrence of additional interest expense due to increases in variable interest
rates. During 1995, we purchased interest rate caps on up to $375 million of
debt, limiting the floating interest rate factor on this debt to a
weighted-average rate of 8.5% through 1997. During 1997, we purchased interest
rate caps on up to $250 million of debt, limiting the floating interest rate
factor on this debt to a weighted-average rate of 8.2% for the period commencing
February 1998 and continuing through various dates ending February 2001. In
February 1999, we purchased interest rate caps on $470 million of debt, limiting
the floating interest rate factor on this debt to 5.1% through 1999. Fees
related to these agreements are charged to interest expense over the term of the
agreements.
Our exposure to changes in currency exchange rates results primarily from:
o investments in our foreign subsidiaries and in our share of the
earnings of those subsidiaries, which are denominated in local
currencies,
o raw material purchases made by our foreign subsidiaries in a currency
other than the local currency, and
o export sales made by our subsidiaries in a currency other than the
local currency.
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When we deem it appropriate, we may attempt to limit our risks associated
with changes in currency exchange rates through both operational and financial
market activities. Financial instruments are used to attempt to hedge existing
exposures, firm commitments and, potentially, anticipated transactions. We use
forward, option and swap contracts to reduce risk by essentially creating
offsetting currency exposures. We held contracts against these risks with an
aggregate notional amount of about $484 million at December 31, 1998 and $233
million at December 31, 1999. All of our contracts mature within one year. All
of our contracts are accounted for as speculative instruments and, accordingly,
are marked to market monthly. Unrealized gains and losses on outstanding foreign
currency contracts were not material at December 31, 1998 or December 31, 1999.
We used a sensitivity analysis to assess the potential effect of changes in
currency exchange rates and interest rates on reported earnings at December 31,
1999. Based on this analysis, a hypothetical 10% weakening or strengthening in
the dollar would not have resulted in a material effect on our reported
earnings. A hypothetical increase in interest rates of 100 basis points across
all maturities would increase our interest expense about $7 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
Independent Auditors' Report......................................... 80
Consolidated Balance Sheets.......................................... 81
Consolidated Statements of Operations................................ 82
Consolidated Statements of Cash Flows................................ 83
Consolidated Statements of Stockholders' Equity (Deficit)............ 85
Notes to Consolidated Financial Statements........................... 86
All schedules are omitted because they are not required or are not applicable
or because the information is included in the Consolidated Financial Statements
or the notes thereto.
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
UCAR International Inc.:
We have audited the accompanying Consolidated Balance Sheets of UCAR
International Inc. and Subsidiaries as of December 31, 1998 and 1999, and the
related Consolidated Statements of Operations, Cash Flows and Stockholders'
Equity (Deficit) for each of the years in the three-year period ended December
31, 1999. These Consolidated Financial Statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
Consolidated Financial Statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the Consolidated Financial Statements referred to above present
fairly, in all material respects, the financial position of UCAR International
Inc. and Subsidiaries at December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Nashville, Tennessee
February 11, 2000, except as to Note 19,
which is as of February 23, 2000
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share data)
AT DECEMBER 31,
1998 1999
---- ----
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 58 $ 17
Short-term investments................................. 11 3
Notes and accounts receivable.......................... 198 171
Inventories:
Raw materials and supplies............................ 58 49
Work in process....................................... 150 113
Finished goods........................................ 56 42
---- ----
264 204
Prepaid expenses....................................... 47 25
---- ----
Total current assets.................................. 578 420
---- ----
Property, plant and equipment............................ 1,220 1,071
Less: accumulated depreciation.......................... 752 673
---- ----
Net fixed assets...................................... 468 398
---- ----
Other assets............................................. 91 115
---- ----
Total assets.......................................... $ 1,137 $ 933
===== ====
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 67 $ 80
Short-term debt........................................ 19 --
Payments due within one year on long-term debt......... 63 82
Accrued income and other taxes......................... 28 39
Other accrued liabilities.............................. 198 114
---- ----
Total current liabilities............................. 375 315
---- ----
Long-term debt........................................... 722 640
Other long-term obligations.............................. 266 224
Deferred income taxes.................................... 48 33
Minority stockholders' equity in consolidated entities... 13 14
Stockholders' equity (deficit):
Preferred stock, par value $.01, 10,000,000 shares -- --
authorized, none issued..................................
Common stock, par value $.01, 100,000,000 shares
authorized,
47,411,296 shares issued at December 31, 1998,
47,440,536 shares issued at December 31, 1999......... -- --
Additional paid-in capital............................. 521 523
Accumulated other comprehensive (loss)................. (157) (205)
Retained earnings (deficit)............................ (566) (525)
Less: cost of common stock held in treasury, 2,226,498
shares at December 31, (85) (86)
---- ----
1998, 2,338,038 shares at December 31, 1999...........
Total stockholders' equity (deficit).................. (287) (293)
---- ----
Total liabilities and stockholders' equity (deficit).. $ 1,137 $ 933
===== ====
See accompanying Notes to Consolidated Financial Statements.
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share data)
For the Year Ended December 31,
-------------------------------
1997 1998 1999
---- ---- ----
Net sales........................................ $ 1,097 $ 947 $ 831
Cost of sales.................................... 686 604 565
Cost of sales - write-down of graphite
specialties inventory.......................... -- -- 8
------- ------ ------
Gross profit................................... 411 343 258
Research and development......................... 9 9 9
Selling, administrative and other expenses....... 115 103 86
Restructuring charge (credit).................... -- 86 (6)
Impairment loss on long-lived Russian assets..... -- 60 --
Impairment loss on long-lived graphite
specialties assets............................... -- -- 35
Antitrust investigations and related lawsuits
and claims....................................... 340 -- --
Securities class action and stockholder
derivative lawsuits.............................. -- -- 13
Other (income) expense, net...................... 5 8 (9)
------ ------ -------
Operating profit (loss)........................ (58) 77 130
Interest expense................................. 64 73 84
------ ------ -------
Income (loss) before provision for income taxes (122) 4 46
Provision for income taxes....................... 39 32 1
------ ------ -------
Income (loss) of consolidated entities......... (161) (28) 45
Less: minority stockholders' share of income.... 1 2 3
Plus: UCAR share of net income from company
carried at equity ............................. 2 -- --
------ ------ -------
Income (loss) before extraordinary item........ (160) (30) 42
Extraordinary item, net of tax................... -- 7 --
------ ------ -------
Net income (loss)............................. $(160) $(37) $ 42
====== ====== =======
Earnings (loss) per common share:
Basic:
-----
Income (loss) before extraordinary item....... $(3.49) $(0.66) $ 0.94
Extraordinary item, net of tax................ -- (0.17) --
------- ------- -------
Net income (loss) per share................... $(3.49) $(0.83) $ 0.94
======= ======= =======
Diluted:
-------
Income (loss) before extraordinary item....... $(3.49) $(0.66) $ 0.91
Extraordinary item, net of tax................ -- (0.17) --
------- ------- -------
Net income (loss) per share................... $(3.49) $(0.83) $ 0.91
======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions, except per share data)
For the Year Ended December 31,
-------------------------------
1997 1998 1999
---- ---- ----
Cash flow from operating activities:
Net income (loss)............................. $ (160) $ (37) $ 42
Extraordinary item, net of tax................ -- 7 --
Non-cash (credits) charges to net income (loss):
Depreciation and amortization................ 49 51 45
Deferred income taxes........................ (38) (24) (26)
Securities class action and stockholder
derivative lawsuits....................... -- -- 13
Restructuring charge (credit)................ -- 86 (6)
Impairment loss on long-lived Russian assets. -- 60 --
Impairment loss on long-lived graphite
specialties assets....................... -- -- 35
Write-down of graphite specialties inventory. -- -- 8
Accelerated vesting of performance stock options. 12 -- --
Other non-cash (credits) charges............. 7 (3) 26
Antitrust investigations and related lawsuits
and claims............................... 340 -- --
Working capital*.............................. (43) (159) (48)
Long-term assets and liabilities.............. 5 (10) (9)
------ ------- ------
Net cash provided by (used in) operating
activities............................... 172 (29) 80
------ ------- ------
Cash flow from investing activities:
Capital expenditures.......................... (79) (52) (56)
Capital incentive grant....................... -- 3 --
Purchase of subsidiaries...................... (124) -- --
Purchases of short-term investments........... (59) (28) (20)
Maturities of short-term investments.......... 39 37 28
Sale of assets................................ 2 9 9
------- ------ ------
Net cash used in investing activities........ (221) (31) (39)
------- ------ ------
Cash flow from financing activities:
Short-term debt borrowings, net............... 23 (58) (18)
Revolving credit facility borrowings, net..... 35 (30) (3)
Long-term debt borrowings..................... 64 210 --
Long-term debt reductions..................... (25) (52) (59)
Financing costs............................... (2) (12) --
Purchase of treasury stock.................... (92) -- --
Sale of common stock.......................... 5 4 1
Dividends paid to minority stockholder........ -- -- (1)
Tax benefit arising from exercise of employee
stock options............................. 5 -- --
------ ------ ------
Net cash provided by (used in) financing
activities................................ 13 62 (80)
------ ------- ------
Net increase (decrease) in cash and cash equivalents (36) 2 (39)
Effect of exchange rate changes on cash and cash
equivalents.................................. (1) (2) (2)
Cash and cash equivalents at beginning of period.... 95 58 58
------ ------- ------
Cash and cash equivalents at end of period...... $ 58 $ 58 $ 17
====== ======= ======
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions, except per share data)
For the Year Ended December 31,
-------------------------------
1997 1998 1999
---- ---- ----
Supplemental disclosures of cash flow information:
Net cash paid during the year for:
Interest expense............................. $ 62 $ 70 $ 76
Income taxes................................. 72 61 33
* Net change in working capital due to the
following components:
(Increase) decrease in current assets:
Notes and accounts receivable................ $ (30) $ 49 $ 15
Inventories.................................. 5 (27) 33
Prepaid expenses............................. (1) (1) 3
Payments for antitrust investigations and
related lawsuits and claims.................. (3) (142) (64)
Payments for securities class action and
stockholder derivative lawsuits.............. -- -- (12)
Restructuring payments........................ -- -- (23)
Increase (decrease) in payables and accruals.. (14) (38) --
------- ------ ------
Working capital......................... $ (43) $(159) $ (48)
======= ===== ======
See accompanying Notes to Consolidated Financial Statements.
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<TABLE>
<CAPTION>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Dollars in millions)
Accumulated Total
Additional Other Retained Stockholders'
Common Paid-in Comprehensive Earnings Treasury Equity
Stock Capital (Loss) (Deficit) Stock (Deficit)
------ --------- ------------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996......... $ -- $ 498 $ (116) $ (365) $ -- $ 17
Comprehensive income (loss):
Net loss.......................... -- -- -- (160) -- (160)
Foreign currency translation
adjustments...................... -- -- (14) -- -- (14)
------ ------- -------- --------- ------- ---------
Total comprehensive income (loss).. -- -- (14) (160) -- (174)
Exercise of employee stock options.. -- 6 -- -- -- 6
Tax benefit arising from exercise of
employee stock options............. -- 5 -- -- -- 5
Repurchase of common stock.......... -- -- -- -- (92) (92)
Vesting of performance stock options -- 12 -- -- -- 12
Cost of secondary offering.......... -- (1) -- -- -- (1)
------- ------- -------- --------- ------- ---------
Balance at December 31, 1997.......... -- 520 (130) (525) (92) (227)
Comprehensive income (loss):
Net loss........................... -- -- -- (37) -- (37)
Foreign currency translation
adjustments....................... -- -- (27) -- -- (27)
------- ------- -------- --------- -------- ----------
Total comprehensive income (loss)... -- -- (27) (37) -- (64)
Sale of common stock - stock options -- 1 -- -- -- 1
Sale of common stock - treasury stock -- -- -- (4) 7 3
-------- -------- -------- ---------- -------- ---------
Balance at December 31, 1998........... -- 521 (157) (566) (85) (287)
Comprehensive income (loss):
Net income.......................... -- -- -- 42 -- 42
Foreign currency translation
adjustments........................ -- -- (48) -- -- (48)
--------- -------- -------- ----------- -------- ---------
Total comprehensive income (loss).... -- -- (48) 42 -- (6)
Sale of common stock - treasury stock -- -- -- (1) 1 --
Acquisition of common stock
held in treasury..................... -- 2 -- -- (2) --
---------- --------- -------- ----------- -------- --------
Balance at December 31, 1999............ $ -- $ 523 $ (205) $ (525) $(86) $(293)
========== ========= ======== ============ ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) DISCUSSION OF BUSINESS AND STRUCTURE
IMPORTANT TERMS
The Company uses the following terms to identify various companies or groups
of companies, markets or other matters in the Consolidated Financial Statements.
"UCAR" refers to UCAR International Inc. only. UCAR is the issuer of the
publicly traded common stock covered by the Consolidated Financial Statements.
"UCAR Global" refers to UCAR Global Enterprises Inc. only. UCAR Global is a
holding company and a direct wholly owned subsidiary of UCAR. UCAR Global is the
issuer of the 12% senior subordinated notes due 2005 (the "Subordinated Notes")
and is the primary borrower under the senior secured credit facilities (the
"Existing Senior Facilities") outstanding at December 31, 1999.
"Company" refers collectively to UCAR, its subsidiaries and its and their
predecessors to the extent those predecessor's activities related to the
graphite and carbon business.
"Subsidiaries" refers to those companies which, at the relevant time, were
majority owned or wholly owned directly or indirectly by UCAR. All of UCAR's
subsidiaries have been wholly owned (with de minimis exceptions in the case of
certain foreign subsidiaries) from at least January 1, 1996 through December 31,
1999, except for:
o UCAR's Russian subsidiary, which was acquired in late 1996 and early
1997 and has been wholly owned since then.
o UCAR's German subsidiary, which was acquired in early 1997 and 70%
owned until early 1999, when it became wholly owned in order to
facilitate the cessation of its manufacturing operations.
o Carbone Savoie S.A.S. ("Carbone Savoie"), which was acquired in
early 1997 and has been 70% owned since then.
o UCAR's South African subsidiary, which was 50% owned until April
1997, when it became wholly owned.
The Company operates in two business segments: graphite electrodes, and
graphite and carbon products. The Company manufactures and markets graphite and
carbon products, including electrodes, for the steel, ferroalloy, aluminum,
chemical, aerospace and transportation industries. Its principal products are
graphite electrodes, carbon electrodes, graphite and carbon cathodes, graphite
and carbon specialties, and flexible graphite.
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(1) DISCUSSION OF BUSINESS AND STRUCTURE -- (CONTINUED)
On February 10, 1997, UCAR's Board of Directors authorized a program to
repurchase up to $100 million of common stock at prevailing prices from time to
time in the open market or otherwise depending on market conditions and other
factors, without any established minimum or maximum time period or number of
shares.
On April 3, 1997, the principal stockholder sold 6,411,227 shares in a
secondary public offering. UCAR did not sell any shares in or receive any
proceeds from the offering. Concurrently with the offering, as part of the
program mentioned above, UCAR repurchased 1,300,000 shares from the principal
stockholder for $48 million. After the offering and the repurchase of shares,
the principal stockholder ceased to be a principal stockholder of UCAR.
On December 8, 1997, UCAR's Board of Directors increased the maximum amount
of common stock that may be purchased under the program mentioned above from
$100 million to $200 million. Through December 31, 1997, UCAR purchased an
aggregate of $92 million of common stock (including the shares repurchased from
the principal stockholder) under the program. No common stock was purchased
under the program in 1998 or 1999. Common stock of $2 million was acquired in
1999 in foreclosure on secured loans to certain former executive officers.
ACQUISITION OF SUBSIDIARIES
On November 10, 1996, the Company purchased the controlling equity interest
in Graphite PLC, which operates a graphite electrode business in Vyazma, Russia.
The Company acquired 90% of the equity of Graphite PLC through a tender offer to
its major shareholders, which included members of the board of directors and
employees of Graphite PLC. The aggregate investment was $50 million. Thereafter,
in 1997 and early 1998, the Company increased its ownership to 99% (at December
31, 1998) of such equity for an additional investment of $7 million. Graphite
PLC changed its name to UCAR Grafit OAO ("UCAR Grafit").
On January 2, 1997, the Company acquired 70% of the outstanding shares of
Carbone Savoie, a wholly owned subsidiary of a competitor in the cathode
business, for a purchase price of $33 million. Carbone Savoie is the leading
manufacturer of cathodes that are used in the production of aluminum.
On February 1, 1997, the Company, through a newly formed 70%-owned
subsidiary, UCAR Elektroden GmbH ("UCAR Elektroden"), purchased the graphite
electrode business of Elektrokohle Lichtenberg AG ("EKL") in Berlin, Germany. A
private German company held the 30% minority interest in UCAR Elektroden. UCAR
Elektroden and UCAR Grafit worked in tandem, with UCAR Elektroden manufacturing
newly formed ungraphitized electrodes and UCAR Grafit baking, pitch
impregnating, rebaking and graphitizing those electrodes. The aggregate purchase
price paid by UCAR Elektroden for the EKL assets was $15 million.
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(1) DISCUSSION OF BUSINESS AND STRUCTURE -- (CONTINUED)
The Company purchased the minority interest in UCAR Elektroden in 1999 to
facilitate the cessation of its manufacturing operations.
On April 22, 1997, the Company purchased the shares of its then 50%-owned
joint venture affiliate, EMSA (Pty) Ltd.("EMSA"), held by the Company's joint
venture partner. EMSA operates a graphite electrode manufacturing facility and
sales office in South Africa. The purchase price was $75 million, plus expenses.
These acquisitions were accounted for as purchases and, accordingly, the
purchase prices have been allocated to the assets purchased and liabilities
assumed based upon the fair values at the dates of purchase. The Company
recorded $20 million and $6 million of goodwill in connection with the
acquisitions of EMSA and UCAR Grafit, respectively. The Consolidated Financial
Statements have not been restated to reflect the increased ownership of EMSA at
any date or for any period prior to the date of purchase.
On September 24, 1998, the Company announced that it was ceasing its
manufacturing operations in Berlin, Germany, closing its manufacturing
operations in Welland, Canada and downsizing its manufacturing operations in
Vyazma, Russia.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Consolidated Financial Statements present the consolidated financial
position, results of operations and cash flows of the Company at the dates and
for the periods indicated. All significant intercompany transactions have been
eliminated in consolidation.
CASH EQUIVALENTS
Cash equivalents are considered to be all highly liquid investments that are
readily convertible to known amounts of cash and so near to maturity that they
present insignificant risk of changes in value because of changes in interest
rates.
SHORT-TERM INVESTMENTS
Investment securities consisted of government securities and other debt
securities. The Company classifies these securities as held-to-maturity and,
accordingly, has recorded them at amortized cost that approximates fair value.
INVENTORIES
Inventories are stated at cost or market, whichever is lower. Cost is
determined generally on the "average cost" method.
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
FIXED ASSETS AND DEPRECIATION
Fixed assets are carried at cost. Expenditures for replacements are
capitalized and the replaced items are retired. Gains and losses from the sale
of property are included in other (income) expense, net.
Depreciation is calculated on a straight-line basis over the estimated
useful lives of the assets. The Company generally uses accelerated depreciation
methods for tax purposes, where appropriate. Depreciation expense was $48
million in 1997, $50 million in 1998 and $44 million in 1999.
The carrying value of fixed assets is assessed when factors indicating
impairment are present. The Company determines such impairment by measuring
undiscounted future cash flows. If impairment is present, the assets are
reported at fair value.
GOODWILL
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally 20 years. When circumstances warrant, the
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
assets. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows of the acquired assets, at the
Company's internal rate of return.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company does not use derivative financial instruments for trading
purposes. They are used to manage well-defined currency exchange rate risks and
interest rate risks. The Company enters into foreign currency instruments to
manage exposure to currency exchange rate fluctuations. These foreign currency
instruments, which include forward exchange contracts, purchased currency
options and currency option collars, attempt to hedge primarily U.S. dollar-
denominated debt held by several of the Company's foreign subsidiaries and
identifiable foreign currency receivables, payables and commitments held by the
Company's foreign and domestic
91
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
subsidiaries. Forward exchange contracts are agreements to exchange different
currencies at a specified future date and at a specified rate. Purchased foreign
currency options are instruments which give the holder the right, but not the
obligation, to exchange different currencies at a specified rate at a specified
date or over a range of specified dates. Currency option collars are financial
arrangements for simultaneous purchases and sales of currency options having the
same maturity and the same principal amount. The result is the creation of a
range in which a best and worst price is defined, while minimizing option cost.
Premiums and discounts on forward exchange contracts are amortized over the life
of the contracts. Net premiums on options purchased (or sold under currency
collar strategies) are amortized over the life of the options. Forward exchange
contracts, purchased currency options and currency option collars are carried at
market value. Gains and losses due to revaluation of these contracts or option
positions are recognized currently as other (income) expense, net and are
intended to mitigate income or expense caused by the accounting revaluation of
the Company's foreign and domestic subsidiaries' net foreign exchange positions.
The Company enters into agreements with financial institutions which are
intended to limit, or cap, its exposure to the incurrence of additional interest
expense due to increases in variable interest rates. Fees related to these
interest rate cap agreements (as well as proceeds received under their
provisions) are charged (or credited) to interest expense over the term of the
agreements.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and for operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rate is recognized in income in the period that includes the
enactment date.
STOCK-BASED COMPENSATION PLANS
The Company accounts for stock-based compensation plans using the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25,
92
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
"Accounting for Stock Issued to Employees" ("APB 25"). As such, compensation
expense is recorded on the date of grant only if the market price of the
underlying stock exceeded the exercise price or if ultimate vesting is subject
to performance conditions. The total amount of recorded compensation expense, if
any, is based on the number of awards that eventually vest. No compensation
expense is recognized for forfeited awards, failure to satisfy a service
requirement or failure to satisfy a performance condition. The Company's
accruals of compensation expense for awards subject to performance conditions
are based on the Company's assessment of the probability of satisfying the
performance conditions.
RETIREMENT PLAN
The cost of pension benefits under the Company's retirement plans is
determined by independent actuarial firms using the "projected unit credit"
actuarial cost method. Contributions to the U.S. retirement plan are made in
accordance with the requirements of the Employee Retirement Income Security Act
of 1974.
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The estimated cost of future medical and life insurance benefits is
determined by independent actuarial firms using the "projected unit credit"
actuarial cost method. Such costs are recognized as employees render the service
necessary to earn the postretirement benefits. Benefits have been accrued, but
not funded.
POSTEMPLOYMENT BENEFITS
The Company accrues postemployment benefits expected to be paid before
retirement, principally severance, over employees' active service periods.
USE OF ESTIMATES
Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare the Consolidated Financial Statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.
FOREIGN CURRENCY TRANSLATION
Generally, except for operations in Brazil in 1997, Russia and Mexico in
1997 and 1998 and Russia in 1999, where high inflation has existed, unrealized
gains and losses resulting from translating foreign subsidiaries' assets and
liabilities into U.S. dollars are accumulated in other comprehensive income on
the Consolidated Balance Sheet until such time as the operations are sold or
substantially or completely liquidated. Except as described in the next
sentence, translation gains and losses relating to operations, where high
93
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-- (CONTINUED)
inflation has existed, are included in income in the Consolidated Financial
Statements. Our Mexican subsidiary began using the U.S. dollar as its functional
currency during 1999, as its sales and purchases are predominantly U.S.
dollar-denominated. Accordingly, its translation gains and losses are included
in income in the Consolidated Statements of Operations, regardless of its
inflation status.
OTHER ACCOUNTING MATTERS..
In 1998, the Company changed its method of accounting for the cost of
certain U.S. inventories from the last-in first-out method ("LIFO") to the
first-in first-out ("FIFO") method. The Company believes the new method to be
preferable because it provides improved consistency in accounting for worldwide
inventories and avoids potential distortion of future profits from anticipated
decrements. The Consolidated Financial Statements for all periods were restated
to reflect this change in accordance with the requirements of Accounting
Principles Board Opinion No. 20, "Accounting Changes." The restatement did not
have a material impact on consolidated net income (loss) or related per share
amounts in 1997 or 1998. The restatement had no cash flow impact.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 133, "Accounting for
Derivative Instruments and Hedging Activities," which is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. The Company is
presently evaluating the impact of this statement on its financial position,
results of operations and cash flows in the period of adoption.
(3) UCAR GLOBAL ENTERPRISES INC.
UCAR has no material assets, liabilities or operations other than those that
result from its ownership of 100% of the outstanding common stock of UCAR Global
and intercompany debt. Separate financial statements of UCAR Global are not
presented because they would not be material to holders of the Subordinated
Notes.
The following table summarizes the consolidated assets and liabilities of
UCAR Global and its subsidiaries at December 31, 1998 and 1999 and their
consolidated results of operations for the three years ended December 31, 1999:
94
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(3) UCAR GLOBAL ENTERPRISES INC. -- (CONTINUED)
At December 31,
------------------
1998 1999
(Dollars in millions)
Assets:
Current assets............................... $ 578 $ 420
Non-current assets........................... 559 513
----- -----
Total assets.............................. $ 1,137 $ 933
===== =====
Liabilities:
Current liabilities.......................... $ 375 $ 315
Non-current liabilities...................... 1,036 897
----- -----
Total liabilities........................ $ 1,411 $ 1,212
===== =====
Minority stockholders' equity in consolidated
entities........................................ $ 13 $ 14
===== =====
For the Year Ended
December 31,
------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
Net sales.................................. $ 1,097 $ 947 $ 831
Gross profit............................... 411 343 258
Income (loss) before extraordinary item.... (160) (30) 42
Net income (loss).......................... (160) (37) 42
(4) FINANCIAL INSTRUMENTS
The Company does not use derivative financial instruments for trading
purposes. They are used to manage well-defined currency exchange rate and
interest rate risks.
FOREIGN CURRENCY CONTRACTS
The amount of foreign exchange contracts used by the Company to minimize
foreign currency exposure was $353 million at December 31, 1997, $484 million at
December 31, 1998 and $233 million at December 31, 1999. Contracts hedging U.S.
dollar-denominated debt totaled $214 million at December 31, 1997, $209 million
at December 31, 1998 and $129 million at December 31, 1999. Of the total foreign
exchange contracts outstanding, approximately $93 million (26%) were offsetting
at December 31, 1997, approximately $142 million (29%) were offsetting at
95
<PAGE>
December 31, 1998 and approximately $3 million (1%) were offsetting at December
31, 1999.
SALE OF RECEIVABLES
Certain of our foreign subsidiaries sold receivables of $90 million in 1997,
$68 million in 1998 and $79 million in 1999. Receivables sold and remaining on
the Consolidated Balance Sheets were $16 million at December 31, 1997, $6
million at December 31, 1998 and nil at December 31, 1999.
INTEREST RATE RISK MANAGEMENT
The Company enters into agreements with financial institutions, which are
intended to limit, or cap, its exposure to the incurrence of additional interest
expense due to increases in variable interest rates. During 1995, the Company
purchased interest rate caps on up to $375 million of debt, limiting the
floating interest rate factor on this debt to a weighted-average rate of 8.5%
through 1997. During 1997, the Company purchased interest rate caps on up to
$250 million of debt, limiting the floating interest rate factor on this debt to
a weighted-average rate of 8.2% for the period commencing February 1998 and
continuing through various dates ending February 2001. During 1999, the Company
purchased interest rate caps on up to $470 million of debt, limiting the
floating interest rate factor on this debt to a weighted-average rate of 5.10%
through 1999. Fees related to these agreements are charged to interest expense
over the term of the agreements.
FAIR MARKET VALUE DISCLOSURES
SFAS 107, "Disclosure about Fair Market Value of Financial Instruments,"
defines the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing parties.
Such fair values must often be determined by using one or more methods that
indicate value based on estimates of quantifiable characteristics as of a
particular date. Values were estimated as follows:
CASH AND CASH EQUIVALENTS, SHORT-TERM INVESTMENTS, SHORT-TERM RECEIVABLES,
ACCOUNTS PAYABLE AND OTHER CURRENT PAYABLES--The carrying amount approximates
fair value because of the short maturity of these instruments.
DEBT--Fair values of debt and related interest rate risk agreements
approximate carrying value at December 31, 1997, 1998 and 1999, respectively,
except for the Subordinated Notes which are carried at $200 million and had an
estimated fair market value of $224 million at December 31, 1997, $216 million
at December 31, 1998 and $209 million at December 31, 1999 based on quoted
market prices.
FOREIGN CURRENCY CONTRACTS--Foreign currency contracts are carried at market
value.
96
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(5) SEGMENT REPORTING
The Company has two reportable operating segments: graphite electrodes, and
graphite and carbon products. The graphite electrode segment produces and
markets graphite electrodes to electric arc furnace and ladle furnace
steelmakers. The graphite and carbon products segment produces and markets
carbon electrodes, flexible graphite, cathodes and graphite and carbon
specialties. These reportable segments are managed separately because of the
different products and markets they serve.
The accounting policies of the reportable segments are the same as those
described in Note 2. The Company evaluates the performance of its operating
segments based on gross profit. Intersegment sales and transfers are not
material.
The following tables summarize financial information concerning the
Company's reportable segments. The line item entitled "Other" includes corporate
related items.
For the Year Ended December 31,
-------------------------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
Net sales to external customers:
Graphite electrodes............. $ 788 $ 652 $ 562
Graphite and carbon products.... 309 295 269
----- ----- -----
Consolidated net sales......... $ 1,097 $ 947 $ 831
===== ===== =====
Gross profit:
Graphite electrodes............. $ 309 $ 247 $ 196
Graphite and carbon products.... 102 96 62
----- ----- -----
Consolidated gross profit...... $ 411 $ 343 $ 258
===== ===== =====
Depreciation and amortization:
Graphite electrodes............. $ 35 $ 36 $ 31
Graphite and carbon products.... 10 11 12
Other........................... 4 4 2
----- ----- -----
Consolidated depreciation and
amortization................. $ 49 $ 51 $ 45
===== ===== =====
The Company does not report assets by business segment. Assets are managed
based on geographic location because both business segments share certain
facilities.
97
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(5) SEGMENT REPORTING -- (CONTINUED)
The following tables summarize information as to the Company's operations in
different geographic areas:
For the Year Ended December 31,
-------------------------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
Net sales (a):
United States.................... $ 393 $ 321 $ 267
Canada........................... 54 56 50
Mexico........................... 98 65 49
Brazil........................... 64 57 48
France........................... 287 148 148
Italy............................ 54 47 42
Switzerland (b).................. -- 107 106
South Africa..................... 53 59 61
Other countries.................. 94 87 60
----- ----- -----
Total.......................... $ 1,097 $ 947 $ 831
===== ===== =====
(a) Net sales are based on location of seller.
(b) During 1998, the Company formed a global export sales office in
Switzerland.
At December 31,
---------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
Long-lived assets (c):
United States.................... $ 172 $ 166 $ 126
Canada........................... 23 1 --
Mexico........................... 30 28 34
Brazil........................... 71 61 42
France........................... 87 97 95
Italy............................ 40 43 35
Russia........................... 65 2 2
South Africa..................... 81 62 56
Other countries.................. 21 23 20
----- ----- -----
Total.......................... $ 590 $ 483 $ 410
===== ===== =====
(c) Long-lived assets represent net fixed assets and goodwill, net of
accumulated amortization.
98
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) LONG-TERM DEBT
Note 19 describes the refinancing of long-term debt in February 2000. The
following table presents the long-term debt of the Company:
At December 31,
---------------
1998 1999
---- ----
(Dollars in millions)
Existing Senior Facilities:
Tranche A Facility........................ $210 $158
Tranche B Facility........................ 119 118
Tranche C Facility........................ 210 209
Revolving Facility........................ 35 32
---- ---
Total Existing Senior Facilities........ 574 517
Subordinated Notes........................... 200 200
Italian lire loans and obligations........... 1 1
Deutsche mark loans.......................... 10 4
---- ---
Subtotal.................................. 785 722
Less: payments due within one year.......... 63 82
---- ---
Total................................... $ 722 $ 640
==== ===
On March 19, 1997, the Existing Senior Facilities were amended to reduce
interest rates, increase the Revolving Facility to $250 million from $100
million and change certain covenants to allow greater flexibility in uses of
free cash flow.
On April 10, 1998, the Company obtained a limited waiver of a breach, if
any, of certain covenants relating to compliance with laws prior to March 13,
1998 and its obligation to deliver certain financial information within 90 days
of the end of the prior year. In connection with the waiver, the Company agreed
to grant a security interest in substantially all of its assets. The Company
also agreed to amend certain provisions of the Existing Senior Facilities. These
amendments had the effect of increasing interest rates. In addition, in reliance
on the waiver, the Company was able to borrow an additional $35 million under
the Revolving Facility. The waiver was not, however, effective for any
additional borrowings and provided that it would terminate no later than July
10, 1999.
Under the Subordinated Notes, subject to certain exceptions, the Company may
not incur additional indebtedness if its adjusted coverage ratio is less than
certain specified ratios. As a result of the $340 million charge against results
of operations for 1997 as a reserve for estimated potential liabilities and
expenses in connection with antitrust investigations and related lawsuits and
claims, its adjusted coverage ratio was less than those specified ratios and,
under the indenture governing the Subordinated Notes (the "Subordinated Note
Indenture"), it could not, with limited exceptions, incur additional
indebtedness (even under the Existing Senior Facilities).
99
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) LONG-TERM DEBT -- (CONTINUED)
On November 3, 1998, the Company amended the Subordinated Note Indenture. On
November 10, 1998, the Company refinanced the Existing Senior Facilities. The
refinancing consisted of the addition of the Tranche C Facility (as defined
below) and amendments to, among other things, modify covenants and
representations relating to compliance with laws, absence of material legal
proceedings and absence of material adverse changes insofar as they relate to
antitrust, stockholder derivative and securities investigations, lawsuits and
claims.
The amendments to the Subordinated Note Indenture, among other things,
eliminated the $340 million charge from the calculation of the Company's
adjusted coverage ratio.
As a result of the refinancing and the amendment of the Subordinated Note
Indenture, the Company had the ability (subject to compliance with applicable
covenants, conditions and other terms in the future under both the Existing
Senior Facilities and the Subordinated Notes) to borrow under the Revolving
Facility. At December 31, 1999, $250 million was the maximum amount available
for borrowing under the Revolving Facility, of which $32 million had been
borrowed.
EXISTING SENIOR FACILITIES
The Existing Senior Facilities consist of:
o A Tranche A Facility in the initial amount of $270 million consisting
of: (i) a Tranche A Letter of Credit Facility providing for the
initial issuance of up to $225 million (including reserves for
interest rate and, if applicable, currency exchange rate fluctuations)
of U.S. dollar-denominated letters of credit for the purpose of
supporting U.S. dollar-denominated or foreign-currency denominated
loans to certain foreign subsidiaries under facilities arranged with
local lending institutions; (ii) a Tranche A
Term Loan Facility providing for initial term loans of $45 million to
UCAR Global; and (iii) a Tranche A Reimbursement Loan Facility to
reimburse drawings under those letters of credit or refinance those
local facilities. The Tranche A Facility amortizes in quarterly
installments over four years, commencing March 31, 1998, with
installments ranging from $50 million in 1998 to $85 million in 2001,
with the final installment payable on December 31, 2001.
o A Tranche B Facility providing for initial term loans of $120 million to
UCAR Global. The Tranche B Facility amortizes over five years, commencing
March 31, 1998, with nominal quarterly installments during the first four
years, and quarterly installments aggregating $116 million in 2002, with
the final installment payable on December 31, 2002.
100
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) LONG-TERM DEBT -- (CONTINUED)
o A Tranche C Facility providing for initial term loans of $125 million to
UCAR Global and $85 million to its Swiss subsidiary. The Tranche C
Facility was added in connection with the refinancing. The Tranche C
Facility amortizes over five years, commencing March 31, 1999, with
nominal quarterly installments during the first four years, and quarterly
installments aggregating $206 million in 2003, with the final installment
payable on December 31, 2003.
o A Revolving Facility providing for revolving and swingline loans to,
and the issuance of U.S. dollar-denominated letters of credit for the
account of UCAR Global and certain other U.S. subsidiaries in an
aggregate principal and stated amount at any time not to exceed $250
million. The Revolving Facility terminates on December 31, 2001. As
a condition to each borrowing under the Revolving Facility, the
Company is required to represent, among other things, that the sum of
payments and reserves relating to specified litigation liabilities has
not and is not reasonably expected to exceed $400 million.
The Company is required to make mandatory prepayments in the amount of :
o Either 75% or 50% (depending on the ratio of (i) adjusted total debt
plus adjusted reserves relating to specified litigation liabilities to
(ii) adjusted total EBITDA) of adjusted excess cash flow. Adjusted
excess cash flow is determined after taking into account, among other
things, debt service on the Existing Senior Facilities and the
Subordinated Notes. The obligation to make these prepayments, if any,
arises after the end of each year with respect to adjusted excess cash
flow during the prior year. Any mandatory prepayments would be
reduced by voluntary prepayments made during the
prior year. The refinancing increased the percentage of excess cash
flow required to be applied to these prepayments.
o 100% of the net proceeds of certain asset sales or incurrence of
certain indebtedness.
o 50% of the net proceeds of the issuance of any equity securities by
UCAR.
Mandatory prepayments require either prepayment of loans, reduction of
letters of credit or both. No mandatory prepayments were required in 1997, 1998
or 1999. The Company may make voluntary prepayments under the Existing Senior
Facilities up to four times each year. Effective immediately after December 31,
1999, there is no penalty or premium due in connection with prepayments (whether
voluntary or mandatory).
101
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) LONG-TERM DEBT -- (CONTINUED)
UCAR has unconditionally and irrevocably guaranteed the obligations of UCAR
Global and the other borrowers under the Existing Senior Facilities. This
guarantee is secured, with certain exceptions, by first priority security
interests in all of the outstanding capital stock of UCAR Global and all of the
intercompany debt owed to UCAR.
Each of UCAR Global's subsidiaries has guaranteed, with certain exceptions,
the obligations of UCAR Global and its other subsidiaries under the Existing
Senior Facilities, except that our U.S. subsidiaries have not guaranteed
obligations of our foreign subsidiaries. The obligations of UCAR Global and the
other borrowers under the Existing Senior Facilities as well as these guarantees
are secured, with certain exceptions, by first priority security interests in
substantially all of the Company's assets, except that no more than 65% of the
capital stock or other equity interests in its foreign subsidiaries held
directly by its U.S. subsidiaries and no other foreign assets secure obligations
or guarantees of its U.S. subsidiaries (including UCAR Global).
After the refinancing, the interest rates applicable to the Tranche A and
Revolving Facilities are, at the Company's option, either adjusted LIBOR plus a
margin ranging from 2.25% to 2.75% (depending on the same ratio) or the
alternate base rate plus a margin ranging from 1.25% to 1.75% (depending on the
same ratio). The interest rate applicable to the Tranche B and Tranche C
Facilities is, at the Company's option, either adjusted LIBOR plus 3.25% or the
alternate base rate plus 2.25%. The alternate base rate is the higher of Chase
Manhattan Bank's prime rate or the federal funds effective rate plus 0.50%. At
the option of foreign borrowers under local facilities, the interest rate under
the local facilities is either adjusted LIBOR plus 0.25%, an alternate base rate
(which varies from facility to facility) or, in the case of local
currency-denominated loans, the local interbank offered rate plus 0.25%. After
the refinancing, UCAR Global pays a per annum fee ranging from 2.25% to 2.75%
(depending on the same ratio) of the aggregate face amount of outstanding
letters of credit under the Tranche A and Revolving Facilities and a per annum
fee of 0.50% on the undrawn portion of the commitments under the Revolving
Facility. The effect of the refinancing has been to increase interest rates by
approximately 2.00% per annum and commitment fees by approximately 0.25% per
annum from those which would otherwise have been payable in the absence of both
the waiver and the refinancing.
The Company enters into agreements with financial institutions, which are
intended, to limit, or cap, its exposure to incurrence of additional interest
expense due to increases in variable interest rates. Use of these agreements is
allowed under the Existing Senior Facilities.
The weighted-average interest rate on the Existing Senior Facilities was
7.38% during 1997, 7.08% during 1998 and 9.65% during 1999.
102
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) LONG-TERM DEBT -- (CONTINUED)
The Existing Senior Facilities contain a number of significant covenants
that, among other things, restrict the Company's ability to sell assets, incur
additional indebtedness, repay or refinance other debt or amend other debt
instruments, create liens on assets, enter into leases, investments or
acquisitions, engage in mergers or consolidations, make capital expenditures,
engage in transactions with affiliates, or pay dividends or make other
restricted payments and that otherwise restrict corporate activities. In
addition, the Company is required to comply with specified minimum interest
coverage and maximum leverage ratios. The refinancing effected changes to these
covenants to make them generally more restrictive. Among the changes is a change
to the calculation of the leverage ratio so as to include reserves relating to
specified litigation liabilities as debt.
In addition to the failure to pay principal, interest and fees when due,
events of default under the Existing 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.
Under the Existing Senior Facilities, UCAR is permitted to pay dividends on
and repurchase common stock, and UCAR Global is permitted to pay dividends to
UCAR for those purposes, only in an aggregate amount of up to $15 million in
1999 and $20 million in 2000 and thereafter. UCAR and UCAR Global are also
permitted to repurchase common stock from present or former directors, officers
or employees in an aggregate amount of up to the lesser of $5 million per year
(with unused amounts permitted to be carried forward) or $25 million on a
cumulative basis since October 19, 1995. In addition, UCAR Global is permitted
to pay dividends to UCAR (i) in respect of UCAR's administrative fees and
expenses and (ii) to fund payments in connection with antitrust investigations,
lawsuits and claims and securities and stockholder derivative lawsuits and
claims. The total amount of dividends to fund those payments, plus the total
amount paid on intercompany debt owed to UCAR for the same purpose, may not
exceed $400 million (adjusted for certain imputed interest expense).
SUBORDINATED NOTES
UCAR Global has $200 million aggregate principal amount of Subordinated
Notes outstanding. Interest on the Subordinated Notes is payable semiannually at
the rate of 12% per annum. The Subordinated Notes mature on January 15, 2005.
On or after January 15, 2000, UCAR Global may redeem the Subordinated Notes
in whole or in part at specified redemption prices beginning at 104.5% of the
principal amount redeemed for the year commencing January 15, 2000 and reducing
to 100% of the principal amount redeemed for the years January 15, 2003 and
thereafter, in each case together with accrued and unpaid interest.
103
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) LONG-TERM DEBT -- (CONTINUED)
Upon the occurrence of a change of control, (i) UCAR Global will have the
option to redeem the Subordinated Notes in whole but not in part at a redemption
price equal to 100% of the principal amount redeemed, plus a specified premium,
plus accrued and unpaid interest and (ii) if UCAR Global does not so redeem the
Subordinated Notes, UCAR Global will be required to make an offer to repurchase
the Subordinated Notes at a price equal to 101% of the principal amount
redeemed, together with accrued and unpaid interest.
The Subordinated Notes are unsecured and subordinated to all existing and
future senior indebtedness of UCAR Global. The Subordinated Notes will rank pari
passu with any future senior subordinated indebtedness of UCAR Global and senior
to all other subordinated indebtedness of UCAR Global. UCAR has unconditionally
guaranteed the Subordinated Notes on a senior subordinated basis.
The Subordinated Note Indenture contains a number of covenants that, among
other things, restrict the Company's ability to incur additional indebtedness,
pay dividends, make investments, create or permit to exist restrictions on
distributions from subsidiaries, sell assets, repurchase Subordinated Notes,
engage in certain transactions with affiliates or enter into certain mergers and
consolidations. It also prohibits UCAR from engaging in any business activities
other than holding the stock of UCAR Global and certain permitted investments.
In addition to the failure to pay principal and interest when due or
repurchase the Subordinated Notes when required, events of default under the
Subordinated Notes include: failure to comply with applicable covenants; failure
to pay at maturity or upon acceleration of other indebtedness exceeding $25
million; judgment defaults in excess of $25 million to the extent not covered by
insurance; and certain events of bankruptcy.
The Subordinated Note Indenture restricts the payment of dividends by UCAR
Global to UCAR if at the time of the proposed dividend, UCAR Global is unable to
meet certain indebtedness incurrence and income tests or the total amount of the
dividends paid exceeds specified aggregate limits based on consolidated net
income, net proceeds from asset and stock sales and certain other transactions.
These restrictions are not applicable to dividends paid to UCAR in respect of
UCAR's administrative fees and expenses and to purchase common stock held by
present or former officers or employees subject to limits similar to those under
the Existing Senior Facilities.
DEUTSCHE MARK LOANS
In order to consummate the purchase by UCAR Elektroden of net working
capital assets from EKL (approximate U.S. dollar equivalent of $12 million),
UCAR Elektroden arranged a bank facility with BHF Bank Aktiengesellschaft. The
facility consists of a committed term loan of deutsche mark 17.3 million (U.S.
dollar equivalent of approximately $9 million in December 1999) and a revolving
line of credit for deutsche mark 2.5 million (U.S. dollar equivalent of
104
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) LONG-TERM DEBT -- (CONTINUED)
approximately $1.3 million in December 1999). The term portion of the
facility is committed through December 2000, with repayment of the outstanding
balance of deutsche mark 17.3 million due on December 31, 2000. The revolving
portion of the facility is committed for one year, with an option to renew
annually.
Credit support is provided by UCAR Global's guarantee of UCAR Elektroden's
obligations under the facility. The facility requires that UCAR Global remain in
compliance with the Existing Senior Facilities and that the facility not be
subordinate to the obligations of the Existing Senior Facilities. It also
restricts the withdrawal of capital from UCAR Elektroden. The shareholders of
UCAR Elektroden have undertaken not to dispose of their capital contributions
during the term of the facility.
EXTRAORDINARY ITEM
In November 1998, the Company recorded a charge of $11 million ($7 million
after tax) related to the refinancing of the Existing Senior Facilities. The
extraordinary charge represents $8 million of fees paid to amend the Existing
Senior Facilities and the write-off of $3 million of deferred debt issuance
costs.
OTHER
At December 31, 1999, payments due on long-term debt in the four years after
2000 are: $87 million in 2001; $117 million in 2002; $206 million in 2003; and
$230 million after 2003.
The Company's weighted-average interest rate on short-term borrowings
outstanding was 9.1% at December 31, 1998 and 9.5% at December 31, 1999.
105
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(7) INCOME TAXES
The following table summarizes the U.S. and non-U.S. components of income
(loss) before provision for income taxes:
For the Year Ended
December 31,
------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
U.S....................................... $ (275) $ (39) $ (84)
Non-U.S................................... 153 43 130
---- ---- ---
$ (122) $ 4 $ 46
==== ==== ====
Total income taxes were allocated as follows:
For the Year Ended
December 31,
------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
Income from operations.................... $ 39 $ 32 $ 1
Extraordinary items....................... -- (4) --
Stockholders' equity (deficit)............ (5) -- --
----- ----- ----
$ 34 $ 28 $ 1
==== ==== ====
The income taxes credited to stockholders' equity (deficit) in 1997 relate
to the tax benefit arising from the exercise of employee stock options.
Income tax expense attributable to income from operations consists of:
1997 1998 1999
---- ---- ----
(Dollars in millions)
U.S. federal income taxes:
Current.......................... $ 11 $ 10 $ (8)
Deferred......................... (41) (4) (23)
-- - --
$ (30) $ 6 $ (31)
== ==== ==
Non-U.S. income taxes
Current.......................... $ 66 $ 46 $ 35
Deferred......................... 3 (20) (3)
---- ---- ----
$ 69 $ 26 $ 32
==== ==== ====
106
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(7) INCOME TAXES -- (CONTINUED)
In December 1992, the Company obtained an income tax exemption from the
Brazilian government on income generated from graphite electrode production
through 1999. The exemption reduced the net expense associated with income taxes
by $6 million in 1997, $5 million in 1998 and $5 million in 1999.
In 1998, the Company obtained an income tax exemption from the Swiss
government. The exemption reduced the net expense associated with income taxes
by $13 million in 1998 and $9 million in 1999.
Income tax expense attributable to income from operations differed from the
amounts computed by applying the U.S. federal income tax rate of 35 % to pretax
income from operations as a result of the following:
For the Year Ended
December 31,
------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
Tax at statutory U.S. federal rate........... $ (43) $ 2 $ 16
Nondeductible (deductible) portion of estimated
liabilities and expenses associated with
antitrust investigations and related lawsuits
and claims................................. 85 (18) --
Nondeductible portion of impairment loss..... -- 19 --
Nondeductible imputed interest associated with
antitrust fines............................ -- 2 2
U.S. investment losses related to restructuring
charge....................................... -- (32) 32
Other taxes related to restructuring charge.. -- 9 --
Foreign earnings taxed at different rates.... 4 -- --
Foreign operating losses with no benefit
provided..................................... -- 9 (9)
Non U.S. tax exemptions and holidays......... (6) (18) (14)
Net taxes related to foreign dividends and
other remittances............................ -- 8 --
Adjustments to deferred tax asset valuation
allowance.................................... -- 55 (17)
Other........................................ (1) (4) (9)
------ ---- ----
$ 39 $ 32 $ 1
====== ==== ====
107
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(7) INCOME TAXES -- (CONTINUED)
The significant components of deferred income tax expense attributable to
income from operations are as follows:
For the Year Ended
December 31,
------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
Deferred tax expense (exclusive of the
effects of other components described below) $ (38) $ (79) $ (9)
Increase (decrease) in beginning of the
year balance of the valuation allowance for
deferred tax assets................. -- 55 (17)
------- ------ -----
$ (38) $ (24) $(26)
======= ====== =====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1999 are as follows:
At December 31,
-----------------
1998 1999
---- ----
(Dollars in millions)
Deferred tax assets:
Fixed assets.................................. $ 8 $ 11
Estimated liabilities and expenses associated
with antitrust investigations and related
lawsuits and claims......................... 23 10
Postretirement and other employee benefits.... 55 56
Net operating loss and credit carryforwards... 34 62
Provision for scheduled plant closings and
other restructurings......................... 61 12
Other......................................... 15 31
------- ------
Total gross deferred tax assets............. 196 182
Less: valuation allowance.................. (58) (41)
------- ------
Deferred tax assets........................ $ 138 $ 141
======= ======
108
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(7) INCOME TAXES -- (CONTINUED)
At December 31,
---------------
1998 1999
---- ----
(Dollars in millions)
Deferred tax liabilities:
Fixed assets................................ $ 86 $ 64
Inventory................................... 13 11
Other....................................... 6 7
----- -----
Total gross deferred tax liabilities....... 105 82
----- -----
Net deferred tax asset.................... $ 33 $ 59
===== =====
Deferred income tax assets and liabilities are classified on a net current
and noncurrent basis within each tax jurisdiction. Net deferred income tax
assets are included in prepaid expenses in the amount of $35 million at December
31, 1998 and $18 million at December 31, 1999 and in other assets in the amount
of $52 million at December 31, 1998 and $81 million at December 31, 1999. Net
deferred tax liabilities are also included in accrued income and other taxes in
the amount of $6 million at December 31, 1998 and $6 million at December 31,
1999 and separately stated as deferred tax liabilities in the amount of $48
million at December 31, 1998 and $34 million at December 31, 1999.
The net change in the total valuation allowance for 1998 was an increase of
$55 million. The increase resulted primarily from deferred taxes associated with
the closure of manufacturing operations in Canada and Germany, settlement of
antitrust lawsuits and claims and excess foreign tax credits where the Company
considers realizability unlikely. The net change in the total valuation
allowance for 1999 was a decrease of $17 million. The decrease results primarily
from the elimination of deferred taxes no longer required due to the completion
of the closure of manufacturing operations in Canada and Germany, the
development of a plan to utilize foreign tax credits and the re-evaluation of
the deductibility of settlements of antitrust lawsuits and claims.
The Company has recomputed total excess foreign tax credit carryforwards to
be $22 million at December 31, 1998 and $58 million at December 31, 1999. Of
these tax credit carryforwards, $1 million expire in 2002, $21 million expire in
2003 and $36 million expire in 2004. The Company used foreign tax credits to
reduce U.S. current tax liabilities in the amount of $54 million in 1997, $48
million in 1998 and nil in 1999. Based upon the level of historical taxable
income and projections for future taxable income over the periods during which
these credits are utilizable, management believes it is more likely than not the
Company will realize the benefits of these deferred tax assets net of the
existing valuation allowances at December 31, 1999.
109
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(7) INCOME TAXES -- (CONTINUED)
U.S. income taxes have not been provided on undistributed earnings of
foreign subsidiaries. The Company's intention is to reinvest these earnings
permanently or to repatriate the earnings only when it is tax efficient to do
so. Accordingly, the Company believes that any U.S. tax on repatriated
earnings would be substantially offset by U.S. foreign tax credits.
(8) OTHER (INCOME) EXPENSE, NET
The following table presents an analysis of other (income) expense, net:
For the Year Ended
December 31,
------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
Interest income....................... $ (9) $ (14) $ (8)
Global integration project consulting 4 9 (1)
fees..................................
Bank fees............................. 2 3 3
Amortization of goodwill.............. 1 1 1
(Gain) loss on sale of assets......... -- 2 (3)
Other................................. 7 7 (1)
---- ---- ----
Total other (income) expense, net... $ 5 $ 8 $ (9)
==== ==== ====
(9) INTEREST EXPENSE
The following table presents an analysis of interest expense:
For the Year Ended
December 31,
------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
Interest incurred on debt............. $ 62 $ 66 $ 77
Amortization of debt issuance costs... 2 2 2
Interest imputed on antitrust fine.... -- 5 5
---- ---- ----
Total interest expense........... $ 64 $ 73 $ 84
==== ==== ====
110
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(10) SUPPLEMENTARY BALANCE SHEET DETAIL
At December 31,
---------------
1998 1999
---- ----
(Dollars in millions)
Notes and accounts receivable:
Trade....................................... $ 172 $ 139
Other....................................... 31 37
----- -----
203 176
Allowance for doubtful accounts............. (5) (5)
----- -----
$ 198 $ 171
===== =====
Property, plant and equipment:
Land and improvements....................... $ 43 $ 47
Buildings................................... 199 120
Machinery and equipment and other........... 946 853
Construction in progress.................... 32 51
----- -----
$ 1,220 $ 1,071
===== =====
Other assets:
Goodwill (net).............................. $ 15 $ 12
Deferred income taxes....................... 52 81
Benefits protection trust................... 2 2
Long-term receivables....................... 8 8
Other....................................... 14 12
----- -----
$ 91 $ 115
===== =====
Accounts payable:
Trade....................................... $ 54 $ 67
Other....................................... 13 13
----- -----
$ 67 $ 80
===== =====
Other accrued liabilities:
Accrued accounts payable.................... $ 13 $ 14
Payrolls.................................... 7 5
Restructuring............................... 57 28
Employee compensation and benefits.......... 31 30
Liabilities and expenses associated with
antitrust investigations and related
lawsuits and claims...................... 78 27
Other....................................... 12 10
----- -----
$ 198 $ 114
===== =====
111
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(10) SUPPLEMENTARY BALANCE SHEET DETAIL -- (CONTINUED)
At December 31,
---------------
1998 1999
---- ----
(Dollars in millions)
Other long-term obligations:
Postretirement benefits..................... $ 83 $ 82
Employee severance costs.................... 12 5
Pension and related benefits................ 21 14
Liabilities and expenses associated with
antitrust investigations and related 117 104
lawsuits and claims......................
Other....................................... 33 19
---- ----
$ 266 $ 224
==== ====
The following table presents an analysis of the allowance for doubtful
accounts:
At December 31,
---------------
1998 1999
---- ----
(Dollars in millions)
Balance at beginning of year.................... $ 6 $ 5
Additions....................................... -- 1
Deductions...................................... (1) (1)
---- ----
Balance at end of year.......................... $ 5 $ 5
==== ====
(11) LEASES
Lease commitments under noncancelable operating leases extending for one
year or more will require the following future payments:
(Dollars in millions)
2000................................................ $ 4
2001................................................ 3
2002................................................ 3
2003................................................ 2
2004................................................ 1
After 2004.......................................... 2
Total lease and rental expenses under noncancelable operating leases
extending one month or more were $5 million in each of 1997, 1998 and 1999.
112
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(12) BENEFIT PLANS
RETIREMENT PLANS AND POSTRETIREMENT BENEFIT PLANS
Until February 25, 1991, the Company participated in the U.S. retirement plan
of Union Carbide Corporation ("Union Carbide"). Effective February 26, 1991, the
Company formed its own U.S. retirement plan which covers substantially all U.S.
employees. Retirement and death benefits related to employee service through
February 25, 1991 are covered by the Union Carbide plan. Benefits paid by the
Union Carbide plan are based on final average pay through February 25, 1991,
plus salary increases (not to exceed 6% per year) until January 26, 1995 when
Union Carbide ceased to own at least 50% of the equity of the Company. All
Company employees who retired prior to February 25, 1991 are covered under the
Union Carbide plan. Pension benefits under the Company plan are based primarily
on years of service and compensation levels prior to retirement. Net pension
cost for the Company plan were $6 million in 1997, $7 million in 1998 and $6
million in 1999.
Pension coverage for employees of foreign subsidiaries is provided, to the
extent deemed appropriate, through separate plans. Obligations under such plans
are systematically provided for by depositing funds with trustees, under
insurance policies or by book reserves. Net pension costs for plans of foreign
subsidiaries amounted to $1 million in 1997, $7 million in 1998 (which includes
a $7 million curtailment loss for the Canadian pension plan recorded in
conjunction with the Company's restructuring charge) and $2 million in 1999.
The Company also provides health care and life insurance benefits for
eligible retired employees. These benefits are provided through various
insurance companies and health care providers. The Company accrues the estimated
net postretirement benefit costs during the employees' credited service periods.
The components of the Company's consolidated net pension costs are as
follows:
For the Year Ended December 31,
-------------------------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
Service cost............................... $ 7 $ 8 $ 7
Interest cost.............................. 12 13 14
Expected return on assets.................. (12) (14) (14)
Amortization .............................. -- (1) 1
Settlement (gain) loss..................... -- 1 (1)
Curtailment loss........................... -- 7 1
--- --- ---
Net pension cost........................ $ 7 $ 14 $ 8
=== === ===
113
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(12) BENEFIT PLANS -- (CONTINUED)
The components of the Company's consolidated net postretirement benefit
costs are as follows:
For the Year Ended December 31,
-------------------------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
Service cost................................ $ 2 $ 3 $ 2
Interest cost............................... 6 5 6
Amortization of prior service cost.......... (3) (3) (2)
--- --- ---
Net postretirement benefit cost.......... $ 5 $ 5 $ 6
=== === ===
The reconciliation of beginning and ending balances of benefit obligations
under, and fair value of assets of, all pension and postretirement benefit plans
of the Company, and the funded status of the plans, are as follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
---------------- -----------------------
At December 31, At December 31,
--------------- ---------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
(Dollars in millions)
Changes in benefit obligation:
Net benefit obligation at beginning of year............... $ 172 $ 199 $ 81 $ 84
Service cost.............................................. 8 7 3 2
Interest cost............................................. 13 14 5 5
Plan amendments........................................... 1 1 -- (5)
Foreign currency exchange rate changes ................... (4) (3) (1) --
Actuarial (gain) loss..................................... 10 (6) 2 (5)
Curtailment............................................... 4 -- (1) --
Settlement................................................ (3) (8) -- --
Special termination benefits.............................. 3 -- -- --
Gross benefits paid....................................... (5) (9) (5) (6)
------- ------- ------ ------
Net benefit obligation at end of year.................. $ 199 $ 195 $ 84 $ 75
======= ======= ======= ======
Changes in plan assets:
Fair value of plan assets at beginning of year............ $ 165 $ 174 $ -- $ --
Actual return on plan assets.............................. 17 27 -- --
Foreign currency exchange rate changes.................... (5) (2) -- --
Employer contributions.................................... 2 9 5 6
Settlement................................................ -- (8) -- --
Gross benefits paid....................................... (5) (9) (5) (6)
------- ------ ------- ------
Fair value of plan assets at end of year............... $ 174 $ 191 $ -- $ --
======= ====== ======= ======
</TABLE>
114
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(12) BENEFIT PLANS -- (CONTINUED)
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
---------------- -----------------------
At December 31, At December 31,
--------------- ---------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
(Dollars in millions)
Reconciliation of funded status:
Funded status at end of year........... $ (25) $ (4) $ (84) $ (75)
Unrecognized net transition obligation
(asset)............................... (6) (6) -- --
Unrecognized prior service cost........ 4 1 (1) (4)
Unrecognized net actuarial (gain) loss. (1) (18) 2 (3)
------- ----- ------ -------
Net amount recognized at end of year $ (28) $(27) $ (83) $ (82)
======= ===== ====== =======
</TABLE>
Assumptions used to determine net pension costs, pension projected benefit
obligation, net postretirement benefit costs and postretirement benefits
projected benefit obligation are as follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
---------------- -----------------------
At December 31, At December 31,
--------------- ---------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average assumptions as of
measurement date:
Discount rate..................................... 7.61% 7.67% 7.34% 8.06%
Expected return on plan assets ................... 8.83% 8.45% N/A N/A
Rate of compensation increase..................... 4.85% 5.16% 4.58% 5.25%
Health care cost trend on covered charges:
Initial....................................... N/A N/A 8.14% 8.13%
Ultimate...................................... N/A N/A 5.11% 5.76%
Years to ultimate............................. N/A N/A 6 6
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for net postretirement benefits. A one-percentage-point change
in the health care cost trend rate would change the accumulated postretirement
benefits net benefit obligation by approximately $5 million at December 31, 1999
and change net postretirement benefit costs by approximately $1 million for
1999.
115
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(12) BENEFIT PLANS -- (CONTINUED)
OTHER NON-QUALIFIED PLANS
Since January 1, 1995, the Company has established various unfunded,
non-qualified supplemental retirement and deferred compensation programs for
certain eligible employees. In 1995, the Company established a benefits
protection trust (the "Trust") to partially provide for the benefits of
employees participating in these plans. At both December 31, 1998, and 1999, the
Trust had assets of approximately $2 million, which are included in other assets
on the Consolidated Balance Sheets.
SAVINGS PLAN
The Company's employee savings plan provides eligible employees the
opportunity for long-term savings and investment. Participating employees can
contribute 1.0% to 7.5% of employee compensation as basic contributions and an
additional 0.5% to 10.0% of employee compensation as supplemental contributions.
The Company contributes on behalf of each participating employee an amount equal
to 30% for 1997 and 50% for 1998 and 1999 of the employee's basic contribution.
The Company contributed $2 million in each of 1997, 1998 and 1999.
INCENTIVE PLANS
In 1997, the Company provided group profit sharing plans for employees in
various subsidiaries. Costs for these profit sharing plans were $19 million in
1997. Effective January 1, 1998, the Company implemented a global profit sharing
plan for the Company's worldwide employees. This plan is based on the global
financial performance of the Company. The cost for this plan was $10 million in
1998 and nil in 1999.
(13) RESTRUCTURING PLAN
In September 1998, the Company recorded a restructuring charge of $86
million in connection with a global restructuring and rationalization plan to
reduce costs and improve operating efficiencies. The principal actions of the
plan involve the closure of manufacturing operations in Welland, Canada and
Berlin, Germany, and the centralization and consolidation of administrative and
financial functions. These actions planned for the elimination of approximately
430 administrative and manufacturing positions, of which 366 positions had been
eliminated at December 31, 1999. The $86 million charge consisted of a write-off
of $29 million of assets and a reserve of $57 million.
116
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(13) RESTRUCTURING PLAN -- (CONTINUED)
During 1999, it was determined that plant closure activities were estimated
to result in lower cash costs than originally anticipated. These savings
represent lower net anticipated demolition costs resulting primarily from the
outsourcing of a majority of the planned demolition at our Welland plant and, to
a lesser extent, lower severance and related costs. These developments resulted
in a net reduction of the restructuring cost estimate of $6 million in the 1999
third quarter. The following is a summary of activity relating to the accrued
liabilities associated with the restructuring plan:
<TABLE>
<CAPTION>
Balance at 1999 Activity Balance At
December 31 Change in December 31,
1998 Payments Estimate 1999
---- -------- --------- ----
<S> <C> <C> <C> <C>
(Dollars in Millions)
Severance and related costs $ 30 $ 16 $ 1 $ 13
Plant shut down and related costs 18 3 5 10
Postmonitoring and environmental 9 4 - 5
-------- ------- -------- --------
$ 57 $ 23 $ 6 $ 28
======== ======== ======== =========
</TABLE>
The Berlin plant ceased production activities in 1998. The Welland plant
ceased production activities in April 1999. In addition, the relocation of
corporate headquarters to Nashville, Tennessee was completed during the 1999
first quarter.
Cash payments of $23 million were made during 1999. Payments of $7 million
were associated with the Berlin plant, payments of $15 million were associated
with the Welland plant and payments of $1 million were associated with the
centralization and consolidation of administrative functions. The restructuring
accrual is included in other accrued liabilities on the Consolidated Balance
Sheets.
(14) MANAGEMENT COMPENSATION AND INCENTIVE PLANS
In 1995, UCAR entered into employment agreements with certain officers. The
employment agreements provided the officers with the opportunity to receive
bonuses based in part on the achievement of designated EBITDA targets. The
Company recorded expenses applicable to these bonuses of $3 million in 1997 and
nil in 1998 and 1999. At December 31, 1999, only one officer was subject to such
an agreement. That officer retired on that date.
In 1998, UCAR entered into a five-year employment agreement with its current
president, chief executive officer and chairman of the board.
UCAR has adopted several stock option plans. The aggregate number of shares
subject to the plans was 6,387,000 at December 31, 1997 and 9,500,000 at
December 31, 1998 and 1999. The plans permit options to be granted to employees
and, in the case of one plan since March 1998, also to non-employee directors.
117
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(14) MANAGEMENT COMPENSATION AND INCENTIVE PLANS - (CONTINUED)
In 1995, UCAR granted 12-year options to management to purchase 4,761,000
shares at an exercise price of $7.60 per share, of which options for 3,967,400
shares vested fully at the time of UCAR's initial public offering, and the
balance were performance options, one-half of which vest in each of 1998 and
1999 on achievement of designated EBITDA targets. In December 1997, UCAR's Board
of Directors approved the accelerated vesting of the outstanding performance
options associated with the 1998 performance targets and, accordingly, the
Company recorded compensation expense of $12 million. No compensation expense
associated with these options was recorded in 1999 because the Company did not
achieve the 1999 performance targets. The outstanding 1999 performance options
have been forfeited and will be canceled. In addition, in 1999 and 2000, options
to purchase an aggregate of 1,183,482 shares granted to two former officers were
canceled.
In 1996, UCAR 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, UCAR 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,
1999, 460,350 of such options were fully vested.
In 1997, UCAR granted fully vested 10-year options to management to purchase
155,000 shares at an exercise price of $37.59 per share.
(14)
In 1998, UCAR granted 10-year options to management to purchase shares as
follows:
o Options for 621,000 shares were granted to certain officers at exercise
prices ranging from $29.22 to $34.36 per share. Options for 300,000
shares vest one year from the grant date, options for 221,000 shares vest
two years from the grant date and options for 100,000 shares vest three
years from the grant date.
o 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 17,000 shares vested on the grant date, 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, 1999, 1,290,000 of such
options were fully vested.
In 1999, UCAR granted options to management to purchase shares as follows:
o Options for 409,600 shares were issued to certain officers and management
at exercise prices ranging from $14.13 to $25.81 per share. Options for
45,359 shares vested on the grant date, options for 269,101 shares vest
118
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(14) MANAGEMENT COMPENSATION AND INCENTIVE PLANS - (CONTINUED)
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.
In 1998, UCAR adopted a loan program under which management borrowed
approximately $3 million in 1998 and less than $1 million in 1999.
In 1998, UCAR adopted stock purchase programs under which management may
purchase shares at fair market value on the date of purchase. Management
purchased stock were 201,373 shares in 1998 and 26,804 shares in 1999.
The Company applies APB 25 in accounting for its stock-based compensation
expense plans. Accordingly, no compensation cost has been recognized for its
time vesting options. The compensation expense that has been charged against
income for its performance vesting options was $12 million in 1997. If
compensation expense for the Company's stock-based compensation plans was
determined by the fair value method prescribed by SFAS 123, the Company's net
income (loss) and net income (loss) per share would have been reduced or
increased to the pro forma amounts indicated below:
119
<PAGE>
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(14) MANAGEMENT COMPENSATION AND INCENTIVE PLANS - (CONTINUED)
For the Year Ended
December 31,
------------
1997 1998 1999
---- ---- ----
(Dollars in millions,
except per share data)
Net income (loss):
As reported............................... $ (160) $ (37) $ 42
Pro forma................................. (156) (41) 40
Diluted net income (loss) per share:
As reported ............................. (3.49) (0.83) 0.91
Pro forma................................ (3.39) (0.91) 0.87
A summary of the status of the Company's stock-based compensation plans at
the dates and for the period indicated is presented below:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
1997 1998 1999
---- ---- ----
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
(Shares in thousands)
Time vesting options:
Outstanding at beginning
of year............................... 3,572 $15.01 3,324 $16.98 5,826 $18.48
Granted at market price................ -- -- 1,884 17.06 410 19.91
Granted at price exceeding
market................................ 62 39.31 621 32.37 -- --
Granted at price below market.......... 155 37.59 51 15.50 -- --
Exercised.............................. (432) 9.91 (10) 7.60 (16) 13.85
Forfeited/canceled..................... (33) 35.00 (44) 32.84 (943) 10.19
------ ------ ------ ------ ------ ------
Outstanding at end of year............ 3,324 16.98 5,826 18.48 5,277 20.15
====== ====== ====== ====== ====== =====
Options exercisable at year
end................................... 2,799 13.55 2,841 13.76 4,176 15.32
Weighted-average fair value of
options granted during year:
At market............................. $ -- $ 8.53 $11.64
Exceeding market...................... 16.98 12.49 --
Below market........................ 17.47 7.99 --
</TABLE>
120
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INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(14) MANAGEMENT COMPENSATION AND INCENTIVE PLANS - (CONTINUED)
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
1997 1998 1999
---- ---- ----
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
(Shares in thousands)
Performance vesting options:
Outstanding at beginning
of year................................. 1,508 $ 7.60 1,174 $ 7.60 938 $ 7.60
Granted.................................. -- -- -- -- -- --
Exercised................................ (284) 7.60 (45) 7.60 (3) 7.60
Forfeited/canceled....................... (50) 7.60 (191) 7.60 (389) 7.60
------ ----- -----
Outstanding at end of year.............. 1,174 7.60 938 7.60 546 7.60
====== ===== =====
Options exercisable at year
end..................... 842 7.60 566 7.60 428 7.60
</TABLE>
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 1997, 1998 and 1999, respectively: dividend yield of
0.0% for all years; expected volatility of 30% in 1997, 35% in 1998 and 45% in
1999; risk-free interest rates of 6.4% in 1997, 4.9% in 1998 and 5.4% in 1999;
and expected lives of 7 years in 1997 and 1998 and 8 years in 1999.
The following table summarizes information about stock options outstanding
at December 31, 1999:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted-
Average Weighted- Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Prices Exercisable Prices
--------------- ----------- ----- ------ ----------- ------
(Shares in thousands)
Time vesting options:
$7.60 1,371 7 years $ 7.60 1,371 $ 7.60
$14.13 to $18.69 2,142 8 years 17.05 1,919 17.02
$22.06 to $29.22 157 9 years 25.45 -- --
$30.59 to $40.44 1,607 6 years 34.46 886 35.36
----- ------
5,277 7 years 20.15 4,176 15.32
===== ======
Performance vesting
options:
$7.60 546 7 years 7.60 428 7.60
=== ===
121
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(15) CONTINGENCIES
ANTITRUST INVESTIGATIONS
On June 5, 1997, the Company was served with subpoenas to produce documents
to a grand jury convened by the U.S. Department of Justice (the "DOJ") and a
related search warrant in connection with a criminal investigation as to whether
there has been any violation of U.S. federal antitrust law by producers of
graphite electrodes. Concurrently, the antitrust enforcement authority of the
European Community (the "EU Competition Authority") visited the offices of one
of the Company's French subsidiaries for purposes of gathering information in
connection with an investigation as to whether there has been any violation of
the antitrust law of the European Community by those producers. In October 1997,
the Company was served with subpoenas by the DOJ to produce documents relating
to, among other things, its carbon electrode and bulk graphite businesses.
In December 1997, UCAR's Board of Directors appointed a special committee of
outside directors to exercise the power and authority of UCAR's Board of
Directors in connection with antitrust investigations and related lawsuits and
claims.
On April 7, 1998, pursuant to a plea agreement between the DOJ and UCAR, the
DOJ charged UCAR and unnamed co-conspirators with participating from at least
July 1992 until at least June 1997 in an international conspiracy involving
meetings and conversations in the Far East, Europe and the United States
resulting in agreements to fix prices and allocate market shares in the United
States and elsewhere, to restrict co-conspirators' capacity and to restrict
non-conspiring producers' access to manufacturing technology for graphite
electrodes. On April 24, 1998, pursuant to the plea agreement, UCAR pled guilty
to a one count charge of violating U.S. federal antitrust 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. The fine is payable in six annual
installments of $20 million, $15 million, $15 million, $18 million, $21 million
and $21 million, commencing July 23, 1998. The agreement was approved by the
court and, as a result, under the plea agreement, the Company will not be
subject to prosecution by the DOJ with respect to any other violations of the
U.S. federal antitrust law occurring prior to 1998. The payments due in 1998 and
1999 were timely made.
In the 2000 first quarter, pursuant to a plea agreement with the DOJ, the
Company's former chief executive officer and chief operating officer, both of
whom retired and resigned from all positions with the Company in March 1998,
pled guilty to one count charges of violating U.S. federal antitrust law in
connection with the sale of graphite electrodes and were sentenced to terms
of incarceration and payment of fines. In December 2000, a former director,
export sales Europe, was indicted by the DOJ on similar charges. The Company
does not intend to reimburse those officers for their fines or that director,
export sales Europe, for any costs or fines he may incur as a result of such
indictment.
122
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(14) CONTINGENCIES - (CONTINUED)
In April 1998, the Company became aware that the Canadian Competition
Bureau (the "Competition Bureau") had commenced a criminal investigation as to
whether there has been any violation of Canadian antitrust law by producers of
graphite electrodes. In March 1999, pursuant to a plea agreement with the
Competition Bureau, the Company's Canadian subsidiary pled guilty to a one count
charge of violating Canadian antitrust law in connection with the sale of
graphite electrodes and to pay a fine of Cdn. $11 million. The court approved
the plea agreement and, as a result, under the plea agreement the Company will
not be subject to prosecution by the Competition Bureau with respect to any
other violations of Canadian antitrust law occurring prior to the date of the
plea agreement. The fine was timely paid.
In June 1998, the Company became aware that the Japanese antitrust
enforcement authority had commenced an investigation as to whether there has
been any violation of Japanese antitrust law of producers and distributors of
graphite electrodes. In addition, in October, 1999, the Company became aware
that the Korean antitrust authority had commenced an investigation as to whether
there has been a violation of Korean antitrust law by producers and distributors
of graphite electrodes. The Company has no facilities or employees in Japan or
Korea. The Company believes that, among other things, it has good defenses to
any claim that it is subject to the jurisdiction of either such authority. In
March 1999, the Japanese antitrust authority issued a warning letter to the four
Japanese graphite electrode producers. While the Japanese antitrust authority
did not issue a similar warning to the Company, the warning letter issued to the
Japanese producers did reference UCAR as a member of an alleged cartel.
In January 2000, the EU Competition Authority issued a statement of
objections initiating proceedings against UCAR and other producers of graphite
electrodes. The statement alleges that UCAR and other producers violated the
antitrust law of the European Community and the European Economic Area in
connection with the sale of graphite electrodes. The statement does not set
forth any proposed fines or the impact which cooperation by UCAR or other
producers would have on their respective fines, if any. The maximum fine for
such a violation is ten percent of a company's revenue during the year preceding
the year in which the fine is assessed. UCAR believes that it has provided
substantial cooperation to the EU Competition Authority and is, therefore,
entitled to a reduction in the amount of any fine which would otherwise be
assessed. UCAR intends to vigorously protect its interests in connection with
such proceeding. UCAR believes that proceedings of this nature typically
continue for about six to twelve months before any fine is assessed. Any such
assessment would be subject to appeal before the Court of First Instance in
Luxembourg, although the fine or collateral security therefor would be payable
about three months after such assessment.
In January 2000, Mitsubishi Corporation ("Mitsubishi"), a former parent of
the Company, was indicted by the DOJ on a one count charge of violating U.S.
federal antitrust law in connection with the sale of graphite electrodes.
123
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(15) CONTINGENCIES - (CONTINUED)
The Company is continuing to cooperate with the DOJ and the Competition
Bureau in their continuing investigations of others and with the EU Competition
Authority in its continuing investigation. In connection therewith, the Company
has produced and is producing documents and witnesses. It is possible that
antitrust investigations seeking, among other things, to impose fines and
penalties could be initiated by authorities in other jurisdictions. The guilty
pleas make it more difficult for the Company to defend against other
investigations as well as civil lawsuits and claims.The Company has been
vigorously protecting, and intends to continue to vigorously protect, its
interests in connection with the investigations described above. The Company
may, however, at any time settle any possible unresolved charges.
ANTITRUST LAWSUITS
In 1997, various producers of graphite electrodes (including the Company)
were served with complaints commencing various antitrust class action lawsuits.
Subsequently, the complaints were either withdrawn without prejudice to refile
or consolidated into a single complaint in the District Court (the "antitrust
class action lawsuit"). In the consolidated complaint, the plaintiffs allege
that the defendants violated U.S. federal antitrust law in connection with the
sale of graphite electrodes and seek, among other things, an award of treble
damages resulting from such alleged violations. In August 1998, the court
certified a class of plaintiffs consisting of all persons who purchased graphite
electrodes in the United States (the "class") directly from the defendants
during the period from July 1, 1992 through June 30, 1997 (the "class period").
In 1998, various producers of graphite electrodes (including the Company),
Union Carbide Corporation ("Union Carbide"), another former parent of the
Company, and Mitsubishi were served with a complaint by Nucor Corporation and an
affiliate commencing a civil antitrust and fraudulent transfer lawsuit (the
"Nucor lawsuit"). In the complaint to the Nucor lawsuit, the plaintiffs allege
that the defendants violated U.S. federal antitrust law in connection with the
sale of graphite electrodes and that payments to Union Carbide and Mitsubishi in
connection with the Company's leveraged equity recapitalization in January 1995
violated applicable state fraudulent transfer laws. The complaint seeks, among
other things, an award of treble damages resulting from such alleged antitrust
violations and an order to have payments made by UCAR to Union Carbide and
Mitsubishi in connection with the recapitalization declared to be fraudulent
conveyances and returned to UCAR for purposes of enabling UCAR to satisfy any
judgments resulting from such alleged antitrust violations.
In 1998 and 1999, various producers of graphite electrodes (including the
Company) were served by steelmakers in the U.S. and Canada with complaints and
petitions commencing eight separate civil antitrust lawsuits in various courts
(the "other initial lawsuits"). Such complaints and petitions allege that the
defendants violated U.S. federal, Texas or Canadian antitrust laws or Canadian
conspiracy law in connection with the sale of graphite electrodes.
124
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(15) CONTINGENCIES -- (CONTINUED)
In 1999, various producers of graphite electrodes (including the Company)
were served two complaints commencing two separate civil antitrust lawsuits in
the District Court (the "foreign customer lawsuits"). The first complaint was
filed by about 27 steelmakers and related parties, all but one of whom are
located outside the U.S., and the second complaint was filed by about 4
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 antitrust
violations. The Company has been advised that is has strong defenses against
claims alleging that purchases of graphite electrodes outside the U.S. are
actionable under U.S. federal antitrust law.
All antitrust lawsuits against one producer of graphite electrodes, SGL
Carbon Corporation, the U.S. subsidiary of SGL Carbon AG, were stayed as a
result of the filing in December 1998 of a petition by SGL Carbon Corporation in
court for reorganization in a proceeding under Chapter 11 of the U.S. Bankruptcy
Code. In the 2000 first quarter, the proceeding was dismissed because it was not
filed in good faith.
In November 1998, the distribution trustee for a company liquidated under
Chapter 7 of the U.S. Bankruptcy Code applied for a court order to compel
discovery from the Company to determine whether to institute proceedings against
the Company for alleged violations of U.S. federal antitrust law in connection
with the sale of carbon electrodes. The guilty pleas described above do not
relate to carbon electrodes. The application was voluntarily withdrawn when the
Company agreed to provide certain documents to the distribution trustee. The
Company and the distribution trustee subsequently entered into an agreement
tolling applicable statutes of limitations. Although no lawsuit relating to such
alleged violations has been commenced by the distribution trustee, the
distribution trustee has threatened to do so.
In December 1999, the Company and another producer of carbon electrodes were
served with a complaint by Globe Metallurgical, Inc. commencing a civil
antitrust lawsuit in the District Court (the "Globe lawsuit"). The guilty please
described above do not relate to carbon electrodes. In the complaint, the
plaintiff alleges that the defendants violated U.S. federal antitrust law in
connection with the sale of carbon electrodes and seeks, among other things, an
award of treble damages resulting from such alleged violations.
The Company understands that certain customers in other countries who
purchased graphite electrodes, carbon electrodes or other products from the
Company have threatened to commence antitrust lawsuits against the Company in
the U.S. or in other jurisdictions with respect to the subject matter of the
investigations and lawsuits described above.
125
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(15) CONTINGENCIES -- (CONTINUED)
Through the date hereof, except as described in the next paragraph, the
Company settled all of the lawsuits described above, certain of the threatened
civil antitrust lawsuits and certain possible antitrust claims by certain other
customers who negotiated directly with the Company. The settlements cover
virtually all of the actual and potential claims against the Company (but not
other defendants) by customers in the U.S. and Canada arising out of alleged
antitrust violations occurring prior to the date of the respective settlements
in connection with the sale of graphite electrodes. Although each settlement is
unique, in the aggregate they consist primarily of current and deferred cash
payments with some product credits and discounts. Through December 31, 1999, all
fines and settlement payments due under the agreements and settlements, an
aggregate of $209 million, net, have been timely paid. Likewise, all fines and
settlements due thereunder from January 1, 2000 through the date hereof have
been timely paid. The Company has paid $7 million in imputed interest related to
the DOJ fine to date. As of December 31, 1999, and based on information known to
the Company on March 1, 2000, the aggregate amount of fines and settlement
payments remaining due under the agreements and settlements is approximately $79
million. Amounts due under the settlement of the antitrust class action will
increase if additional claims are filed by members of the class (which includes
purchasers of graphite electrodes who are located outside the U.S. but who
purchased graphite electrodes from one of the Company's U.S. subsidiaries) or if
a purchaser of semi-graphitic electrodes is determined to be a member of the
class and such purchaser files a claim thereunder.
The foreign customer lawsuits and the Globe lawsuit have not been settled
and are still in their early stages. The Company has been vigorously defending,
and has been directed by the special committee to continue to vigorously defend,
against these lawsuits as well as all threatened lawsuits and possible
unasserted claims, including those mentioned above. The Company may at any time,
however, settle these lawsuits as well as any threatened lawsuits and possible
claims and is actively negotiating settlements of certain of these lawsuits and
claims.
It is possible that additional civil antitrust lawsuits seeking, among other
things, to recover damages could be commenced against the Company in the U.S.
and in other jurisdictions.
ANTITRUST EARNINGS CHARGE
The Company recorded a charge of $340 million against results of operations
for 1997 as a reserve for potential liabilities and expenses in connection with
antitrust investigations and related lawsuits and claims. Actual liabilities and
expenses could be materially higher than $340 million. To the extent that the
Company's liabilities and expenses are reasonably estimable, at March 1, 2000,
the Company believes that $340 million continues to represent the estimate of
such potential liabilities and expenses. In the aggregate, the fines and
settlements described above are within the amounts used by the Company to
evaluate the $340 million charge.
126
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(15) CONTINGENCIES -- (CONTINUED)
STOCKHOLDER DERIVATIVE LAWSUIT
In March 1998, UCAR was served with a complaint commencing a stockholder
derivative lawsuit. Certain former and current officers and directors were named
as defendants. UCAR was named as a nominal defendant. In the complaint, the
plaintiff alleged that the defendants breached their fiduciary duties in
connection with alleged non-compliance by the Company and its employees with
antitrust laws. The plaintiff also alleged that certain of the defendants sold
common stock while in possession of materially adverse non-public information
relating to such non-compliance with antitrust law. As described below, this
lawsuit has been settled.
SECURITIES CLASS ACTION LAWSUIT
In April and May 1998, UCAR was served with complaints commencing securities
class actions. The complaints were consolidated into a single complaint and the
Florida State Board of Administration was designated lead plaintiff. UCAR and
certain former and current officers and directors were named as defendants. The
class consists of all persons (other than the defendants) who purchased common
stock during the period from August 1995 through March 1998. In the consolidated
complaint, the plaintiff alleged that, during such period, the defendants
violated U.S. federal securities law in connection with purchases and sales of
common stock by making material misrepresentations and omissions regarding
alleged violations of antitrust laws and sought, among other things, to recover
damages resulting from such alleged violations. As described below, this lawsuit
has been settled.
SETTLEMENT OF SECURITIES CLASS ACTION AND STOCKHOLDER DERIVATIVE LAWSUITS
In October 1999, UCAR and the individual defendants settled the securities
class action and stockholder derivative lawsuits. The settlements have received
court approval, and all appeal periods have expired. Under the settlements, a
total of $40.5 million has been contributed to escrow accounts for the benefit
of former and current stockholders who are members of the class for whom the
securities class action was brought as well as for plaintiffs' attorney's fees.
The Company contributed $11.0 million and the insurers under its directors and
officer's insurance policies at the time the lawsuits were filed contributed the
balance of $29.5 million. In addition, a new outside director, acceptable to
both UCAR and the lead securities class action plaintiff, the Florida State
Board of Administration, the eighth largest state employees' pension fund, has
been added to UCAR's Board of Directors. The Company has incurred about $2.0
million of unreimbursed expenses related to the lawsuits. These expenses,
together with the $11.0 million, were recorded as a charge to operations of
$13.0 million in the 1999 third quarter.
127
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(16) EARNINGS PER SHARE
Basic and diluted earnings per share are calculated based upon the
provisions of SFAS 128, adopted in 1997, using the following share data:
1997 1998 1999
---- ---- ----
Weighted-average common shares
outstanding for basic calculation 45,963,407 44,971,598 45,114,278
Add: Effect of stock options...... -- -- 1,388,874
----------- --------- ---------
Weighted-average common shares
outstanding, adjusted for diluted
calculation...................... 45,963,407 44,971,598 46,503,152
========== ========== ==========
No outstanding options were considered in the 1997 and 1998 calculation of
weighted-average common shares outstanding for the diluted calculation as they
were not dilutive due to net losses in the respective periods. The calculation
of weighted average common shares outstanding for the diluted calculation in
1999 excludes options for 1,898,657 shares because they were not dilutive due to
the fact that the exercise prices were greater than the weighted average market
price of the common stock.
(17) STOCKHOLDER RIGHTS PLAN
Effective August 7, 1998, UCAR adopted a Stockholder Rights Plan (the
"Rights Plan"). Under the Rights Plan, one preferred stock purchase right (a
"Right") was distributed as a dividend on each outstanding share of common
stock. Each share of common stock issued after the distribution is accompanied
by a Right.
When a Right becomes exercisable, it entitles the holder to buy one
one-thousandth of a share of a new series of preferred stock for $110. The
Rights are subject to adjustment upon the occurrence of certain dilutive events.
The Rights will become exercisable only when a person or group becomes the
beneficial owner of 15% or more of the outstanding shares of common stock or 10
days after a person or group announces a tender offer to acquire beneficial
ownership of 15% or more of the outstanding shares of common stock. No
certificates representing the Rights will be issued unless the Rights become
exercisable.
Under certain circumstances, holders of Rights, except a person or group
described above and certain related parties, will be entitled to purchase shares
of common stock at 50% of the price at which the common stock traded prior to
the acquisition or announcement. In addition, if UCAR is acquired after the
Rights become exercisable, the Rights will entitle those holders to buy the
acquiring company's shares at a similar discount.
128
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(17) STOCKHOLDER RIGHTS PLAN -- (CONTINUED)
UCAR is entitled to redeem the Rights for one cent per Right under certain
circumstances. If not redeemed, the Rights will expire on August 7, 2008. For
stockholders who owned more than 15% of the outstanding shares of common stock
on August 7, 1998, the thresholds described above are 22.5% (and not 15%) of the
outstanding shares of common stock.
The preferred stock issuable upon exercise of Rights consists of Series A
Junior Participating Preferred Stock, par value $.01 per share, of UCAR. In
general, each share of that preferred stock will be entitled to a minimum
preferential quarterly dividend declared on the common stock, will be entitled
to a liquidation preference of $110,000 and will have 1,000 votes, voting
together with the common stock.
(18) IMPAIRMENT LOSSES
During August 1998, the Russian economic and business climate experienced
significant adverse change. This change, when considered in conjunction with the
current and historical operating and cash flow losses of the Company's
manufacturing operations in Vyazma, Russia, indicated the need for assessing the
recoverability of the long-lived and intangible assets of these operations. The
Company estimated future undiscounted cash flows expected to result from the use
of the related assets and concluded they were less than the carrying amount of
these assets. Accordingly, the Company recorded an impairment loss of $60
million for the unrecoverable portion of these assets, effectively writing down
the carrying value of these assets to their estimated fair value of $2 million.
The impairment loss affected the graphite electrode business segment and
consisted of $55 million of long-lived assets and $5 million of goodwill.
During late 1999, the Company's graphite specialties business experienced
significant adverse changes in performance due to a decline in demand and prices
for graphite specialties. In addition, performance adversely changed due to
delays in bringing new or improved products to markets. This change indicated
the need for assessing the recoverability of the long-lived assets of this
business. These assets are located primarily at the Company's plant in
Clarksburg, West Virginia. The Company estimated the future undiscounted cash
flows expected to result from the use of these assets and concluded they were
below the respective carrying amounts. Accordingly, the Company recorded an
impairment loss of $35 million for the unrecoverable portion of these assets,
effectively writing down the carrying value of the fixed assets to their
estimated fair value of $6 million. Additionally, an inventory write-down of $8
million was recorded to reduce their carrying amount to the lower of cost or
market. The impairment loss and inventory write-down affected the graphite and
carbon products segment.
129
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(18) IMPAIRMENT LOSSES -- (CONTINUED)
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.
(19) SUBSEQUENT EVENTS
GRAPHITE SPECIALTIES RESTRUCTURING - (UNAUDITED)
In the first quarter of 2000, the Company announced that it would retain and
restructure its graphite specialties business. The Company originally intended
to divest or joint venture this business, but the demand and prices for graphite
specialties declined significantly. As a result, the Company was unable to
obtain a strategic value for the business and, accordingly, has determined to
restructure it. Net sales of the graphite specialties business represent
approximately 9% of the Company's 1999 net sales. Completion of the
restructuring is expected within the next twelve months. The Company expects to
record a restructuring charge in the 2000 first quarter which management
believes will approximate $8 million, consisting of an expected $6 million of
cash expenditures and $2 million of non-cash charges.
REFINANCING
On February 22, 2000, the Company completed a debt recapitalization. The
Company obtained new senior secured credit facilities (the "New Senior
Facilities") and used the net proceeds to repay and terminate the Existing
Senior Facilities, to call the Subordinated Notes for redemption at a redemption
price of 104.5% of the principal amount redeemed, plus accrued interest, and to
repay certain other debt.
The New Senior Facilities consist of:
o A Tranche A Facility providing for initial term loans of $138 million
and of [Euro]161 million (equivalent to $158 million at February 22,
2000) to UCAR Finance Inc. ("UCAR Finance"), a direct wholly owned
special purpose finance subsidiary of UCAR. The Tranche A Facility
amortizes in quarterly installments over six years, commencing June 30,
2000, with installments ranging from [Euro]2 million in 2000 to [Euro]17
million in 2005, with the final installment payable on December 31, 2005.
o A Tranche B Facility providing for initial term loans of $350 million to
UCAR Finance. The Tranche B Facility amortizes over eight years,
commencing June 30, 2000, with nominal quarterly installments during the
first six years, and quarterly installments of $41 million in 2006 and
2007, with the final installment payable on December 31, 2007.
130
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(19) SUBSEQUENT EVENTS - (CONTINUED)
o A Revolving Facility providing for revolving and swingline loans to,
and the issuance of U.S. dollar-denominated letters of credit for the
account of, UCAR Finance and certain other subsidiaries in an
aggregate principal and stated amount at any time not to exceed $250
million. The Revolving Facility terminates on February 22, 2006. As
a condition to each borrowing under the Revolving Facility, the
Company is required to represent, among other things, that the
aggregate amount of payments (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 $130 million (which $130 million is
reduced by the amount of certain debt incurred by the Company that is
not incurred under the New Senior Facilities).
The Company is required to make mandatory prepayments in the amount of:
o Either 75% or 50% (depending on the ratio of adjusted net debt to
adjusted total EBITDA) of adjusted 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.
o 100% of the net proceeds of certain asset sales or incurrence of
certain indebtedness.
o 50% of the net proceeds of the issuance of any equity securities by UCAR
The Company may make voluntary prepayments under the New Senior Facilities.
There is no penalty or premium due in connection with prepayments (whether
voluntary or mandatory).
UCAR Finance makes secured and guaranteed intercompany loans of the net
proceeds of borrowings under the New Senior Facilities to UCAR Global's
subsidiaries. The obligations of UCAR Finance under the New Senior Facilities
are secured, with certain exceptions, by first priority security interests in
all of these intercompany loans (including the related security interests and
guarantees).
UCAR has unconditionally and irrevocably guaranteed the obligations of UCAR
Finance under the New Senior Facilities. This guarantee is secured, with certain
exceptions, by first priority security interests in all of the outstanding
capital stock of UCAR Global and UCAR Finance and all of the intercompany debt
owed to UCAR.
UCAR, UCAR Global and each of UCAR Global's subsidiaries has guaranteed,
with certain exceptions, the obligations of UCAR Global's subsidiaries under the
intercompany loans, except that the Company's U.S. subsidiaries have not
guaranteed obligations of its foreign subsidiaries.
131
<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(19) SUBSEQUENT EVENTS -(CONTINUED)
The obligations of UCAR Global's subsidiaries under the intercompany loans
as well as these guarantees are secured, with certain exceptions, by first
priority security interests in substantially all of the Company's assets, except
that no more than 65% of the capital stock or other equity interests in its
foreign subsidiaries held directly by its U.S. subsidiaries and no other foreign
assets secure obligations or guarantees of its U.S. subsidiaries.
The interest rates applicable to the Tranche A and Revolving Facilities are,
at the Company's option, either leverage Euro LIBOR plus a margin ranging from
1.00% to 2.50% (depending on the leverage ratio) or the alternate base rate plus
a margin ranging from 0.00% to 1.50% (depending on the leverage ratio). The
interest rate applicable to the Tranche B Facility is, at the Company's option,
either Euro LIBOR plus a margin ranging from 2.50% to 2.75% (depending on
leverage ratio) or the alternate base rate plus a margin ranging from 1.50% to
2.00%. The alternate base rate is the higher of the prime rate announced by
Morgan Guaranty Trust Company of New York or the federal funds effective rate
plus 0.50%. UCAR Finance pays a per annum fee ranging from 0.375% to 0.500%
(depending on the leverage ratio) on the undrawn portion of the commitments
under the Revolving Facility.
The Company enters into agreements with financial institutions which are
intended to limit, or cap, its exposure to incurrence of additional interest
expense due to increases in variable interest rates. Use of these agreements is
allowed under the New Senior Facilities.
The New Senior Facilities contain a number of significant covenants that,
among other things, restrict the Company's ability to sell assets, incur
additional indebtedness, repay or refinance other debt or amend other debt
instruments, create liens on assets, enter into leases, investments or
acquisitions, engage in mergers or consolidations, make capital expenditures,
make dividend payments to UCAR, pay intercompany debt owed to UCAR, engage in
transactions with affiliates, or pay dividends or make other restricted payments
and that otherwise restrict corporate activities. UCAR Global is, however,
permitted to pay dividends to UCAR of up to $15 million for the purpose of
making an investment in UCAR Graph-Tech and may also distribute the capital
stock of UCAR Graph-Tech to UCAR. In addition, the Company is required to comply
with specified minimum interest coverage and maximum leverage ratios, which
become more restrictive with time.
In addition to the failure to pay principal, interest and fees when due,
events of default under the New 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.
132
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UCAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(19) SUBSEQUENT EVENTS - (CONTINUED)
Under the New Senior Facilities, UCAR is permitted to pay dividends on, and
repurchase, common stock in an aggregate amount of up to $25 million,
plus up to an additional $25 million if certain leverage ratio and excess cash
flow requirements are satisfied. The Company's 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. Payments due in the aggregate on the Tranche A and B
Facilities are $8 million in 2000; $28 million in 2001; $68 million in 2002 and
2003; $72 million in 2004 and 2005; and $165 million in 2006 and 2007.
LAWSUIT AGAINST FORMER PARENTS
On February 23, 2000, UCAR commenced a lawsuit against its former parents,
Mitsubishi and Union Carbide. The other defendants are Mitsubishi International
Corporation, a U.S. subsidiary of Mitsubishi, and two of the respective
representatives of Mitsubishi and Union Carbide who served on UCAR's Board of
Directors at the time of the Company's leveraged equity recapitalization in
January 1995, one of whom was a member of UCAR's Board of Directors and the
Board of Directors of Union Carbide at February 23, 2000. In the lawsuit, UCAR
alleges, among other things, that certain payments made to its former parents in
connection with the recapitalization were unlawful under the General Corporation
Law of the State of Delaware, that its former parents were unjustly enriched by
receipts from their investments in UCAR and that its former parents aided and
abetted breaches of fiduciary duties owed to us by its former senior management
in connection with illegal graphite electrode price fixing activities. UCAR is
seeking to recover more than $1.5 billion in damages, including interest. UCAR
expect to incur $10 million to $20 million for legal expenses to pursue this
lawsuit through trial.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEMS 10 TO 13 (INCLUSIVE).
The information required by Items 10, 11, 12 and 13 will appear in the UCAR
International Inc. Proxy Statement for the Annual Meeting of Stockholders to be
held on May 9, 2000, which will be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934 and is incorporated by reference in this Report
pursuant to General Instruction G(3) of Form 10-K (other than the portions
thereof not deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934). In addition, the information set forth below is provided
as required by Item 10.
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information with respect to our current
executive officers and directors.
NAME AGE* POSITION
EXECUTIVE OFFICERS
Gilbert E. Playford........ 52 Chairman of the Board, Chief Executive Officer
and President
Petrus J. Barnard.......... 50 Executive Vice President, Global Electrode
Supply Chain
W. David Cate.............. 53 Executive Vice President, Strategic
Alliances and Business Development
Corrado F. De Gasperis..... 34 Vice President and Chief Information Officer
Karen G. Narwold........... 40 Vice President, General Counsel and Secretary
Craig S. Shular............ 47 Executive Vice President, Electrode Sales
and Marketing and Chief Financial Officer
DIRECTORS
R. Eugene Cartledge........ 70 Director
Mary B. Cranston........... 52 Director
Alec Flamm................. 73 Director
John R. Hall............... 67 Director
Thomas Marshall............ 71 Director
Michael C. Nahl............ 57 Director
- --------------------
* As of March 1, 2000
134
<PAGE>
EXECUTIVE OFFICERS
GILBERT E. PLAYFORD became President and Chief Executive Officer in June
1998 and Chairman of the Board in September 1999. From 1996 until June 1998, Mr.
Playford was President, Chief Executive Officer and a director of LionOre Mining
International Ltd. Mr. Playford served in various positions, including most
recently Vice President, Treasurer and Principal Financial Officer, of Union
Carbide from 1972 until 1996. He is a director of LionOre Mining International
Ltd.
PETRUS J. BARNARD joined our South African subsidiary in 1972. Since then,
he has held various management positions in our South African subsidiary and in
the Carbon Products Division of Union Carbide in the United States. He became
Director of Operations for Europe and South Africa in 1994, General Manager of
the Graphite Electrode Business for Europe and South Africa in 1995, Vice
President, Electrodes for the Americas in 1997 and as Director, Electrodes for
the Americas in 1998. He became Executive Vice President, Global Electrode
Supply Chain in February 2000.
W. DAVID CATE joined Union Carbide in 1969 and held various manufacturing
and management positions in the Carbon Products Division. He became General
Manager for Graphite Specialties and Flexible Graphite in 1991, General Manager
for North America in 1994, Vice President, Electrodes for Europe and South
Africa, in 1997 and Director, Pipeline Management in 1998. He became Executive
Vice President, Strategic Alliances and Business Development in February 2000.
CORRADO F. DE GASPERIS became Chief Information Officer and Vice President
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 a Senior
Assurance Manager in the Manufacturing, Retail and Distribution Practice. KPMG
had announced his admittance into their partnership as a partner effective July
1, 1998.
KAREN G. NARWOLD became General Counsel, Vice President and Secretary in
September 1999. She joined our Law Department in July 1990 and served as
Assistant General Counsel from January 1997 to September 1998 and Deputy General
Counsel from September 1998 to September 1999. She was an associate with
Cummings & Lockwood from 1986 to 1990.
CRAIG S. SHULAR became Vice President and Chief Financial Officer in January
1999 and Executive Vice President, Electrode Sales and Marketing in February
2000. From 1976 through 1998, he held various finance and auditing positions in
various divisions of Union Carbide, including the Carbon Products Division from
1976 to 1979.
135
<PAGE>
DIRECTORS
R. EUGENE CARTLEDGE became a director in February 1996. From 1986 until
his retirement in 1994, he was the Chairman of the Board and Chief Executive
Officer of Union Camp Corporation. Mr. Cartledge retired as Chairman of the
Board of Savannah Foods & Industries Inc. in December 1997. He is a director
of Union Camp Corporation, Chase Brass Industries, Inc., Sun Company, Inc.,
Delta Air Lines, Inc. and Blount, Inc. Mr. Cartledge is a member of the
Organization, Compensation and Pension Committee of UCAR's Board of Directors.
MARY B. CRANSTON became a director in January 1999. She is the chairperson
of Pillsbury Madison & Sutro, LLP. Ms. Cranston has served on the boards of
trustees or directors of several private art and education institutions, and
currently serves on the Board of Directors of the San Francisco Chamber of
Commerce.
ALEC FLAMM became a director in April 1998. From January 1982 to August
1985, Mr. Flamm served as President and Chief Operating Officer of Union
Carbide. Mr. Flamm joined Union Carbide in 1949 and held various marketing
and management positions. He retired as a Vice Chairman and a director of
Union Carbide in March 1986. Mr. Flamm served Union Carbide as Vice Chairman
from August 1985 and as a director from 1981. Mr. Flamm is Chairman of the
Audit Committee and the Nominating Committee of UCAR's Board of Directors.
JOHN R. HALL became a director in November 1995. Since July 1997, he has
been the non-employee Chairman of Arch Coal, Inc. He retired as Chairman
effective January 31, 1997 and as Chief Executive Officer effective
October 1, 1996 of Ashland Inc., positions which he had held since 1981. Mr.
Hall served in various engineering and managerial capacities at Ashland Inc.
since 1957. Mr. Hall is a director of Banc One Corporation, Canada Life
Assurance Company, CSX Corporation, Humana Inc., Reynolds Metals Company,
Arch Coal Inc., and USEC Inc. Mr. Hall is Chairman of the Organization,
Compensation and Pension Committee of UCAR's Board of Directors.
THOMAS MARSHALL became a director in June 1998. He retired in 1995 as
Chairman of the Board and Chief Executive Officer of Aristech Chemical
Corporation, a spin-off of USX Corp., positions which he had held since
1986. Mr. Marshall had previously served in various positions, including
Executive Vice President and Chief Operating Officer - Manufacturing,
Fabricating and Chemicals, for the former U.S. Steel Corp. Mr. Marshall is a
member of the Audit Committee and the Organization, Compensation and Pension
Committee of UCAR's Board of Directors.
MICHAEL C. NAHL became a director in January 1999. He is Senior Vice
President and Chief Financial Officer of Albany International Corp. He
joined Albany International Corp. as Group Vice President, Corporate and was
appointed to his present position in 1983. He is a member of the Chase
Regional Advisory Board. Mr. Nahl is a member of the Audit Committee and
Nominating Committee of UCAR's Board of Directors.
136
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1)Financial Statements
See Index to Consolidated Financial Statements at page 66 of this
Report.
(2) Financial Statement Schedules
None.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the year for which this
Report is filed.
(c) Exhibits
The exhibits listed in the following table have been filed as part of
this Report.
Exhibit
Number Description of Exhibit
- ------ ----------------------
2.1(1) - Recapitalization and Stock Purchase and Sale Agreement dated
as of November 14, 1994 among Union Carbide Corporation,
Mitsubishi Corporation, UCAR International Inc. and UCAR
International Acquisition Inc. and Guaranty made by Blackstone
Capital Partners II Merchant Banking Fund L.P. and Blackstone
Offshore Capital Partners II L.P.
2.2(2) - Amended and Restated Stockholders' Agreement dated as of
February 29, 1996
2.3 - [omitted]
2.4 - [omitted]
2.5 - [omitted]
2.6 - [omitted]
2.7 - [omitted]
2.8 - [omitted]
2.9 - [omitted]
2.10 - [omitted]
2.11 - [omitted]
2.12 - [omitted]
2.13 - [omitted]
2.14 - [omitted]
2.15(1) - Exchange Agreement dated as of December 15, 1993 by and among
Union Carbide Corporation, Union Carbide Chemicals and
Plastics Company Inc., Mitsubishi Corporation and UCAR
International Inc.
2.16(1) - Stock Purchase and Sale Agreement dated as of November 9, 1990
among Mitsubishi Corporation, Union Carbide Corporation and
UCAR Carbon Company Inc.
137
<PAGE>
2.17(1) - Letter Agreement dated January 26, 1995 with respect to
termination of the Stockholders' Agreement dated as of
November 9, 1990 among Mitsubishi Corporation, Union Carbide
Corporation and UCAR Carbon Company Inc.
2.18(1) - Settlement Agreement dated as of November 30, 1993 among
Mitsubishi Corporation, Union Carbide Corporation and UCAR
Carbon Company Inc.
2.19(1) - Transfer Agreement dated January 1, 1989 between Union Carbide
Corporation and UCAR Carbon Company Inc.
2.20(1) - Amendment No. 1 to such Transfer Agreement dated December 31,
1989
2.21(1) - Amendment No. 2 to such Transfer Agreement dated July 2, 1990.
2.22(1) - Amendment No. 3 to such Transfer Agreement dated as of
February 25, 1991
2.23(1) - Amended and Restated Realignment Indemnification Agreement
dated as of June 4, 1992 among Union Carbide Corporation,
Union Carbide Chemicals and Plastics Company Inc., Union
Carbide Industrial Gases Inc., UCAR Carbon Company Inc. and
Union Carbide Coatings Service Corporation
2.24(1) - Environmental Management Services and Liabilities Allocation
Agreement dated as of January 1, 1990 among Union Carbide
Corporation, Union Carbide Chemicals and Plastics Company
Inc., UCAR Carbon Company Inc., Union Carbide Industrial Gases
Inc. and Union Carbide Coatings Service Corporation
2.25(1) - Amendment No. 1 to such Environmental Management Services and
Liabilities Allocation Agreement dated as of June 4, 1992
2.26 - [omitted]
2.27 - [omitted]
2.28(4) - Trade Name and Trademark License Agreement dated March 1, 1996
between Union Carbide Corporation and UCAR Carbon Technology
Corporation
2.29(1) - Employee Benefit Services and Liabilities Agreement dated
January 1, 1990 between Union Carbide Corporation and UCAR
Carbon Company Inc.
2.30(1) - Amendment to such Employee Benefit Services and Liabilities
Agreement dated January 15, 1991
2.31(1) - Supplemental Agreement to such Employee Benefit Services and
Liabilities Agreement dated February 25, 1991
2.32(1) - Letter Agreement dated December 31, 1990 among Union Carbide
Chemicals and Plastics Company Inc., UCAR Carbon Company Inc.,
Union Carbide Grafito, Inc. and Union Carbide Corporation
2.33 - [omitted]
2.34(9) - Share Sale Agreement between Samancor Limited and UCAR Carbon
Company Inc. dated April 21, 1997
3.1(3) - Amended and Restated Certificate of Incorporation of UCAR
International Inc.
3.1(a)(15) - Certificate of Designations of Series A Junior Participating
Preferred Stock
3.2(3) - Amended and Restated By-Laws of UCAR International Inc.
3.2(a)(15) - Amendment to By-Laws of UCAR International Inc.
4.1 - [omitted]
4.2 - [omitted]
138
<PAGE>
4.3(15) - Rights Agreement dated as of August 7, 1998 between UCAR
International Inc. and The Bank of New York, as Rights Agent
10.1* - Credit Agreement dated as of February 22, 2000 among UCAR
International Inc., UCAR Global Enterprises Inc., UCAR 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
10.2* - Guarantee Agreement dated as of February 22, 2000 made by
UCAR International Inc., UCAR Global Enterprises Inc., UCAR
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
10.3* - Security Agreement dated as of February 22, 2000 made by UCAR
International Inc., UCAR Global Enterprises Inc., UCAR Finance
Inc. and the subsidiaries of UCAR from time to time party
thereto, in favor of Morgan Guaranty Trust Company of New York
as collateral agent for the Secured Parties
10.4* - Indemnity, Subrogation And Contribution Agreement dated as of
February 22, 2000 among UCAR International Inc., UCAR Global
Enterprises Inc., UCAR Finance Inc., each of the Domestic
Subsidiaries party thereto and Morgan Guaranty Trust Company
of New York, as collateral agent for the Secured Parties
10.5* - Pledge Agreement dated as of February 22, 2000 by UCAR
International Inc., UCAR Global Enterprises Inc., UCAR Finance
Inc. and the direct and indirect subsidiaries of UCAR that are
signatories thereto in favor of Morgan Guaranty Trust Company
of New York, as collateral agent for the Secured Parties
10.6* Intellectual Property Security Agreement dated as of February 22,
2000 made by UCAR International Inc., UCAR Global Enterprises
Inc., UCAR Finance Inc. and the subsidiaries of UCAR from time
to time party thereto in favor of Morgan Guaranty Trust Company
of New York, as collateral agent for the Secured Parties
10.7 - [omitted]
10.8 - [omitted]
10.9 - [omitted]
10.10 - [omitted]
10.10 - [omitted]
10.11 - [omitted]
10.11 - [omitted]
10.12 - [omitted]
10.13 - [omitted]
10.14* - Tax Sharing Agreement dated as of February 16, 2000 among UCAR
International Inc., UCAR Global Enterprises Inc., UCAR Finance
Inc., UCAR Carbon Company Inc., UCAR Holdings II Inc., UCAR
Holdings III Inc., Union Carbide Grafito, Inc. and UCAR
Composites Inc.
10.15 - [omitted]
10.16 - [omitted]
10.17 - [omitted]
139
<PAGE>
10.18 - [omitted]
10.19 - [omitted]
10.20 - [omitted]
10.21(1) - Form of Non-Qualified Stock Option Agreement (Original Version)
10.22(15) - UCAR International Inc. Management Stock Option Plan as
amended and restated through September 29, 1998
10.22(a)(15) UCAR International Inc. Management Stock Option Plan
effective as of September 29, 1998 (Senior Management Version)
10.23(12) - Employment Agreement dated as of June 22, 1998 between UCAR
International Inc. and Gilbert E. Playford
10.24(15) - Forms of Non-Qualified Stock Option Agreement (Standard Option
Version and Directors Version)
10.25* - UCAR International Inc. Compensation Deferral Program
effective January 1, 2000
10.26 - [omitted]
10.27 - [omitted]
10.28 - [omitted]
10.29 - [omitted]
10.30 - [omitted]
10.31* - UCAR International Inc. Management Incentive Plan amended and
restated as of January 1, 1999
10.32 - [omitted]
10.33(15) - UCAR International Inc. Executive Employee Stock Purchase
Program (Senior Management Version)
10.34(15) - UCAR International Inc. Executive Employee Loan Program
10.35 - [omitted]
10.36* - UCAR Carbon Company Inc. Equalization Benefit Plan amended and
restated as of October 1, 1998
10.37* - First Amendment to Equalization Benefit Plan effective, as to
paragraph 1, January 1, 2000 and, as to paragraph 2, October 1,
1998
10.38* - UCAR Carbon Company Inc. Supplemental Retirement Income Plan
amended and restated as of July 1, 1998
10.38(a)* - First Amendment to Supplemental Retirement Income Plan effective,
as to paragraph 1, January 1, 2000 and, as to paragraph 2,
July 1, 1998
10.39* - UCAR Carbon Company Inc. Enhanced Retirement Income Plan
amended and restated as of July 1, 1998
10.39(a)* - First Amendment to Enhanced Retirement Income Plan effective, as
to paragraph 1, January 1, 2000 and, as to paragraph 2,
July 1, 1998
10.40(15) - Form of Severance Compensation Agreement (U.S. Version and
International Version)
10.41(3) - UCAR International Inc. Benefits Protection Trust effective as
of July 27, 1995
10.41(a)(10)- First Amendment to such Benefits Protection Trust effective
as of July 27, 1995
10.42(7) - Second Amendment to such Benefits Protection Trust effective
as of January 1, 1996
10.42(a)(14) - Third Amendment to such Benefits Protection Trust effective
as of January 1, 1997
10.43(3) - UCAR International Inc. 1995 Equity Incentive Plan effective
as of August 15, 1995
10.43(a)(6)- First Amendment to such Equity Incentive Plan dated July 29, 1996
140
<PAGE>
10.44 - [omitted]
10.45 - [omitted]
10.46 - [omitted]
10.47 - [omitted]
10.48 - [omitted]
10.49(13) - Plea Agreement between the United States of America and UCAR
International Inc. executed April 7, 1998
10.50(16) Stipulation and Agreement of Settlement dated October 13, 1999
among David Jaroslawicz and Robert P. Krass, Robert J. Hart,
Peter B. Mancino, William P. Wiemels, Fred C. Wolf, Eugene
Cartledge, John R. Hall, Glenn H. Hutchins, Robert D. Kennedy,
Howard A. Lipson, Peter G. Peterson, Stephen A. Schwarzman and
UCAR International Inc.
10.51(16) Stipulation and Agreement of Settlement dated October 13, 1999
among the Florida State Board of Administration and UCAR
International Inc., Peter G. Peterson, Stephen A. Schwarzman,
Howard A. Lipson, Glenn H. Hutchins, Robert P. Krass, Robert
J. Hart, William P. Wiemels, Fred C. Wolf and Peter B. Mancino.
21.1* - List of subsidiaries of UCAR International Inc.
23.1* - Consent of KPMG LLP
24.1* - Powers of Attorney (included on signature pages)
27.1* - Financial Data Schedule for fiscal 1999 (for SEC use only)
- ---------------
* Filed herewith.
(1) Incorporated by reference to the Registration Statement of UCAR
International Inc. and UCAR Global Enterprises Inc. on Form S-1 (File No.
33-84850).
(2) Incorporated by reference to the Annual Report of the registrant on Form
10-K for the year ended December 31, 1995.
(3) Incorporated by reference to the Registration Statement of the registrant
on Form S-1 (File No. 33-94698).
(4) Incorporated by reference to the Quarterly Report of the registrant on Form
l0-Q for the quarter ended March 31, 1996.
(5) Incorporated by reference to the Registration Statement of the registrant
on Form S-1 (File No. 333-1090).
(6) Incorporated by reference to the Quarterly Report of the registrant on Form
10-Q for the quarter ended June 30, 1996.
(7) Incorporated by reference to the Quarterly Report of the registrant on Form
10-Q for the quarter ended September 30, 1996.
(8) Incorporated by reference to the Quarterly Report of the registrant on Form
10-Q for the quarter ended March 31, 1997.
(9) Incorporated by reference to the Quarterly Report of the registrant on Form
l0-Q for the quarter ended September 30, 1997.
(10)Incorporated by reference to the Annual Report of the registrant on Form
10-K for the year ended December 31, 1996.
(11)Incorporated by reference to the Quarterly Report of the
registrant on Form 10-Q for the quarter ended June 30,1997.
141
<PAGE>
(12)Incorporated by reference to the Quarterly Report of the registrant on Form
10-Q for the quarter ended September 30, 1998.
(13)Incorporated by reference to the Quarterly Report of the registrant on Form
10-Q for the quarter ended March 31, 1998.
(14)Incorporated by reference to the Annual Report of the registrant on Form
10-K for the year ended December 31, 1997.
(15)Incorporated by reference to the Annual Report of the registrant on Form
10-K for the year ended December 31, 1998.
(16)Incorporated by reference to the Quarterly Report of the registrant on Form
10-Q for the quarter ended September 30, 1999.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
UCAR INTERNATIONAL INC.
March 30, 2000 By: /S/ CORRADO F. DE GASPERIS
----------------------------
Corrado F. De Gasperis
Title: CHIEF INFORMATION OFFICER
(PRINCIPAL ACCOUNTING OFFICER)
Know All Men By These Presents, that each individual whose signature appears
below hereby constitutes and appoints Gilbert E. Playford, Craig S. Shular,
Corrado F. DeGasperis and Karen G. Narwold, and each of them individually, his
true and lawful agent, proxy and attorney-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to (i) act on, sign and file with the Securities and
Exchange Commission any and all amendments to this Report together with all
schedules and exhibits thereto, (ii) act on, sign and file with the Securities
and Exchange Commission any and all exhibits to this Report, (iii) act on, sign
and file any and all such certificates, instruments, agreements and other
documents as may be necessary or appropriate in connection therewith and (iv)
take any and all such actions which may be necessary or appropriate in
connection therewith, granting unto such agents, proxies and attorneys-in-fact,
and each of them individually, full power and authority to do and perform each
and every act and thing necessary or appropriate to be done, as fully for all
intents and purposes as he might or could do in person, hereby approving,
ratifying and confirming all that such agents, proxies and attorneys-in-fact,
any of them or any of his or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
142
<PAGE>
Signatures Title Date
---------- ----- ----
/s/ Gilbert E. Playford Chairman of the Board, March 30, 2000
- ---------------------------- Chief Executive Officer
Gilbert E. Playford and President (Principal
Executive Officer)
/s/ Craig S. Shular Vice President, Chief March 30, 2000
- --------------------------- Financial Officer and
Craig S. Shular Director, Electrode Sales
and Marketing (Principal
Financial Officer)
/s/ Corrado F. De Gasperis Chief Information Officer March 30, 2000
- --------------------------- (Principal Accounting Officer)
Corrado F. De Gasperis
/s/ R. Eugene Cartledge Director March 30, 2000
- ----------------------------
R. Eugene Cartledge
/s/ Mary B. Cranston Director March 30, 2000
- ---------------------------
Mary B. Cranston
/s/ Alec Flamm Director March 30, 2000
- ---------------------------
Alec Flamm
/s/ John R. Hall Director March 30, 2000
- ---------------------------
John R. Hall
/s/ Thomas Marshall Director March 30, 2000
- -------------------------
Thomas Marshall
/s/ Michael C. Nahl Director March 30, 2000
- -------------------------
Michael C. Nahl
143
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ------
10.1* - Credit Agreement dated as of February 22, 2000 among UCAR
International Inc., UCAR Global Enterprises Inc., UCAR 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
10.2* - Guarantee Agreement dated as of February 22, 2000 made by
UCAR International Inc., UCAR Global Enterprises Inc., UCAR
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
10.3* - Security Agreement dated as of February 22, 2000, made by UCAR
International Inc., UCAR Global Enterprises Inc., UCAR Finance
Inc., and the subsidiaries of UCAR from time to time party
thereto, in favor of Morgan Guaranty Trust Company of New York
as collateral agent for the Secured Parties
10.4* - Indemnity, Subrogation And Contribution Agreement dated as of
February 22, 2000 among UCAR International Inc., UCAR Global
Enterprises Inc., UCAR Finance Inc., each of the Domestic
Subsidiaries party thereto, and Morgan Guaranty Trust Company
of New York, as collateral agent for the Secured Parties
10.5* - Pledge Agreement dated as of February 22, 2000 by UCAR
International Inc., UCAR Global Enterprises Inc., UCAR Finance
Inc. and the direct and indirect subsidiaries of UCAR that are
signatories thereto in favor of Morgan Guaranty Trust Company
of New York, as collateral agent for the Secured Parties
10.6* Intellectual Property Security Agreement dated as of February 22,
2000 made by UCAR International Inc., UCAR Global Enterprises
Inc., UCAR Finance Inc., and the subsidiaries of UCAR from time
to time party thereto in favor of Morgan Guaranty Trust Company
of New York, as collateral agent for the Secured Parties
10.14* - Tax Sharing Agreement dated as of February 16, 2000 among UCAR
International Inc., UCAR Global Enterprises Inc., UCAR Finance
Inc., UCAR Carbon Company Inc., UCAR Holdings II Inc., UCAR
Holdings III Inc., Union Carbide Grafito, Inc. and UCAR
Composites Inc.
10.25* - UCAR International Inc. Compensation Deferral Program
effective January 1, 2000
10.31* - UCAR International Inc. Management Incentive Plan amended and
restated as of January 1, 1999
10.36* - UCAR Carbon Company Inc. Equalization Benefit Plan amended and
restated as of October 1, 1998.
10.37* - Amendment to Equalization Benefit Plan
10.38* - UCAR Carbon Company Inc. Supplemental Retirement Income Plan
amended and restated as of July 1, 1998
144
<PAGE>
10.38(a)* - First Amendment to Supplemental Retirement Income Plan effective,
as to paragraph 1, January 1, 2000 and, as to paragraph 2, July
1, 1998
10.39* - UCAR Carbon Company Inc. Enhanced Retirement Income Plan
amended and restated as of January 1, 1999
10.39(a)* - First Amendment to Enhanced Retirement Income Plan effective, as
to paragraph 1, January 1, 2000 and, as to paragraph 2, July 1,
1998
21.1* - List of subsidiaries of UCAR International Inc.
23.1* - Consent of KPMG LLP
24.1* - Powers of Attorney (included on signature pages)
27.1* - Financial Data Schedule for fiscal 1999 (for SEC use only)
</TABLE>
- ---------------
* Filed herewith.
145
<PAGE>
CONFORMED COPY
CREDIT AGREEMENT
dated as of
February 22, 2000
among
UCAR INTERNATIONAL INC.
UCAR GLOBAL ENTERPRISES INC.
UCAR FINANCE INC.
The LC Subsidiaries
Party Hereto
The Lenders Party Hereto
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Administrative Agent
J.P. MORGAN SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
as Joint-Lead Arrangers
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
as Syndication Agents
[CS&M #7061-536]
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS
SECTION 1.01. DEFINED TERMS................................................1
SECTION 1.02. CLASSIFICATION OF LOANS AND BORROWINGS......................26
SECTION 1.03. TERMS GENERALLY.............................................26
SECTION 1.04. ACCOUNTING TERMS; GAAP......................................26
SECTION 1.05. EXCHANGE RATES..............................................27
ARTICLE II THE CREDITS
SECTION 2.01. COMMITMENTS.................................................27
SECTION 2.02. LOANS AND BORROWINGS........................................27
SECTION 2.03. REQUESTS FOR BORROWINGS.....................................28
SECTION 2.04. REPAYMENT OF BORROWINGS; EVIDENCE OF DEBT...................29
SECTION 2.05. LETTERS OF CREDIT............................................29
SECTION 2.06. FUNDING OF BORROWINGS.......................................33
SECTION 2.07. INTEREST ELECTIONS..........................................33
SECTION 2.08. TERMINATION AND REDUCTION OF COMMITMENTS....................34
SECTION 2.09. AMORTIZATION OF TERM LOANS..................................35
SECTION 2.10. PREPAYMENT OF LOANS.........................................37
SECTION 2.11. FEES........................................................38
SECTION 2.12. INTEREST....................................................39
SECTION 2.13. ALTERNATE RATE OF INTEREST..................................40
SECTION 2.14. INCREASED COSTS.............................................40
SECTION 2.15. BREAK FUNDING PAYMENTS......................................41
SECTION 2.16. TAXES.......................................................42
SECTION 2.17. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SETOFFS..43
SECTION 2.18. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS..............45
SECTION 2.19. SWINGLINE LOANS.............................................45
ARTICLE III INTERCOMPANY LOANS
SECTION 3.01. INTERCOMPANY LOANS..........................................46
SECTION 3.02. INTERCOMPANY NOTES..........................................46
SECTION 3.03. MODIFICATION AND PREPAYMENT OF INTERCOMPANY LOANS...........47
SECTION 3.04. DESIGNATION OF INTERCOMPANY BORROWERS.......................48
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01. ORGANIZATION; POWERS........................................48
SECTION 4.02. AUTHORIZATION...............................................48
SECTION 4.03. ENFORCEABILITY..............................................49
SECTION 4.04. GOVERNMENTAL APPROVALS......................................49
SECTION 4.05. FINANCIAL STATEMENTS........................................49
SECTION 4.06. NO MATERIAL ADVERSE CHANGE..................................49
SECTION 4.07. TITLE TO PROPERTIES; POSSESSION UNDER LEASES................49
SECTION 4.08. SUBSIDIARIES................................................50
SECTION 4.09. LITIGATION; COMPLIANCE WITH LAWS............................50
SECTION 4.10. AGREEMENTS..................................................50
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<PAGE>
PAGE
SECTION 4.11. FEDERAL RESERVE REGULATIONS.................................51
SECTION 4.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT..51
SECTION 4.13. USE OF PROCEEDS.............................................51
SECTION 4.14. TAX RETURNS.................................................51
SECTION 4.15. NO MATERIAL MISSTATEMENTS...................................51
SECTION 4.16. EMPLOYEE BENEFIT PLANS......................................52
SECTION 4.17. ENVIRONMENTAL MATTERS.......................................52
SECTION 4.18. CAPITALIZATION OF UCAR, GLOBAL AND THE BORROWER.............53
SECTION 4.19. SECURITY DOCUMENTS..........................................53
SECTION 4.20. LABOR MATTERS...............................................54
SECTION 4.21. NO FOREIGN ASSETS CONTROL REGULATION VIOLATION..............54
SECTION 4.22. INSURANCE...................................................54
SECTION 4.23. LOCATION OF REAL PROPERTY AND LEASED PREMISES...............54
SECTION 4.24. LITIGATION LIABILITIES......................................55
SECTION 4.25. YEAR 2000...................................................55
SECTION 4.26. UCAR GRAPH-TECH INC.........................................55
ARTICLE V CONDITIONS
SECTION 5.01. EFFECTIVE DATE..............................................55
SECTION 5.02. EACH CREDIT EVENT...........................................57
SECTION 5.03. INTERCOMPANY BORROWERS AND LC SUBSIDIARIES..................57
ARTICLE VI AFFIRMATIVE COVENANTS
SECTION 6.01. EXISTENCE; BUSINESSES AND PROPERTIES........................58
SECTION 6.02. INSURANCE...................................................59
SECTION 6.03. TAXES; OTHER CLAIMS.........................................60
SECTION 6.04. FINANCIAL STATEMENTS, REPORTS, ETC..........................60
SECTION 6.05. LITIGATION AND OTHER NOTICES................................62
SECTION 6.06. EMPLOYEE BENEFITS...........................................62
SECTION 6.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS...63
SECTION 6.08. USE OF PROCEEDS.............................................63
SECTION 6.09. COMPLIANCE WITH ENVIRONMENTAL LAWS..........................63
SECTION 6.10. PREPARATION OF ENVIRONMENTAL REPORTS........................63
SECTION 6.11. FURTHER ASSURANCES..........................................63
SECTION 6.12. SIGNIFICANT SUBSIDIARIES....................................63
SECTION 6.13. CERTAIN ACCOUNTING MATTERS..................................64
SECTION 6.14. DIVIDENDS...................................................64
SECTION 6.15. INTEREST/EXCHANGE RATE PROTECTION AGREEMENTS................64
SECTION 6.16. CORPORATE SEPARATENESS......................................64
ARTICLE VII NEGATIVE COVENANTS
SECTION 7.01. INDEBTEDNESS; CERTAIN EQUITY SECURITIES.....................64
SECTION 7.02. LIENS; SALES OF CERTAIN ASSETS..............................66
SECTION 7.03. SALE AND LEASE-BACK TRANSACTIONS............................69
SECTION 7.04. INVESTMENTS, LOANS, ADVANCES AND ACQUISITIONS...............69
SECTION 7.05. MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND ACQUISITIONS...70
SECTION 7.06. DIVIDENDS AND DISTRIBUTIONS.................................72
SECTION 7.07. TRANSACTIONS WITH AFFILIATES................................73
SECTION 7.08. BUSINESS OF UCAR, THE BORROWER AND THE SUBSIDIARIES.........74
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<PAGE>
PAGE
SECTION 7.09. INDEBTEDNESS AND OTHER MATERIAL AGREEMENTS..................74
SECTION 7.10. CAPITAL EXPENDITURES........................................75
SECTION 7.11. INTEREST COVERAGE RATIO.....................................75
SECTION 7.12. LEVERAGE RATIO..............................................75
SECTION 7.13. CAPITAL STOCK OF THE SUBSIDIARIES...........................76
ARTICLE VIII EVENTS OF DEFAULT
ARTICLE IX THE AGENTS
ARTICLE X MISCELLANEOUS
SECTION 10.01. NOTICES....................................................80
SECTION 10.02. WAIVERS; AMENDMENTS........................................81
SECTION 10.03. EXPENSES; INDEMNITY; DAMAGE WAIVER.........................82
SECTION 10.04. SUCCESSORS AND ASSIGNS.....................................83
SECTION 10.05. SURVIVAL...................................................85
SECTION 10.06. COUNTERPARTS; Integration; EFFECTIVENESS...................85
SECTION 10.07. SEVERABILITY...............................................85
SECTION 10.08. RIGHT OF SETOFF............................................86
SECTION 10.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.86
SECTION 10.10. WAIVER OF JURY TRIAL.......................................86
SECTION 10.11. HEADINGS...................................................87
SECTION 10.12. Confidentiality............................................87
SECTION 10.13. INTEREST RATE LIMITATION...................................87
SECTION 10.14. RELEASE OF Liens AND GUARANTEES............................87
Schedule A Investments/Leverage Ratios
Exhibits to the Credit Agreement
Exhibit A-1 Form of Assignment and Acceptance
Exhibit A-2 Form of Second Closing Assignment and Acceptance
Exhibit B Form of Domestic Pledge Agreement
Exhibit C Form of Guarantee Agreement
Exhibit D Form of Indemnity, Subrogation and Contribution Agreement
Exhibit E Form of Intercompany Borrower Agreement
Exhibit F-1 Form of Intercompany Revolving Note
Exhibit F-2 Form of Intercompany Term Note
Exhibit G-1 Form of LC Subsidiary Agreement
Exhibit G-2 Form of LC Subsidiary Termination
Exhibit H Form of Security Agreement
Exhibit I Form of Intellectual Property Security Agreement
Exhibit J-1 Form of Opinion of Kelley Drye & Warren LLP, counsel for UCAR
Exhibit J-2 Form of Opinion of General Counsel of UCAR
Exhibit J-3 Form of Opinion of Chief Patent Counsel for UCAR
Schedules to the Credit Agreement
Schedule 2.01 Lenders and Commitments
Schedule 2.05(j) Existing Letters of Credit
Schedule 3.01 Intercompany Term Loans to the Intercompany Borrowers
Schedule 4.08 Subsidiaries
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<PAGE>
Schedule 4.09 Litigation
Schedule 4.14 Taxes
Schedule 4.17 Environmental Matters
Schedule 4.18 Capitalization of UCAR, Global and the Borrower
Schedule 4.19(d) Recording Offices for Mortgages
Schedule 4.20 Labor Matters
Schedule 4.23(a) Owned Real Property
Schedule 4.23(b) Leased Real Property
Schedule 5.01 Local Counsel
Schedule 7.01 Existing Indebtedness
Schedule 7.02 Existing Liens
Schedule 7.04 Investments
Schedule 7.07 Transactions Pursuant to Permitted Agreements in Existence
on Effective Date
Schedule 7.09 Restrictive Agreements
-iv-
<PAGE>
CREDIT AGREEMENT dated as of February 22, 2000, among
UCAR INTERNATIONAL INC.; UCAR GLOBAL ENTERPRISES INC.; UCAR
FINANCE INC.; the LC SUBSIDIARIES from time to time party
hereto; the LENDERS from time to time party hereto; and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative
Agent.
UCAR, Global, the Borrower and the initial Intercompany
Borrowers have requested the Lenders to establish the credit facilities provided
for herein under which the Borrower (and, to the extent provided herein, the LC
Subsidiaries) may obtain (a) Tranche A Term Loans in Euros or Dollars on the
Effective Date in an aggregate principal amount of up to EUR300,000,000, (b)
Tranche B Term Loans in Dollars on the Effective Date in an aggregate principal
amount of up to $350,000,000 and (c) Revolving Loans and Letters of Credit in
Euros and Dollars from time to time in an aggregate principal or stated amount
of up to EUR250,000,000 at any time outstanding. The proceeds of such Loans will
be advanced to the Intercompany Borrowers and used to refinance certain
Indebtedness of Global, the Intercompany Borrowers and the Subsidiaries
(including Indebtedness outstanding under the Existing Credit Agreements), to
pay fees and expenses in connection with the foregoing and for working capital
and other general corporate purposes of UCAR, Global, the Borrower, the
Intercompany Borrowers and the Subsidiaries. Such Letters of Credit will be used
for general corporate purposes of the respective LC Subsidiaries requesting the
same. The Lenders are willing to establish such credit facilities upon the terms
and subject to the conditions set forth herein. Accordingly, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the
following terms have the meanings specified below:
"ADJUSTED LIBO RATE" shall mean, with respect to any
Eurocurrency Borrowing for any Interest Period, an interest rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO
Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.
"ADMINISTRATIVE AGENT" shall mean Morgan Guaranty Trust
Company of New York, in its capacity as administrative agent for the Lenders
hereunder.
"ADMINISTRATIVE QUESTIONNAIRE" shall mean an administrative
questionnaire in a form supplied by the Administrative Agent.
"AFFILIATE" shall mean, when used with respect to a specified
person, another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
person specified.
"AGENTS" shall mean, collectively, the Administrative Agent
and the Collateral Agent.
-5-
<PAGE>
"APPLICABLE OFFICE" shall mean (a) with respect to a Loan or
Borrowing denominated in Euros or any Letter of Credit, the Delaware office of
the Administrative Agent referred to in clause (i) of Section 2.17(a) and (b)
with respect to a Loan or Borrowing denominated in Dollars, the Delaware office
of the Administrative Agent referred to in clause (ii) of Section 2.17(a) (or,
in either case, such other office of the Administrative Agent as shall have been
designated by the Administrative Agent in accordance with Section 2.17(a)).
"APPLICABLE RATE" shall mean, for any day, (a) with respect to
(i) any Revolving Loan or Tranche A Term Loan or (ii) the commitment fees
payable hereunder, the applicable rate per annum set forth under the appropriate
caption in Table I below or (b) with respect to any Tranche B Term Loan, the
applicable rate per annum set forth under the appropriate caption in Table II
below, in each case based upon the Leverage Ratio as of the most recent
determination date:
TABLE I
================================================================================
EUROCURRENCY BASE RATE COMMITMENT FEE
LEVERAGE RATIO: SPREAD SPREAD RATE
- --------------------------------------------------------------------------------
CATEGORY 1
>2.75 2.50% 1.50% 0.500%
-
- --------------------------------------------------------------------------------
CATEGORY 2
<2.75 and >2.50 2.25% 1.25% 0.500%
-
- --------------------------------------------------------------------------------
CATEGORY 3
<2.50 and >2.25 2.00% 1.00% 0.375%
-
- --------------------------------------------------------------------------------
CATEGORY 4
<2.25 and >2.00 1.75% 0.75% 0.375%
-
- --------------------------------------------------------------------------------
CATEGORY 5
<2.00 and >1.75 1.50% 0.50% 0.375%
-
- --------------------------------------------------------------------------------
CATEGORY 6
<1.75 1.00% 0.00% 0.375%
================================================================================
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<PAGE>
TABLE II
================================================================================
EUROCURRENCY BASE RATE
LEVERAGE RATIO: SPREAD SPREAD
- --------------------------------------------------------------------------------
CATEGORY 1
>2.75 2.75% 2.00%
-
- --------------------------------------------------------------------------------
CATEGORY 2
<2.75 and >2.50 2.75% 2.00%
-
- --------------------------------------------------------------------------------
CATEGORY 3
<2.50 and >2.25 2.50% 1.50%
-
- --------------------------------------------------------------------------------
CATEGORY 4
<2.25 and >2.00 2.50% 1.50%
-
- --------------------------------------------------------------------------------
CATEGORY 5
<2.00 and >1.75 2.50% 1.50%
-
- --------------------------------------------------------------------------------
CATEGORY 6
<1.75 2.50% 1.50%
================================================================================
Except as set forth below, the Leverage Ratio used on any date to determine the
Applicable Rate shall be that in effect at the fiscal quarter end next preceding
the Financial Statement Delivery Date occurring on or most recently prior to
such date; PROVIDED that at any time when any Financial Statement Delivery Date
shall have occurred and the financial statements or the certificate required to
have been delivered under Section 6.04(a), (b) or (c) by such date have not yet
been delivered, the Applicable Rate shall be determined by reference to Category
1 in the applicable Table. Notwithstanding the foregoing, until the Financial
Statement Delivery Date immediately following June 30, 2000, the Applicable Rate
will for all purposes be determined by reference to Category 1 in the applicable
Table.
"APPLICABLE REVOLVING PERCENTAGE" shall mean, with respect to
any Revolving Lender, the percentage of the total Revolving Commitments
represented by such Lender's Revolving Commitment. If the Revolving Commitments
have been terminated or expired, the Applicable Revolving Percentages shall be
determined based upon the Applicable Revolving Commitments most recently in
effect, after giving effect to any assignments.
"APPLICABLE TRANCHE A TERM PERCENTAGE" shall mean, with
respect to any Tranche A Term Lender, the percentage of the total Tranche A Term
Commitments represented by such Lender's Tranche A Term Commitment.
"APPLICABLE TRANCHE B TERM PERCENTAGE" shall mean, with
respect to any Tranche B Term Lender, the percentage of the total Tranche B Term
Commitments represented by such Lender's Tranche B Term Commitment.
"ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and
acceptance entered into by a Lender and an assignee (with the consent of any
party whose consent is required by Section 10.04), and accepted by the
Administrative Agent, in the form of Exhibit A-1 or any other form approved by
the Administrative Agent.
"AVAILABLE DISPOSITION PROCEEDS" shall mean, at any time, the
aggregate amount at such time of proceeds excluded from Net Proceeds pursuant to
the second sentence of the definition of Net Proceeds, net of all such proceeds
-7-
<PAGE>
used since the Effective Date to purchase assets useful in the business of
Global and the Subsidiaries.
"AVAILABLE REVOLVING COMMITMENT" shall mean, with respect to
any Revolving Lender at any time, an amount equal to such Lender's Revolving
Commitment at such time minus such Lender's Revolving Exposure at such time.
"BASE RATE" shall mean, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus, in the case of this clause (b),
1/2 of 1%. Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective from and including the effective
date of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
"BOARD" shall mean the Board of Governors of the Federal
Reserve System of the United States of America.
"BORROWER" shall mean UCAR Finance Inc., a Delaware
corporation and a direct, wholly owned subsidiary of UCAR.
"BORROWING" shall mean Loans of the same Type and currency,
made, converted or continued on the same date and, in the case of Eurocurrency
Loans, as to which a single Interest Period is in effect.
"BORROWING MINIMUM" shall mean (a) in the case of a Borrowing
denominated in Euros, EUR5,000,000 and (b) in the case of a Borrowing
denominated in Dollars, $5,000,000.
"BORROWING MULTIPLE" shall mean, in the case of a Borrowing
denominated in Euros, EUR1,000,000 and (b) in the case of a Borrowing
denominated in Dollars, $1,000,000.
"BORROWING REQUEST" shall mean a request by the Borrower for a
Revolving Borrowing in accordance with Section 2.03.
"BRAZIL" shall mean UCAR Carbon S.A., a Brazilian corporation
and the direct or indirect owner of virtually all the business of Global and the
Subsidiaries in Brazil.
"BUSINESS DAY" shall mean any day that is not a Saturday,
Sunday or other day on which commercial banks in New York City are authorized or
required by law to remain closed; PROVIDED that (a) when used in connection with
a Eurocurrency Loan or a Loan denominated in Euros, the term "BUSINESS DAY"
shall also exclude any day on which banks are not open for general business in
London and (b) when used in connection with a Loan or Letter of Credit
denominated in Euros, the term "BUSINESS DAY" shall also exclude any day on
which the TARGET payment system is not open for the settlement of payments in
Euros.
"CAPITAL EXPENDITURES" shall mean, for any period, without
duplication, (a) the additions to property, plant and equipment and other
capital expenditures of UCAR, Global, the Borrower and the consolidated
Subsidiaries that are (or would be) set forth in a consolidated statement of
cash flows of UCAR for such period prepared in accordance with GAAP and (b)
Capital Lease Obligations incurred by the consolidated Subsidiaries during such
period, PROVIDED that Capital Expenditures shall not include expenditures of
proceeds of insurance settlements, condemnation awards and other settlements in
-8-
<PAGE>
respect of lost, destroyed, damaged or condemned assets, equipment or other
property to the extent such expenditures are made to replace or regain such
lost, destroyed, damaged or condemned assets, equipment or other property or
otherwise to acquire assets or properties useful in the business of the
Subsidiaries within 12 months after the receipt of such proceeds.
"CAPITAL LEASE OBLIGATIONS" of any person shall mean the
obligations of such person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP
and, for purposes hereof, the amount of such obligations at any time shall be
the capitalized amount thereof at such time determined in accordance with GAAP.
"CAPITAL STOCK" of any person shall mean any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such person,
including any preferred stock, any limited or general partnership interest and
any limited liability company membership interest, but excluding any debt
securities convertible into such equity.
"CASH INTEREST EXPENSE" shall mean, with respect to UCAR,
Global, the Borrower and the Subsidiaries on a consolidated basis for any
period, Interest Expense for such period less the sum of (a) pay-in-kind
Interest Expense, (b) to the extent included in Interest Expense, imputed
interest in respect of Litigation Liabilities, (c) the amortization or write-off
of debt discounts, or deferred issuance costs, if any, or fees in respect of
Interest/Exchange Rate Protection Agreements and (d) the amortization of fees
paid by UCAR, Global, the Borrower or any Subsidiary on or prior to June 30,
2000, in connection with the transactions under this Agreement consummated on
the Effective Date.
"CERCLA" shall have the meaning given such term in the
definition of "Environmental Law".
A "CHANGE IN CONTROL" shall be deemed to have occurred if (a)
UCAR should fail to own directly, beneficially and of record, free and clear of
any and all Liens (other than Liens in favor of the Collateral Agent pursuant to
the Domestic Pledge Agreement, the lien of the Department of Justice on the
assets of UCAR and any Liens of the EU on the assets of UCAR with respect to
antitrust actions against UCAR), 100% of the issued and outstanding capital
stock of Global or the Borrower; (b) any person or group (within the meaning of
Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the Effective
Date), other than members of management of UCAR, Global, the Subsidiaries or the
Borrower holding voting stock of UCAR or options to acquire such stock on the
Effective Date, shall own beneficially, directly or indirectly, shares
representing more than 25% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of UCAR; (c) a majority of the seats
(excluding vacant seats) on the board of directors of UCAR shall at any time
after the Effective Date be occupied by persons who were neither (i) nominated
by a majority of the board of directors of UCAR, nor (ii) appointed by directors
so nominated; or (d) a change in control with respect to UCAR, Global or the
Borrower (or similar event, however denominated) shall occur under and as
defined in any indenture or agreement in respect of Indebtedness in an aggregate
outstanding principal amount in excess of $7,500,000 to which UCAR, Global, the
Borrower or any Subsidiary is party.
"CHANGE IN LAW" shall mean (a) the adoption of any law, rule
or regulation after the date of this Agreement, (b) any change in any law, rule
or regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c) compliance by any
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Lender or the Issuing Bank (or, for purposes of Section 2.14(b), by any lending
office of such Lender or by such Lender's or the Issuing Bank's holding company,
if any) with any request, guideline or directive (whether or not having the
force of law) of any Governmental Authority made or issued after the date of
this Agreement.
"CLASS", when used in reference to (a) any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are Tranche
A Term Loans, Tranche B Term Loans, Revolving Loans or Swingline Loans, and (b)
any Commitment, refers to whether such Commitment is a Tranche A Term
Commitment, a Tranche B Term Commitment or a Revolving Commitment.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"COLLATERAL" shall mean any and all "collateral" as defined or
described in any Security Document. "COLLATERAL AGENT" shall mean Morgan
Guaranty Trust Company of New York, in its capacity as collateral agent for the
Secured Parties hereunder.
"COLLATERAL AND GUARANTEE REQUIREMENT" shall mean, at any
time, that:
(a) one or more Pledge Agreements (or supplements thereto)
shall have been duly executed by UCAR, Global, the Borrower and each
Domestic Subsidiary existing at such time and owning any Capital Stock
or Indebtedness (including the Intercompany Loans) of UCAR, Global, the
Borrower or any other Subsidiary or other person, shall have been
delivered to the Collateral Agent and shall be in full force and
effect, and such outstanding Capital Stock and all such Indebtedness
owned by or on behalf of each such pledgor shall have been duly and
validly pledged under such Pledge Agreement (or to the extent not
evidenced by any instrument, under a Security Agreement) to the
Collateral Agent for the ratable benefit of the Secured Parties, and
certificates or other instruments representing such Capital Stock or
Indebtedness (to the extent such Indebtedness is evidenced by
instruments), accompanied by stock powers or other instruments of
transfer endorsed in blank, shall be in the actual possession of the
Collateral Agent; PROVIDED that in the case of a pledge by Global, the
Borrower or any Domestic Subsidiary of voting Equity Interests in a
Foreign Subsidiary, such pledge may be limited to 65% of such voting
Capital Stock of such Foreign Subsidiary if the Collateral Agent shall
be advised by UCAR that adverse tax consequences would arise from a
pledge of a greater percentage of such voting Equity Interests;
(b) one or more Security Agreements (or supplements thereto)
shall have been duly executed by UCAR, Global, the Borrower and each
Domestic Subsidiary existing at such time, shall have been delivered to
the Collateral Agent and shall be in full force and effect (and all
consents of third parties required for the effectiveness or
enforceability of the Liens created by the Security Agreements shall
have been obtained), and each document (including each Uniform
Commercial Code financing statement or similar filing and each filing
with respect to intellectual property owned by UCAR or any Subsidiary
party to any Security Agreement) required by law or reasonably
requested by the Administrative Agent to be filed, registered or
recorded in order to create in favor of the Collateral Agent for the
benefit of the Secured Parties a valid, legal and perfected
first-priority security interest in and lien on the Collateral subject
to the applicable Security Agreement (subject to any Lien expressly
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permitted by Section 7.02) shall have been so filed, registered or
recorded and evidence thereof delivered to the Collateral Agent;
(c)(i) each of the Mortgages relating to each of the Mortgaged
Properties shall have been duly executed by the parties thereto and
delivered to the Collateral Agent and shall be in full force and
effect, (ii) each of such Mortgaged Properties shall not be subject to
any Lien other than those expressly permitted under Section 7.02, (iii)
each of such Mortgages shall have been filed and recorded in the
recording office referred to in Section 4.19(d) and, in connection
therewith, the Collateral Agent shall have received evidence
satisfactory to it of each such filing and recordation and (iv) the
Collateral Agent shall have received such other documents, including a
policy or policies of title insurance issued by a nationally recognized
title insurance company, together with such endorsements, coinsurance
and reinsurance as may be requested by the Collateral Agent and the
Lenders, insuring the Mortgages as valid first liens on the Mortgaged
Properties, free of Liens other than those expressly permitted under
Section 7.02, together with such surveys, abstracts, appraisals and
legal opinions required to be furnished pursuant to the terms of the
Mortgages or as reasonably requested by the Collateral Agent or the
Lenders;
(d) a Guarantee Agreement referred to in clause (a) of the
definition of such term (or a supplement thereto) shall have been
executed by UCAR, Global and each Domestic Subsidiary existing from
time to time, shall have been delivered to the Collateral Agent and
shall be in full force and effect;
(e) the Indemnity, Subrogation and Contribution Agreement (or
supplements thereto) shall have been executed by UCAR, Global, the
Borrower and each other Loan Party, shall have been delivered to the
Collateral Agent and shall be in full force and effect;
(f) each Foreign Subsidiary shall have taken all actions
required to Guarantee and to secure with all its assets (i) its own
Intercompany Borrower Obligations, if any, and those of the other
Foreign Subsidiaries that are Intercompany Borrowers and (ii) its own
Obligations as an LC Subsidiary, if any, and those of the other Foreign
Subsidiaries that are LC Subsidiaries; and
(g) UCAR, Global, the Borrower and each Subsidiary shall have
obtained all consents and approvals required to be obtained by it in
connection with the execution and delivery of each Loan Document to
which it is party, the incurrence and the performance of its
obligations thereunder and the granting by it of the Liens thereunder.
Notwithstanding the foregoing, (a) a Subsidiary shall not be required to become
a Guarantor under a Guarantee Agreement or pledge or grant any security interest
in or Lien on any Collateral under any Pledge Agreement or Security Agreement or
Mortgage if UCAR shall have advised the Administrative Agent that it would be a
violation of applicable law for such Subsidiary to take such action or if, in
the judgment of the Administrative Agent, in consultation with the Borrower, the
expense, tax or regulatory consequences or difficulty of taking such action
would not, in light of the benefits to accrue to the Lenders, justify taking
such action and (b) none of UCAR, Global or any Subsidiary shall be required to
pledge the Capital Stock of UCAR Graph-Tech Inc. The Collateral Agent is
expressly authorized upon the request of the Borrower to release any Collateral
or Guarantee previously delivered in respect of any Obligation that at the time
of such request is not required in order for the Collateral and Guarantee
Requirement to be satisfied.
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"COMMITMENT" shall mean a Tranche A Term Commitment, a Tranche
B Term Commitment or a Revolving Commitment.
"CONTROL" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.
"CURRENT ASSETS" shall mean, with respect to UCAR, Global, the
Borrower and the Subsidiaries on a consolidated basis at any date of
determination, all assets (other than cash and Permitted Investments or other
cash equivalents) which would, in accordance with GAAP, be classified on a
consolidated balance sheet of UCAR, Global, the Borrower and the Subsidiaries as
current assets at such date of determination.
"CURRENT LIABILITIES" shall mean, with respect to UCAR,
Global, the Borrower and the Subsidiaries on a consolidated basis at any date of
determination, all liabilities which would, in accordance with GAAP, be
classified on a consolidated balance sheet of UCAR, Global, the Borrower and the
Subsidiaries as current liabilities at such date of determination, other than
(a) the current portion of long term debt, (b) accruals of Interest Expense
(excluding Interest Expense which is due and unpaid) and (c) Revolving Loans
classified as current.
"DEBT SERVICE" shall mean, with respect to UCAR, Global, the
Borrower and the Subsidiaries on a consolidated basis for any period, Interest
Expense for such period plus scheduled principal amortization of Total Debt for
such period (whether or not such payments are made).
"DEFAULT" shall mean any event or condition which upon notice,
lapse of time or both would constitute an Event of Default.
"DISQUALIFIED STOCK" shall mean any Capital Stock that by its
terms (or the terms of any security into which it is convertible, or for which
it is exchangeable, in each case at the option of the holder thereof), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
final maturity of the latest maturing Loan.
"DOLLARS" or "$" shall mean the lawful money of the United
States of America.
"DOMESTIC PLEDGE AGREEMENT" shall mean a Pledge Agreement
substantially in the form of Exhibit B between UCAR, Global, the Borrower, each
Domestic Subsidiary owning Capital Stock or Indebtedness of Global, the Borrower
or any other Subsidiary or other person, each Foreign Subsidiary that shall have
become a party thereto in order to satisfy the Collateral and Guarantee
Requirement and the Collateral Agent for the benefit of the Secured Parties.
"DOMESTIC SUBSIDIARY" shall mean a Subsidiary incorporated or
organized under the laws of the United States of America, any State thereof or
the District of Columbia (but shall exclude Union Carbide Grafito, Inc.).
"EBITDA" shall mean, with respect to UCAR, Global, the
Borrower and the Subsidiaries on a consolidated basis for any period, the
consolidated net income of UCAR, Global, the Borrower and the Subsidiaries for
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such period plus, to the extent deducted in computing such consolidated net
income, without duplication, the sum of (a)(i) income tax expense and (ii)
withholding tax expense incurred in connection with cross border transactions
involving Foreign Subsidiaries, (b) interest expense, (c) depreciation and
amortization expense, without duplication, (d) any special charges (other than
new charges after the Effective Date in respect of Litigation Liabilities) and
any extraordinary or non-recurring losses, (e) other noncash items reducing
consolidated net income, (f) noncash exchange, translation or performance losses
relating to any Interest/Exchange Rate Protection Agreements or currency or
interest rate fluctuations and (g) fees, costs and expenses paid by UCAR,
Global, the Borrower or any Subsidiary on or prior to June 30, 2000, in
connection with the transactions under this Agreement consummated on the
Effective Date, minus, to the extent added in computing such consolidated net
income, without duplication, (i) interest income, (ii) extraordinary or
non-recurring gains, (iii) other noncash items increasing consolidated net
income and (iv) noncash exchange, translation or performance gains relating to
any Interest/Exchange Rate Protection Agreements or currency or interest rate
fluctuations.
"EFFECTIVE DATE" shall mean the date on which the conditions
specified in Section 5.01 are satisfied (or waived in accordance with Section
10.02).
"EMU LEGISLATION" shall mean the legislative measures of the
European Union for the introduction of, changeover to or operation of the Euro
in one or more member states.
"ENVIRONMENT" shall mean ambient air, surface water and
groundwater (including potable water, navigable water and wetlands), the land
surface or subsurface strata, the workplace or as otherwise defined in any
Environmental Law.
"ENVIRONMENTAL CLAIM" shall mean any written accusation,
allegation, notice of violation, claim, demand, order, directive, cost recovery
action or other cause of action by, or on behalf of, any Governmental Authority
or any person for damages, injunctive or equitable relief, personal injury
(including sickness, disease or death), Remedial Action costs, tangible or
intangible property damage, natural resource damages, nuisance, pollution, any
adverse effect on the environment caused by any Hazardous Material, or for
fines, penalties or restrictions, resulting from or based upon: (a) the threat,
the existence, or the continuation of the existence of a Release (including
sudden or non-sudden, accidental or non-accidental Releases); (b) exposure to
any Hazardous Material; (c) the presence, use, handling, transportation,
storage, treatment or disposal of any Hazardous Material; or (d) the violation
or alleged violation of any Environmental Law or Environmental Permit.
"ENVIRONMENTAL LAW" shall mean any and all applicable present
and future treaties, laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
treatment, storage, disposal, Release or threatened Release of any Hazardous
Material or to human health or safety, including the Hazardous Materials
Transportation Act, 49 U.S.C.ss.ss. 1801 et seq., the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.ss.ss. 9601
et seq. ("CERCLA"), the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C.ss.ss. 6901, et seq., the Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C.ss.ss. 1251 et
seq., the Clean Air Act of 1970, as amended 42 U.S.C.ss.ss. 7401 et seq., the
Toxic Substances Control Act of 1976, 15 U.S.C.ss.ss. 2601 et seq., the
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Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.ss.ss.
11001 et seq., the National Environmental Policy Act of 1975, 42 U.S.C.ss.ss.
4321 et seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C.ss.ss.
300(f) et seq., and any similar or implementing state or foreign law, and all
amendments or regulations promulgated thereunder.
"ENVIRONMENTAL PERMIT" shall mean any permit, approval,
authorization, certificate, license, variance, filing or permission required by
or from any Governmental Authority pursuant to any Environmental Law.
"EQUITY PROCEEDS" shall mean, at any time, (a) the aggregate
amount at such time of the Net Proceeds received by UCAR since the Effective
Date from the issuance or sale by UCAR of any Capital Stock of UCAR (other than
sales of Capital Stock of UCAR to directors, officers or employees of UCAR,
Global, the Borrower or any Subsidiary in connection with permitted employee
compensation and incentive arrangements), net of (b) all such Net Proceeds at
such time used since the Effective Date to prepay Indebtedness (other than
Revolving Loans), to make any Permitted Subsidiary Investment, any investment in
any Unrestricted Subsidiary or any Capital Expenditure or otherwise for any
purpose resulting in a deduction to Excess Cash Flow in any fiscal year.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time.
"ERISA AFFILIATE" shall mean any trade or business (whether or
not incorporated) that, together with the Borrower, is treated as a single
employer under Section 414 of the Code.
"EURO" or "EUR" shall mean the single currency of the European
Union as constituted by the Treaty on European Union and as referred to in the
EMU Legislation.
"EURO EQUIVALENT" shall mean, on any date of determination,
(a) with respect to any amount in Euros, such amount, and (b) with respect to
any amount in Dollars, the equivalent in Euros of such amount, determined by the
Administrative Agent pursuant to Section 1.05 using the Exchange Rate with
respect to Dollars in effect for such amount under the provisions of such
Section.
"EUROCURRENCY", when used in reference to any Loan or
Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing,
are bearing interest at a rate determined by reference to the Adjusted LIBO
Rate.
"EVENT OF DEFAULT" shall have the meaning given such term in
Article VIII.
"EXCESS CASH FLOW" shall mean, with respect to UCAR, Global,
the Borrower and the Subsidiaries on a consolidated basis for any fiscal year,
EBITDA of UCAR on a consolidated basis for such fiscal year, minus, without
duplication, (a) Debt Service for such fiscal year, (b) permitted Capital
Expenditures by the Subsidiaries on a consolidated basis during such fiscal year
which are paid in cash, (c) taxes paid in cash by UCAR, Global, the Borrower and
the Subsidiaries on a consolidated basis during such fiscal year, including
income tax expense and withholding tax expense incurred in connection with cross
border transactions involving Foreign Subsidiaries, (d) an amount equal to any
increase in Working Capital of UCAR, Global, the Borrower and the Subsidiaries
for such fiscal year, (e) Permitted Acquisitions and investments in Unrestricted
Subsidiaries during such fiscal year to the extent paid in cash, (f) cash
expenditures made in respect of Interest/Exchange Rate Protection Agreements
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during such fiscal year, to the extent not reflected in the computation of
EBITDA or Interest Expense, (g) permitted Restricted Payments and Litigation
Payments paid in cash by UCAR or Global and Litigation Payments paid in cash by
the Subsidiaries during such fiscal year and permitted dividends paid by any
Subsidiary to any person other than Global or any of the other Subsidiaries
during such fiscal year, in each case in accordance with Section 7.06, (h)
amounts paid in cash during such fiscal year on account of items that were
accounted for as noncash reductions of consolidated net income of UCAR, Global,
the Borrower and the Subsidiaries in the current or a prior period, (i) special
charges or any extraordinary or non-recurring loss, in either case paid in cash
during such fiscal year, (j) to the extent not deducted in the computation of
Net Proceeds in respect of any asset disposition or condemnation giving rise
thereto, mandatory prepayments of Indebtedness (other than Indebtedness created
hereunder or under any other Loan Document), and (k) to the extent included in
determining EBITDA, all items which did not result from a cash payment to UCAR,
Global, the Borrower and the Subsidiaries on a consolidated basis during such
fiscal year plus, without duplication, (i) an amount equal to any decrease in
Working Capital for such fiscal year, (ii) all proceeds received during such
fiscal year of Capital Lease Obligations, purchase money Indebtedness, other
Indebtedness to the extent used to finance any Permitted Acquisition, any
investment in an Unrestricted Subsidiary or Capital Expenditure (other than
Indebtedness under this Agreement or the Existing Agreements to the extent there
is no corresponding deduction to Excess Cash Flow above in respect of the use of
such Indebtedness) and all proceeds received during such fiscal year from Sale
and Lease-Back Transactions, (iii) all amounts referred to in (b) and (e) above
to the extent funded with Equity Proceeds or Available Disposition Proceeds, in
each case to the extent there is a corresponding deduction to Excess Cash Flow
above, (iv) cash payments received in respect of Interest/Exchange Rate
Protection Agreements during such fiscal year to the extent not (A) included in
the computation of EBITDA or (B) red__ing Interest Expense, (v) any
extraordinary or non-recurring gain realized in cash during such fiscal year
(except to the extent such gain constitutes Available Disposition Proceeds),
(vi) to the extent deducted in the computation of EBITDA, interest income and
(vii) to the extent subtracted in determining EBITDA, all items which did not
result from a cash payment by UCAR, Global, the Borrower and the Subsidiaries on
a consolidated basis during such fiscal year.
"EXCHANGE RATE" shall mean on any day, (i) with respect to
Dollars, the rate at which Dollars may be exchanged into Euro, as set forth at
approximately 12:00 noon, London time, on such day on the Reuters World Currency
Page for Dollars, or (ii) with respect to Euros, the rate at which Euros may be
exchanged into Dollars, as set forth at approximately 12:00 noon, London time,
on such day on the Reuters World Currency Page for Euros. In the event that such
rate does not appear on any Reuters World Currency Page, the Exchange Rate shall
be determined by reference to such other publicly available service for
displaying exchange rates as may be agreed upon by the Administrative Agent and
the Borrower or, in the absence of such agreement, such Exchange Rate shall
instead be the arithmetic average of the spot rates of exchange of the
Administrative Agent, at or about 11:00 a.m., London time, on such date for the
purchase of Euro or Dollars, as the case may be, for delivery two Business Days
later; PROVIDED that if at the time of any such determination, for any reason,
no such spot rate is being quoted, the Administrative Agent, after consultation
with the Borrower, may use any reasonable method it deems appropriate to
determine such rate, and such determination shall be conclusive absent manifest
error.
"EXCLUDED TAXES" shall mean, with respect to the
Administrative Agent, any Lender, the Issuing Bank or any other recipient of any
payment to be made by or on account of any obligation of the Borrower or any LC
Subsidiary hereunder, (a) income or franchise taxes imposed on (or measured by)
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its net income by the United States of America, or by the jurisdiction under
which such recipient is organized or in which its principal office is located,
or in which its applicable lending office is located, (b) any branch profit
taxes imposed by the United States of America or any similar tax imposed by any
other jurisdiction described in clause (a) above and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 2.18(b)), any withholding tax that is imposed by the United States
of America on amounts payable to such Foreign Lender (i) to the extent such tax
is in effect and would apply as of the date such Foreign Lender becomes a party
to this Agreement or relates to payments received by a new lending office
designated by such Foreign Lender and is in effect and would apply at the time
such lending office is designated or (ii) that is attributable to such Foreign
Lender's failure to comply with Section 2.16(e), except, in the case of clause
(i) above, to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment), to
receive additional amounts from the Borrower or any LC Subsidiary with respect
to such withholding tax pursuant to Section 2.16(a).
"EXISTING CREDIT AGREEMENTS" shall mean (a) the Credit
Agreement dated as of October 19, 1995, as amended and restated as of March 19,
1997, and November 10, 1998, among UCAR, Global, certain other subsidiaries of
Global, the lenders and fronting banks party thereto and The Chase Manhattan
Bank, as administrative agent and collateral agent, and (b) the Credit Agreement
dated as of November 10, 1998, among UCAR, Global, certain other subsidiaries of
Global, the lenders and fronting banks party thereto and The Chase Manhattan
Bank, as administrative agent and collateral agent.
"EXISTING LETTERS OF CREDIT" shall mean the letters of credit
issued under the Existing Credit Agreements and described on Schedule 2.05(j).
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"FINANCIAL OFFICER" of any person shall mean the chief
financial officer, principal accounting officer, Treasurer, Assistant Treasurer
or Controller of such person.
"FINANCIAL STATEMENT DELIVERY DATE" shall mean the 90th day
following the end of each fiscal year of UCAR, and the 45th day following the
end of each of the first three fiscal quarters in each fiscal year of UCAR.
"FOREIGN INTERCOMPANY BORROWER" shall mean any Foreign
Subsidiary that is an Intercompany Borrower. "FOREIGN LENDER" shall mean any
Lender that is organized under the laws of a jurisdiction other than the
United States of America or a political subdivision thereof.
"FOREIGN SUBSIDIARY" shall mean any Subsidiary that is not a
Domestic Subsidiary.
"GAAP" shall mean generally accepted accounting principles in
effect from time to time in the United States applied on a consistent basis or,
when reference is made to another jurisdiction, generally accepted accounting
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principles in effect from time to time in such jurisdiction applied on a
consistent basis.
"GLOBAL" shall mean UCAR Global Enterprises Inc., a Delaware
corporation.
"GOVERNMENTAL AUTHORITY" shall mean the government of the
United States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"GUARANTEE" of or by any person shall mean (a) any obligation,
contingent or otherwise, of such person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay or
otherwise) or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness, (ii) to purchase or lease
property, securities or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness, (iii) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or (iv) entered into for the purpose of assuring in any other
manner the holders of such Indebtedness of the payment thereof or to protect
such holders against loss in respect thereof (in whole or in part), or (b) any
Lien on any assets of such person securing any Indebtedness of any other person,
whether or not such Indebtedness is assumed by such person; PROVIDED, HOWEVER,
that the term "Guarantee" shall not include endorsements for collection or
deposit, in either case in the ordinary course of business, or customary and
reasonable indemnity obligations in effect on the Effective Date or entered into
in connection with any acquisition or disposition of assets permitted under this
Agreement.
"GUARANTEE AGREEMENT" shall mean (a) a Guarantee Agreement
substantially in the form of Exhibit C by UCAR, Global and each Domestic
Subsidiary in favor of the Collateral Agent for the benefit of the Secured
Parties and (b) in connection with Guarantees of the Intercompany Borrower
Obligations provided by any Foreign Subsidiaries, other guarantee agreements or
similar agreements giving effect to the Collateral and Guarantee Requirement and
satisfactory in form and substance to the Collateral Agent.
"GUARANTOR" shall mean UCAR, Global, the Borrower and each
Subsidiary at any time that has outstanding at such time a Guarantee under any
Guarantee Agreement.
"HAZARDOUS MATERIAL" shall mean any material meeting the
definition of a "hazardous substance" in CERCLA 42 U.S.C. ss.9601(14) and all
explosive or radioactive substances or wastes, toxic substances or wastes,
pollutants, solid, liquid or gaseous wastes, including petroleum, petroleum
distillates or fractions or residues, asbestos or asbestos containing materials,
polychlorinated biphenyls ("PCBs") or materials or equipment containing PCBs in
excess of 50 ppm, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law,
or that reasonably could form the basis of an Environmental Claim.
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"INDEBTEDNESS" of any person shall mean, without duplication,
(a) all obligations of such person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such person evidenced
by bonds, debentures, notes or similar instruments, (c) all obligations of such
person upon which interest charges are customarily paid (other than trade
payables incurred in the ordinary course of business), (d) all obligations of
such person under conditional sale or other title retention agreements relating
to property or assets purchased by such person, (e) all obligations of such
person issued or assumed as the deferred purchase price of property or services
(other than current trade liabilities incurred in the ordinary course of
business), (f) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (g) all Guarantees by such person
of Indebtedness of others, (h) all Capital Lease Obligations of such person, (i)
all payments that such person would have to make in the event of an early
termination, on the date Indebtedness of such person is being determined, in
respect of outstanding interest rate protection agreements, foreign currency
exchange agreements or other interest or exchange rate hedging arrangements and
(j) all obligations of such person as an account party in respect of letters of
credit and bankers' acceptances. The Indebtedness of any person shall include
the Indebtedness of any other entity (including any partnership in which such
person is a general partner) to the extent such person is liable therefor as a
result of such person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
person is not liable therefor.
"INDEMNIFIED TAXES" shall mean Taxes other than Excluded
Taxes.
"INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT" shall mean
an Indemnity, Subrogation and Contribution Agreement substantially in the form
of Exhibit D among UCAR, Global, the Borrower, the Guarantors and the Collateral
Agent.
"INTERCOMPANY BORROWER AGREEMENT" shall mean each agreement
substantially in the form of Exhibit E executed and delivered by an Intercompany
Borrower pursuant to Section 5.03.
"INTERCOMPANY BORROWERS" shall mean UCAR Carbon Company Inc.,
UCAR Holdings S.A., UCAR S.p.A., UCAR S.A., UCAR Electrodos S.l. and, in respect
of Intercompany Loans made with the proceeds of Revolving Borrowings, one or
more other Wholly Owned Subsidiaries designated by the Borrower as provided in
Section 3.04.
"INTERCOMPANY BORROWER OBLIGATIONS" shall mean (a) the due and
punctual payment of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Intercompany Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise and (ii) all other monetary obligations, including fees, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Loan Parties and the
other Subsidiaries in respect of the Intercompany Loans (whether under any
Intercompany Note, any Guarantee or any document or instrument in respect of any
security interest in respect of any Intercompany Note) and (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Loan Parties and the other Subsidiaries in respect of the Intercompany
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Loans (whether under any Intercompany Note, any Guarantee or any document or
instrument in respect of any security interest in respect of any Intercompany
Note).
"INTERCOMPANY LOAN" shall mean an Intercompany Term Loan or an
Intercompany Revolving Loan.
"INTERCOMPANY NOTE" shall mean an Intercompany Term Note or an
Intercompany Revolving Note.
"INTERCOMPANY REVOLVING LOAN" shall mean a loan made by the
Borrower to an Intercompany Borrower in accordance with the provisions of
Section 3.01(b).
"INTERCOMPANY REVOLVING NOTE" shall mean a promissory note in
substantially the form of Exhibit F-1 evidencing one or more Intercompany
Revolving Loans.
"INTERCOMPANY TERM LOAN" shall mean a loan made by the
Borrower to an Intercompany Borrower in accordance with the provisions of
Section 3.01(a).
"INTERCOMPANY TERM NOTE" shall mean a promissory note in
substantially the form of Exhibit F-2 evidencing one or more Intercompany Term
Loans.
"INTEREST COVERAGE RATIO" shall have the meaning given such
term in Section 7.11.
"INTEREST ELECTION REQUEST" shall mean a request by the
Borrower to convert or continue a Revolving Borrowing or Term Borrowing in
accordance with Section 2.07.
"INTEREST EXPENSE" shall mean, with respect to UCAR, Global,
the Borrower and the Subsidiaries on a consolidated basis for any period, the
sum of (a) gross interest expense of UCAR, Global, the Borrower and the
Subsidiaries for such period on a consolidated basis, including (i) the
amortization of debt discounts, (ii) the amortization of all fees (including
fees with respect to interest rate protection agreements) payable in connection
with the incurrence of Indebtedness to the extent included in interest expense
and (iii) the portion of any payments or accruals with respect to Capital Lease
Obligations allocable to interest expense and (b) capitalized interest of UCAR,
Global, the Borrower and the Subsidiaries on a consolidated basis, minus (c)
interest income of UCAR, Global, the Borrower and the Subsidiaries on a
consolidated basis. For purposes of the foregoing, (A) gross interest expense
shall be determined after giving effect to any net payments made or received by
Global, the Borrower and the Subsidiaries with respect to interest rate
protection agreements and (B) interest expense of Brazil or any Subsidiary
thereof shall be deemed reduced by the aggregate amount of interest income
received by Brazil or such Subsidiary from Permitted Investments acquired for
the purpose of hedging the Indebtedness giving rise to such interest expense.
"INTEREST/EXCHANGE RATE PROTECTION AGREEMENT" shall mean any
interest rate or currency hedging agreement or arrangement approved by the
Administrative Agent (such approval not to be unreasonably withheld) entered
into by the Borrower or a Subsidiary (or entered into by Global prior to the
Effective Date) and designed to protect against fluctuations in interest rates
or currency exchange rates.
"INTEREST PAYMENT DATE" shall mean (a) with respect to any
Eurocurrency Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurocurrency
Borrowing with an Interest Period of more than three months' duration, each day
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prior to the last day of such Interest Period that occurs at intervals of three
months' duration after the first day of such Interest Period, (b) with respect
to any Base Rate Loan (other than a Swingline Loan), the last day of each March,
June, September and December and the date on which such Loan is repaid or
converted to a Eurocurrency Loan and (c) with respect to any Swingline Loan, the
day that such Loan is required to be repaid.
"INTEREST PERIOD" shall mean, with respect to any Eurocurrency
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or
six months (or, with the consent of each affected Lender, any other period not
in excess of twelve months) thereafter, as the Borrower may elect; provided that
the initial Interest Period commencing on the Effective Date will end on the
seventh day thereafter; PROVIDED FURTHER that (i) if any Interest Period would
end on a day other than a Business Day, such Interest Period shall be extended
to the next succeeding Business Day unless, in the case of a Eurocurrency
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day (ii) any Interest Period pertaining to a Eurocurrency
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period and (iii) any Interest Period in respect
of a Tranche A Term Borrowing, a Tranche B Term Borrowing or a Revolving
Borrowing that would otherwise end after the Tranche A Maturity Date, the
Tranche B Maturity Date or the Revolving Maturity Date, respectively, shall
instead end on the Tranche A Maturity Date, the Tranche B Maturity Date or the
Revolving Maturity Date, as the case may be. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made, and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
"ISSUING BANK" shall mean Morgan Guaranty Trust Company of New
York, in its capacity as the issuer of Letters of Credit hereunder, and its
successors in such capacity as provided in Section 2.05(i). The Issuing Bank
may, in its discretion, arrange for one or more Letters of Credit to be issued
by Affiliates of the Issuing Bank, in which case the term "Issuing Bank" shall
include any such Affiliate with respect to Letters of Credit issued by such
Affiliate.
"LC DISBURSEMENT" shall mean a payment made by the Issuing
Bank in respect of a Letter of Credit.
"LC EXPOSURE" shall mean, at any time, the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit denominated in
Euros at such time, (b) the aggregate amount of the Euro Equivalents of the
undrawn amounts of all outstanding Letters of Credit denominated in Dollars at
such time, (c) the aggregate amount of all LC Disbursements denominated in Euros
that have not yet been reimbursed by or on behalf of the Borrower or the
applicable LC Subsidiary at such time and (d) the aggregate amount of the Euro
Equivalents of the amounts of all LC Disbursements denominated in Dollars that
have not yet been reimbursed by or on behalf of the Borrower or the applicable
LC Subsidiary at such time. The LC Exposure of any Revolving Lender at any time
shall be such Lender's Applicable Revolving Percentage of the aggregate LC
Exposure.
"LC SUBSIDIARY" shall mean, at any time, each Wholly Owned
Subsidiary that has been designated as an LC Subsidiary by the Borrower pursuant
to Section 2.05(k) and that has not ceased to be an LC Subsidiary as provided in
such Section.
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"LC SUBSIDIARY AGREEMENT" shall mean an LC Subsidiary
Agreement substantially in the form of Exhibit G-1.
"LC SUBSIDIARY TERMINATION" shall mean an LC Subsidiary
Termination substantially in the form of Exhibit G-2.
"LENDERS" shall mean the persons listed on Schedule 2.01 and
any other person that shall have become a party hereto pursuant to the Second
Closing Assignment or an Assignment and Acceptance, other than any such person
that shall have ceased to be a party hereto pursuant to an Assignment and
Acceptance. Unless the context otherwise requires, the term "Lenders" includes
the Swingline Lender.
"LETTER OF CREDIT" shall mean any letter of credit issued
pursuant to this Agreement on behalf of Lenders holding Revolving Commitments.
"LEVERAGE RATIO" shall have the meaning given such term in
Section 7.12.
"LIBO RATE" shall mean, with respect to any Eurocurrency
Borrowing for any Interest Period, the rate per annum determined by the
Administrative Agent at approximately 11:00 a.m., London time, on the Quotation
Day for such Interest Period by reference to the British Bankers' Association
Interest Settlement Rates for deposits in the currency of such Borrowing (as
reflected on the applicable Telerate screen), for a period equal to such
Interest Period; PROVIDED that, to the extent that an interest rate is not
ascertainable pursuant to the foregoing provisions of this definition or with
respect to any Interest Period for an initial Borrowing that is seven days,
"LIBO Rate" shall mean the average of the rates per annum at which deposits in
the currency of such Borrowing are offered for such Interest Period to the
principal London offices of the Reference Banks in the London interbank market
at approximately 11:00 a.m., London time, on the Quotation Day for such Interest
Period; "REFERENCE BANKS" shall mean Credit Suisse First Boston, The Chase
Manhattan Bank and ABN AMRO Bank (or any replacement thereof that is a Lender
identified by the Administrative Agent in consultation with the Borrower and
Lenders).
"LIEN" shall mean, with respect to any asset, (a) any
mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest
in or on such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"LITIGATION LIABILITIES" shall mean liabilities and expenses
of UCAR, Global, the Borrower and the Subsidiaries associated with (a) antitrust
investigations and related lawsuits, settlements and claims of the type
described in UCAR's Annual Report on Form 10-K for the year ended December 31,
1998, and UCAR's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999, June 30, 1999 and September 30, 1999 (together, the "SEC REPORTS"), (b)
shareholder derivative lawsuits and claims of the type described in the SEC
Reports and (c) securities lawsuits and claims of the type described in the SEC
Reports and any investigations that may arise relating to the subject matter of
such securities lawsuits and claims.
"LITIGATION PAYMENTS" shall mean payments, credits, discounts,
transfers of assets and any other transfers of value made in respect of
Litigation Liabilities which are or would be applied against the Litigation
Reserves in accordance with GAAP.
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"LITIGATION RESERVES" shall mean, with respect to UCAR,
Global, the Borrower and the Subsidiaries on a consolidated basis at any date of
determination, all reserves in respect of Litigation Liabilities which are or
would be disclosed on a consolidated balance sheet of UCAR and its subsidiaries
prepared in accordance with GAAP at such date of determination.
"LOAN DOCUMENTS" shall mean this Agreement, the Second Closing
Assignment, any promissory note issued under Section 2.04(e), the Intercompany
Notes, the Intercompany Borrower Agreements, the Guarantee Agreements, the
Indemnity, Subrogation and Contribution Agreement and the Security Documents.
"LOAN PARTIES" shall mean UCAR, Global, the Borrower and each
Subsidiary that is a Guarantor of all or substantially all the Obligations.
"LOANS" shall mean the loans made by the Lenders to the
Borrower pursuant to this Agreement.
"MATERIAL ADVERSE EFFECT" shall mean (a) a materially adverse
effect on the assets, business, properties, financial condition or results of
operations of UCAR, Global, the Borrower and the Subsidiaries, taken as a whole,
(b) a material impairment of the ability of UCAR, Global, the Borrower or any
Subsidiary to perform any of its material obligations under any Loan Document to
which it is or will be a party or (c) an impairment of the validity or
enforceability of, or a material impairment of the material rights, remedies or
benefits available to the Lenders, the Issuing Banks, the Administrative Agent
or the Collateral Agent under, any Loan Document.
"MOODY'S" shall mean Moody's Investors Service, Inc.
"MORTGAGED PROPERTIES" shall mean each parcel of real property
and improvements thereto identified on Schedule 4.23(a), and each other parcel
of real property and improvements thereto from time to time owned by UCAR,
Global, the Borrower or any Domestic Subsidiary.
"MORTGAGES" shall mean mortgages, deeds of trust, leasehold
mortgages, assignments of leases and rents, modifications and other security
documents reasonably satisfactory to the Collateral Agent, delivered pursuant to
Section 5.01, 5.03 or 6.11.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate (other than one considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Code Section 414) is making or accruing an obligation
to make contributions, or has within any of the preceding five plan years made
or accrued an obligation to make contributions.
"NET DEBT" shall mean, with respect to UCAR, Global, the
Borrower and the Subsidiaries on a consolidated basis, at any time, (a) Total
Debt at such time minus (b) the aggregate amount held at such time by UCAR,
Global, the Borrower and the Subsidiary Loan Parties of (i) Permitted
Investments of the type described in clauses (a), (b), (c), (e) and (to the
extent analogous to such clauses (a), (b), (c) and (e)) (f) of the definition of
Permitted Investments that are denominated in Euros or Dollars, mature 30 days
or less from the date of determination and are held in jurisdictions from which
funds may be freely transferred to the Borrower and (ii) cash denominated in
Euros or Dollars that are held in jurisdictions from which funds may be freely
transferred to the Borrower.
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"NET PROCEEDS" shall mean, with respect to any event, (a) the
cash proceeds received, but only as and when received, in respect of such event,
including (i) any cash received in respect of any non-cash proceeds, (ii) in the
case of a casualty, insurance proceeds, and (iii) in the case of a condemnation
or similar event, condemnation awards and similar payments, net of (b) the sum
of (i) all reasonable fees, commissions and out-of-pocket expenses, costs and
charges paid by UCAR, Global, the Borrower and the Subsidiaries to third parties
(other than Affiliates) in connection with such event, (ii) in the case of a
sale, transfer or other disposition of an asset (including pursuant to a Sale
and Lease-Back Transaction or a casualty or a condemnation or similar
proceeding), the amount of all payments required to be made by UCAR, Global, the
Borrower and the Subsidiaries as a result of such event to repay Indebtedness
(other than Loans) secured by such asset or otherwise subject to mandatory
prepayment as a result of such event, and (iii) the amount of all taxes paid (or
reasonably estimated to be payable) by UCAR, Global, the Borrower and the
Subsidiaries, and the amount of any reserves established by UCAR, Global, the
Borrower and the Subsidiaries to fund contingent liabilities reasonably
estimated to be payable, in each case during the year that such event occurred
or the next succeeding year and that are directly attributable to such event (as
determined reasonably and in good faith by a Financial Officer of Global). If
Global shall deliver a certificate of Global signed by a Responsible Officer of
Global to the Administrative Agent promptly following receipt of any Net
Proceeds in respect of any Prepayment Event described in clause (a) or (b) of
the definition thereof setting forth Global's intention to use any portion of
such proceeds to purchase assets useful in the business of Global and the
Subsidiaries (including by way of a purchase of Capital Stock of any person
holding such assets) within 12 months of such receipt, such portion of such
proceeds shall not constitute Net Proceeds except to the extent not so used
within such 12-month period; PROVIDED that proceeds may not be so excluded from
Net Proceeds (i) if any Default or Event of Default shall exist at the time such
notice is delivered or (ii) to the extent that such exclusion would result in
the aggregate amount of Available Disposition Proceeds at any time exceeding
$50,000,000.
"OBLIGATIONS" shall mean (a) the due and punctual payment of
(i) the principal of and premium, if any, and interest (including interest
accruing during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in such
proceeding) on the Loans, when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise, (ii) each payment
required to be made by the Borrower or any Subsidiary under this Agreement in
respect of any Letter of Credit, when and as due, including payments in respect
of reimbursement of disbursements, interest thereon and obligations to provide
cash collateral and (iii) all other monetary obligations, including fees, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of UCAR, Global, the Borrower
and the Subsidiaries under this Agreement and the other Loan Documents
(including, without limitation, all monetary obligations of the Intercompany
Borrowers under the Intercompany Notes and Intercompany Borrower Agreements, but
only for as long as the Intercompany Notes and the rights of the Borrower under
the Intercompany Borrower Agreements are pledged to the Collateral Agent under
one or more Pledge Agreements as security for the Obligations), (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of UCAR, Global, the Borrower and the Subsidiaries under or pursuant to this
Agreement and the other Loan Documents, (c) unless otherwise agreed upon in
writing by the applicable Lender party thereto, the due and punctual payment and
performance of all obligations of UCAR, Global, the Borrower and the
Subsidiaries, monetary or otherwise, under each Interest/Exchange Rate
Protection Agreement entered into with any counterparty that (i) was a Lender
(or an Affiliate thereof) at the time such Interest/Exchange Rate Protection
Agreement was entered into or (ii)(A) was a "Lender" (or an Affiliate thereof)
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as defined in the Existing Credit Agreements at the time such Interest/Exchange
Rate Protection Agreement was entered into and (B) was one of the initial
Lenders under this Agreement (or an Affiliate thereof) and (d) all obligations
of UCAR, Global, the Borrower and the Subsidiaries under the Guarantee
Agreements.
"OTHER TAXES" shall mean any and all present or future
recording, stamp, documentary, excise, transfer, sales, property or similar
taxes, charges or levies arising from any payment made hereunder or from the
execution, delivery or enforcement of, or otherwise with respect to, this
Agreement or any other Loan Document.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA.
"PERMITTED ACQUISITION" shall mean any acquisition of all or
substantially all the assets of, or any shares or other equity interests in, a
person or division or line of business of a person (or any subsequent investment
made in a previously acquired Permitted Acquisition) if immediately after giving
effect thereto: (a) no Default or Event of Default shall have occurred and be
continuing or would result therefrom, (b) all transactions related thereto shall
be consummated in accordance with applicable laws, (c) any acquired or newly
formed corporation, partnership, association or other business entity shall be a
Subsidiary that is owned directly by Global or a domestic Wholly Owned
Subsidiary (unless there is a material tax or legal or other economic
disadvantage in having Global or a Wholly Owned Subsidiary hold such Capital
Stock, in which case such Capital Stock may be held directly by a Foreign
Subsidiary) and all actions required to be taken, if any, with respect to such
assets or such acquired or newly formed Subsidiary under Section 6.11 shall have
been taken, (d) UCAR shall be in compliance, on a pro forma basis after giving
effect to such acquisition or formation, with the covenants contained in
Sections 7.11 and 7.12 recomputed as at the last day of the most recently ended
fiscal quarter of UCAR for which financial statements have been delivered under
Section 6.04(a) or (b) as if such acquisition or formation had occurred on the
first day of each relevant period for testing such compliance, and Global shall
have delivered to the Administrative Agent a certificate of Global signed by a
Responsible Officer of Global to such effect, together with all relevant
financial information for such subsidiary or assets (including a summary of the
financial terms of the acquisition or investment and the material terms of any
joint venture arrangements), (e) if the Leverage Ratio as of the last day of the
most recent fiscal quarter for which financial statements have been delivered
under Section 6.04(a) or (b) is greater than 2.50 to 1.00, (i) the total
aggregate amount of the Revolving Commitments then in effect shall exceed the
total aggregate amount of the Revolving Exposures then in effect by at least
EUR75,000,000 following such acquisition and payment of all related costs and
expenses and (ii) Global shall have delivered to the Administrative Agent a
certificate of Global signed by a Responsible Officer of Global representing
that in Global's good faith judgment, based on such analysis as it shall deem
appropriate, it will have liquidity it deems adequate following such acquisition
or formation, and (f) any acquired or newly formed Subsidiary shall not be
liable for any Indebtedness (except for Indebtedness permitted by Section 7.01).
"PERMITTED INVESTMENTS" shall mean: (a) direct obligations of
the United States of America or any agency thereof or obligations guaranteed by
the United States of America or any agency thereof; (b) time deposit accounts,
certificates of deposit and money market deposits maturing within 180 days of
the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any state thereof or
any foreign country recognized by the United States of America having capital,
surplus and undivided profits aggregating in excess of $250,000,000 (or the
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foreign currency equivalent thereof) and whose long-term debt, or whose parent
holding company's long-term debt, is rated A at the time of deposit (or such
similar equivalent rating or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities Act
of 1933, as amended)); (c) repurchase obligations with a term of not more than
30 days for underlying securities of the types described in clause (a) above
entered into with a bank meeting the qualifications described in clause (b)
above; (d) commercial paper, maturing not more than 180 days after the date of
acquisition, issued by a corporation (other than an Affiliate of Global)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of P-1 (or higher) according to
Moody's, or A-1 (or higher) according to S&P; (e) securities with maturities of
six months or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least A by S&P
or A2 by Moody's; (f) in the case of any Subsidiary organized in a jurisdiction
outside the United States: (i) direct obligations of the sovereign nation (or
any agency thereof) in which such Subsidiary is organized and is conducting
business or in obligations fully and unconditionally guaranteed by such
sovereign nation (or any agency thereof); PROVIDED that such obligations have a
rating of at least A by S&P or A2 by Moody's (or the equivalent thereof from
comparable foreign rating agencies), (ii) investments of the type and maturity
described in clauses (a) through (e) above of foreign obligors, which
investments or obligors (or the parents of such obligors) have ratings described
in such clauses or equivalent ratings from comparable foreign rating agencies or
(iii) investments of the type and maturity described in clauses (a) through (e)
above of foreign obligors (or the parents of such obligors), which investments
or obligors (or the parents of such obligors) are not rated as provided in such
clauses or in clause (ii) above but which are, in the reasonable judgment of
Global, comparable in investment quality to such investments and obligors (or
the parents of such obligors); PROVIDED that the aggregate face amount
outstanding at any time of such investments of all foreign Subsidiaries made
pursuant to this clause (iii) does not exceed $50,000,000; (g) mutual funds
whose investment guidelines restrict such funds' investments to those satisfying
the provisions of clauses (a) through (e) above; and (h) time deposit accounts,
certificates of deposit and money market deposits in an aggregate face amount
not in excess of 1/2 of 1% of Total Assets as of the end of the Borrower's most
recently completed fiscal year.
"PERMITTED SUBSIDIARY INVESTMENT" shall mean any Permitted
Acquisition and any other investment by any Loan Party in, or loan or advance by
any Loan Party to, or any Guarantee by any Loan Party of Indebtedness of, any
Subsidiary or other person that is not a Loan Party that would be a Permitted
Acquisition but for the fact that it is an acquisition of less than all the
shares or other equity interests in such Subsidiary or other person.
"PERMITTED SUBSIDIARY TRANSFER" shall mean the transfer from
any Subsidiary Loan Party to any Subsidiary that is not a Subsidiary Loan Party
but at least 90% of the outstanding Capital Stock of which is owned by Global or
a Wholly Owned Subsidiary of inventory and equipment in the ordinary course of
business consistent with past practice.
"PERSON" shall mean any natural person, corporation, limited
liability company, business trust, joint venture, association, company,
partnership or government, or any agency or political subdivision thereof.
"PLAN" shall mean any employee pension benefit plan, as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan), subject to
the provisions of Title IV of ERISA or Section 412 of the Code and in respect of
which the Borrower or any ERISA Affiliate is (or, if such plan were terminated,
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would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"PLEDGE AGREEMENTS" shall mean (a) the Domestic Pledge
Agreement and (b) in connection with pledges of Capital Stock in Foreign
Subsidiaries, other pledge agreements or similar agreements giving effect to the
Collateral and Guarantee Requirement and in form and substance satisfactory to
the Collateral Agent.
"PREPAYMENT EVENT" shall mean:
(a) any sale, transfer or other disposition of any property or
asset of UCAR, Global, the Borrower or any Subsidiary, other than (i)
dispositions permitted under clause (a) of Section 7.03 or clauses (a),
(b), (e) and (h) of Section 7.05 and (ii) other dispositions resulting
in aggregate Net Proceeds not exceeding $1,000,000 in the aggregate
during any fiscal year of Global; or
(b) any casualty or other insured damage to, or any taking
under power of eminent domain or by condemnation or similar proceeding
of, any property or asset of Global or any Subsidiary, but only to the
extent that the Net Proceeds therefrom have not been applied to repair,
restore or replace such property or asset within 12 months after such
event; or
(c) the issuance by UCAR of any Capital Stock (other than
Disqualified Stock and other than sales of Capital Stock of UCAR to
directors, officers or employees of UCAR, Global, the Borrower or any
Subsidiary in connection with permitted employee compensation and
incentive arrangements); or
(d) the incurrence by UCAR, Global, the Borrower or any
Subsidiary of any Indebtedness, other than Indebtedness permitted by
Section 7.01, or the issuance by any of them of Disqualified Stock.
"PRIME RATE" shall mean the rate of interest per annum
publicly announced from time to time by Morgan Guaranty Trust Company of New
York as its prime rate in effect at its principal office in New York City. Each
change in the Prime Rate shall be effective from and including the date such
change is publicly announced as being effective.
"QUOTATION DAY" shall mean, with respect to any Eurocurrency
Borrowing and any Interest Period, the day on which it is market practice in the
relevant interbank market for prime banks to give quotations for deposits in the
currency of such Borrowing for delivery on the first day of such Interest
Period. If such quotations would normally be given by prime banks on more than
one day, the Quotation Day will be the last of such days.
"RELATED BUSINESS" shall mean any business or business
activity conducted by UCAR or its subsidiaries on the date hereof and any
business or business activities incidental or related thereto or incidental or
related to the procurement, manufacture or sale of products or services
manufactured or provided by UCAR or any of its subsidiaries on the date hereof.
"RELATED PARTIES" shall mean, with respect to any specified
person, such person's Affiliates and the respective directors, officers,
employees, agents and advisors of such person and such person's Affiliates.
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"RELEASE" shall have the meaning given such term in CERCLA, 42
U.S.C.ss.9601(22).
"REMEDIAL ACTION" shall mean (a) "remedial action" as such
term is defined in CERCLA, 42 U.S.C. ss. 9601(24), and (b) all other actions,
including studies and investigations, required by any Governmental Authority or
voluntarily undertaken to: (i) clean up, remove, treat, abate or in any other
way respond to any Hazardous Material in the environment; or (ii) prevent the
Release or threat of Release, or minimize the further Release, of any Hazardous
Material.
"REPORTABLE EVENT" shall mean any reportable event as defined
in Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414).
"REQUIRED LENDERS" shall mean, at any time, Lenders having
Loans, Letter of Credit Exposures and unused Commitments (excluding commitments
to issue Letters of Credit) representing at least 51% of the sum of all Loans
outstanding, Letter of Credit Exposures and unused Commitments (excluding
commitments to issue Letters of Credit) at such time.
"RESPONSIBLE OFFICER" of any person shall mean any executive
officer or Financial Officer of such person and any other officer or similar
official thereof responsible for the administration of the obligations of such
person in respect of this Agreement.
"RESTRICTED PAYMENT" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Capital
Stock of UCAR, Global, the Borrower or any Subsidiary, or any payment (whether
in cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancelation or termination of any Capital Stock of UCAR, Global, the Borrower or
any Subsidiary or any option, warrant or other right to acquire any such Capital
Stock.
"REVOLVING AVAILABILITY PERIOD" shall mean the period from and
including the Effective Date to but excluding the earlier of (a) the 10th day
prior to the Revolving Maturity Date and (b) the date of termination of the
Revolving Commitments.
"REVOLVING BORROWING" shall mean a Borrowing comprised of
Revolving Loans.
"REVOLVING COMMITMENT" shall mean, with respect to each
Revolving Lender, the commitment of such Revolving Lender to make Revolving
Loans pursuant to Section 2.01(c), to acquire participations in Letters of
Credit pursuant to Section 2.05 and to acquire participations in Swingline Loans
pursuant to Section 2.19, expressed as an amount representing the maximum
aggregate amount of such Revolving Lender's Revolving Exposure hereunder, as
such commitment may be (a) reduced from time to time pursuant to Section 2.08
and (b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to the Second Closing Assignment or Section 10.04. The
initial amount of each Revolving Lender's Revolving Commitment is set forth on
Schedule 2.01 or in the Assignment and Acceptance pursuant to which Revolving
Lender shall have assumed its Revolving Commitment, as applicable. The aggregate
amount of the Revolving Commitments on the date hereof is EUR250,000,000.
"REVOLVING EXPOSURE" shall mean, with respect to any Revolving
Lender at any time, the sum at such time, without duplication, of (a) such
Lender's Applicable Revolving Percentage of the principal amounts of the
outstanding Revolving Loans denominated in Euros, plus (b) such Lender's
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Applicable Revolving Percentage of the aggregate amount of the Euro Equivalents
of the principal amounts of the outstanding Revolving Loans denominated in
Dollars, plus (c) the aggregate amount of such Lender's LC Exposure, plus (d)
the aggregate amount of the Euro Equivalent of such Lender's Swingline Exposure.
"REVOLVING LENDER" mean a Lender with a Revolving Commitment.
"REVOLVING LOAN" shall mean a Loan made pursuant to Section
2.01(c). Each Revolving Loan shall be a Eurocurrency Loan or, in the case of a
Revolving Loan denominated in Dollars, a Base Rate Loan.
"REVOLVING MATURITY DATE" shall mean February 22, 2006.
"S&P" shall mean Standard & Poor's.
"SALE AND LEASE-BACK TRANSACTION" shall have the meaning given
such term in Section 7.03.
"SEC REPORTS" shall have the meaning given such term in the
definition of "LITIGATION LIABILITIES".
"SECURED PARTIES" shall mean the Agents, each Lender, the
Issuing Bank and each other person to which any of the Obligations is owed.
"SECOND CLOSING ASSIGNMENT" shall mean an assignment and
acceptance entered into by UCAR, Global, the Borrower, the Administrative Agent,
certain Lenders and the assignees specified therein in the form of Exhibit A-2
with such changes therein as may be approved by the Administrative Agent.
"SECURITY AGREEMENTS" shall mean (a) a Security Agreement
substantially in the form of Exhibit H between UCAR, Global, the Borrower and
the Subsidiaries from time to time party thereto and the Collateral Agent for
the benefit of the Secured Parties, (b) an Intellectual Property Security
Agreement substantially in the form of Exhibit I between UCAR, Global, the
Borrower and the Subsidiaries from time to time party thereto and the Collateral
Agent for the benefit of the Secured Partes and (c) in connection with the
creation of security interests in the assets of Foreign Subsidiaries, other
security agreements or similar agreements giving effect to the Collateral and
Guarantee Requirement and satisfactory in form and substance to the Collateral
Agent.
"SECURITY DOCUMENTS" shall mean the Security Agreements, the
Pledge Agreements, the Mortgages and each other security agreement or other
instrument executed and delivered in satisfaction of the Collateral and
Guarantee Requirement or pursuant to Section 6.11.
"SIGNIFICANT SUBSIDIARY" shall mean Global, the Borrower, any
Intercompany Borrower, any LC Subsidiary, any Subsidiary owning Capital Stock of
an Intercompany Borrower or LC Subsidiary and any other Subsidiary that at the
date of any determination (a) accounts for 2.5% or more of the consolidated
assets of UCAR, (b) has accounted for 2.5% or more of EBITDA for each of the two
consecutive periods of four fiscal quarters immediately preceding the date of
determination or (c) has been designated by Global in writing to the
Administrative Agent as a Significant Subsidiary and such designation has not
subsequently been withdrawn.
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"STATUTORY RESERVE RATE" shall mean, with respect to any
currency, a fraction (expressed as a decimal), the numerator of which is the
number one and the denominator of which is the number one minus the aggregate of
the maximum reserve, liquid asset or similar percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by any Governmental Authority of the jurisdiction of such currency
or any jurisdiction in which Loans in such currency are made to which banks in
such jurisdiction are subject for any category of deposits or liabilities
customarily used to fund loans in such currency or by reference to which
interest rates applicable to Loans in such currency are determined. Eurocurrency
Loans shall be deemed to be subject to such reserve, liquid asset or similar
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Lender under any applicable law,
rule or regulation. The Statutory Reserve Rate shall be adjusted automatically
on and as of the effective date of any change in any reserve percentage.
"SUBSIDIARY" shall mean, with respect to any person (the
"PARENT") at any date of determination, any corporation, limited liability
company, partnership, association or other entity the accounts of which would be
consolidated with those of the parent in the parent's consolidated financial
statements if such financial statements were prepared in accordance with GAAP as
of such date of determination, as well as any other corporation, limited
liability company, partnership, association or other entity (a) of which
securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power or, in the case of a partnership,
more than 50% of the general partnership interests are, as of such date, owned,
controlled or held, or (b) that is, at the time any determination is made,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"SUBSIDIARY" shall mean any subsidiary of Global.
"SUBSIDIARY LOAN PARTY" shall mean any Loan Party that is a
Subsidiary.
"SWINGLINE EXPOSURE" means, at any time, the aggregate
principal amount of all Swingline Loans outstanding at such time. The Swingline
Exposure of any Lender at any time shall be its Applicable Revolving Percentage
of the total Swingline Exposure at such time.
"SWINGLINE LENDER" means Morgan Guaranty Trust Company of New
York, in its capacity as lender of Swingline Loans hereunder.
"SWINGLINE LOAN" means a Loan made pursuant to Section 2.19.
"TAXES" shall mean any and all present or future taxes,
levies, imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority.
"TAX SHARING AGREEMENT" means (a) that certain tax sharing
agreement dated February 16, 2000, between Global and UCAR and (b) any other tax
allocation agreement between or among UCAR, Global, the Borrower or any of the
Subsidiaries with respect to consolidated or combined tax returns including
Global, the Borrower or any of the Subsidiaries, but only to the extent that
amounts payable from time to time by Global, the Borrower or any such Subsidiary
under any such agreement do not exceed the corresponding tax payments that
Global, the Borrower or such Subsidiary would have been required to make to any
relevant taxing authority had Global, the Borrower or such Subsidiary not joined
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in such consolidated or combined return, but instead had filed returns including
only Global, the Borrower and the Subsidiaries (PROVIDED that any such agreement
may provide that, if Global, the Borrower or any such Subsidiary ceases to be a
member of the affiliated group of corporations of which UCAR is the common
parent for purposes of filing a consolidated federal income tax return (such
cessation, a "DECONSOLIDATION EVENT"), then Global, the Borrower or such
Subsidiary will indemnify UCAR with respect to any Federal, state or local
income, franchise or other tax liability (including any related interest,
additions or penalties) imposed on UCAR as the result of an audit or other
adjustment with respect to any period prior to such Deconsolidation Event that
is attributable to Global, the Borrower, such Subsidiary or any predecessor
business thereof (computed as if Global, the Borrower, such Subsidiary or such
predecessor business, as the case may be, were a stand-alone entity that filed
separate tax returns as an independent corporation), but only to the extent that
any such tax liability exceeds any liability for taxes recorded on the books of
Global, the Borrower or such Subsidiary with respect to any such period).
"TERM LOANS" shall mean Tranche A Term Loans and Tranche B
Term Loans.
"TOTAL ASSETS" shall mean, with respect to UCAR, Global, the
Borrower and the Subsidiaries on a consolidated basis at any date of
determination, all assets which would, in accordance with GAAP, be classified on
a consolidated balance sheet of UCAR, Global, the Borrower and the Subsidiaries
as assets at such date of determination.
"TOTAL DEBT" shall mean, with respect to UCAR, Global, the
Borrower and the Subsidiaries on a consolidated basis at any time, all Capital
Lease Obligations, Indebtedness for borrowed money, including reimbursement
obligations in respect of Letters of Credit, and Indebtedness in respect of the
deferred purchase price of property or services of UCAR, Global, the Borrower
and the Subsidiaries at such time, PROVIDED that for purposes of determining
Total Debt, the aggregate outstanding principal amount of Indebtedness of Brazil
and its Subsidiaries at any time shall be deemed reduced by the aggregate amount
of Permitted Investments held at such time by Brazil and its Subsidiaries for
the purpose of hedging such Indebtedness (but in any case shall not be less than
zero).
"TRANCHE A TERM BORROWING" shall mean a Borrowing comprised of
Tranche A Term Loans.
"TRANCHE A TERM COMMITMENT" shall mean, with respect to each
Lender, the commitment, if any, of such Lender to make Tranche A Term Loans
hereunder on the Effective Date, as such commitment may be (a) reduced from time
to time pursuant to Section 2.08 and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to the Second Closing
Assignment or Section 10.04. The initial amounts of the Tranche A Term Loans in
Euros and Dollars that each Lender is obligated to make pursuant to its Tranche
A Term Commitment are set forth on Schedule 2.01 or in the Assignment and
Acceptance pursuant to which such Lender shall have assumed its Tranche A Term
Commitment, as applicable. The aggregate amount of the Tranche A Term
Commitments on the date hereof is EUR300,000,000.
"TRANCHE A TERM LENDER" shall mean a Lender with a Tranche A
Term Commitment or an outstanding Tranche A Term Loan.
"TRANCHE A TERM LOAN" shall mean a Loan made pursuant to
paragraph (a) of Section 2.01. "TRANCHE A TERM MATURITY DATE"
shall mean December 31, 2005.
"TRANCHE B TERM COMMITMENT" shall mean, with respect to each
Lender, the commitment, if any, of such Lender to make Tranche B Term Loans
hereunder on the Effective Date, as such commitment may be (a) reduced from time
to time pursuant to Section 2.08 and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to the Second Closing
Assignment or Section 10.04. The initial amount of each Lender's Tranche B Term
Commitment is set forth on Schedule 2.01 or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Tranche B Term Commitment,
as applicable. The aggregate amount of the Tranche B Term Commitments on the
date hereof is $350,000,000.
"TRANCHE B TERM LENDER" shall mean a Lender with a Tranche B
Term Commitment or an outstanding Tranche B Term Loan.
"TRANCHE B TERM MATURITY DATE" shall mean December 31, 2007.
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"TRANCHE B TERM BORROWING" shall mean a Borrowing comprised of
Tranche B Term Loans.
"TRANCHE B TERM LOAN" shall mean a Loan made pursuant to
paragraph (b) of Section 2.01.
"TRANSACTIONS" shall have the meaning given such term in
Section 4.02.
"TYPE", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Base
Rate.
"UCAR" shall mean UCAR International Inc., a Delaware
corporation.
"UNRESTRICTED SUBSIDIARY" shall mean (a) UCAR Graph-Tech Inc.
and any subsidiary of UCAR (other than Global or the Borrower or any of their
subsidiaries other than UCAR Graph-Tech Inc.) and any other direct or indirect
investment by UCAR or any such subsidiary in the Capital Stock of any other
person (other than Global, the Borrower or any Subsidiary) so long as (i) none
of the Capital Stock or other ownership interests of such subsidiary or other
person is owned by Global, the Borrower or any of the Subsidiaries (except that
the Capital Stock of UCAR Graph-Tech Inc. may be so owned while UCAR is
diligently acting to transfer the ownership of such Capital Stock to UCAR), (ii)
UCAR shall have notified the Administrative Agent of its acquisition or creation
of such subsidiary or such other investment and its ownership interest therein
concurrently with such acquisition, creation or investment and the intended
purposes of such subsidiary or investment, (iii) any such subsidiary (unless it
is a Foreign Subsidiary) shall have entered into the Tax Sharing Agreement
existing at the time of such acquisition or creation (or another tax sharing
agreement containing terms which, in the reasonable judgment of the
Administrative Agent, are customary in similar circumstances to provide an
appropriate allocation of tax liabilities and benefits), (iv) except in the case
of UCAR as permitted in the proviso below, none of UCAR, Global, the Borrower
and the Subsidiaries shall have any contingent liability in respect of such
subsidiary or investment or any obligations thereof and (v) any such subsidiary
or investment shall be capitalized solely from the following sources: (A) any
investment by any person other than UCAR, Global, the Borrower and the
Subsidiaries; (B) Indebtedness issued by such subsidiary or person, or any of
its subsidiaries, (other than Indebtedness to UCAR, Global, the Borrower or any
Subsidiary) that is nonrecourse to UCAR, Global, the Borrower and the
Subsidiaries (except in the case of UCAR as otherwise permitted by the proviso
below), or proceeds thereof; (C) Capital Stock of such subsidiary or person, or
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any other Unrestricted Subsidiary, or proceeds thereof, other than Capital Stock
sold to UCAR, the Borrower or any Subsidiary; (D) Equity Proceeds; (E) in the
case of UCAR Graph-Tech Inc., investments therein made on or prior to the
Effective Date and not in anticipation thereof; and (F) proceeds of investments
permitted to be made in Unrestricted Subsidiaries pursuant to Section 7.04;
PROVIDED that UCAR may incur a contingent liability or Indebtedness in a
specified and limited amount in respect of such a subsidiary or investment if it
would at the time of such incurrence be permitted to make an additional
investment in such subsidiary or investment in the amount of such incurrence and
the amount so incurred shall thereafter constitute an investment in such
subsidiary or investment in such amount for purposes of calculating compliance
with Section 7.04; and (b) any subsidiary of an Unrestricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" means a Subsidiary of Global (a) at
least 99% of the Capital Stock of which (other than directors' qualifying
shares) is owned by Global or another Wholly Owned Subsidiary or (b) solely in
the case of any Subsidiary included in Brazil or UCAR Grafit OAO, a Russian
corporation, at least 97% of the Capital Stock of which (other than directors'
qualifying shares) is owned by Global or another Wholly Owned Subsidiary.
"WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
"WORKING CAPITAL" shall mean, with respect to UCAR, Global,
the Borrower and the Subsidiaries on a consolidated basis at any date of
determination, Current Assets at such date of determination minus Current
Liabilities at such date of determination.
SECTION 1.02. CLASSIFICATION OF LOANS AND BORROWINGS. For
purposes of this Agreement, Loans may be classified and referred to by Class
(E.G., a "Revolving Loan") or by Type (E.G., a "Eurocurrency Loan") or by Class
and Type (E.G., a "Eurocurrency Revolving Loan"). Borrowings also may be
classified and referred to by Class (E.G., a "Revolving Borrowing") or by Type
(E.G., a "Eurocurrency Borrowing") or by Class and Type (E.G., a "Eurocurrency
Revolving Borrowing").
SECTION 1.03. TERMS GENERALLY. The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The word "will" shall be construed to have the same meaning and
effect as the word "shall". Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any person shall be construed to include such
person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder" and words of similar import shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights. References herein to the taking of any action hereunder of an
administrative nature by the Borrower shall be deemed to include references to
UCAR or Global taking such action on the Borrower's behalf and the Agents are
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expressly authorized to accept any such action taken by UCAR or Global as having
the same effect as if taken by the Borrower.
SECTION 1.04. ACCOUNTING TERMS; GAAP. (a) Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP as in effect from time to time; PROVIDED
that if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
(b) All pro forma computations required to be made hereunder
giving effect to any acquisition, investment, sale, disposition, merger or
similar event shall reflect on a pro forma basis such event and, to the extent
applicable, the historical earnings and cash flows associated with the assets
acquired or disposed of and any related incurrence or reduction of Indebtedness,
but shall not take into account any projected synergies or similar benefits
expected to be realized as a result of such event.
(c) Except as expressly provided herein, all accounting and
financial calculations and determinations hereunder shall be made without
consolidating the accounts of Unrestricted Subsidiaries with those of UCAR,
Global, the Borrower or any Subsidiary, notwithstanding that such treatment is
inconsistent with GAAP.
(d) For purposes of determining compliance with Sections 7.01,
7.02, 7.04, 7.06 and 7.10, amounts expended or incurred in currencies other than
Dollars shall be translated into Dollars at the exchange rates in effect on the
dates of the applicable expenditures or incurrences, as reasonably determined by
UCAR. No Default or Event of Default shall arise as a result of limitations set
forth in Dollars in Sections 7.01, 7.02, 7.04, 7.06 and 7.10 in respect of
amounts permitted to have been expended or incurred in a currency other than
Dollars at the time of such expense or incurrence solely as a result of
fluctuations in currency values subsequent to the date of such expense or
incurrence.
SECTION 1.05. EXCHANGE RATES. The Exchange Rate used to
determine the Euro Equivalent of any Eurocurrency Loan or Borrowing denominated
in Dollars shall, for all purposes of this Agreement, be that in effect as of
11:00 a.m., London time, on the date three Business Days before the first day of
the Interest Period at the time in effect for such Loan or Borrowing (or, in the
case of a Loan or Borrowing with an Interest Period that shall have been in
effect for more than six months, the date corresponding to the first day of such
Interest Period in the sixth month following the month in which such Interest
Period shall have commenced). The Exchange Rate used to determine the Euro
Equivalent of any Base Rate Loan or Borrowing or the stated amount of any Letter
of Credit denominated in Dollars shall, for all purposes of this Agreement, be
that in effect as of 11:00 a.m., London time, on the date three Business Days
before the drawing of such Loan or Borrowing or the issuance of such Letter of
Credit (or, in the case of a Loan or Borrowing or Letter of Credit that shall
have been outstanding for more than six months, the date corresponding to the
date of such drawing or issuance in the sixth month following the month in which
such Letter of Credit shall have been issued).
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ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS. (a) Subject to the terms and
conditions set forth herein, each Tranche A Term Lender agrees to make Tranche A
Term Loans to the Borrower on the Effective Date (i) in Euros in a principal
amount equal to such Tranche A Term Lender's Applicable Tranche A Percentage of
EUR 160,760,000 and (ii) in Dollars in a principal amount equal to such Tranche
A Term Lender's Applicable Tranche A Percentage of $136,733,680.
(b) Subject to the terms and conditions set forth herein, each
Tranche B Term Lender agrees to make a Tranche B Term Loan to the Borrower on
the Effective Date in Dollars in a principal amount equal to such Tranche B Term
Lender's Applicable Tranche B Percentage of $350,000,000.
(c) Subject to the terms and conditions set forth herein, each
Revolving Lender agrees to make Revolving Loans to the Borrower from time to
time during the Revolving Availability Period in Euros or Dollars in an
aggregate principal amount that will not result in such Lender's Revolving
Exposure exceeding its Revolving Commitment.
SECTION 2.02. LOANS AND BORROWINGS. (a) Each Tranche A Term
Loan shall be made as part of a Borrowing consisting of Tranche A Term Loans
made by the Tranche A Term Lenders ratably in accordance with their respective
Tranche A Term Commitments. Each Tranche B Term Loan shall be made as part of a
Borrowing consisting of Tranche B Term Loans made by the Tranche B Term Lenders
ratably in accordance with their respective Tranche B Term Commitments. Each
Revolving Loan shall be made as part of a Borrowing consisting of Revolving
Loans made by the Revolving Lenders ratably in accordance with their respective
Revolving Commitments. The failure of any Lender to make any Loan required to be
made by it shall not relieve any other Lender of its obligations hereunder;
PROVIDED that the Commitments of the Lenders are several and no Lender shall be
responsible for any other Lender's failure to make Loans as required hereunder.
(b) Subject to Section 2.13, (i) each Tranche A Term Borrowing
shall be comprised entirely of Eurocurrency Loans or, in the case of a Tranche A
Term Borrowing denominated in Dollars, Base Rate Loans as the Borrower may
request in accordance herewith, (ii) each Tranche B Term Borrowing shall be
comprised entirely of Eurocurrency Loans or Base Rate Loans as the Borrower may
request in accordance herewith and (iii) each Revolving Borrowing shall be
comprised entirely of Eurocurrency Loans or, in the case of a Revolving
Borrowing denominated in Dollars, Base Rate Loans as the Borrower may request in
accordance herewith. Each Swingline Loan shall be a Base Rate Loan. Each Lender
at its option may make any Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; PROVIDED that any exercise of such
option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any
Borrowing, such Borrowing shall be in an aggregate amount that is at least equal
to the Borrowing Minimum and an integral multiple of the Borrowing Multiple;
PROVIDED that a Revolving Borrowing may be in an aggregate amount that is equal
to the aggregate Available Revolving Commitments. Each Swingline Loan shall be
in an amount that is an integral multiple of $100,000 and no less than $500,000.
Borrowings of more than one Type and Class may be outstanding at the same time;
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PROVIDED that there shall not at any time be more than a total of (i) twenty
Eurocurrency Borrowings outstanding.
SECTION 2.03. REQUESTS FOR BORROWINGS. To request a
Borrowing, the Borrower shall notify the Administrative Agent at the Applicable
Office of such request by telephone (a) in the case of a Eurocurrency Borrowing,
not later than 12:00 noon, New York time, (i) three Business Days, in the case
of a Dollar denominated Borrowing, or (ii) four Business days, in the case of a
Euro denominated Borrowing, before the date of the proposed Borrowing and (b) in
the case of a Base Rate Borrowing, not later than 12:00 noon, New York time, one
Business Day before the date of the proposed Borrowing. Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent at the Applicable Office of a
written Borrowing Request in a form approved by the Administrative Agent and
signed by the Borrower. Each such telephonic and written Borrowing Request shall
specify the following information in compliance with Section 2.02:
(i) whether the requested Borrowing is to be a Tranche A Term
Borrowing, a Tranche B Term Borrowing or a Revolving Borrowing;
(ii) the currency and aggregate principal amount of the
requested Borrowing;
(iii) the date of the requested Borrowing, which shall be a
Business Day;
(iv) whether the requested Borrowing is to be a Eurocurrency
Borrowing or a Base Rate Borrowing;
(v) in the case of a Eurocurrency Borrowing, the initial
Interest Period to be applicable thereto, which shall be a period
contemplated by the definition of the term "Interest Period";
(vi) the Intercompany Borrower or Intercompany Borrowers to
which the proceeds of the requested Borrowing are to be advanced, and
the amount to be advanced to each such Intercompany Borrower; and
(vii) the location and number of the Borrower's account to
which funds are to be disbursed, which shall comply with the
requirements of Section 2.06.
If no currency is specified with respect to any requested Revolving Borrowing,
then the Borrower shall be deemed to have selected Euros. If no election as to
the Type of Borrowing is specified, then the requested Borrowing shall be (i) in
the case of a Borrowing denominated in Euros, a Eurocurrency Borrowing, and (ii)
in the case of a Borrowing denominated in Dollars, a Base Rate Borrowing. If no
Interest Period is specified with respect to any requested Eurocurrency
Borrowing, then the Borrower shall be deemed to have selected an Interest Period
of one month's duration. Promptly following receipt of a Borrowing Request in
accordance with this Section, the Administrative Agent shall advise each Lender
that will make a Loan as part of the requested Borrowing of the details thereof
and of the amount of the Loan to be made by such Lender as part of the requested
Borrowing.
SECTION 2.04. REPAYMENT OF BORROWINGS; EVIDENCE OF DEBT. (a)
The Borrower hereby unconditionally promises to pay (i) to the Administrative
Agent at the Applicable Office for the accounts of the applicable Lenders the
then unpaid principal amount of each Term Borrowing as provided in paragraphs
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(a) and (b) of Section 2.09, (ii) to the Administrative Agent at the Applicable
Office for the accounts of the Revolving Lenders, the then unpaid principal
amount of each Revolving Borrowing on the Revolving Maturity Date and (iii) to
the Swingline Lender the then unpaid principal amount of each Swingline Loan on
the earlier of the Revolving Maturity Date and the 10th day after such Swingline
Loan is made; PROVIDED that on each date that a Revolving Borrowing is made, the
Borrower shall repay all Swingline Loans that were outstanding on the date such
Borrowing was requested. The Borrower will repay the principal amount of each
Loan and the accrued interest thereon in the currency of such Loan.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which
it shall record (i) the amount of each Loan made hereunder, the Class, Type and
currency thereof and, in the case of any Eurocurrency Loan, the Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from the Borrower to each Lender hereunder and
(iii) the amount of any sum received by the Administrative Agent hereunder for
the accounts of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be PRIMA FACIE evidence of the
existence and amounts of the obligations recorded therein; PROVIDED that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it
be evidenced by a promissory note. In such event, the Borrower, at its own
expense, shall prepare, execute and deliver to such Lender a promissory note
payable to the order of such Lender (or, if requested by such Lender, to such
Lender and its registered assigns) and in a form consistent with this Agreement
and reasonably approved by the Administrative Agent. Thereafter, the Loans
evidenced by each such promissory note and interest thereon shall at all times
(including after assignment pursuant to the Second Closing Assignment or Section
10.04) be represented by one or more promissory notes in such form payable to
the order of the payee named therein (or, if such promissory note is a
registered note, to such payee and its registered assigns).
SECTION 2.05. LETTERS OF CREDIT. (a) GENERAL. Subject to the
terms and conditions set forth herein, any LC Subsidiary may request the
issuance (or the amendment, renewal or extension) of Letters of Credit
denominated in Dollars or Euros in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Revolving Availability Period. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by any
LC Subsidiary to, or entered into by any LC Subsidiary with, the Issuing Bank
relating to any Letter of Credit, the terms and conditions of this Agreement
shall control.
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN
CONDITIONS. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), an LC Subsidiary shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent, at the Applicable Office, reasonably in
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advance of the requested date of issuance, amendment, renewal or extension, a
notice requesting the issuance of a Letter of Credit, or identifying the Letter
of Credit to be amended, renewed or extended, the date of issuance, amendment,
renewal or extension (which shall be a Business Day), the date on which such
Letter of Credit is to expire (which shall comply with paragraph (c) of this
Section), the amount and currency of such Letter of Credit, the name and address
of the beneficiary thereof and such other information as shall be necessary to
prepare, amend, renew or extend such Letter of Credit. If requested by the
Issuing Bank, the applicable LC Subsidiary also shall submit a letter of credit
application on the Issuing Bank's standard form in connection with any request
for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or
extended only if (and upon issuance, amendment, renewal or extension of each
Letter of Credit the applicable LC Subsidiary shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed EUR 25,000,000 and (ii) the
aggregate Revolving Exposures will not exceed the aggregate Revolving
Commitments.
(c) EXPIRATION DATE. Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after the
date of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Revolving Maturity Date.
(d) PARTICIPATIONS. By the issuance of a Letter of Credit (or
an amendment to a Letter of Credit increasing the amount thereof) and without
any further action on the part of the Issuing Bank or the Lenders, the Issuing
Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Revolving Lender's Applicable Revolving Percentage of the aggregate
amount available to be drawn under such Letter of Credit. In consideration and
in furtherance of the foregoing, each Revolving Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, at the Applicable
Office, for the account of the Issuing Bank, such Lender's Applicable Revolving
Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed
by the applicable LC Subsidiary on the date due as provided in paragraph (e) of
this Section, or of any reimbursement payment required to be refunded to the
applicable LC Subsidiary for any reason. Each Revolving Lender acknowledges and
agrees that its obligation to acquire participations pursuant to this paragraph
in respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit or the occurrence and continuance of a Default
or reduction or termination of the Revolving Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.
(e) REIMBURSEMENT. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower or the applicable LC
Subsidiary shall reimburse such LC Disbursement by paying to the Administrative
Agent at the Applicable Office an amount equal to such LC Disbursement, in the
currency in which such LC Disbursement shall have been made, not later than
12:00 noon, New York time, on the date that such LC Disbursement is made, if the
applicable LC Subsidiary shall have received notice of such LC Disbursement
prior to 10:00 a.m., New York time, on such date, or, if such notice has not
been received by the applicable LC Subsidiary prior to such time on such date,
then not later than 12:00 noon, New York time, on (A) the Business Day that the
applicable LC Subsidiary receives such notice, if such notice is received prior
to 10:00 a.m., New York time, on the day of receipt, or (B) the Business Day
immediately following the day that the applicable LC Subsidiary receives such
notice, if such notice is not received prior to such time on the day of receipt.
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If the Borrower or the applicable LC Subsidiary fails to make such payment when
due, then the Administrative Agent shall notify each Revolving Lender of the
applicable LC Disbursement, the payment then due from the applicable LC
Subsidiary in respect thereof and such Lender's Applicable Revolving Percentage
thereof. Promptly following receipt of such notice, each Revolving Lender shall
pay to the Administrative Agent its Applicable Revolving Percentage of the
payment then due from the applicable LC Subsidiary in the same manner as
provided in Section 2.06 with respect to Loans made by such Revolving Lender
(and Section 2.06 shall apply, MUTATIS MUTANDIS, to the payment obligations of
the Revolving Lenders), and the Administrative Agent shall promptly pay to the
applicable Issuing Bank the amounts so received by it from the Revolving
Lenders. Promptly following receipt by the Administrative Agent of any payment
from the Borrower or the applicable LC Subsidiary pursuant to this paragraph,
the Administrative Agent shall distribute such payment to the Issuing Bank or,
to the extent that Revolving Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such Revolving Lenders and the
Issuing Bank as their interests may appear. Any payment made by a Revolving
Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC
Disbursement shall not constitute a Loan and shall not relieve the Borrower or
the applicable LC Subsidiary of its obligation to reimburse such LC
Disbursement.
(f) OBLIGATIONS ABSOLUTE. The Borrower's or the applicable LC
Subsidiary's obligations to reimburse LC Disbursements as provided in paragraph
(e) of this Section shall be absolute, unconditional and irrevocable, and shall
be performed strictly in accordance with the terms of this Agreement under any
and all circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any Letter of Credit, this Agreement or any other Loan
Document, or any term or provision herein or therein, (ii) any draft or other
document presented under a Letter of Credit proving to be forged, fraudulent or
invalid in any respect or any statement therein being untrue or inaccurate in
any respect, (iii) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the terms of
such Letter of Credit, subject to the proviso in the next sentence, or (iv) any
other event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section, constitute a
legal or equitable discharge of, or provide a right of setoff against, the
Borrower's or the applicable LC Subsidiary's obligations hereunder. None of the
Administrative Agent, the Revolving Lenders or the Issuing Bank, or any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; PROVIDED that the foregoing shall not be construed to excuse the
Issuing Bank from liability to any LC Subsidiary to the extent of any direct
damages (as opposed to consequential damages, claims in respect of which are
hereby waived by the Borrower and each LC Subsidiary to the extent permitted by
applicable law) suffered by the Borrower or any LC Subsidiary that are caused by
the Issuing Bank's failure to exercise care when determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of gross
negligence or wilful misconduct on the part of the Issuing Bank (as finally
determined by a court of competent jurisdiction), the Issuing Bank shall be
deemed to have exercised care in each such determination. In furtherance of the
foregoing and without limiting the generality thereof, the parties agree that,
with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
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information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.
(g) DISBURSEMENT PROCEDURES. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the applicable LC Subsidiary by telephone
(confirmed by telecopy) of such demand for payment and whether the Issuing Bank
has made or will make an LC Disbursement thereunder; PROVIDED that any failure
to give or delay in giving such notice shall not relieve the applicable LC
Subsidiary of its obligation to reimburse the Issuing Bank and the Revolving
Lenders with respect to any such LC Disbursement.
(h) INTERIM INTEREST. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower or the applicable LC Subsidiary shall
reimburse such LC Disbursement in full on the date such LC Disbursement is made,
the unpaid amount thereof shall bear interest, for each day from and including
the date such LC Disbursement is made to but excluding the date that the
Borrower or the applicable LC Subsidiary reimburses such LC Disbursement, at (i)
in the case of any LC Disbursement denominated in Dollars, the rate per annum
then applicable to Base Rate Revolving Loans and (ii) in the case of any LC
Disbursement denominated in Euros, a rate per annum determined by the Issuing
Bank (which determination will be conclusive absent manifest error) to represent
its cost of funds plus the Applicable Rate used to determine interest applicable
to Eurocurrency Revolving Loans; PROVIDED that, at all times after the Borrower
or the applicable LC Subsidiary fails to reimburse such LC Disbursement when due
pursuant to paragraph (e) of this Section, Section 2.12(d) shall apply. Interest
accrued pursuant to this paragraph shall be for the account of the Issuing Bank,
except that interest accrued on and after the date of payment by any Revolving
Lender pursuant to paragraph (e) of this Section to reimburse the applicable
Issuing Bank shall be for the account of such Revolving Lender to the extent of
such payment.
(i) CASH COLLATERALIZATION. If the Revolving Commitments shall
be terminated or if any Event of Default shall occur and be continuing, on the
Business Day that the Borrower receives notice from the Administrative Agent or
the Required Lenders (or, if the maturity of the Loans has been accelerated,
Revolving Lenders with LC Exposures representing greater than 50% of the total
LC Exposure) demanding the deposit of cash collateral pursuant to this
paragraph, the Borrower and the applicable LC Subsidiaries shall deposit in an
account with the Administrative Agent, in the name of the Administrative Agent
and for the benefit of the Revolving Lenders, an amount in cash equal to the LC
Exposure as of such date plus any accrued and unpaid interest thereon; PROVIDED
that the obligation to deposit such cash collateral with respect to the LC
Exposure shall become effective immediately, and such deposit shall become
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to the Borrower described in
clause (h) or (i) of Article VIII. Such deposit shall be held by the
Administrative Agent as collateral for the payment and performance of the
obligations of the Borrower and the LC Subsidiaries under this Agreement. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits, which investments shall be made at the
option and sole discretion of the Administrative Agent and at the risk and
expense of the Borrower and the LC Subsidiaries, such deposits shall not bear
interest. Interest or profits, if any, on such investments shall accumulate in
such account. Moneys in such account shall be applied by the Administrative
Agent to reimburse the Issuing Bank for LC Disbursements for which it has not
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been reimbursed and, to the extent not so applied, shall be held for the
satisfaction of the reimbursement obligations of the Borrower and the LC
Subsidiaries for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but subject to the consent of Revolving Lenders with LC
Exposure representing greater than 50% of the total LC Exposure), be applied to
satisfy other obligations of the Borrower and the LC Subsidiaries under this
Agreement. If the Borrower and the LC Subsidiaries are required to provide an
amount of cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be returned
to them within three Business Days after all Events of Default have been cured
or waived.
(j) EXISTING LETTERS OF CREDIT. As of the date hereof, Global
has outstanding for its account two Existing Letters of Credit under the
Existing Credit Agreements. The parties hereto agree that each Existing Letter
of Credit shall be deemed for purposes of this Agreement to be a Letter of
Credit issued on the Effective Date on the same terms and conditions as each
other Letter of Credit and that the issuing bank in respect thereof shall for
all purposes hereof have the same rights in respect of each Existing Letter of
Credit as the Issuing Bank has in respect of any Letter of Credit.
(k) DESIGNATION OF LC SUBSIDIARIES. On or after the Effective
Date, the Borrower may designate any Subsidiary as an LC Subsidiary by delivery
to the Administrative Agent of an LC Subsidiary Agreement executed by such
Subsidiary and the Borrower, and such Subsidiary shall for all purposes of this
Agreement be an LC Subsidiary and a party to this Agreement upon such delivery
and the satisfaction of the conditions set forth in Section 5.03 with respect to
such Subsidiary until the Borrower shall have executed and delivered to the
Administrative Agent an LC Subsidiary Termination with respect to such
Subsidiary, whereupon such Subsidiary shall cease to be an LC Subsidiary and a
party to this Agreement. Notwithstanding the preceding sentence, no LC
Subsidiary Termination will become effective as to any LC Subsidiary at a time
when any Letter of Credit issued for the account of such LC Subsidiary or any LC
Disbursement in respect of any such Letter of Credit shall be outstanding
hereunder. As soon as practicable upon receipt of an LC Subsidiary Agreement,
the Administrative Agent shall send a copy thereof to each Lender.
SECTION 2.06. FUNDING OF BORROWINGS. (a) Each Lender shall
make each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds in the applicable currency by 12:00
noon, New York time, to the account of the Administrative Agent at the
Applicable Office most recently designated by it for such purpose for Loans of
such Class and currency by notice to the applicable Lenders; PROVIDED that
Swingline Loans shall be made as provided in Section 2.19. The Administrative
Agent will make such Loans available to the Borrower by promptly crediting the
amounts so received, in like funds, to an account of the Borrower maintained by
the Administrative Agent (i) in London, in the case of Loans denominated in
Euros, or (ii) in New York City, in the case of Loans denominated in Dollars;
PROVIDED that Revolving Loans made to finance the reimbursement of an LC
Disbursement shall be remitted by the Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received at the
Applicable Office notice from a Lender prior to the proposed date of any
Borrowing that such Lender will not make available to the Administrative Agent
such Lender's share of such Borrowing, the Administrative Agent may assume that
such Lender has made such share available on such date in accordance with
paragraph (a) of this Section and may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. In such event, if a Lender has
not in fact made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender and the Borrower severally
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agree to pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon, for each day from and including the date such
amount is made available to the Borrower to but excluding the date of payment to
the Administrative Agent, at (i) in the case of such Lender, (x) the rate
reasonably determined by the Applicable Agent to be the cost to it of funding
such amount (in the case of a Borrowing in Euros) and (y) the Federal Funds
Effective Rate (in the case of a Borrowing in Dollars) or (ii) in the case of
the Borrower, the interest rate applicable to the subject Loan. If such Lender
pays such amount to the Administrative Agent, then such amount shall constitute
such Lender's Loan included in such Borrowing and the Administrative Agent shall
return to the Borrower any amount (including interest) paid by the Borrower to
the Administrative Agent pursuant to this paragraph.
SECTION 2.07. INTEREST ELECTIONS. (a) Each Borrowing
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurocurrency Borrowing, shall have an initial Interest
Period as specified in such Borrowing Request. Thereafter, the Borrower may
elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest
Periods therefor, all as provided in this Section and on terms consistent with
the other provisions of this Agreement. The Borrower may elect different options
with respect to different portions of the affected Borrowing, in which case each
such portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing. This Section shall not apply to Swingline
Loans, which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower
shall notify the Administrative Agent at the Applicable Office of such election
by telephone by the time that a Borrowing Request would be required under
Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type
resulting from such election to be made on the effective date of such election.
Each such telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent at
the Applicable Office of a written Interest Election Request in a form approved
by the Administrative Agent and signed by the Borrower. Notwithstanding any
contrary provision herein, this Section shall not be construed to permit any
Borrower to (i) change the currency of any Borrowing, (ii) elect an Interest
Period for Eurocurrency Loans that does not comply with Section 2.02(d) or (iii)
convert any Borrowing denominated in Euros to a Base Rate Borrowing.
(c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to
each resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified for each
resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) if the resulting Borrowing is to be denominated in
Dollars, whether such Borrowing is to be a Base Rate Borrowing or
Eurocurrency Borrowing; and
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(iv) if the resulting Borrowing is to be a Eurocurrency
Borrowing, the Interest Period to be applicable thereto after giving
effect to such election, which shall be a period contemplated by the
definition of the term "Interest Period".
If any such Interest Election Request requests a Eurocurrency Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election
Request, the Administrative Agent shall advise each applicable Lender holding a
Loan to which such request relates of the details thereof and of such Lender's
portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurocurrency Borrowing prior to the end of
the Interest Period applicable thereto, then (i) in the case of a Borrowing
denominated in Dollars, such Borrowing shall be converted to a Base Rate
Borrowing as of the end of such Interest Period and (ii) in the case of a
Borrowing denominated in Euros, such Borrowing shall become due and payable on
the last day of such Interest Period.
SECTION 2.08. TERMINATION AND REDUCTION OF COMMITMENTS. (a)
Unless previously terminated, the (i) Tranche A Term Commitments and Tranche B
Term Commitments shall terminate at 5:00 p.m., New York City time, on the
Effective Date and (ii) the Revolving Commitments shall terminate on the
Revolving Maturity Date; PROVIDED that all the Commitments shall terminate at
5:00 p.m., New York City time, on March 31, 2000, if the Effective Date shall
not have occurred prior to such time.
(b) The Borrower may at any time terminate, or from time to
time reduce, the Commitments of any Class; PROVIDED that (i) each reduction of
the Commitments of any Class shall be in an amount that is an integral multiple
that is a Borrowing Multiple and not less than the Borrowing Minimum and (ii)
the Borrower shall not terminate or reduce the Revolving Commitments if, after
giving effect to any concurrent prepayment of the Revolving Loans in accordance
with Section 2.10, the aggregate Revolving Exposures would exceed the aggregate
Revolving Commitments.
(c) If any prepayment of Term Borrowings is required pursuant
to Section 2.10 but cannot be made because there are no Term Borrowings
outstanding or because the amount of the required prepayment exceeds the
outstanding amount of Term Borrowings, then, on the date that such prepayment is
required, the Revolving Commitments shall be reduced ratably by an aggregate
amount equal to the amount of the required prepayment, or the excess of such
amount over the outstanding amount of Term Borrowings, as the case may be.
(d) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section or any required reduction of the Revolving Commitments under paragraph
(c) of this Section, at least five Business Days prior to the effective date of
such termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the applicable Lenders of the contents thereof. Each notice
delivered by the Borrower pursuant to this Section shall be irrevocable;
PROVIDED that a notice of termination of the Revolving Commitments delivered by
the Borrower may state that such notice is conditioned upon the effectiveness of
other credit facilities, in which case such notice may be revoked by the
Borrower (by notice to the Administrative Agent on or prior to the specified
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effective date) if such condition is not satisfied. Any termination or reduction
of the Commitments of any Class shall be permanent. Each reduction of the
Commitments of any Class shall be made ratably among the applicable Lenders in
accordance with their respective Commitments of such Class.
SECTION 2.09. AMORTIZATION OF TERM LOANS. (a) The Borrower
shall repay the Tranche A Term Borrowings on each of the dates set forth below
in an aggregate principal amount sufficient to reduce the aggregate amount of
the Euro Equivalents of the outstanding principal amounts of the Tranche A Term
Borrowings to the respective amounts set forth opposite such dates (as such
amounts shall be reduced from time to time pursuant to paragraph (d) below):
DATE AMOUNT
June 30, 2000 EUR298,333,333
September 30, 2000 EUR296,666,660
December 31, 2000 EUR295,000,000
March 31, 2001 EUR288,750,000
June 30, 2001 EUR282,500,000
September 30, 2001 EUR276,250,000
December 31, 2001 EUR270,000,000
March 31, 2002 EUR253,750,000
June 30, 2002 EUR237,500,000
September 30, 2002 EUR221,250,000
December 31, 2002 EUR205,000,000
March 31, 2003 EUR188,750,000
June 30, 2003 EUR172,500,000
September 30, 2003 EUR156,250,000
December 31, 2003 EUR140,000,000
March 31, 3004 EUR122,500,000
June 30, 2004 EUR105,000,000
September 30, 2004 EUR 87,500,000
December 31, 2004 EUR 70,000,000
March 31, 2005 EUR 52,500,000
June 30, 2005 EUR 35,000,000
September 30, 2005 EUR 17,500,000
December 31, 2005 0
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(b) The Borrower shall repay the Tranche B Term Borrowings on
each of the dates set forth below in the aggregate principal amount set forth
opposite such date (as such amount shall be reduced from time to time pursuant
to paragraph (d) below):
DATE AMOUNT
June 30, 2000 $ 1,166,667
September 30, 2000 $ 1,166,667
December 31, 2000 $ 1,166,666
March 31, 2001 $ 875,000
June 30, 2001 $ 875,000
September 30, 2001 $ 875,000
December 31, 2001 $ 875,000
March 31, 2002 $ 875,000
June 30, 2002 $ 875,000
September 30, 2002 $ 875,000
December 31, 2002 $ 875,000
March 31, 2003 $ 875,000
June 30, 2003 $ 875,000
September 30, 2003 $ 875,000
December 31, 2003 $ 875,000
March 31, 2004 $ 875,000
June 30, 2004 $ 875,000
September 30, 2004 $ 875,000
December 31, 2004 $ 875,000
March 31, 2005 $ 875,000
June 30, 2005 $ 875,000
September 30, 2005 $ 875,000
December 31, 2005 $ 875,000
March 31, 2006 $41,125,000
June 30, 2006 $41,125,000
September 30, 2006 $41,125,000
December 31, 2006 $41,125,000
March 31, 2007 $41,125,000
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June 30, 2007 $41,125,000
September 30, 2007 $41,125,000
December 31, 2007 $41,125,000
(c) To the extent not previously paid, all Tranche A Term
Loans shall be due and payable on the Tranche A Term Maturity Date and all
Tranche B Term Loans shall be due and payable on the Tranche B Term Maturity
Date.
(d) Any prepayment of a Term Borrowing of any Class shall be
applied (i) first to reduce the scheduled repayments of the Term Borrowings of
such Class becoming due prior to the first anniversary of such prepayment in the
order of maturity, and (ii) second to reduce the subsequent scheduled repayments
of the Term Borrowings of such Class ratably. The applicable amortization
schedule set forth in paragraph (a) or (b) above shall be appropriately adjusted
by the Administrative Agent to give effect to the application of each prepayment
as specified in this paragraph.
(e) Prior to any repayment of any Term Borrowings of either
Class hereunder, the Borrower shall select the Borrowing or Borrowings of the
applicable Class to be repaid and shall notify the Administrative Agent by
telephone (confirmed by telecopy) of such selection not later than 12:00 noon,
New York City time, three Business Days before the scheduled date of such
repayment. Each repayment of a Borrowing shall be applied ratably to the Loans
included in the repaid Borrowing. Repayments of Term Borrowings shall be
accompanied by accrued interest on the amount repaid.
SECTION 2.10. PREPAYMENT OF LOANS. (a) The Borrower shall
have the right at any time and from time to time to prepay any Borrowing in
whole or in part, subject to prior notice in accordance with paragraph (f) of
this Section.
(b) If on any date the aggregate Revolving Exposures exceed
the aggregate Revolving Commitments the Borrower shall, not later than the
second Business Day following such date, prepay Revolving Loans in an amount
sufficient to eliminate such excess (after giving effect to any other prepayment
of Loans on or prior to the date of prepayment).
(c) In the event and on each occasion that any Net Proceeds
are received by or on behalf of UCAR, Global, the Borrower or any Subsidiary in
respect of any Prepayment Event, the Borrower shall promptly notify the
Administrative Agent and shall, not later than the next Business Day after such
Net Proceeds are received, prepay Term Borrowings in an aggregate amount equal
to 100% (or, in the case of any event described in clause (c) of the definition
of the term Prepayment Event, 50%) of such Net Proceeds; PROVIDED that no
prepayment shall be required under this paragraph in respect of a Prepayment
Event described in clause (b) or (c) of the definition of such term if at UCAR's
fiscal quarter end occurring on or most recently prior to the date on which such
prepayment would otherwise have been due and for the four quarter period then
ended the Leverage Ratio shall have been lower than 2.00 to 1.00.
(d) Following the end of each fiscal year of UCAR, commencing
with the fiscal year ending December 31, 2000, the Borrower shall prepay Term
Borrowings in an aggregate amount equal to (i) if the Leverage Ratio at the end
of and for such fiscal year shall have been equal to or greater than 2.50 to
1.00, 75% of Excess Cash Flow for such fiscal year, or (ii) if the Leverage
Ratio at the end of and for such fiscal year shall have been lower than 2.50 to
1.00, 50% of Excess Cash Flow for such fiscal year; PROVIDED that no prepayment
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shall be required under this paragraph in respect of any fiscal year if at the
end of such fiscal year the Leverage Ratio shall have been lower than 2.00 to
1.00. Each prepayment pursuant to this paragraph shall be made on or before the
date on which financial statements are delivered pursuant to Section 6.04 with
respect to the fiscal year for which Excess Cash Flow is being calculated (and
in any event within 90 days after the end of such fiscal year).
(e) Prior to any optional or mandatory prepayment of
Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to
be prepaid and shall specify such selection in the notice of such prepayment
pursuant to paragraph (f) of this Section. In the event of any optional or
mandatory prepayment of Term Borrowings made at a time when Term Borrowings of
more than one Class remain outstanding, the Borrower shall select Term
Borrowings to be prepaid so that the aggregate amount of such prepayment is
allocated between the Tranche A Term Borrowings and Tranche B Term Borrowings
ratably based on the aggregate Euro Equivalents of the principal amounts of the
outstanding Borrowings of each such Class; PROVIDED that any Tranche B Term
Lender may elect, by notice to the Administrative Agent by telephone (confirmed
by telecopy) at least three Business Days prior to the prepayment date, to
decline all or any portion of any prepayment of its Tranche B Term Loans
pursuant to paragraph (a) or (c) above, in which case the aggregate amount of
the prepayment that would have been applied to prepay Tranche B Term Loans but
was so declined shall be applied to prepay Tranche A Term Borrowings and Tranche
B Term Loans of Lenders that shall not have declined such prepayment, ratably in
accordance with the aggregate Euro Equivalents of the outstanding principal
amounts thereof; PROVIDED FURTHER that no Tranche B Lender shall be entitled to
make such election to the extent that the portion of the prepayment as to which
such election is made exceeds the aggregate outstanding amount of Tranche A Term
Loans and Tranche B Term Loans of Lenders that shall not have declined such
prepayment (and if the Tranche B Term Lenders shall not be permitted by reason
of this further proviso to decline the entire amount of any prepayment, the
portion of such prepayment that may be so declined shall be apportioned among
the Tranche B Term Lenders that shall have notified the Administrative Agent of
their election to decline such prepayment ratably in accordance with the amounts
of their respective Tranche B Term Loans).
(f) The Borrower shall notify the Administrative Agent (and,
in the case of prepayment of a Swingline Loan, the Swingline Lender) by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
a prepayment of a Loan other than a Swingline Loan, at the Applicable Office not
later than 11:00 a.m., New York time, five Business Days before the date of
prepayment and (ii) in the case of prepayment of a Swingline Loan, at the
Applicable Office not later than 12:00 noon, New York time, on the date of
prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid; PROVIDED that, if a notice of optional prepayment is given in
connection with a conditional notice of termination of the Revolving Commitments
as contemplated by Section 2.08, then such notice of prepayment may be revoked
if such notice of termination is revoked in accordance with Section 2.08.
Promptly following receipt of any such notice, the Administrative Agent shall
advise the affected Lenders of the contents thereof. Each partial prepayment of
any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02, except as
necessary to apply fully the required amount of a mandatory prepayment. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest on the
amount prepaid.
SECTION 2.11. FEES. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee, which
shall accrue at the Applicable Rate on the daily unused amount of each
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Commitment of such Lender during the period from and including the date hereof
to but excluding the date on which such Commitment terminates. Accrued
commitment fees in respect of any Commitment shall be payable in arrears on the
last day of March, June, September and December of each year commencing on the
first such date to occur after the date hereof, and on the date on which such
Commitment terminates. All commitment fees shall be computed on the basis of a
year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). For purposes of computing
commitment fees with respect to Revolving Commitments, a Revolving Commitment of
a Lender shall be deemed to be used to the extent of the LC Exposure of such
Lender.
(b) The Borrower agrees to pay (i) to the Administrative Agent
for the account of each Revolving Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the Applicable Rate
used to determine the interest rate applicable to Eurocurrency Revolving Loans
on the daily amount of such Revolving Lender's LC Exposure (excluding any
portion thereof attributable to unreimbursed LC Disbursements) during the period
from and including the date hereof to but excluding the later of the date on
which such Revolving Lender's Revolving Commitment terminates and the date on
which such Revolving Lender ceases to have any LC Exposure, and (ii) to the
Issuing Bank a fronting fee, which shall accrue at a rate separately agreed
between the Issuing Bank and the Borrower on the average daily amount of the LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date hereof to but
excluding the later of the date of termination of the Revolving Commitments and
the date on which there ceases to be any LC Exposure, as well as the Issuing
Bank's standard fees with respect to the issuance, amendment, renewal or
extension of any Letter of Credit or processing of drawings thereunder.
Participation fees and fronting fees accrued under this paragraph through and
including the last day of March, June, September and December of each year shall
be payable on the third Business Day following such last day, commencing on the
first such date to occur after the date hereof; PROVIDED that all such fees
shall be payable on the later of the date of termination of the Revolving
Commitments and the date on which there ceases to be any LC Exposure (and any
such fees remaining unpaid after the Revolving Maturity Date or earlier
termination of the Revolving Commitments shall be payable on demand). Any other
fees payable to the Issuing Bank pursuant to this paragraph shall be payable
within 10 days after demand. All participation fees and fronting fees payable
under this paragraph shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent,
for its own account, fees payable in the amounts and at the times separately
agreed upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due,
in immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
commitment fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances (absent manifest error).
SECTION 2.12. INTEREST. (a) The Loans comprising each
Eurocurrency Term Borrowing and each Eurocurrency Revolving Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.
(b) The Loans comprising each Base Rate Borrowing (including
each Swingline Loan) shall bear interest at the Base Rate plus the Applicable
Rate.
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(c) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 1% per annum plus the rate otherwise applicable to such Loan as
provided in the preceding paragraphs of this Section or (ii) in the case of any
other amount, 1% per annum plus the rate applicable to Base Rate Revolving Loans
as provided in paragraph (b) above.
(d) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and, in the case of Revolving Loans,
upon termination of the applicable Revolving Commitments; PROVIDED that (i)
interest accrued pursuant to paragraph (c) above shall be payable on demand,
(ii) in the event of any repayment or prepayment of any Loan, accrued interest
on the principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment and (iii) in the event of any conversion of any Loan,
accrued interest on such Loan shall be payable on the effective date of such
conversion.
(e) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Base Rate at
times when the Base Rate is based on the Prime Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day). The applicable Adjusted LIBO Rate or Base Rate shall be determined by
the Administrative Agent, and such determination shall be conclusive absent
manifest error.
SECTION 2.13. ALTERNATE RATE OF INTEREST. If prior to the
commencement of any Interest Period for a Eurocurrency Borrowing denominated in
any currency:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable
means do not exist for ascertaining the Adjusted LIBO Rate for such
Interest Period; or
(b) the Administrative Agent is advised by a majority in
interest of the affected Lenders that the Adjusted LIBO Rate for such
Interest Period will not adequately and fairly reflect the cost to such
Lenders of making or maintaining their Loans included in such Borrowing
for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Borrowing
Request for a Eurocurrency Revolving Borrowing denominated in such currency (A)
if such currency is the Dollar, shall be deemed a request for a Base Rate
Borrowing and (B) if such currency is the Euro, shall be ineffective, and (ii)
any Interest Election Request that requests the conversion of any Revolving
Borrowing denominated in such currency to, or continuation of any Revolving
Borrowing denominated in such currency as, a Eurocurrency Borrowing shall be
ineffective, and any Eurocurrency Borrowing denominated in such currency that is
requested to be continued shall bear interest at such rate or rates as the
Administrative Agent and the Borrower shall agree upon to reflect the cost to
such Lenders of making or maintaining their Loans (or, in the absence of such
agreement, shall be repaid on the last day of the then current Interest Period
applicable thereto).
SECTION 2.14. INCREASED COSTS. (a) If any Change in Law
shall:
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(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of or credit extended by any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing
Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or
Eurocurrency Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurocurrency Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank
for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any
Change in Law regarding capital requirements has had or would have the effect of
reducing the rate of return on such Lender's or the Issuing Bank's capital or on
the capital of such Lender's or the Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in Letters
of Credit held by, such Lender, or the Letters of Credit issued by the Issuing
Bank, to a level below that which such Lender or the Issuing Bank or such
Lender's or the Issuing Bank's holding company could have achieved but for such
Change in Law (taking into consideration such Lender's or the Issuing Bank's
policies and the policies of such Lender's or the Issuing Bank's holding company
with respect to capital adequacy), then from time to time the Borrower will pay
to such Lender or the Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or the Issuing Bank or such Lender's
or the Issuing Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting
forth the amount or amounts necessary to compensate such Lender or the Issuing
Bank or its holding company, as the case may be, as specified in paragraph (a)
or (b) of this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing
Bank to demand compensation pursuant to this Section shall not constitute a
waiver of such Lender's or the Issuing Bank's right to demand such compensation;
PROVIDED that the Borrower shall not be required to compensate a Lender or the
Issuing Bank pursuant to this Section for any increased costs or reductions
incurred more than 180 days prior to the date that such Lender or the Issuing
Bank, as the case may be, notifies the Borrower of the Change in Law giving rise
to such increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; PROVIDED FURTHER that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.
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SECTION 2.15. BREAK FUNDING PAYMENTS. In the event of (a) the
payment of any principal of any Eurocurrency Loan other than on the last day of
an Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurocurrency Loan to a Loan of a different
Type or Interest Period other than on the last day of the Interest Period
applicable thereto, (c) the failure to borrow, convert, continue or prepay any
Loan on the date specified in any notice delivered pursuant hereto (regardless
of whether such notice may be revoked under Section 2.10(f) and is revoked in
accordance therewith) or (d) the assignment of any Eurocurrency Loan other than
on the last day of the Interest Period applicable thereto as a result of a
request by the Borrower pursuant to Section 2.18, then, in any such event, the
Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event. In the case of a Eurocurrency Loan, such loss, cost
or expense to any Lender shall be deemed to include an amount determined by such
Lender to be the excess, if any, of (i) the amount of interest that would have
accrued on the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest that would accrue on such principal amount for such period at
the interest rate such Lender would bid were it to bid, at the commencement of
such period, for deposits in the applicable currency of a comparable amount and
period from other banks in the eurocurrency market. A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount
shown as due on any such certificate within 10 days after receipt thereof.
SECTION 2.16. TAXES. (a) Any and all payments by or on
account of the Borrower or any LC Subsidiary hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrower or any LC
Subsidiary shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower or such LC
Subsidiary shall make such deductions and (iii) the Borrower or such LC
Subsidiary shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Loan Parties shall pay any Other Taxes to
the relevant Governmental Authority in accordance with applicable law.
(c) The Borrower and each LC Subsidiary shall indemnify the
Administrative Agent, each Lender and the Issuing Bank, within 10 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the
case may be, on or with respect to any payment by or on account of any
obligation of the Borrower or any LC Subsidiary hereunder or under any other
Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on
or attributable to amounts payable under this Section) and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority; PROVIDED, that the
Administrative Agent, such Lender or the Issuing Bank, as applicable, shall
cooperate with the Borrower and any LC Subsidiary, at the Borrower's or such LC
Subsidiary's sole cost and expense, in good faith to recover any such
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Indemnified Taxes or Other Taxes that the Administrative Agent, such Lender or
the Issuing Bank, as applicable, and the Borrower or such LC Subsidiary agree
were incorrectly or illegally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability delivered
to the Borrower or any LC Subsidiary by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower or any LC Subsidiary to a Governmental
Authority, the Borrower or such LC Subsidiary shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in which the
Borrower or any LC Subsidiary is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall
deliver to the Borrower (with a copy to the Administrative Agent), at the time
or times prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower or such LC Subsidiary as will permit such payments to be made without
withholding or at a reduced rate; PROVIDED that such Foreign Lender has received
written notice from the Borrower or such LC Subsidiary advising it of the
availability of such exemption or reduction and containing all applicable
documentation. For purposes of any withholding tax imposed by the United States
of America in effect as of the date of this Agreement, the documentation
referred to in the preceding sentence of this paragraph (e) shall include (and
this sentence shall constitute the written notice referred to in such preceding
sentence): (i) in the case of a Foreign Lender that is a "bank" under Section
881(c)(3)(A) of the Code, two duly completed copies of either Internal Revenue
Service Form W-8ECI or W-8BEN (or applicable successor form, as the case may
be), and (ii) in the case of a Foreign Lender that is not a "bank" under Section
881(c)(3)(A) of the Code, (x) a certificate of a duly authorized officer of such
Foreign Lender certifying that such Foreign Lender is not (A) a "bank" within
the meaning of Section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder"
of the Borrower or LC Subsidiary within the meaning of Section 881(c)(3)(B) of
the Code or (c) a controlled foreign corporation receiving interest from a
related person within the meaning of Section 881(c)(3)(C) of the Code and (y)
two duly completed copies of Internal Revenue Service Form W-8BEN (or applicable
successor form).
(f) If the Administrative Agent, any Lender or the Issuing
Bank, as the case may be, determines in its reasonable discretion that it is
entitled to receive a refund, credit or other tax benefit in respect of Taxes
with respect to which it has received additional amounts from the Borrower or
any LC Subsidiary pursuant to paragraph (a) of this Section 2.16 or to which it
has been indemnified by the Borrower or any LC Subsidiary pursuant to paragraph
(b) or (c) of this Section 2.16, the Administrative Agent, such Lender or the
Issuing Bank, as applicable, shall notify the Borrower or such LC Subsidiary, as
applicable, and shall, within 45 days (or such shorter period of time as may be
prescribed by applicable law for a timely application) after receipt of a
request by the Borrower or such LC Subsidiary, apply for such refund, credit or
other tax benefit at the Borrower's or LC Subsidiary's expense. The
Administrative Agent, such Lender or the Issuing Bank, as applicable, shall in
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good faith prepare or amend any filings, returns or other documentation required
to obtain such refund, credit or other tax benefit and the Borrower or LC
Subsidiary, as applicable, shall not have the right to participate therein. If
the Administrative Agent, such Lender or the Issuing Bank, as applicable,
receives a refund, credit or other tax benefit pursuant to this paragraph (f),
the Administrative Agent, such Lender or the Issuing Bank, as applicable, shall
promptly pay such amount to the Borrower or LC Subsidiary, as applicable,
together with any interest received thereon.
SECTION 2.17. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING
OF SETOFFS. (a) The Borrower and each LC Subsidiary shall make each payment
required to be made by it hereunder or under any other Loan Document (whether of
principal, interest, fees or reimbursement of LC Disbursements, or of amounts
payable under Section 2.14, 2.15 or 2.16, or otherwise) prior to 12:00 noon, New
York time, on the date when due, in immediately available funds, without set-off
or counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent to such account as the
Administrative Agent shall from time to time specify at its offices at (i) in
the case of any amount denominated in Euros, c/o J. P. Morgan Services, Inc.,
Morgan Christiana Center, 500 Stanton Christiana Road, Newark, Delaware
19713-2107, and (ii) in the case of any amount denominated in Dollars, c/o J. P.
Morgan Services, Inc., Morgan Christiana Center, 500 Stanton Christiana Road,
Newark, Delaware 19713-2107 or, in either case, at such other address as the
Administrative Agent shall from time to time specify in a notice delivered to
the Borrower; PROVIDED that payments to be made directly to the Issuing Bank or
Swingline Lender as expressly provided herein and payments pursuant to Sections
2.14, 2.15, 2.16, 2.19 and 10.03 shall be made directly to the persons entitled
thereto and payments pursuant to other Loan Documents shall be made to the
persons specified therein. The Administrative Agent shall distribute any such
payments received by it for the account of any other person to the appropriate
recipient promptly following receipt thereof. If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension.
All payments hereunder of principal or interest or fees in respect of any Loan
or LC Disbursement shall be made in the currency of such Loan or LC
Disbursement; all other payments hereunder and under each other Loan Document
shall be made in Dollars at the Exchange Rate in effect at such time of payment,
if applicable. Any payment required to be made by the Administrative Agent
hereunder shall be deemed to have been made by the time required if the
Administrative Agent shall, at or before such time, have taken the necessary
steps to make such payment in accordance with the regulations or operating
procedures of the clearing or settlement system used by the Administrative Agent
to make such payment.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC Disbursements then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal and unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on its Term Loans, Revolving Loans or participations in LC
Disbursements or Swingline Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Term Loans, Revolving Loans or
participations in LC Disbursements and Swingline Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
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participations in the Term Loans, Revolving Loans or participations in LC
Disbursements and Swingline Loans of other Lenders to the extent necessary so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of their respective Term Loans, Revolving
Loans or participations in LC Disbursements and Swingline Loans and accrued
interest thereon; PROVIDED that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by a
Lender as consideration for the assignment of or sale of a participation in any
of its Loans or participations in LC Disbursements to any assignee or
participant, other than to UCAR, Global, the Borrower or any Subsidiary or
Affiliate thereof (as to which the provisions of this paragraph shall apply).
Each of UCAR, Global, the Borrower and each LC Subsidiary consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against UCAR, Global, the Borrower or such LC
Subsidiary rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of UCAR, Global, the Borrower
or such LC Subsidiary in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice
from the Borrower or an LC Subsidiary prior to the date on which any payment is
due to the Administrative Agent for the account of all or certain of the Lenders
or the Issuing Bank hereunder that the Borrower or such LC Subsidiary will not
make such payment, the Administrative Agent may assume that the Borrower or such
LC Subsidiary has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the applicable Lenders or the
Issuing Bank, as the case may be, the amount due. In such event, if the Borrower
or such LC Subsidiary has not in fact made such payment, then each of the
applicable Lenders or the Issuing Bank, as the case may be, severally agrees to
repay to the Administrative Agent forthwith on demand the amount so distributed
to such Lender or Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at a rate determined by the Administrative
Agent in accordance with banking industry practices on interbank compensation.
(e) If any Lender shall fail to make any payment required to
be made by it to the Administrative Agent or another Lender under this
Agreement, then the Administrative Agent may, in its discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter received by it for
the account of such Lender to satisfy such Lender's obligations under this
Agreement until all such unsatisfied obligations are fully paid.
SECTION 2.18. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.
(a) If any Lender requests compensation under Section 2.14, or if the Borrower
or any LC Subsidiary is required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section
2.16, then such Lender shall use reasonable efforts to designate a different
lending office for funding or booking its Loans hereunder or to assign its
rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16,
as the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.
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(b) If any Lender requests compensation under Section 2.14, or
if any Loan Party is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 10.04), all its interests, rights and obligations under the Loan
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); PROVIDED that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent (and, if a Revolving Commitment is being assigned, the Issuing Bank and
Swingline Lender), which consent shall not unreasonably be withheld, (ii) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements and Swingline
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder, from the assignee or the Borrower and (iii) in the case of any
such assignment resulting from a claim for compensation under Section 2.14 or
payments required to be made pursuant to Section 2.16, such assignment will
result in a material reduction in such compensation or payments. A Lender shall
not be required to make any such assignment and delegation if, prior thereto, as
a result of a waiver by such Lender or otherwise, the circumstances entitling
the Borrower to require such assignment and delegation cease to apply.
SECTION 2.19. SWINGLINE LOANS. (a) Subject to the terms and
conditions set forth herein, the Swingline Lender agrees to make Swingline Loans
to the Borrower from time to time during the Revolving Availability Period, in
an aggregate principal amount at any time outstanding that will not result in
(i) the aggregate principal amount of outstanding Swingline Loans exceeding
$20,000,000 or (ii) the aggregate Revolving Exposures exceeding the total
Revolving Commitments; PROVIDED that the Swingline Lender shall not be required
to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Swingline Loans.
(b) To request a Swingline Loan, the Borrower shall notify the
Administrative Agent of such request by telephone (confirmed by telecopy), not
later than 12:00 noon, New York City time, on the day of a proposed Swingline
Loan. Each such notice shall be irrevocable and shall specify the requested date
(which shall be a Business Day) and amount of the requested Swingline Loan. The
Administrative Agent will promptly advise the Swingline Lender of any such
notice received from the Borrower. The Swingline Lender shall make each
Swingline Loan available to the Borrower by means of a credit to the general
deposit account of the Borrower with the Swingline Lender by 3:00 p.m., New York
City time, on the requested date of such Swingline Loan.
(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Lenders to acquire participations on such Business Day
in all or a portion of the Swingline Loans outstanding. Such notice shall
specify the aggregate amount of Swingline Loans in which Lenders will
participate. Promptly upon receipt of such notice, the Administrative Agent will
give notice thereof to each Lender, specifying in such notice such Lender's
Applicable Revolving Percentage of such Swingline Loan or Loans. Each Lender
hereby absolutely and unconditionally agrees, upon receipt of notice as provided
above, to pay to the Administrative Agent, for the account of the Swingline
Lender, such Lender's Applicable Revolving Percentage of such Swingline Loan or
Loans. Each Lender acknowledges and agrees that its obligation to acquire
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participations in Swingline Loans pursuant to this paragraph is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever. Each Lender shall
comply with its obligation under this paragraph by wire transfer of immediately
available funds, in the same manner as provided in Section 2.06 with respect to
Loans made by such Lender (and Section 2.06 shall apply, MUTATIS MUTANDIS, to
the payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to the Swingline Lender the amounts so received by it from the
Lenders. The Administrative Agent shall notify the Borrower of any
participations in any Swingline Loan acquired pursuant to this paragraph, and
thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the Swingline Lender. Any amounts received by
the Swingline Lender from the Borrower (or other party on behalf of the
Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender
of the proceeds of a sale of participations therein shall be promptly remitted
to the Administrative Agent; any such amounts received by the Administrative
Agent shall be promptly remitted by the Administrative Agent to the Lenders that
shall have made their payments pursuant to this paragraph and to the Swingline
Lender, as their interests may appear. The purchase of participations in a
Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any
default in the payment thereof. Notwithstanding the foregoing, a Lender shall
not have any obligation to acquire a participation in a Swingline Loan pursuant
to this paragraph if an Event of Default shall have occurred and be continuing
at the time such Swingline Loan was made and such Lender shall have notified the
Swingline Lender in writing, at least one Business Day prior to the time such
Swingline Loan was made, that such Event of Default has occurred and that such
Lender will not acquire participations in Swingline Loans made while such Event
of Default is continuing.
ARTICLE IIII
NTERCOMPANY LOANS
SECTION 3.01. INTERCOMPANY LOANS. (a) The proceeds of the
Term Borrowings shall be used by the Borrower, simultaneously with the making of
such Borrowings, to make Intercompany Term Loans to the Intercompany Borrowers
in the respective amounts set forth in Schedule 3.01.
(b) The proceeds of each Revolving Borrowing shall be used by
the Borrower, simultaneously with the making of such Borrowing, to make one or
more Intercompany Revolving Loans or Intercompany Term Loans to the Intercompany
Borrowers and in the amounts specified in the Borrowing Request delivered in
connection with such Borrowing under Section 2.03.
SECTION 3.02. INTERCOMPANY NOTES. Each Intercompany Term Loan
shall be evidenced by an Intercompany Term Note in the form of Exhibit F-2,
payable to the order of the Borrower and duly executed by the applicable
Intercompany Borrower. Each Intercompany Revolving Loan shall be evidenced by an
Intercompany Revolving Note in the form of Exhibit F-1, payable to the order of
the Borrower and duly executed by the applicable Intercompany Borrower. Each
Intercompany Note will be pledged by the Borrower to the Collateral Agent
pursuant to the Domestic Pledge Agreement as security for the Obligations.
Notwithstanding the foregoing, Intercompany Term Loans and Intercompany
Revolving Loans may be evidenced by notes or other instruments in a form
approved by the Administrative Agent, which approval will not be unreasonably
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withheld, PROVIDED that such notes will contain covenants substantially the same
as the covenants set forth in Section 3.03(a).
SECTION 3.03. MODIFICATION AND PREPAYMENT OF INTERCOMPANY
LOANS. (a) The Borrower covenants and agrees that it will not, without the
consent of the Required Lenders, (i) cause or permit the terms of any
Intercompany Loan or Intercompany Note or any related document (including any
Guarantee or Security Document) to be amended, modified or waived in any respect
(except that the Borrower and the applicable Intercompany Borrower may agree to
change the rate at which interest accrues on any Intercompany Note and the
Administrative Agent may, without the approval of the Required Lenders, approve
any other changes that it determines are not adverse to the Lenders), (ii)
cancel or compromise any Intercompany Note or contribute any Intercompany Note
to the capital of the Intercompany Borrower obligated thereon, (iii) transfer or
assign, or create any Lien (other than pursuant to the Domestic Pledge
Agreement) on, any Intercompany Loan or Intercompany Note, or (iv) demand or
accept any payment under any Intercompany Note (other than payments of interest
when and as due and prepayments permitted under paragraph (b) below).
(b) The Borrower covenants and agrees that it will not,
without the consent of the Required Lenders, cause or permit any Intercompany
Loan or Intercompany Note to be prepaid; PROVIDED that:
(i) any Intercompany Revolving Loan may be prepaid if the
proceeds of such prepayment are simultaneously applied to
prepay the related Revolving Borrowing;
(ii) the Intercompany Term Loans may be prepaid if (A) the
Borrower shall have delivered to the Administrative Agent and each
Lender, not fewer than 10 Business Days prior to the date of any such
prepayment, a notice setting forth the amounts by which the respective
Intercompany Term Loans are to be prepaid and, (x) unless such
prepayment is to be made by the Intercompany Borrowers ratably in
accordance with the outstanding principal amounts of their respective
Intercompany Term Notes, the Administrative Agent or the Required
Lenders shall not have objected to such prepayment on the ground that
it would result in the assets securing such remaining Intercompany Term
Loans having a materially lower realizable value in relation to the
outstanding principal amounts thereof than prior to such prepayment or
(y) such prepayment is made in connection with a repayment or
prepayment of Term Loans, and is in the amount required due to the
non-Intercompany Borrowers being unable to declare and pay dividends or
to make loans to fund such repayment or prepayment of Term Loans
without material tax disadvantages, and in each case (B) the aggregate
amount of all prepayments of Intercompany Term Loans of the initial
Foreign Intercompany Borrowers (less the amount of additional
Intercompany Term Loans made to the initial Foreign Intercompany
Borrowers after the Effective Date), expressed as a percentage of the
aggregate original principal amount of the Intercompany Term Loans,
shall not at any time exceed the percentage of the Term Borrowings
repaid or prepaid at any time after the Effective Date pursuant to
Section 2.09 or 2.10; and
(iii) in the event that Global shall have determined that an
Intercompany Borrower will not be able to support the Intercompany Loan
outstanding to it due to a deterioration in performance or a plant
closure or shutdown, such Intercompany Loan may be prepaid in an amount
sufficient to reduce the outstanding amount thereof to the greatest
amount that such Intercompany Borrower can reasonably be expected to
support in light of such deterioration or plant closure or shutdown if
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the proceeds of such prepayment are simultaneously advanced to another
Intercompany Borrower or used to prepay Term Loans; PROVIDED that the
Borrower shall have delivered to the Administrative Agent and each
Lender, not fewer than 10 Business Days prior to the date of any such
prepayment, a notice setting forth the amount of such prepayment and
the facts giving rise thereto, and the Administrative Agent or the
Required Lenders shall not have objected to such prepayment.
In any case described under clause (ii) or (iii) above in which the Intercompany
Loans of a Foreign Subsidiary will be reduced (other than in connection with a
ratable reduction of the Intercompany Loans of all Intercompany Borrowers), the
Borrower shall deliver together with the notice required under clause (ii) or
(iii) above a balance sheet certified on behalf of Global by a Financial Officer
of Global for each Foreign Subsidiary the Intercompany Loans of which will be
reduced in connection with the proposed prepayments.
SECTION 3.04. DESIGNATION OF INTERCOMPANY BORROWERS. The
initial Intercompany Borrowers shall be those listed in Schedule 3.01 hereto. On
or after the Effective Date, the Borrower may designate any Wholly Owned
Subsidiary of Global as an Intercompany Borrower by delivery to the
Administrative Agent of an Intercompany Borrower Agreement executed by such
Subsidiary and the Borrower, and such Subsidiary shall for all purposes of this
Agreement be an Intercompany Borrower upon such delivery and the satisfaction of
the conditions set forth in Section 5.03 with respect to such Subsidiary. As
soon as practicable upon receipt of an Intercompany Borrower Agreement, the
Administrative Agent shall send a copy thereof to each Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each of UCAR, Global and the Borrower represents and warrants
to each of the Lenders that:
SECTION 4.01. ORGANIZATION; POWERS. Each of UCAR, Global, the
Borrower and each of the Subsidiaries (a) is a corporation duly organized,
validly existing and in good standing (or, if applicable in a foreign
jurisdiction, enjoys the equivalent status under the laws of any jurisdiction of
organization outside the United States) under the laws of the jurisdiction of
its organization, (b) has all requisite power and authority to own its property
and assets and to carry on its business as now conducted and as proposed to be
conducted, (c) is qualified to do business in every jurisdiction where such
qualification is required, except where the failure so to qualify could not
reasonably be expected to result in a Material Adverse Effect, and (d) has the
corporate power and authority to execute, deliver and perform its obligations
under each of the Loan Documents and each other agreement or instrument
contemplated thereby to which it is or will be a party and, in the case of the
Borrower and the LC Subsidiaries, to borrow and otherwise obtain credit
hereunder.
SECTION 4.02. AUTHORIZATION. The execution, delivery and
performance by UCAR, Global, the Borrower and each of the Subsidiaries of each
of the Loan Documents to which it is or will be a party (and, in the case of the
Borrower and the LC Subsidiaries, the borrowings and other extensions of credit
hereunder), the making of the Intercompany Loans, the refinancing of the
Existing Credit Agreements and Global's 12% Senior Subordinated Notes due 2005,
the satisfaction of the Collateral and Guarantee Requirement and the other
transactions contemplated hereby and thereby (collectively, the "TRANSACTIONS")
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(a) have been duly authorized by all corporate and stockholder action required
to be obtained by UCAR, Global, the Borrower and the Subsidiaries and (b) will
not (i) violate (A) any provision of any law, statute, rule or regulation or of
the certificate or articles of incorporation or other constitutive documents or
by-laws of UCAR, Global, the Borrower or any Subsidiary, (B) any applicable
order of any court or any rule, regulation or order of any Governmental
Authority or (C) any provision of any indenture, certificate of designation for
preferred stock, agreement or other instrument to which UCAR, Global, the
Borrower or any Subsidiary is a party or by which any of them or any of their
property is or may be bound, (ii) be in conflict with, result in a breach of or
constitute (alone or with notice or lapse of time or both) a default under any
such indenture, certificate of designation for preferred stock, agreement or
other instrument, where any such conflict, violation, breach or default referred
to in clause (i) or (ii) of this Section 4.02, individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect, or (iii) result
in the creation or imposition of any Lien upon or with respect to any property
or assets now owned or hereafter acquired by UCAR, Global, the Borrower or any
Subsidiary, other than the Liens created by the Loan Documents.
SECTION 4.03. ENFORCEABILITY. This Agreement has been duly
executed and delivered by UCAR, Global, the Borrower and each LC Subsidiary
which is party hereto and constitutes, and each other Loan Document when
executed and delivered by UCAR, Global, the Borrower and each other Loan Party
which is party thereto will constitute, a legal, valid and binding obligation of
UCAR, Global, the Borrower and such Loan Party enforceable against UCAR, Global,
the Borrower and such Loan Party in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
SECTION 4.04. GOVERNMENTAL APPROVALS. No action, consent or
approval of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
(a) filings and recording necessary to satisfy the Collateral and Guarantee
Requirement, (b) such as have been made or obtained and are in full force and
effect and (c) such actions, consents, registrations, filings and approvals the
failure to obtain or make which could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 4.05. FINANCIAL STATEMENTS. UCAR has heretofore
furnished to the Lenders its consolidated balance sheets and consolidated
statements of operations, cash flows and stockholders' equity as of and for (a)
the fiscal year ended December 31, 1998, audited by and accompanied by the
opinion of KPMG LLP, independent public accountants and (b) the fiscal periods
ended March 31, 1999, June 30, 1999 and September 30, 1999, in each case
unaudited but certified on behalf of Global by a Financial Officer of Global.
Such financial statements present fairly the consolidated financial condition
and results of operations of UCAR and its subsidiaries as of such dates and for
such periods. Except as disclosed in the Information Memorandum, none of UCAR,
Global, the Borrower and the Subsidiaries has or shall have as of the Effective
Date any material Guarantee, contingent liability or liability for taxes, or any
material long-term lease or unusual forward or long-term commitment, including
any interest rate or foreign currency hedging transaction, which is not
reflected in the foregoing statements or the notes thereto. Such financial
statements were prepared in accordance with GAAP applied on a consistent basis.
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SECTION 4.06. NO MATERIAL ADVERSE CHANGE. There has been no
material adverse change in the assets, liabilities (including contingent
liabilities), business, properties, financial condition or results of operations
of UCAR and its subsidiaries, taken as a whole, since December 31, 1998.
SECTION 4.07. TITLE TO PROPERTIES; POSSESSION UNDER LEASES.
(a) Each of UCAR, Global, the Borrower and the Subsidiaries has good and
marketable title to, or valid leasehold interests in, or easements or other
limited property interests in, all its respective material properties and
assets, except for minor defects in title that do not interfere with its ability
to conduct its business as currently conducted or to utilize such properties and
assets for their intended purposes. All such material properties and assets are
free and clear of Liens, other than Liens expressly permitted by Section 7.02.
(b) Each of UCAR, Global, the Borrower and the Subsidiaries
has complied with all obligations under all material leases to which it is a
party, except where the failure to comply would not have a Material Adverse
Effect, and all such leases are in full force and effect, except leases in
respect of which the failure to be in full force and effect could not reasonably
be expected to have a Material Adverse Effect. Each of UCAR, Global, the
Borrower and the Subsidiaries enjoys peaceful and undisturbed possession under
all such material leases to which it is a party, other than leases which,
individually or in the aggregate, are not material to Global, the Borrower and
the Subsidiaries, taken as a whole, and in respect of which the failure to enjoy
peaceful and undisturbed possession could not reasonably be expected to,
individually or in the aggregate, result in a Material Adverse Effect.
(c) Each of UCAR, Global, the Borrower and the Subsidiaries
owns or has licenses to use, or could obtain ownership of or licenses to use, on
terms not materially adverse to it, all patents, trademarks, service marks,
trade names, copyrights and rights with respect thereto necessary for the
present conduct of its business, without any known conflict with the rights of
others, and free from any burdensome restrictions, except where such conflicts
and restrictions could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 4.08. SUBSIDIARIES. (a) Schedule 4.08 sets forth as
of the Effective Date the name and jurisdiction of incorporation of each
Subsidiary and, as to each such Subsidiary, the percentage of each class of
Capital Stock owned by Global or by any Subsidiary.
(b) As of the Effective Date, there are no outstanding
subscriptions, options, warrants, calls, rights or other agreements or
commitments (other than those granted to employees, consultants or directors and
directors' qualifying shares) of any nature relating to any Capital Stock of
UCAR, Global, the Borrower or any Subsidiary, except under the Loan Documents or
as set forth on Schedule 4.08.
SECTION 4.09. LITIGATION; COMPLIANCE WITH LAWS. (a) Except as
set forth in Schedule 4.09, there are not any material actions, suits or
proceedings at law or in equity or by or before any Governmental Authority now
pending or, to the knowledge of Global, threatened against or affecting UCAR,
Global, the Borrower or any Subsidiary or any business, property or rights of
any such person (i) which involve any Loan Document or, as of the Effective
Date, the Transactions or (ii) as to which there is a reasonable possibility of
an adverse determination and which, if adversely determined, could, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.
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(b) None of UCAR, Global, the Borrower, the Subsidiaries and
their respective material properties or assets is in violation of (nor will the
continued operation of their material properties and assets as currently
conducted violate) any law, rule or regulation (including any Environmental
Law), or is in default with respect to any judgment, writ, injunction or decree
of any Governmental Authority, where such violation or default could reasonably
be expected to result in a Material Adverse Effect.
SECTION 4.10. AGREEMENTS. (a) None of UCAR, Global, the
Borrower and the Subsidiaries is a party to any agreement or instrument or
subject to any corporate restriction that has resulted or could reasonably be
expected to result in a Material Adverse Effect.
(b) None of UCAR, Global, the Borrower and the Subsidiaries is
in default in any manner under any provision of any indenture or other agreement
or instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are or may be bound, in either case where such default could reasonably
be expected to result in a Material Adverse Effect. Immediately after giving
effect to the Transactions, no Default or Event of Default shall have occurred
and be continuing.
SECTION 4.11. FEDERAL RESERVE REGULATIONS. (a) None of UCAR,
Global, the Borrower and the Subsidiaries is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock, as defined in Regulation U of the Board
from time to time in effect ("MARGIN STOCK").
(b) No part of the proceeds of any Loan or Letter of Credit
will be used, whether directly or indirectly, and whether immediately,
incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend
credit to others for the purpose of purchasing or carrying Margin Stock or to
refund indebtedness originally incurred for such purpose or (ii) for any purpose
which entails a violation of, or which is inconsistent with, the provisions of
the Regulations of the Board, including Regulation U or X.
SECTION 4.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING
COMPANY ACT. None of UCAR, Global, the Borrower and the Subsidiaries is (a) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
SECTION 4.13. USE OF PROCEEDS. The Borrower and the LC
Subsidiaries have used, and will use, the proceeds of the Loans and have
requested, and will request, the issuance of Letters of Credit only for the
purposes specified in the preamble to this Agreement.
SECTION 4.14. TAX RETURNS. Each of UCAR, Global, the Borrower
and the Subsidiaries has timely filed or caused to be timely filed all Federal,
and all material state and local, tax returns required to have been filed by it
and has paid or caused to be paid all taxes shown thereon to be due and payable
by it and all assessments in excess of $2,000,000 in the aggregate, except for
taxes or assessments that are being contested in good faith by appropriate
proceedings in accordance with Section 6.03 and for which such person has set
aside on its books adequate reserves. Each of UCAR, the Borrower and the
Subsidiaries has paid in full or made adequate provision (in accordance with
GAAP) for the payment of all taxes due with respect to all periods ending on or
before the Effective Date, which taxes, if not paid or adequately provided for,
could reasonably be expected to have a Material Adverse Effect. Except as set
forth on Schedule 4.14, as of the Effective Date, with respect to each of UCAR,
Global, the Borrower and the Subsidiaries, (a) no material claims are being
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asserted in writing with respect to any taxes, (b) no presently effective
waivers or extensions of statutes of limitation with respect to taxes have been
given or requested, (c) no tax returns are being examined by, and no written
notification of intention to examine has been received from, the Internal
Revenue Service or, with respect to any material potential tax liability, any
other taxing authority and (d) no currently pending issues have been raised in
writing by the Internal Revenue Service or, with respect to any material
potential tax liability, any other taxing authority. For purposes hereof,
"TAXES" shall mean any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and additions
thereto) that is imposed by any Governmental Authority.
SECTION 4.15. NO MATERIAL MISSTATEMENTS. (a) The written
information, reports, financial statements, exhibits and schedules furnished by
or on behalf of UCAR, the Borrower or any of the Subsidiaries to the
Administrative Agent or any Lender in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto (including the
Confidential Information Memorandum dated January 2000 and the supplement
thereto dated February 2000 (the "INFORMATION MEMORANDUM") relating to UCAR and
its subsidiaries), when taken as a whole, did not contain, and as they may be
amended, supplemented or modified from time to time, will not contain, as of the
Effective Date any material misstatement of fact and did not omit, and as they
may be amended, supplemented or modified from time to time, will not omit, to
state as of the Effective Date any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not materially misleading in their presentation of the
refinancing (as described in the Information Memorandum) or of UCAR, Global, the
Borrower, and the Subsidiaries, taken as a whole.
(b) All financial projections concerning UCAR, Global, the
Borrower and the Subsidiaries that are or have been made available to the
Administrative Agent or any Lender by UCAR, Global, the Borrower or any
Subsidiary, including those contained in the Information Memorandum, unless
otherwise disclosed, have been or will be prepared in good faith based upon
assumptions believed by UCAR, Global and the Borrower to be reasonable.
SECTION 4.16. EMPLOYEE BENEFIT PLANS. Each of UCAR, Global,
the Borrower and the ERISA Affiliates is in compliance with the applicable
provisions of ERISA and the provisions of the Code relating to ERISA and the
regulations and published interpretations thereunder and any similar applicable
non-U.S. law, except for such noncompliance which could not reasonably be
expected to result in a Material Adverse Effect. No Reportable Event has
occurred as to which UCAR, Global, the Borrower or any ERISA Affiliate was
required to file a report with the PBGC, other than reports for which the 30 day
notice requirement is waived, reports that have been filed and reports the
failure of which to file could not reasonably be expected to result in a
Material Adverse Effect. As of the Effective Date, the present value of all
benefit liabilities under each Plan of UCAR, the Borrower and the ERISA
Affiliates (on a termination basis and based on the actual assumptions used by
such Plan under Section 412 of the Code) did not, as of the last annual
valuation date applicable thereto for which a valuation is available, exceed by
more than $7,500,000 the value of the assets of such Plan, and the present value
of all benefit liabilities of all underfunded Plans (based on the actual
assumptions used by such Plan under Section 412 of the Code) did not, as of the
last annual valuation dates applicable thereto for which valuations are
available, exceed by more than $15,000,000 the value of the assets of all such
underfunded Plans. None of UCAR, Global, the Borrower and the ERISA Affiliates
has incurred or could reasonably be expected to incur any Withdrawal Liability
that could reasonably be expected to result in a Material Adverse Effect. None
of UCAR, Global, the Borrower and the ERISA Affiliates has received any written
notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is
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reasonably expected to be in reorganization or to be terminated, where such
reorganization or termination has resulted or could reasonably be expected to
result, through increases in the contributions required to be made to such Plan
or otherwise, in a Material Adverse Effect.
SECTION 4.17. ENVIRONMENTAL MATTERS. Except as set forth in
Schedule 4.17:
(a) There has not been a Release or threatened Release of
Hazardous Materials at, on, under or around the properties currently owned or
currently or formerly operated by UCAR, Global, the Borrower and the
Subsidiaries (the "PROPERTIES") in amounts or concentrations which (i)
constitute or constituted a violation of Environmental Laws, except as could not
reasonably be expected to have a Material Adverse Effect, (ii) would reasonably
be expected to give rise to an Environmental Claim which, in any such case or in
the aggregate, is reasonably likely to result in a Material Adverse Effect or
(iii) could reasonably be expected to impair materially the fair saleable value
of any material Property.
(b) The Properties and all operations of UCAR, Global, the
Borrower and the Subsidiaries are in compliance, and in all prior periods have
been in compliance, with all Environmental Laws, and all necessary Environmental
Permits have been obtained and are in effect, except to the extent that such
non-compliance or failure to obtain any necessary permits, in the aggregate, are
not reasonably likely to result in a Material Adverse Effect.
(c) None of UCAR, Global, the Borrower and the Subsidiaries
has received any written notice of an Environmental Claim in connection with the
Properties or the operations of the Borrower or the Subsidiaries or with regard
to any person whose liabilities for environmental matters UCAR, Global, the
Borrower or the Subsidiaries has retained or assumed, in whole or in part,
contractually, by operation of law or otherwise, which, in either such case or
in the aggregate, is reasonably likely to result in a Material Adverse Effect.
(d) Hazardous Materials have not been transported from the
Properties, nor have Hazardous Materials been generated, treated, stored or
disposed of at, on, under or around any of the Properties in a manner that could
reasonably be expected to give rise to liability of UCAR, the Borrower or any
Subsidiary under any Environmental Law, nor have any of UCAR, the Borrower and
the Subsidiaries retained or assumed any liability, contractually, by operation
of law or otherwise, with respect to the generation, treatment, storage or
disposal of Hazardous Materials, which, in each case, individually or in the
aggregate, is reasonably likely to result in a Material Adverse Effect.
(e) No Lien in favor of any Governmental Authority for (i) any
liability under any Environmental Law or (ii) damages arising from or costs
incurred by such Governmental Authority in response to a Release or threatened
Release of Hazardous Materials into the environment has been recorded with
respect to the Properties except for Liens permitted by Section 7.02.
(f) During the period from the date of the environmental
assessment report prepared by ENVIRON Corporation in connection with the
recapitalization of UCAR consummated in 1995 to the Effective Date, no event has
occurred or been discovered, no liability has been incurred and no Environmental
Claim has been asserted that, had it been in existence at the time such report
was issued, would have materially adversely altered the ultimate conclusions
contained therein as to the general materiality to the Lenders of environmental
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liabilities, actual and potential, with respect to the properties, activities
and operations covered thereby.
SECTION 4.18. CAPITALIZATION OF UCAR, GLOBAL AND THE BORROWER
. The authorized Capital Stock, the par value thereof and the amount of such
authorized Capital Stock issued and outstanding for each of UCAR, Global and the
Borrower as of February 9, 2000, is set forth on Schedule 4.18 (except for
changes in the outstanding common stock of UCAR due to exercises under employee
stock option or employee stock purchase plans in the ordinary course since
February 9, 2000). All outstanding shares of Capital Stock of each of Global and
the Borrower are fully paid and nonassessable, are owned beneficially and of
record by UCAR and are free and clear of all Liens and encumbrances whatsoever
other than the Liens created by the Loan Documents.
SECTION 4.19. SECURITY DOCUMENTS. (a) Each Pledge Agreement
is effective to create in favor of the Collateral Agent, for the ratable benefit
of the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in such Pledge Agreement), and when such Collateral is
delivered to the Collateral Agent such Pledge Agreement will constitute a fully
perfected first priority Lien on and security interest in all right, title and
interest of each pledgor thereunder in such Collateral, in each case prior and
superior in right to any other person.
(b) Each Security Agreement is effective to create in favor of
the Collateral Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in such
Security Agreement), and when the actions contemplated by such Security
Agreement are taken, such Security Agreement will constitute a fully perfected
Lien on and security interest in all right, title and interest of the grantors
thereunder in such Collateral and, subject to ss. 9-306 of the Uniform
Commercial Code, the proceeds thereof, in each case prior and superior in right
to any other person, other than with respect to Liens expressly permitted by
Section 7.02.
(c) When a Security Agreement is filed in the United States
Patent and Trademark Office and the United States Copyright Office, and when the
other actions contemplated by such Security Agreement are taken, such Security
Agreement will constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the grantors thereunder in the Intellectual
Property (as defined in such Security Agreement) and, subject to ss. 9-306 of
the Uniform Commercial Code, the proceeds thereof, in each case prior and
superior in right to any other person.
(d) The Mortgages are effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable Lien on all of the Loan Parties' right, title and interest in
and to the Mortgaged Properties and the proceeds thereof, and when the Mortgages
are filed in the offices specified on Schedule 4.19(d) (or, in the case of
Mortgaged Properties not owned by UCAR or a Subsidiary on the date hereof, the
appropriate filing offices in the jurisdictions in which such Mortgaged
Properties are located), the Mortgages will constitute fully perfected Liens on,
and security interests in, all right, title and interest of the Loan Parties in
the Mortgaged Properties and, subject to ss. 9-306 of the Uniform Commercial
Code, the proceeds thereof, in each case prior and superior in right to any
other person, other than with respect to the rights of persons pursuant to Liens
expressly permitted by Section 7.02.
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(e) On the Effective Date, after giving effect to the
Transactions to occur on the Effective Date, and at all times thereafter, the
Collateral and Guarantee Requirement will have been satisfied.
SECTION 4.20. LABOR MATTERS. Except as set forth in Schedule
4.20, there are no strikes pending or threatened against UCAR, Global, the
Borrower or any Subsidiary which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. The hours worked
and payments made to employees of UCAR, Global, the Borrower and the
Subsidiaries have not been in violation in any material respect of the Fair
Labor Standards Act or any other applicable law dealing with such matters. All
material payments due from UCAR, Global, the Borrower or any Subsidiary or for
which any claim may be made against UCAR, Global, the Borrower or any
Subsidiary, on account of wages and employee health and welfare insurance and
other benefits, have been paid or accrued as a liability on the books of UCAR,
Global, the Borrower or such Subsidiary to the extent required by GAAP. None of
the Transactions has given or will give rise to a right of termination or right
of renegotiation on the part of any union under any collective bargaining
agreement to which UCAR, Global, the Borrower or any Subsidiary (or any
predecessor) is a party or by which UCAR, Global, the Borrower or any Subsidiary
(or any predecessor) is bound, other than collective bargaining agreements
which, individually or in the aggregate, are not material to UCAR, Global, the
Borrower and the Subsidiaries taken as a whole.
SECTION 4.21. NO FOREIGN ASSETS CONTROL REGULATION VIOLATION.
None of the Transactions will result in a violation of any of the foreign assets
control regulations of the United States Treasury Department, 31 C.F.R.,
Subtitle B, Chapter V, as amended (including the Foreign Assets Control
Regulations, the Transaction Control Regulations, the Cuban Assets Control
Regulations, the Foreign Funds Control Regulations, the Iranian Assets Control
Regulations, the Nicaraguan Trade Control Regulations, the South African
Transactions Regulations, the Libyan Sanctions Regulations, the Soviet Gold Coin
Regulations, the Panamanian Transactions Regulations, the Kuwaiti Assets Control
Regulations and the Iraqi Sanctions Regulations contained in said Chapter V), or
any ruling issued thereunder or any enabling legislation or Presidential
Executive Order granting authority therefor, nor will the proceeds of the Loans
or the Letters of Credit be used by the Borrower or any LC Subsidiary in a
manner that would violate any thereof.
SECTION 4.22. INSURANCE. Each of UCAR, Global, the Borrower
and the Subsidiaries carries and maintains with respect to its insurable
properties insurance (including, to the extent consistent with past practices,
self-insurance) with financially sound and reputable insurers of the types, to
such extent and against such risks as is customary with companies in the same or
similar businesses.
SECTION 4.23. LOCATION OF REAL PROPERTY AND LEASED PREMISES.
(a) Schedule 4.23(a) lists completely and correctly as of the Effective Date all
real property owned by UCAR, Global, the Borrower, each Domestic Subsidiary,
each Intercompany Borrower and each other Subsidiary that is required to grant a
Mortgage pursuant to the Collateral and Guarantee Requirement and the address
thereof. As of the Effective Date, UCAR, Global, the Borrower and the
Subsidiaries own in fee all the real property set forth as being owned by them
on Schedule 4.23(a).
(b) Schedule 4.23(b) lists completely and correctly as of the
Effective Date all real property leased by UCAR, Global, the Borrower, each
Domestic Subsidiary, each Intercompany Borrower and each other Subsidiary that
is required to grant a leasehold mortgage pursuant to the Collateral and
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Guarantee Requirement and the address thereof. As of the Effective Date, UCAR,
Global, the Borrower and the Subsidiaries have valid leases in all the real
property set forth as being leased by them on Schedule 4.23(b).
SECTION 4.24. LITIGATION LIABILITIES. The sum of the
aggregate Litigation Payments made after the Effective Date in excess of the
Litigation Reserves in effect on September 30, 1999 (less the amount of charges
against such Litigation Reserves prior to the Effective Date), plus the
aggregate amount of additional Litigation Reserves in respect of Litigation
Liabilities created after September 30, 1999, does not, and is not reasonably
expected to, exceed at any time the difference between $130,000,000 and the
aggregate amount of Indebtedness outstanding under Section 7.01(a)(xii) at the
time of determination. It is understood that all Litigation Payments and
Litigation Reserves other than those of the Department of Justice will be
calculated on a gross Dollar basis for purposes of determining the accuracy of
this representation.
SECTION 4.25. YEAR 2000. There has not occurred, and none of
UCAR, Global, the Borrower and the Subsidiaries expects that there will occur,
any material disruption in the operations or business systems of any of them
resulting from the inability of their computer systems or equipment to recognize
or properly process dates in or following the year 2000.
SECTION 4.26. UCAR GRAPH-TECH INC. As of the Effective Date,
the net book value of the assets of UCAR Graph-Tech Inc. is less than
$25,000,000. The portion of EBITDA attributable to UCAR Graph-Tech Inc. for the
three month period ended December 31, 1999, was less than $2,000,000.
ARTICLE V
CONDITIONS
SECTION 5.01. EFFECTIVE DATE. The obligations of the Lenders
to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall
not become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 10.02):
(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this
Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent, the Collateral
Agent, the Lenders and the Issuing Bank and dated the Effective Date)
of each of (i) Kelley Drye & Warren LLP, counsel for UCAR, Global and
the Borrower, substantially to the effect set forth in the form of
Exhibit J-1, (ii) the General Counsel of UCAR, Global and the Borrower,
substantially to the effect set forth in the form of Exhibit J-2, (iii)
the Chief Patent Counsel of UCAR substantially to the effect set forth
in the form of Exhibit J-3, and (iv) local counsel in each jurisdiction
listed on Schedule 5.01, in each case in a form reasonably satisfactory
to the Administrative Agent, and, in the case of each such opinion
required by this paragraph, covering such other matters relating to the
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Loan Parties, the Loan Documents or the Transactions as the Required
Lenders shall reasonably request. Each of UCAR, Global and the Borrower
hereby requests such counsel to deliver such opinions.
(c) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good
standing of each Loan Party and each initial Intercompany Borrower and
LC Subsidiary, the authorization of the Transactions and any other
legal matters relating to the Loan Parties, the initial Intercompany
Borrowers and LC Subsidiaries, the Loan Documents or the Transactions,
all in form and substance reasonably satisfactory to the Administrative
Agent and its counsel.
(d) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by the President, a
Vice President or a Financial Officer of Global, confirming compliance
with the conditions set forth in paragraphs (a) and (b) of Section
5.02.
(e) The Collateral and Guarantee Requirement shall have been
satisfied and the Administrative Agent shall have received a completed
Perfection Certificate dated the Effective Date and signed by an
executive officer or Financial Officer of Global, in form and substance
reasonably satisfactory to the Administrative Agent, together with all
attachments contemplated thereby, including the results of a search of
the Uniform Commercial Code (or equivalent) filings made with respect
to the Loan Parties and the other Subsidiaries in the jurisdictions
contemplated by such Perfection Certificate and copies of the financing
statements (or similar documents) disclosed by such search and evidence
reasonably satisfactory to the Administrative Agent that the Liens
indicated by such financing statements (or similar documents) are
permitted by Section 7.02 or have been released.
(f) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses (including fees, charges and disbursements of
counsel) required to be reimbursed or paid by any Loan Party hereunder
or under any other Loan Document.
(g) The Lenders shall have received a reasonably satisfactory
pro forma consolidated balance sheet of UCAR as of September 30, 1999,
reflecting all pro forma adjustments as if the Transactions had been
consummated on such date, together with a certificate of Global signed
by a Financial Officer of Global to the effect that such balance sheet
fairly presents the pro forma consolidated financial position of UCAR
and its subsidiaries in accordance with GAAP, and such pro forma
consolidated balance sheet shall be consistent in all material respects
with the forecasts and other information previously provided to the
Lenders.
(h) All requisite material Governmental Authorities and
material third parties shall have been approved or consented to the
Transactions and the other transactions contemplated hereby to the
extent required and all applicable appeal periods shall have expired.
(i) Global's 12% Senior Subordinated Notes due 2005 shall have
been repaid, or irrevocable action shall have been taken to effect the
repayment thereof, in full, funds shall simultaneously with the initial
Borrowing have been set aside with the trustee therefor to effect such
repayment, and the indenture in respect thereof shall have no further
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force and effect (except in connection with such repayment), in each
case on terms and conditions satisfactory to the Administrative Agent.
(j) The Existing Credit Agreements shall have been or shall
simultaneously with the initial Borrowing be repaid in full, all
agreements and instruments evidencing or governing the Indebtedness and
other obligations thereunder, and all lending or other commitments
thereunder, shall have been terminated and all Liens securing such
Indebtedness and other obligations shall have been released, and the
Administrative Agent shall have received such evidence as it shall have
requested as to the foregoing.
(k) Each of the conditions set forth in Section 5.03 shall be
satisfied with respect to each Intercompany Borrower and LC Subsidiary
as of the Effective Date.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 10.02)
at or prior to 3:00 p.m., New York City time, on March 31, 2000.
SECTION 5.02. EACH CREDIT EVENT. The obligation of each
Lender to make a Loan on the occasion of any Borrowing, and of the Issuing Bank
to issue, amend, renew or extend any Letter of Credit, is subject to receipt of
the request therefor in accordance herewith and to the satisfaction of the
following conditions:
(a) The representations and warranties of each Loan Party set
forth in the Loan Documents shall be true and correct in all material
respects on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, except to the extent such representations and warranties
expressly relate to an earlier date.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, no Default or Event of Default shall
have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit (other than those in which a Revolving Loan is being continued or
converted without any increase in the aggregate principal amount thereof or a
Letter of Credit is being extended or renewed) shall be deemed to constitute a
representation and warranty by UCAR, Global and the Borrower on the date thereof
as to the matters specified in paragraphs (a) and (b) of this Section.
SECTION 5.03. INTERCOMPANY BORROWERS AND LC SUBSIDIARIES. The
designation of any Subsidiary as an Intercompany Borrower or LC Subsidiary and
the obligations of the Lenders to make any Loan the proceeds of which are to be
advanced to an Intercompany Borrower and of the Issuing Bank to issue any Letter
of Credit for the account of an LC Subsidiary shall not become effective until
each of the following conditions is satisfied with respect to such Intercompany
Borrower or LC Subsidiary (or waived in accordance with Section 10.02):
(a) The Administrative Agent (or its counsel) shall have
received (i) in the case of an Intercompany Borrower, a counterpart of
an Intercompany Borrower Agreement signed on behalf of the Borrower and
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such Intercompany Borrower or (ii) in the case of an LC Subsidiary, an
LC Subsidiary Agreement signed on behalf of the Borrower and such LC
Subsidiary, or in either case written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a
signed signature page of such Intercompany Borrower Agreement or LC
Subsidiary Agreement, as applicable) that such party has signed a
counterpart of such Intercompany Borrower Agreement or LC Subsidiary
Agreement, as applicable.
(b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent, the Collateral
Agent, the Lenders and the Issuing Bank) of counsel satisfactory to the
Administrative Agent in form reasonably satisfactory to the
Administrative Agent and covering such matters as the Administrative
Agent shall reasonably request in connection with such Intercompany
Borrower or LC Subsidiary and the satisfaction of the Collateral and
Guarantee Requirement in respect thereof. Each of UCAR, Global and the
Borrower hereby requests such counsel to deliver such opinions.
(c) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good
standing of such Intercompany Borrower or LC Subsidiary, the
authorization of the Transactions to which it will be party and any
other legal matters relating thereto, all in form and substance
satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a
certificate, dated the date such Subsidiary is intended to become an
Intercompany Borrower or LC Subsidiary and signed by the President, a
Vice President or a Financial Officer of Global, confirming compliance
with the conditions set forth in paragraphs (a) and (b) of Section
5.02.
(e) The Collateral and Guarantee Requirement shall have been
satisfied with respect to such Intercompany Borrower or LC Subsidiary.
All requisite material Governmental Authorities and material third
parties shall have been approved or consented to such Subsidiary
becoming and acting as an Intercompany Borrower or LC Subsidiary and
the Transactions to which it will be party.
(f) The Administrative Agent shall have received a balance
sheet certified on behalf of Global by a Financial Officer of Global
for such Intercompany Borrower or LC Subsidiary as of the fiscal
quarter end next preceding the Financial Statement Delivery Date
occurring on or most recently prior to the date of determination.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each of UCAR, Global and the Borrower covenants and agrees
with each Lender that, so long as this Agreement shall remain in effect and
until the Commitments have been terminated and the principal of and interest on
each Loan, all fees and all other expenses or amounts payable under any Loan
Document have been paid in full and all Letters of Credit have been canceled or
have expired and all amounts drawn thereunder have been reimbursed in full,
unless the Required Lenders shall otherwise consent in writing, each of UCAR,
Global and the Borrower will, and will cause each of the Subsidiaries to:
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SECTION 6.01. EXISTENCE; BUSINESSES AND PROPERTIES. (a) Do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence, except as otherwise expressly permitted under
Section 7.05 and except for the liquidation or dissolution of Subsidiaries if
the assets of such persons to the extent they exceed estimated liabilities are
acquired by Global or a Wholly Owned Subsidiary in such liquidation or
dissolution; PROVIDED that Subsidiaries that are Loan Parties or Guarantors may
not be liquidated or dissolved into Subsidiaries that are not Loan Parties or
Guarantors, respectively, and Domestic Subsidiaries may not be liquidated or
dissolved into Foreign Subsidiaries.
(b) Do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights, licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and trade
names material to the conduct of its business; comply in all material respects
with all applicable laws, rules, regulations (including any Environmental Law)
and orders of any Governmental Authority, whether now in effect or hereafter
enacted; and at all times maintain and preserve all property material to the
conduct of such business and keep such property in good repair, working order
and condition and from time to time make, or cause to be made, all needful and
proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith, if any,
may be properly conducted at all times (in each case except as expressly
permitted by this Agreement).
SECTION 6.02. INSURANCE. (a) Keep its insurable properties
insured at all times by financially sound and reputable insurers in such amounts
as shall be customary for similar businesses and maintain such other insurance
(including, to the extent consistent with past practices, self-insurance), of
such types, to such extent and against such risks, as is customary with
companies in the same or similar businesses.
(b) Cause all such property and casualty insurance policies
with respect to the Mortgaged Properties to be endorsed or otherwise amended to
include a "standard" or "New York" lender's loss payable endorsement, in form
and substance reasonably satisfactory to the Administrative Agent and the
Collateral Agent, which endorsement shall provide that, from and after the
Effective Date, if the insurance carrier shall have received written notice from
the Administrative Agent or the Collateral Agent of the occurrence of an Event
of Default, the insurance carrier shall pay all proceeds otherwise payable to
the Loan Parties under such policies directly to the Collateral Agent; cause all
such policies to provide that none of the applicable Loan Party, the
Administrative Agent, the Collateral Agent or any other party shall be a
coinsurer thereunder and to contain a "Replacement Cost Endorsement", without
any deduction for depreciation, and such other provisions as the Administrative
Agent or the Collateral Agent may reasonably (in light of a Default or a
material development in respect of the insured Mortgaged Property) require from
time to time to protect their interests; deliver original or certified copies of
all such policies (or certificates in respect thereof satisfactory to the
Collateral Agent) to the Collateral Agent; cause each such policy to provide
that it shall not be canceled, modified or not renewed (i) by reason of
nonpayment of premium upon less than 10 days' prior written notice thereof by
the insurer to the Administrative Agent and the Collateral Agent or (ii) for any
other reason upon less than 30 days' prior written notice thereof by the insurer
to the Administrative Agent and the Collateral Agent; deliver to the
Administrative Agent and the Collateral Agent, prior to the cancelation,
modification or nonrenewal of any such policy of insurance, a copy of a renewal
or replacement policy (or other evidence of renewal of a policy previously
delivered to the Administrative Agent and the Collateral Agent), or an insurance
certificate with respect thereto, together with evidence reasonably satisfactory
to the Administrative Agent and the Collateral Agent of payment of the premium
therefor.
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(c) If at any time the area in which any of the Premises (as
defined in the Mortgages) is located is designated (i) a "flood hazard area" in
any Flood Insurance Rate Map published by the Federal Emergency Management
Agency (or any successor agency), obtain flood insurance in such reasonable
total amount as the Administrative Agent, the Collateral Agent or the Required
Lenders may from time to time reasonably require, and otherwise comply with the
National Flood Insurance Program as set forth in the Flood Disaster Protection
Act of 1973, as it may be amended from time to time, or (ii) a "Zone 1" area (as
so designated in the National Ocean and Earthquake Risk Map), obtain earthquake
insurance in such reasonable total amount as the Administrative Agent, the
Collateral Agent or the Required Lenders may from time to time reasonably
require.
(d) With respect to each Mortgaged Property, carry and
maintain comprehensive general liability insurance and coverage on an occurrence
basis against claims made for personal injury (including bodily injury, death
and property damage) and umbrella liability insurance against any and all
claims, in no event for a combined single limit of less than $1,000,000, naming
the Collateral Agent as an additional insured, on forms reasonably satisfactory
to the Collateral Agent.
(e) Notify the Administrative Agent and the Collateral Agent
promptly whenever any separate insurance concurrent in form or contributing in
the event of loss with that required to be maintained under this Section 6.02 is
taken out by UCAR, Global, the Borrower or any Subsidiary; and promptly deliver
to the Administrative Agent and the Collateral Agent a duplicate original copy
or certified copy of such policy or policies, or an insurance certificate with
respect thereto.
(f) In connection with the covenants set forth in this Section
6.02, it is understood and agreed that:
(i) none of the Administrative Agent, the Collateral Agent,
the Lenders, the Issuing Banks and their respective agents and
employees shall be liable for any loss or damage insured by the
insurance policies required to be maintained under this Section 6.02,
it being understood that (A) the Loan Parties shall look solely to
their insurance companies or parties other than the aforesaid parties
for the recovery of such loss or damage and (B) such insurance
companies shall have no rights of subrogation against the
Administrative Agent, the Collateral Agent, the Lenders, the Issuing
Banks or their agents or employees. If, however, the insurance policies
do not provide for waiver of subrogation rights against such parties,
as required above, then each of UCAR, Global and the Borrower hereby
agrees, to the extent permitted by law, to waive, and to cause each
Subsidiary to waive, its right of recovery, if any, against the
Administrative Agent, the Collateral Agent, the Lenders, the Issuing
Banks and their agents and employees; and
(ii) the designation of any form, type or amount of insurance
coverage by the Administrative Agent, the Collateral Agent or the
Required Lenders under this Section 6.02 shall in no event be deemed a
representation, warranty or advice by the Administrative Agent, the
Collateral Agent or the Lenders that such insurance is adequate for the
purposes of the business of UCAR, Global, the Borrower and the
Subsidiaries or the protection of their properties.
SECTION 6.03. TAXES; OTHER CLAIMS. Pay and discharge promptly
when due all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits or in respect of its property, before the same
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shall become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might give rise to a Lien
upon such properties or any part thereof; PROVIDED, HOWEVER, that such payment
and discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as (a) the validity or amount thereof shall be
contested in good faith by appropriate proceedings and UCAR, Global, the
Borrower or the affected Subsidiary, as applicable, shall have set aside on its
books adequate reserves with respect thereto, or (b) the amount of such taxes,
assessments, charges, levies and claims and interest and penalties thereon does
not exceed $1,000,000 in the aggregate.
SECTION 6.04. FINANCIAL STATEMENTS, REPORTS, ETC. Furnish to
the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year, a
consolidated balance sheet and related consolidated statements of
operations, cash flows and stockholders' equity showing the
consolidated financial condition of UCAR, Global, the Borrower and the
Subsidiaries as of the close of such fiscal year and the consolidated
results of their operations during such year, all audited by KPMG LLP
or other independent public accountants of recognized national standing
reasonably acceptable to the Administrative Agent (which consent shall
not be unreasonably withheld) and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect) to
the effect that such consolidated financial statements fairly present
the financial condition and results of operations of UCAR, Global, the
Borrower and the Subsidiaries on a consolidated basis in accordance
with GAAP;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, a consolidated balance sheet and
related consolidated statements of operations, cash flows and
stockholders' equity showing the consolidated financial condition of
UCAR, Global, the Borrower and the Subsidiaries as of the close of such
fiscal quarter and the consolidated results of their operations during
such fiscal quarter and the then-elapsed portion of the fiscal year,
all certified by one of its Financial Officers on behalf of Global as
fairly presenting the financial condition and results of operations of
UCAR, Global, the Borrower and the Subsidiaries on a consolidated basis
in accordance with GAAP (except for the absence of footnotes), subject
to normal year-end audit adjustments;
(c) concurrently with any delivery of financial statements
under paragraph (a) or (b) above, (i) a certificate of such accountants
or of Global signed by one of its Financial Officers opining on or
certifying such statements (which certificate, when furnished by such
accountants, may be limited to accounting matters and disclaim
responsibility for legal interpretations) (A) certifying that no Event
of Default or Default has occurred or, if an Event of Default or
Default has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto
and (B) setting forth computations in detail reasonably satisfactory to
the Administrative Agent demonstrating compliance with the covenants
contained in Sections 7.10, 7.11 and 7.12 (it being understood that the
information required by this clause (B) may be provided in a
certificate of Global signed by one of its Financial Officers instead
of from such accountants) and (ii) a certificate on behalf of Global
signed by a Financial Officer certifying the outstanding principal
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amount and current rate of interest of each Intercompany Note as of
such fiscal quarter or fiscal year end, as the case may be; PROVIDED,
HOWEVER, that in the event the Euro Equivalent of the outstanding
principal amount of any Intercompany Note shall increase by
EUR25,000,000 or more at any time between the dates on which
certificates are, or are to be, delivered under this paragraph, the
Borrower will give prompt notice to the Administrative Agent of such
increase;
(d) promptly after the same become publicly available, copies
of all periodic and other publicly available reports, proxy statements
and, to the extent requested by the Administrative Agent, other
publicly available materials filed by UCAR, Global, the Borrower or any
Subsidiary with the Securities and Exchange Commission, or any
governmental authority succeeding to any or all the functions of said
Commission, or with any national securities exchange, or distributed to
its shareholders generally, as the case may be;
(e) if, as a result of any change in accounting principles and
policies from those as in effect on the date of this Agreement, the
consolidated financial statements of UCAR, Global, the Borrower and the
Subsidiaries delivered pursuant to paragraph (a) or (b) above will
differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such paragraphs
had no such change in accounting principles and policies been made,
then, together with the first delivery of financial statements pursuant
to paragraph (a) and (b) above following such change, a schedule
prepared by Global signed by one of its Financial Officers reconciling
such changes to what the financial statements would have been without
such changes;
(f) within 90 days after the beginning of each fiscal year, a
copy of an operating and capital expenditure budget for such fiscal
year;
(g) promptly following the creation of or the initial
acquisition of any equity interest in any Subsidiary, a certificate of
Global signed by a Responsible Officer of Global identifying such new
Subsidiary and the ownership interest of Global and the Subsidiaries
therein;
(h) simultaneously with the delivery of any financial
statements pursuant to paragraph (a) or (b) above, a balance sheet and
related statements of operations, cash flows and stockholder's equity
for the applicable period for each Unrestricted Subsidiary and for each
minority interest in respect of which the Loan Parties shall, directly
or indirectly, have an aggregate outstanding investment in excess of
$1,000,000;
(i) promptly, a copy of all final reports submitted in
connection with any material interim or material special audit made by
independent accountants of the books of UCAR, Global, the Borrower or
any Subsidiary; and
(j) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of
UCAR, Global, the Borrower or any Subsidiary or compliance with the
terms of any Loan Document, or such consolidating financial statements,
or such financial statements showing the results of operations of any
Unrestricted Subsidiary, as in each case the Administrative Agent or
any Lender, acting through the Administrative Agent, may reasonably
request.
SECTION 6.05. LITIGATION AND OTHER NOTICES. Furnish to the
Administrative Agent and each Lender written notice of the following promptly
after any Responsible Officer of Global obtains actual knowledge thereof:
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(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) proposed to be taken
with respect thereto;
(b) the filing or commencement of, or any written threat or
notice of intention of any person to file or commence, any action, suit
or proceeding, whether at law or in equity or by or before any
Governmental Authority, against UCAR, Global, the Borrower or any
Subsidiary in respect of which there is a reasonable possibility of an
adverse determination and which, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect; and
(c) any other development specific to UCAR, Global, the
Borrower or any Subsidiary that is not a matter of general public
knowledge and that has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect.
SECTION 6.06. EMPLOYEE BENEFITS. (a) Comply in all material
respects with the applicable provisions of ERISA and the provisions of the Code
relating to ERISA and any applicable similar non-U.S. law and (b) furnish to the
Administrative Agent (i) as soon as possible after, and in any event within 30
days after any Responsible Officer of UCAR, Global, the Borrower or any ERISA
Affiliate knows or has reason to know that, any Reportable Event has occurred, a
statement of Global signed by one of its Financial Officers setting forth
details as to such Reportable Event and the action proposed to be taken with
respect thereto, together with a copy of the notice, if any, of such Reportable
Event given to the PBGC, (ii) promptly after any such Responsible Officer learns
of receipt thereof, a copy of any notice that the Borrower or any ERISA
Affiliate may receive from the PBGC relating to the intention of the PBGC to
terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate
that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Code Section 414) or to appoint a trustee to administer any such Plan, (iii)
within 30 days after the due date for filing with the PBGC pursuant to Section
412(n) of the Code a notice of failure to make a required installment or other
payment with respect to a Plan, a statement of Global signed by one of its
Financial Officers setting forth details as to such failure and the action
proposed to be taken with respect thereto, together with a copy of any such
notice given to the PBGC and (iv) promptly after any such Responsible Officer
learns thereof and in any event within 30 days after receipt thereof by UCAR,
Global, the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer
Plan, a copy of each notice received by UCAR, Global, the Borrower or any ERISA
Affiliate concerning (A) the imposition of Withdrawal Liability or (B) a
determination that a Multiemployer Plan is, or is expected to be, terminated or
in reorganization, in each case within the meaning of Title IV of ERISA;
PROVIDED that in the case of each of clauses (i) through (iv) above, notice to
the Administrative Agent shall only be required if such event or condition,
together with all other events or conditions referred to in clauses (i) through
(iv) above, could reasonably be expected to result in liability of UCAR, Global,
the Borrower or any Subsidiary in an aggregate amount exceeding $7,500,000.
SECTION 6.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND
INSPECTIONS. Maintain all financial records in accordance with GAAP and permit
any persons designated by the Administrative Agent or any Lender to visit and
inspect the financial records and the properties of UCAR, Global, the Borrower
or any Subsidiary at reasonable times, upon reasonable prior notice to UCAR, and
as often as reasonably requested, and to make extracts from and copies of such
financial records, and to discuss the affairs, finances and condition of the
Borrower or any Subsidiary with the officers thereof and independent accountants
therefor (in each case, subject to reasonable requirements of confidentiality,
including requirements imposed by law or by contract).
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SECTION 6.08. USE OF PROCEEDS. Use the proceeds of the Loans
and request the issuance of Letters of Credit only for the purposes set forth in
the preamble to this Agreement.
SECTION 6.09. COMPLIANCE WITH ENVIRONMENTAL LAWS. Comply, and
cause all lessees and other persons occupying its Properties to comply, with all
Environmental Laws and Environmental Permits applicable to its and their
respective operations and Properties; obtain and renew all Environmental Permits
necessary for its and their respective operations and Properties; and conduct
any Remedial Action in accordance with Environmental Laws, except, in each case
with respect to this Section 6.09, to the extent the failure to do so,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
SECTION 6.10. PREPARATION OF ENVIRONMENTAL REPORTS. If a
Default caused by reason of a breach, or facts that constitute a breach, of
Section 4.17 or 6.09 shall have occurred and be continuing, at the request of
the Required Lenders through the Administrative Agent, provide to Lenders within
90 days after such request, at the expense of Global, an environmental site
assessment report for the Properties which are the subject of such Default
prepared by an environmental consulting firm reasonably acceptable to the
Administrative Agent, indicating the presence or absence of Hazardous Materials
and the estimated cost of any Remedial Action required under any applicable
Environmental Law in connection with such Properties.
SECTION 6.11. FURTHER ASSURANCES. Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements) that may be required under applicable law or that the Collateral
Agent may reasonably request, (a) in order to effectuate the transactions
contemplated by the Loan Documents, (b) in order to cause the Collateral and
Guarantee Requirement to be satisfied at all times and (c) in order to grant,
preserve, protect and perfect the validity and first priority (subject to Liens
permitted by Section 7.02) of the security interests created or intended to be
created by the Security Documents. All such security interests and Liens will be
created under the Security Documents and other instruments and documents in form
and substance reasonably satisfactory to the Collateral Agent, and UCAR, Global,
the Borrower and the Subsidiaries shall deliver or cause to be delivered to the
Administrative Agent all such instruments and documents (including legal
opinions and lien searches) as the Collateral Agent or the Required Lenders
shall reasonably request to evidence compliance with this Section 6.11. UCAR,
Global and the Borrower agree to provide, and to cause each Subsidiary to
provide, such evidence as the Collateral Agent shall reasonably request as to
the perfection and priority status of each such security interest and Lien.
SECTION 6.12. SIGNIFICANT SUBSIDIARIES. Cause Significant
Subsidiaries at all times to (a) account for 85% or more of the consolidated
assets of Global and (b) have accounted for 85% or more of EBITDA for each of
the two consecutive periods of four fiscal quarters immediately preceding the
date of determination, after giving effect to the designation of any Significant
Subsidiary on any date as of which compliance with this Section 6.12 is being
determined.
SECTION 6.13. CERTAIN ACCOUNTING MATTERS. (a) In the case of
each of UCAR, Global, the Borrower and the Subsidiaries, cause its respective
fiscal year to end on December 31.
(b) Cause its independent public accountants to be KPMG LLP or
any other independent public accountant of recognized national standing
reasonably acceptable to the Administrative Agent.
SECTION 6.14. DIVIDENDS. In the case of Global, permit its
Subsidiaries to pay dividends and cause such dividends to be paid to the extent
required to pay the monetary Obligations, subject to restrictions permitted by
Section 7.09(c) and to prohibitions imposed by applicable requirements of law.
SECTION 6.15. INTEREST/EXCHANGE RATE PROTECTION AGREEMENTS.
Maintain in effect one or more Interest/Exchange Rate Protection Agreements with
any of the Lenders or other financial institutions reasonably satisfactory to
the Administrative Agent, the effect of which shall be to limit the interest
payable in connection with 40% of the aggregate principal amount of the Term
Borrowings projected in good faith to be outstanding at all times to a maximum
rate and on terms and conditions comparable to those set forth in the
Interest/Exchange Rate Protection Agreements in effect on the Effective Date or
otherwise reasonably acceptable, taking into account current market conditions,
to the Administrative Agent, and deliver evidence of the execution and delivery
thereof to the Administrative Agent.
SECTION 6.16. CORPORATE SEPARATENESS. Cause the management,
business and affairs of each of the Unrestricted Subsidiaries to be conducted in
such a manner that each Unrestricted Subsidiary will be perceived as a legal
entity separate and distinct from UCAR, Global, the Borrower and the
Subsidiaries.
ARTICLE VII
NEGATIVE COVENANTS
Each of UCAR, Global and the Borrower covenants and agrees
with each Lender that, so long as this Agreement shall remain in effect and
until the Commitments have been terminated and the principal of and interest on
each Loan, all fees and all other expenses or amounts payable under any Loan
Document have been paid in full and all Letters of Credit have been canceled or
have expired and all amounts drawn thereunder have been reimbursed in full,
unless the Required Lenders shall otherwise consent in writing, none of UCAR,
Global and the Borrower will, or will cause or permit any of the Subsidiaries
to:
SECTION 7.01. INDEBTEDNESS; CERTAIN EQUITY SECURITIES. (a) In
the case of the Borrower and the Subsidiaries, incur, create, assume or permit
to exist any Indebtedness, except:
(i) Indebtedness existing on the Effective Date and set forth
in Schedule 7.01, and (other than in the case of intercompany
Indebtedness among UCAR, Global and other Loan Parties) extensions,
renewals and replacements of any such Indebtedness that do not increase
the outstanding principal amount thereof or result in an earlier
maturity date or decreased weighted average life thereof;
(ii) Indebtedness created under the Loan Documents (including
the Intercompany Notes);
(iii) Indebtedness pursuant to Interest/Exchange Rate
Protection Agreements entered into in order to fix the effective rate
of interest, or to hedge against currency fluctuations, on the Loans
and other Indebtedness or to hedge against currency fluctuations with
respect to purchases and sales of goods in the ordinary course;
PROVIDED, in each case, that such transactions shall be entered into to
limit risks arising in the business of the Borrower and the
Subsidiaries and not for the purpose of speculation;
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(iv) Indebtedness of any Subsidiary owed to (including
obligations in respect of letters of credit for the benefit of) any
person providing worker's compensation, health, disability or other
employee benefits or property, casualty or liability insurance to any
Subsidiary, pursuant to reimbursement or indemnification obligations to
such person;
(v) Indebtedness of Global, the Borrower or any Subsidiary to
any Subsidiary, the Borrower or Global, PROVIDED that (A) Indebtedness
of any Subsidiary that is not a Loan Party to the Borrower or to any
Subsidiary Loan Party shall be subject to Section 7.04(j) (other than
loans made to UCAR's Canadian subsidiary in amounts in the aggregate
not in excess of the remaining reserve for plant closure costs
established on UCAR's accounts and reflected on its audited December
31, 1998 financial statements) and shall be evidenced by promissory
notes that are pledged under the Domestic Pledge Agreement and (B)
Indebtedness of Global, the Borrower or any Subsidiary Loan Party to
any Subsidiary that is not a Loan Party shall be subordinated to the
Obligations on terms satisfactory to the Administrative Agent;
(vi) Indebtedness of a Subsidiary which represents the
assumption by such Subsidiary of Indebtedness of another Subsidiary in
connection with the permitted merger of such other Subsidiary with or
into such Subsidiary or the permitted purchase of all or substantially
all the assets of such other Subsidiary;
(vii) Indebtedness of any Subsidiary in respect of performance
bonds, bid bonds, appeal bonds, surety bonds and similar obligations
and trade-related letters of credit, in each case provided in the
ordinary course of business, including those incurred to secure health,
safety and environmental obligations in the ordinary course of
business, and any extension, renewal or refinancing thereof to the
extent not provided to secure the repayment of other Indebtedness and
to the extent that the amount of refinancing Indebtedness is not
greater than the amount of Indebtedness being refinanced;
(viii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of business;
PROVIDED that such Indebtedness is extinguished within five Business
Days of its incurrence;
(ix) Indebtedness of a Subsidiary acquired after the date
hereof (or of a special purpose subsidiary formed after the date hereof
to acquire the assets and assume the Indebtedness of a business unit)
and Indebtedness of a person merged or consolidated with or into a
Subsidiary after the date hereof, which Indebtedness in each case
exists at the time of such acquisition, formation, merger,
consolidation or conversion into a Subsidiary and is not created in
contemplation of such event and where such acquisition, formation,
merger or consolidation is permitted by this Agreement, PROVIDED that
the aggregate principal amount of Indebtedness under this paragraph
(ix) shall not exceed $25,000,000 for all Subsidiaries at any time
outstanding;
(x) Capital Lease Obligations, mortgage financings and
purchase money Indebtedness incurred by any Subsidiary prior to or
within 270 days after a Capital Expenditure permitted under Section
7.10 in order to finance such Capital Expenditure, and extensions,
renewals and replacements of any such Indebtedness that do not increase
the outstanding principal amount thereof or result in an earlier
maturity date or decreased weighted average life thereof;
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(xi) Capital Lease Obligations incurred by any Subsidiary in
respect of any Sale and Leaseback Transaction that is permitted under
Section 7.03;
(xii) other Indebtedness of the Subsidiaries in an aggregate
principal amount at any time outstanding that, when taken together at
the time of the incurrence, creation or assumption of such Indebtedness
with the sum of the aggregate Litigation Payments made after the
Effective Date in excess of the Litigation Reserves in effect on
September 30, 1999 (less the amount of charges against such Litigation
Reserves prior to the Effective Date), plus the aggregate amount of
additional Litigation Reserves in respect of the Litigation Liabilities
created after September 30, 1999, is not in excess of $130,000,000,
PROVIDED that (A) no more than $20,000,000 of such Indebtedness may be
secured, (B) no more than $15,000,000 of such Indebtedness may be
Indebtedness of Subsidiaries that are not Loan Parties and (C) for
purposes of determining compliance herewith, the aggregate principal
amount of Indebtedness of Brazil and its Subsidiaries at any time shall
be deemed reduced by the aggregate amount of Permitted Investments held
at such time by Brazil and its Subsidiaries for the purpose of hedging
such Indebtedness; and
(xiii) all premium (if any), interest (including post-petition
interest), fees, expenses, indemnities, charges and additional or
contingent interest on obligations described in clauses (i) through
(xii) above.
(b) In the case of UCAR and Global, incur, create, assume or permit to
exist any Indebtedness other than Indebtedness existing on the Effective Date
and set forth on Schedule 7.01, Indebtedness created under the Loan Documents,
Indebtedness permitted by Section 7.01(a)(v) and Indebtedness of UCAR consisting
of contingent liabilities or Indebtedness of the type referred to in the proviso
contained in the definition of "Unrestricted Subsidiary." In addition, UCAR may
elect to receive any Restricted Payment permitted to be made to it under Section
7.06 by incurring intercompany Indebtedness to Global.
(c) Incur, create, assume or permit to exist any preferred Capital
Stock, unless the Net Proceeds thereof are applied in accordance with Section
2.10(c).
SECTION 7.02. LIENS; SALES OF CERTAIN ASSETS. Create, incur,
assume or permit to exist any Lien on any property or assets (including stock or
other securities of any person, including any Subsidiary) now owned or hereafter
acquired by it or on any income or revenues or rights in respect of any thereof,
or sell or transfer income or revenues (including any accounts receivable) or
any right in respect thereof, except:
(a) Liens on property or assets of UCAR, Global and the
Subsidiaries existing on the Effective Date and set forth in Schedule
7.02; PROVIDED that such Liens shall secure only those obligations
which they secure on the Effective Date (and extensions, renewals and
refinancings of such obligations permitted by Section 7.01(a)(i)) and
shall not subsequently apply to any other property or assets of UCAR,
Global, the Borrower or any Subsidiary (other than investments in
Unrestricted Subsidiaries);
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset of any
Subsidiary prior to the acquisition thereof by such Subsidiary;
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PROVIDED that (i) such Lien is not created in contemplation of or in
connection with such acquisition and (ii) such Lien does not apply to
any other property or asset of UCAR, Global, the Borrower or any
Subsidiary;
(d) any Lien on any property or asset of a Subsidiary securing
Indebtedness permitted by Section 7.01(a)(ix); PROVIDED that such Lien
does not apply to any other property or assets of UCAR, Global, the
Borrower or any Subsidiary not securing such Indebtedness at the date
of acquisition of such property or asset (other than after acquired
property of such Subsidiary subjected to a Lien securing Indebtedness
incurred prior to such date and permitted hereunder which contains a
requirement for the pledging of after acquired property);
(e) Liens for taxes, assessments or other governmental charges
or levies not yet delinquent, or which are for less than $1,000,000 in
the aggregate, or which are being contested in compliance with Section
6.03 or for property taxes on property that UCAR, Global, the Borrower
or the affected Subsidiary has determined to abandon if the sole
recourse for such tax, assessment, charge, levy or claim is to such
property;
(f) carriers', warehousemen's, mechanic's, materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business and securing obligations that are not yet due and payable or
that are being contested in good faith by appropriate proceedings and
in respect of which, if applicable, UCAR, Global, the Borrower or the
relevant Subsidiary shall have set aside on its books reserves in
accordance with GAAP;
(g) pledges and deposits made in the ordinary course of
business in compliance with the Federal Employers Liability Act or any
other worker's compensation, unemployment insurance and other social
security laws or regulations and deposits securing liability to
insurance carriers under insurance or self-insurance arrangements in
respect of such obligations;
(h) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than Capital
Lease Obligations), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business, including those incurred to secure
health, safety and environmental obligations in the ordinary course of
business or in connection with an appeal of litigation disclosed on
Schedule 4.09;
(i) zoning restrictions, easements, trackage rights, leases
(other than Capital Lease Obligations), licenses, special assessments,
rights-of-way, restrictions on use of real property and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and do not materially detract
from the value of the property subject thereto or interfere with the
ordinary conduct of the business of UCAR, Global, the Borrower or any
of the Subsidiaries;
(j) purchase money security interests in real property,
improvements thereto or equipment hereafter acquired (or, in the case
of improvements, constructed) by any Subsidiary (including the
interests of vendors and lessors under conditional sale and title
retention agreements); PROVIDED that (i) such security interests secure
Indebtedness or Sale and Lease-Back Transactions permitted by Section
7.01, (ii) such security interests are incurred, and the Indebtedness
secured thereby is created, within 270 days after such acquisition (or
construction), (iii) the Indebtedness secured thereby does not exceed
100% of the cost (including capitalized interest on construction
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financing) of such real property, improvements or equipment at the time
of such acquisition (or construction), (iv) such expenditures are
permitted by this Agreement and (v) such security interests do not
apply to any other property or assets of the Borrower or any Subsidiary
(other than to accessions to such real property, improvements or
equipment and provided that individual financings of equipment provided
by a single lender may be cross-collateralized to other financings of
equipment provided solely by such lender);
(k) Liens securing reimbursement obligations in respect of
trade-related letters of credit permitted under Section 7.01 and
covering the goods (or the documents of title in respect of such goods)
financed by such letters of credit;
(l) Liens arising out of capitalized or operating lease
transactions permitted under Section 7.03, so long as such Liens (i)
attach only to the property sold in such transaction and any accessions
thereto and (ii) do not interfere with the business of UCAR, Global,
the Borrower or any Subsidiary in any material respect;
(m) Liens consisting of interests of lessors under capital
leases permitted by Section 7.01;
(n) Liens securing judgments for the payment of money in an
aggregate amount not in excess of $7,500,000 (except to the extent
covered by insurance as to which the insurer has acknowledged in
writing its obligation to cover), unless such judgments shall remain
undischarged for a period of more than 30 consecutive days during which
execution shall not be effectively stayed, 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;
(o) any Lien arising by operation of law pursuant to Section
107(1) of CERCLA or pursuant to analogous state or foreign law, for
costs or damages which are not yet due (by virtue of a written demand
for payment by a Governmental Authority) or which are being contested
in compliance with the standard set forth in Section 6.03(a), or on
property that a Subsidiary has determined to abandon if the sole
recourse for such costs or damages is to such property, PROVIDED that
the liability of UCAR, Global, the Borrower and the Subsidiaries with
respect to the matter giving rise to all such Liens shall not, in the
reasonable estimate of Global (in light of all attendant circumstances,
including the likelihood of contribution by third parties), exceed
$7,500,000;
(p) any leases or subleases to other persons of properties or
assets owned or leased by a Subsidiary;
(q) Liens which are contractual rights of set-off (i) relating
to the establishment of depository relations with banks not given in
connection with the issuance of Indebtedness or (ii) pertaining to
pooled deposit and/or sweep accounts of Global, the Borrower and/or any
Subsidiary to permit satisfaction of overdraft or similar obligations
incurred in the ordinary course of business of Global, the Borrower and
the Subsidiaries;
(r) other Liens with respect to property or assets not
constituting collateral for the Obligations with an aggregate fair
market value of not more than $20,000,000 at any time;
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(s) any Lien arising as a result of a transaction permitted
under Section 7.05(h) or (i) or under Section 7.13;
(t) the sale of accounts receivable in connection with
collection in the ordinary course of business and Liens which might
arise as a result of the sale or other disposition of accounts
receivable pursuant to Section 7.05(h); and
(u) the replacement, extension or renewal of any Lien
permitted by clause (c), (d) or (j) above; PROVIDED that such
replacement, extension or renewal Lien shall not cover any property
other than the property that was subject to such Lien prior to such
replacement, extension or renewal; and PROVIDED FURTHER that the
Indebtedness and other obligations secured by such replacement,
extension or renewal Lien are permitted by this Agreement.
Notwithstanding the foregoing, none of UCAR, Global and the Borrower will
create, incur, assume or permit to exist any Lien on any property or assets
(including stock or other securities of any person, including any Subsidiary)
now owned or hereafter acquired by it or on any income or revenues or rights in
respect of any thereof, or sell or transfer any income or revenues (including
any account receivable) or any right in respect thereof, except any Lien created
under the Loan Documents and involuntary Liens of the type described in
paragraphs (a), (e), (n), (o), (q) or (s) above and Liens on any property or
assets of an Unrestricted Subsidiary.
SECTION 7.03. SALE AND LEASE-BACK TRANSACTIONS. Enter into
any arrangement, directly or indirectly, with any person whereby it shall sell
or transfer any property, real or personal, used or useful in its business,
whether now owned or hereafter acquired, and thereafter rent or lease such
property or other property which it intends to use for substantially the same
purpose or purposes as the property being sold or transferred (a "SALE AND
LEASE-BACK TRANSACTION"), other than any Sale and Lease-Back Transaction which
involves a sale by a Subsidiary solely for cash consideration on terms not less
favorable than would prevail in an arm's-length transaction and which (a)
results in a Capital Lease Obligation or an operating lease, in either case
entered into to finance a Capital Expenditure permitted by Section 7.10
consisting of the initial acquisition by such Subsidiary of the property sold or
transferred in such Sale and Lease-Back Transaction, PROVIDED that such Sale and
Lease-Back Transaction occurs within 270 days after such acquisition or (b)
results in a Capital Lease Obligation or an operating lease entered into for any
other purpose.
SECTION 7.04. INVESTMENTS, LOANS, ADVANCES AND ACQUISITIONS.
Purchase, hold or acquire any Capital Stock, evidences of Indebtedness or other
securities of (including any option, warrant or other right to acquire any of
the foregoing), make or permit to exist any loans or advances to, Guarantee any
obligations of, or make or permit to exist any investment or any other interest
in, any other person, or purchase or otherwise acquire (in one transaction or a
series of transactions) any assets of any other person constituting a business
unit, except:
(a) investments (i) existing on the Effective Date in the
capital stock of the Subsidiaries; (ii) by UCAR in the capital stock of
Global and the Borrower; (iii) by Global or any Subsidiary in any Loan
Party (so long as such person shall remain a Loan Party after giving
effect to such investment); and (iv) by any Subsidiary that is not a
Loan Party in any Wholly Owned Subsidiary that is not a Loan Party (so
long as such Subsidiary shall remain a Wholly Owned Subsidiary after
giving effect to such investment);
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(b) Permitted Investments and investments that were Permitted
Investments when made;
(c) investments arising out of the receipt by Global or any
Subsidiary of noncash consideration for the sale of assets permitted
under Section 7.05 provided that such consideration (if the stated
amount or value thereof is in excess of $1,000,000) is pledged upon
receipt pursuant to the Pledge Agreements to the extent required
thereby;
(d) the Intercompany Loans and intercompany loans to Global,
the Borrower or Subsidiary Loan Parties that comply with Section 7.01;
(e) (i) loans and advances to employees of UCAR, Global, the
Borrower or the Subsidiaries not to exceed $6,000,000 in the aggregate
at any time outstanding (excluding up to $1,000,000 in loans existing
on the Effective Date to former employees) and (ii) advances of payroll
payments and expenses to employees in the ordinary course of business;
(f) (i) accounts receivable arising and trade credit granted
in the ordinary course of business and any securities received in
satisfaction or partial satisfaction thereof from financially troubled
account debtors to the extent reasonably necessary in order to prevent
or limit loss and (ii) prepayments and other credits to suppliers made
in the ordinary course of business consistent with the past practices
of UCAR, Global and the Subsidiaries;
(g) Interest/Exchange Rate Protection Agreements permitted
pursuant to Section 7.01(a)(iii);
(h) investments, other than investments listed in paragraphs
(a) through (g) of this Section, existing on the Effective Date and set
forth on Schedule 7.04;
(i) investments resulting from pledges and deposits referred
to in Section 7.02(g) or (h); and
(j) (i) investments constituting Permitted Acquisitions made
with Available Disposition Proceeds and (ii) investments constituting
Permitted Subsidiary Investments or investments in Unrestricted
Subsidiaries made after the Effective Date (A) with Equity Proceeds or
(B) in respect of which the aggregate amount of consideration (whether
cash or property, as valued at the time each such investment is made)
does not exceed (net of any return representing return of capital of
(but not return on) any such investment) at any time the amount set
forth on Schedule A for the Leverage Ratio that is in effect at such
time (it being agreed that any such investment permitted when made
shall not cease to be permitted as a result of the applicable Leverage
Ratio subsequently changing), PROVIDED that (x) the aggregate amount of
the consideration (whether cash or property, as valued at the time each
such investment is made) for all investments made in Unrestricted
Subsidiaries (other than investments made therein with Equity Proceeds
after the Effective Date) shall not exceed (net of return of capital of
(but not return on) any such investment) $50,000,000 at any time (it
being understood that investments referred to in clause (E) of the
definition of "Unrestricted Subsidiary" shall not be included in
determining compliance with such limitation and that no investment
shall be deemed made solely as a result of the transfer of ownership of
the Capital Stock of UCAR Graph-Tech Inc. to UCAR), and (A) no more
than $15,000,000 of such amount at any time may be invested in UCAR
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Graph-Tech Inc. and (B) no more than $25,000,000 of such amount at any
time may be invested in Unrestricted Subsidiaries not engaged primarily
in Related Businesses, and (y) the aggregate amount of the
consideration (whether cash or property, as valued at the time each
such investment is made) for all Permitted Subsidiary Investments made
in persons in which at the time of determination Global owns, directly
or indirectly, less than 90% of the outstanding Capital Stock (other
than investments made therein with Equity Proceeds) after the Effective
Date shall not exceed (net of return of capital of (but not return on)
any such investment) $125,000,000 at any time, of which no more than
$30,000,000 at any time may be invested in persons that are not
Subsidiaries.
Notwithstanding the foregoing, under no circumstances shall any Foreign
Subsidiary own any of the Capital Stock of any Domestic Subsidiary.
SECTION 7.05. MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND
ACQUISITIONS. Merge into or consolidate with any other person, or permit any
other person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of transactions) all or
any substantial part of its assets (whether now owned or hereafter acquired),
other than assets of UCAR constituting an Unrestricted Subsidiary, or any
Capital Stock of Global, the Borrower or any Subsidiary, or purchase, lease or
otherwise acquire (in one transaction or a series of transactions) all or any
substantial part of the assets of any other person, except that this Section
shall not prohibit:
(a) the purchase and sale of inventory in the ordinary course
of business by any Subsidiary or the acquisition of any asset of any
person in the ordinary course of business or any purchase or sale of
Permitted Investments in the ordinary course of business;
(b) if at the time thereof and immediately after giving effect
thereto no Event of Default or Default shall have occurred and be
continuing, the merger of any Subsidiary into or with any other Wholly
Owned Subsidiary in a transaction in which the surviving entity is a
Wholly Owned Subsidiary (which shall be a domestic Subsidiary if the
non-surviving person shall be a Domestic Subsidiary and a Guarantor if
the non-surviving person shall be a Guarantor), and no person other
than Global or a Wholly Owned Subsidiary receives any consideration;
(c) Sale and Lease-Back Transactions permitted by Section 7.03;
(d) investments permitted by Section 7.04;
(e) subject to Section 7.07, sales, leases or transfers (i)
from Global or any Subsidiary to Global or to a domestic Wholly Owned
Subsidiary, (ii) from any Foreign Subsidiary to any Foreign Wholly
Owned Subsidiary or to Global; (iii) constituting Permitted Subsidiary
Transfers; or (iv) constituting Permitted Subsidiary Investments
(subject to the limitations set forth in Section 7.04(j));
(f) sales, leases or other dispositions of equipment or real
property of the Subsidiaries determined by the Board of Directors or
senior management of Global to be no longer useful or necessary in the
operation of the business of Global and the Subsidiaries; PROVIDED that
(x) the Net Proceeds thereof shall be applied in accordance with
Section 2.10(c) and (y) the fair market value of assets sold, leased or
otherwise disposed of in any one year shall not exceed $4,000,000 in
the aggregate;
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(g) sales, leases or other dispositions of inventory of the
Subsidiaries determined by the Board of Directors or senior management
of Global to be no longer useful or necessary in the operation of the
business of Global and the Subsidiaries; PROVIDED that the Net Proceeds
thereof shall be applied in accordance with Section 2.10(c);
(h) sales or other dispositions of accounts receivable of
Subsidiaries in connection with factoring arrangements so long as the
aggregate face amount at any time outstanding of receivables subject to
such arrangements does not exceed (i) $70,000,000 in the aggregate or
(ii) $10,000,000 for receivables of Domestic Subsidiaries;
(i) sales or other dispositions by Global or any Subsidiary of
assets (other than receivables, except to the extent disposed of
incidentally in connection with an asset disposition otherwise
permitted hereby), including Capital Stock of Subsidiaries, for
consideration in an aggregate amount not exceeding $300,000,000;
PROVIDED that (i) each such disposition shall be for a consideration
determined in good faith by the Board of Directors or senior management
of Global to be at least equal to the fair market value (if any) of the
asset sold; (ii) the aggregate amount of all noncash consideration
included in the proceeds of any such disposition may not exceed 25% of
the fair market value of such proceeds, PROVIDED HOWEVER, that
obligations of the type referred to in paragraphs (a) or (e) of the
definition of "Permitted Investments" shall be deemed not to be noncash
proceeds if such obligations are promptly sold for cash and the
proceeds of such sale are included in the calculation of Net Proceeds
from such sale; (iii) no Default or Event of Default shall have
occurred and be continuing immediately prior to or after such
disposition; and (iv) no such disposition shall be made unless UCAR
shall be in compliance, on a pro forma basis of the giving effect to
such disposition, with the covenants contained in Sections 7.11 and
7.12 recomputed as at the last day of the most recently ended fiscal
quarter of UCAR for which financial statements have been delivered
under Section 5.04(a) or (b) as if such disposition had taken place on
the first day of each relevant period for testing such compliance, and,
in the case of any such disposition for consideration in excess of
$50,000,000, Global shall have delivered to the Administrative Agent a
certificate of Global signed by a Responsible Officer of Global to such
effect. Notwithstanding any other provision herein, no Mortgaged
Property (other than the Mortgaged Property a portion of which is
currently leased to UCAR Graph-Tech Inc.) may be sold, transferred,
leased or otherwise disposed of at any time unless the Net Proceeds
thereof shall be applied immediately to the prepayment of Obligations
in accordance with Section 2.10(c) or within 10 Business Days to the
acquisition of property having a value equivalent to or greater than
the value of such Mortgaged Property and such newly acquired property
is thereupon either made a Mortgaged Property subject to a Mortgage on
terms reasonably satisfactory to the Collateral Agent or constitutes an
addition to a Mortgaged Property and is subject to the Mortgage on such
Mortgaged Property (or, if not so applied within 10 Business Days,
deposited in a cash collateral account with the Collateral Agent on
terms satisfactory to the Collateral Agent); and no sale may be made of
the Capital Stock of (x) Global, the Borrower, any LC Subsidiary, UCAR
Carbon Company Inc. or UCAR Holdings II Inc. or (y) any other
Subsidiary, except in connection with the sale of all the outstanding
Capital Stock of such Subsidiary that is held by Global or any other
Subsidiary. Notwithstanding any other provision herein, subject to
Section 7.06(f), Global or any Subsidiary may sell or otherwise
transfer to UCAR Graph-Tech Inc. the Mortgaged Property a portion of
which is currently leased to UCAR Graph-Tech Inc.;
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(j) the sale or other disposition of (i) facilities owned on
the Effective Date in Berlin, Germany and Welland, Canada and (ii) real
property and the related closed facilities in Sheffield, England; and
(k) the sale or other disposition of all or any part of the
Capital Stock of UCAR Graph-Tech Inc., PROVIDED that (i) all the Net
Proceeds received by UCAR in respect thereof (which Net Proceeds shall
include any repayment of intercompany indebtedness made in connection
with such sale or disposition) shall be applied immediately to the
prepayment of Obligations in accordance with Section 2.10(c) and (ii)
in the case of a spin off of such Capital Stock to the shareholders of
UCAR, all intercompany Indebtedness owed to UCAR shall have been repaid
in full and the amount of such repayment shall be deemed to be Net
Proceeds and shall be applied immediately to the prepayment of
Obligations in accordance with Section 2.10(c) (and not reinvested).
SECTION 7.06. DIVIDENDS AND DISTRIBUTIONS. Declare or make,
directly or indirectly, any Restricted Payment, or incur any obligation
(contingent or otherwise) to do so, except that:
(a) any Subsidiary may make any Restricted Payments to Global
or to any Wholly Owned Subsidiary Loan Party (or, in the case of
non-Wholly Owned Subsidiaries, to Global or any Subsidiary and to each
other owner of Capital Stock of such Subsidiary on a pro rata basis (or
more favorable basis from the perspective of Global or such Subsidiary)
based on their relative ownership interests);
(b) Global may make any Restricted Payments to UCAR in respect
of overhead, tax liabilities, legal, accounting and other professional
fees and expenses and any fees and expenses associated with
registration statements filed with the Securities and Exchange
Commission and ongoing public reporting requirements, in each case to
the extent actually incurred by UCAR in connection with the business of
maintaining its status as a public company or its ownership of the
Capital Stock of Global, the Borrower and the Unrestricted
Subsidiaries;
(c) so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, UCAR, Global and
the Subsidiaries may make other Restricted Payments so long as, after
giving effect thereto, the aggregate amount of Restricted Payments made
under this paragraph (c) in any fiscal year shall not exceed the sum of
(i) $25,000,000 and (ii) the lesser of (A) the portion of Excess Cash
Flow for the immediately preceding year that is not required to be
applied to prepay Loans and (B) (x) $10,000,000, if the Leverage Ratio
as of the last day of the most recent fiscal quarter of UCAR for which
financial statements have been delivered under Section 6.04(a) or (b)
is greater than or equal to 2.50 to 1.00, or (y) $25,000,000, if such
Leverage Ratio is less than 2.50 to 1.00;
(d) UCAR or Global may make Restricted Payments to purchase or
redeem shares of Capital Stock (or rights, options or warrants in
respect of such shares) of UCAR (including related stock appreciation
rights or similar securities) held by present or former directors,
officers or employees of UCAR, Global or any Subsidiary or by any Plan
upon such person's death, disability, retirement or termination of
employment or under the terms of any such Plan or any other agreement
under which such shares of stock or related rights were issued;
PROVIDED that the aggregate amount of such purchases or redemptions (or
dividends or distributions to UCAR) under this paragraph (d) shall not
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exceed $5,000,000 per calendar year which, if not used in any year, may
be carried forward to any subsequent calendar year; PROVIDED, HOWEVER,
that the aggregate amount of such purchases or redemptions (or
dividends or distributions to UCAR) that may be made pursuant to this
paragraph (d) shall not exceed $25,000,000;
(e) Global may otherwise make Restricted Payments to UCAR in
order to fund Litigation Payments; PROVIDED that the amount of
Restricted Payments made under this paragraph (e) plus the amount of
payments in respect of intercompany Indebtedness owed to UCAR made
pursuant to Section 7.09(a) to fund Litigation Payments, shall not at
any time exceed the Litigation Reserves in effect on September 30, 1999
(less the amount of charges against such Litigation Reserves prior to
the Effective Date), and the amount available for additional Litigation
Liabilities at such time under Section 7.01(a)(xii) (calculated in the
manner described in Section 4.24);
(f) Global may otherwise make Restricted Payments to UCAR in
an aggregate amount not to exceed $15,000,000 for the sole and
exclusive purpose of making investments in UCAR Graph-Tech Inc.,
PROVIDED that each such investment shall be made in the form of
intercompany Indebtedness evidenced by promissory notes in form
satisfactory to the Collateral Agent that are pledged under the
Domestic Pledge Agreement; and
(g) the Capital Stock of UCAR Graph-Tech Inc. may initially be
distributed (and UCAR shall diligently act to effect such distribution)
to UCAR, and may subsequently be distributed, subject to Section
7.05(k), to the stockholders of UCAR.
SECTION 7.07. TRANSACTIONS WITH AFFILIATES. (a) Sell or
transfer any property or assets to, or purchase or acquire any property or
assets from, or otherwise engage in any other transaction with, any of its
Affiliates or any known direct or indirect holder of 10% or more of any class of
capital stock of UCAR, unless such transaction is (i) otherwise permitted under
this Agreement and (ii) upon terms no less favorable to UCAR, Global, the
Borrower or such Subsidiary, as the case may be, than it would obtain in a
comparable arm's-length transaction with a person which was not an Affiliate,
PROVIDED that the foregoing restriction shall not apply to the indemnification
of directors of UCAR, Global, the Borrower and the Subsidiaries in accordance
with customary practice.
(b) The foregoing paragraph (a) shall not prohibit, to the
extent otherwise permitted under this Agreement, (i) any issuance of securities,
or other payments, awards or grants in cash, securities or otherwise pursuant
to, or the funding of, employment arrangements or stock option, ownership or
purchase plans approved by the Board of Directors of UCAR, (ii) loans or
advances to employees of UCAR, Global, the Borrower or any Subsidiary in
accordance with Section 7.04(e), (iii) transactions among UCAR, Global, the
Borrower and Wholly Owned Subsidiaries and transactions among Wholly Owned
Subsidiaries otherwise permitted by this Agreement, (iv) Permitted Subsidiary
Transfers, (v) the payment of fees and indemnities to directors, officers and
employees of UCAR, Global, the Borrower and the Subsidiaries in the ordinary
course of business, (vi) transactions pursuant to permitted agreements in
existence on the Effective Date and set forth on Schedule 7.07, (vii) payments
pursuant to the Tax Sharing Agreement, (viii) any employment agreements entered
into by UCAR, Global or any of the Subsidiaries in the ordinary course of
business and any payments, awards or grants pursuant thereto, (ix) dividends and
repurchases permitted under Section 7.06, and (x) any purchase by UCAR of
Capital Stock of Global or the Borrower or any contribution by UCAR to the
equity capital of Global or the Borrower.
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SECTION 7.08. BUSINESS OF UCAR, THE BORROWER AND THE
SUBSIDIARIES. (a) In the case of Global and the Subsidiaries (taken as a
whole), cease to engage primarily in the business of manufacturing graphite and
carbon electrodes; (b) in the case of UCAR, engage at any time in any business
or business activity other than (i) the ownership of all the outstanding Capital
Stock of Global and the Borrower together with activities directly related
thereto, (ii) the ownership of Unrestricted Subsidiaries together with
activities directly related thereto, (iii) performance of its obligations under
the Loan Documents, under intercompany Indebtedness and under Indebtedness
incurred in accordance with Section 7.01(b) and (iv) actions required by law to
maintain its status as a corporation and as a public company, and (c) in the
case of the Borrower, own any Capital Stock of any person or engage at any time
in any business activity other than (i) performance of its obligations under the
Loan Documents, (ii) ownership of the Intercompany Notes and (iii) activities
required by law to maintain its status as a corporation.
SECTION 7.09. INDEBTEDNESS AND OTHER MATERIAL AGREEMENTS. (a)
Directly or indirectly, make any payment, retirement, repurchase or redemption
on account of the principal of intercompany Indebtedness owed to UCAR or
directly or indirectly prepay or defease any such Indebtedness, except that
Global may make payments in respect of intercompany Indebtedness owed to UCAR in
order to fund Litigation Payments; PROVIDED that the amount of payments that may
be made to UCAR pursuant to this sentence, plus the amount of Restricted
Payments made to UCAR pursuant to Section 7.06(e), shall not exceed the amount
set forth in Section 7.06(e).
(b) Amend or modify in any manner adverse to the Lenders, or
grant any waiver or release under or terminate in any manner (if such action
shall be adverse to the Lenders), the certificate of incorporation or by-laws of
Global, the Borrower or any Subsidiary.
(c) Permit Global or any Subsidiary to enter into any
agreement or instrument which by its terms restricts the payment of dividends or
the making of cash advances by Global or such Subsidiary to the Borrower or any
Subsidiary that is a direct or indirect parent of such Subsidiary other than
those in effect on the Effective Date and set forth on Schedule 7.09 (or
replacements of such agreements on terms no less favorable to the Lenders), and
those arising under any Loan Document.
SECTION 7.10. CAPITAL EXPENDITURES. Permit the aggregate
amount of Capital Expenditures made by the Subsidiaries (other than to the
extent funded with Available Disposition Proceeds) in any fiscal year to exceed
the aggregate amount set forth below:
YEAR AMOUNT
2000 $80,000,000
2001 80,000,000
2002 80,000,000
2003 80,000,000
2004 80,000,000
2005 80,000,000
2006 81,000,000
2007 84,000,000
PROVIDED, HOWEVER, that (a) Global may in any fiscal year, upon written notice
to the Administrative Agent, increase the amount of Capital Expenditures
permitted to be made pursuant to this Section by an amount up to $10,000,000 by
reducing the amount of Capital Expenditures permitted to be made pursuant to
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this Section in the next succeeding fiscal year by the amount of such increase,
and (b) to the extent that Capital Expenditures made in any fiscal year were
less than the amount set forth above for such fiscal year less any reduction
made for such fiscal year pursuant to clause (a), such unused amount may be
carried forward to the next succeeding fiscal year; PROVIDED that not more that
$20,000,000 may be carried forward from any fiscal year.
SECTION 7.11. INTEREST COVERAGE RATIO. Permit the ratio (the
"INTEREST COVERAGE RATIO") for any four fiscal quarter period ended during any
period set forth below of (a) EBITDA of UCAR, Global, the Borrower and the
Subsidiaries to (b) Cash Interest Expense to be less than the ratio set forth
below for such period:
- ----------------------- ---------------------------------- ---------------------
From and Including: To and Including: Ratio:
- ----------------------- ---------------------------------- ---------------------
Effective Date September 30, 2000 2.50 : 1.00
- ----------------------- ---------------------------------- ---------------------
October 1, 2000 September 30, 2001 2.50 : 1.00
- ----------------------- ---------------------------------- ---------------------
October 1, 2001 September 30, 2002 2.75 : 1.00
- ----------------------- ---------------------------------- ---------------------
October 1, 2002 September 30, 2003 3.00 : 1.00
- ----------------------- ---------------------------------- ---------------------
October 1, 2003 September 30, 2004 3.25 : 1.00
- ----------------------- ---------------------------------- ---------------------
October 1, 2004 September 30, 2005 3.50 : 1.00
- ----------------------- ---------------------------------- ---------------------
October 1, 2005 September 30, 2006 3.50 : 1.00
- ----------------------- ---------------------------------- ---------------------
October 1, 2006 September 30, 2007 3.50 : 1.00
- ----------------------- ---------------------------------- ---------------------
October 1, 2007 Tranche B Maturity Date 3.50 : 1.00
- ----------------------- ---------------------------------- ---------------------
SECTION 7.12. LEVERAGE RATIO. Permit the ratio (the "LEVERAGE
RATIO") of (a) Net Debt as of the last day of any fiscal quarter, which last day
occurs in any period set forth below, to (b) EBITDA for the four quarter period
ended as of such day to be in excess of the ratio set forth below for such
period:
- ------------------------- ---------------------------------- -------------------
From and Including: To and Including: Ratio:
- ------------------------- ---------------------------------- -------------------
Effective Date September 30, 2000 4.25 : 1.00
- ------------------------- ---------------------------------- -------------------
October 1, 2000 September 30, 2001 4.00 : 1.00
- ------------------------- ---------------------------------- -------------------
October 1, 2001 September 30, 2002 4.00 : 1.00
- ------------------------- ---------------------------------- -------------------
October 1, 2002 September 30, 2003 3.75 : 1.00
- ------------------------- ---------------------------------- -------------------
October 1, 2003 September 30, 2004 3.75 : 1.00
- ------------------------- ---------------------------------- -------------------
October 1, 2004 September 30, 2005 3.50 : 1.00
- ------------------------- ---------------------------------- -------------------
October 1, 2005 September 30, 2006 3.50 : 1.00
- ------------------------- ---------------------------------- -------------------
October 1, 2006 September 30, 2007 3.50 : 1.00
- ------------------------- ---------------------------------- -------------------
October 1, 2007 Tranche B Maturity Date 3.50 : 1.00
- ------------------------- ---------------------------------- -------------------
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SECTION 7.13. CAPITAL STOCK OF THE SUBSIDIARIES. Sell,
transfer, lease or otherwise dispose of, or make subject to any subscription,
option, warrant, call, right or other agreement or commitment of any nature, the
Capital Stock of any Subsidiary, other than (a) pursuant to the Loan Documents
or pursuant to a transaction permitted pursuant to Section 7.05 and subject to
Section 2.10(c), (b) sales, transfers and other dispositions of the Capital
Stock of UCAR Graph-Tech Inc. as contemplated by Section 7.05(k), (c) in
connection with transactions of the type described in Section 7.07(b)(i) and (d)
directors' qualifying shares.
ARTICLE VIII
EVENTS OF DEFAULT
If any of the following events ("EVENTS OF DEFAULT") shall
occur:
(a) the Borrower or any LC Subsidiary shall fail to pay any
principal of any Loan or any reimbursement obligation in respect of any
LC Disbursement when and as the same shall become due and payable,
whether at the due date thereof or at a date fixed for prepayment
thereof or otherwise;
(b) the Borrower or any LC Subsidiary shall fail to pay any
interest on any Loan or any reimbursement obligation in respect of any
LC Disbursement, any fee or any other amount (other than an amount
referred to in clause (a) of this Article) payable under this Agreement
or any other Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of
five Business Days;
(c) any representation or warranty made or deemed made by or
on behalf of UCAR, Global, the Borrower or any Subsidiary in or in
connection with any Loan Document or any amendment or modification
thereof or waiver thereunder, or in any report, certificate, financial
statement or other document furnished pursuant to or in connection with
any Loan Document or any amendment or modification thereof or waiver
thereunder, shall prove to have been incorrect in any material respect
when made or deemed made;
(d) UCAR, Global or the Borrower shall fail to observe or
perform any covenant, condition or agreement contained in Article III,
in Section 6.01 (with respect to the existence of UCAR, Global or the
Borrower), 6.05 or 6.08 or in Article VII;
(e) any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in any Loan Document (other
than those specified in clause (a), (b) or (d) of this Article), and
such failure shall continue unremedied for a period of 30 days after
notice thereof from the Administrative Agent to the Borrower (which
notice will be given at the request of the Required Lenders);
(f) UCAR, Global, the Borrower, any LC Subsidiary, any
Intercompany Borrower or any Significant Subsidiary shall fail to make
any payment (whether of principal or interest and regardless of amount)
in respect of any Indebtedness (other than Indebtedness under any Loan
Document) having an aggregate principal or notional amount in excess of
$7,500,000 (such Indebtedness of any such person being called,
"MATERIAL INDEBTEDNESS"), when and as the same shall become due and
payable;
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(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that
enables or permits (with or without the giving of notice, the lapse of
time or both) the holder or holders of any Material Indebtedness or any
trustee or agent on its or their behalf to cause any Material
Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity;
PROVIDED that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of a voluntary sale or transfer of the
property or assets securing such Indebtedness that is permitted under
the Loan Documents;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in or with a court or other
Governmental Authority of competent jurisdiction seeking (i)
liquidation, reorganization or other relief in respect of UCAR, Global,
the Borrower or any Subsidiary or its debts, or of a substantial part
of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or
(ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for UCAR, Global, the Borrower or any
Subsidiary or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the foregoing
shall be entered;
(i) UCAR, Global, the Borrower or any Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition
described in clause (h) of this Article, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for UCAR, Global, the Borrower or any
Subsidiary or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors or (vi) take any action for the purpose of effecting any of
the foregoing;
(j) UCAR, Global, the Borrower or any Significant Subsidiary
shall become unable, admit in writing its inability or fail generally
to pay its debts as they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $7,500,000 (except to the extent covered
by insurance as to which the insurer has acknowledged in writing its
obligation to pay such judgment or judgments) shall be rendered against
UCAR, Global, the Borrower, any LC Subsidiary, any Intercompany
Borrower, any Significant Subsidiary or any combination thereof and the
same shall remain undischarged for a period of 30 consecutive days
during which execution shall not be effectively stayed, or any action
shall be legally taken by a judgment creditor to attach or levy upon
any assets of UCAR, Global, the Borrower, any LC Subsidiary, any
Intercompany Borrower or any Significant Subsidiary to enforce any such
judgment;
(l) a Reportable Event or Reportable Events, or a failure to
make a required installment or other payment (within the meaning of
Section 412(n)(1) of the Code), shall have occurred with respect to any
Plan, (ii) a trustee shall be appointed by a United States district
court to administer any Plan, (iii) the PBGC shall institute
proceedings (including giving notice of intent thereof) to terminate
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any Plan, (iv) the Borrower or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan and the Borrower or
such ERISA Affiliate does not have reasonable grounds for contesting
such Withdrawal Liability or is not contesting such Withdrawal
Liability in a timely and appropriate manner, (v) the Borrower or any
ERISA Affiliate shall have been notified by the sponsor of a
Multiemployer Plan that such Multiemployer Plan is in reorganization or
is being terminated, within the meaning of Title IV of ERISA, (vi) the
Borrower or any ERISA Affiliate shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (vii) any other similar event or condition
shall occur or exist with respect to a Plan; and in each case in
clauses (i) through (vii) above, such event or condition, together with
all other such events or conditions, if any, could reasonably be
expected to have a Material Adverse Effect;
(m) any Lien purported to be created under any Security
Document shall cease to be, or shall be asserted by any Loan Party or
Subsidiary not to be, a valid and perfected Lien on any Collateral,
with the priority required by the applicable Security Document, or any
Guarantee purported to be created under any Loan Document shall cease
to be, or shall be asserted by any Loan Party not to be, in full force
and effect except (i) as a result of the sale or other disposition of
the applicable Collateral in a transaction permitted under the Loan
Documents or (ii) as a result of the Administrative Agent's failure to
maintain possession of any stock certificates, promissory notes or
other instruments delivered to it under any Security Document; or
(n) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower; and in case of any
event with respect to the Borrower described in clause (h) or (i) of this
Article, the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
ARTICLE IX
THE AGENTS
Each of the Lenders and the Issuing Bank hereby irrevocably
appoints each of the Administrative Agent and the Collateral Agent as its agent
and authorizes each Agent to take such actions on its behalf and to exercise
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such powers as are delegated to the Agents by the terms of the Loan Documents,
together with such actions and powers as are reasonably incidental thereto.
Any bank serving as Agent hereunder shall have the same rights
and powers in its capacity as a Lender as any other Lender and may exercise the
same as though it were not an Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
UCAR, Global, the Borrower or any Subsidiary or other Affiliate thereof as if it
were not an Agent hereunder.
The Agents shall not have any duties or obligations except
those expressly set forth in the Loan Documents. Without limiting the generality
of the foregoing, (a) the Agents shall not be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) the Agents shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated by the Loan Documents that the Agents are required to
exercise in writing by the Required Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 10.02), and (c) except as expressly set forth in the Loan Documents, the
Agents shall not have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to UCAR, Global, the Borrower or
any of the Subsidiaries that is communicated to or obtained by any bank serving
as Agent or any of its Affiliates in any capacity. The Agents shall not be
liable for any action taken or not taken by them with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
10.02) or in the absence of their own gross negligence or wilful misconduct. The
Agents shall be deemed not to have knowledge of any Default unless and until
written notice thereof is given to the Agents by UCAR, Global, the Borrower or a
Lender, and the Agents shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with any Loan Document, (ii) the contents of any certificate,
report or other document delivered thereunder or in connection therewith, (iii)
the performance or observance of any of the covenants, agreements or other terms
or conditions set forth in any Loan Document, (iv) the validity, enforceability,
effectiveness or genuineness of any Loan Document or any other agreement,
instrument or document, or (v) the satisfaction of any condition set forth in
Article V or elsewhere in any Loan Document, other than to confirm receipt of
items expressly required to be delivered to the Agents.
The Agents shall be entitled to rely upon, and shall not incur
any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by them to be genuine
and to have been signed or sent by the proper person. The Agents also may rely
upon any statement made to them orally or by telephone and believed by them to
be made by the proper person, and shall not incur any liability for relying
thereon. The Agents may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by them, and shall
not be liable for any action taken or not taken by them in accordance with the
advice of any such counsel, accountants or experts.
The Agents may perform any and all their duties and exercise
their rights and powers by or through any one or more sub-agents appointed by
them. The Agents and any such sub-agent may perform any and all their duties and
exercise their rights and powers through their respective Related Parties. The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Related Parties of each Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as Agent.
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Subject to the appointment and acceptance of a successor to an
Agent as provided in this paragraph, such Agent may resign at any time by
notifying the Lenders, the Issuing Bank and the Borrower. Upon any such
resignation, the Required Lenders shall have the right, in consultation with the
Borrower, to appoint a successor. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the resigning Agent gives notice of its resignation, then the resigning
Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor
Agent which shall be a bank with an office in New York, New York, or an
Affiliate of any such bank. Upon the acceptance of its appointment as Agent
hereunder by a predecessor, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent, and
the resigning Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrower to a successor Agent shall be the
same as those payable to its predecessor unless otherwise agreed between the
Borrower and such successor. After any Agent's resignation hereunder, the
provisions of this Article and Section 10.03 shall continue in effect for the
benefit of such resigning Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Agent.
Each Lender acknowledges that it has, independently and
without reliance upon the Agents or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agents or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or related agreement
or any document furnished hereunder or thereunder.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. NOTICES. Except in the case of notices and
other communications expressly permitted to be given by telephone, all notices
and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to UCAR, Global or the Borrower, to it at [3102 West
End Avenue, Suite 1100, Nashville, TN 37203, Attention of President
(Telecopy No. (615) 760-7651);
(b) if to the Administrative Agent, to Morgan Guaranty Trust
Company of New York, c/o J. P. Morgan Services, Inc., Morgan Christiana
Center, 500 Stanton Christiana Road, Newark, DE 19713-2107, Attention
of Andrew Lipsett (Telecopy No. (302) 634-4061);
(c) if to the Swingline Lender, to it at Morgan Guaranty Trust
Company of New York, c/o J. P. Morgan Services, Inc., Morgan Christiana
Center, 500 Stanton Christiana Road, Newark, DE 19713-2107, Attention
of Andrew Lipsett (Telecopy No. (302) 634-4061);
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(d) if to the Issuing Bank, to it at Morgan Guaranty Trust
Company of New York, c/o J. P. Morgan Services, Inc., Morgan Christiana
Center, 500 Stanton Christiana Road, Newark, DE 19713-2107, Attention
of Andrew Lipsett (Telecopy No. (302) 634-4061); and
(e) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 10.02. WAIVERS; AMENDMENTS. (a) No failure
or delay by the Administrative Agent, the Issuing Bank or any Lender in
exercising any right or power hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any
other or further exercise thereof or the exercise of any other right or
power. The rights and remedies of the Administrative Agent, the Issuing
Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they
would otherwise have. No waiver of any provision of any Loan Document
or consent to any departure by any Loan Party therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b)
of this Section, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan
or issuance of a Letter of Credit shall not be construed as a waiver of
any Default, regardless of whether the Administrative Agent, any Lender
or the Issuing Bank may have had notice or knowledge of such Default at
the time.
(b) Neither this Agreement nor any other Loan
Document nor any provision hereof or thereof may be waived, amended or
modified except, in the case of this Agreement, pursuant to an
agreement or agreements in writing entered into by UCAR, Global, the
Borrower and the Required Lenders or, in the case of any other Loan
Document, pursuant to an agreement or agreements in writing entered
into by the Administrative Agent and the Loan Party or Loan Parties
that are parties thereto, in each case (other than in the case of any
Security Document relating solely to the Obligations or Intercompany
Borrower Obligations of a Foreign Subsidiary) with the consent of the
Required Lenders; PROVIDED that no such agreement shall (i) increase
the Commitment of any Lender without the written consent of such
Lender, (ii) reduce the principal amount of any Loan or LC Disbursement
or reduce the rate of interest thereon, or reduce any fees payable
hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the maturity of any Loan, or any scheduled date of
payment of the principal amount of any Term Loan under Section 2.09, or
the required date of reimbursement of any LC Disbursement, or any date
for the payment of any interest or fees payable hereunder, or reduce
the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of any Commitment, without the written
consent of each Lender affected thereby, (iv) change Section 2.17(b) or
(c) in a manner that would alter the pro rata sharing of payments
required thereby, without the written consent of each Lender, (v)
change any of the provisions of this Section or the percentage set
forth in the definition of "REQUIRED LENDERS" or any other provision of
any Loan Document specifying the number or percentage of Lenders (or
Lenders of any Class) required to waive, amend or modify any rights
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thereunder or make any determination or grant any consent thereunder,
without the written consent of each Lender (or each Lender of such
Class, as the case may be), (vi) release UCAR, Global or any Subsidiary
Loan Party from its Guarantee under any Guarantee Agreement (except as
expressly provided in such Guarantee Agreement or in this Agreement),
or limit its liability in respect of such Guarantee, without the
written consent of each Lender, (vii) release all or substantially all
the Collateral from the Liens of the Security Documents, without the
written consent of each Lender, (viii) change any provisions of any
Loan Document in a manner that by its terms adversely affects the
rights in respect of payments due of Lenders holding Loans of any Class
differently than those of Lenders holding Loans of any other Class,
without the written consent of Lenders holding a majority in interest
of the outstanding Loans and unused Commitments of each affected Class
or (ix) change the rights of the Tranche B Lenders to decline mandatory
prepayments as provided in Section 2.10 without the written consent of
Tranche B Lenders holding a majority of the outstanding Tranche B
Loans; PROVIDED FURTHER that (A) no such agreement shall amend, modify
or otherwise affect the rights or duties of the Administrative Agent,
the Collateral Agent, the Issuing Bank or the Swingline Lender without
the prior written consent of the Administrative Agent, the Collateral
Agent, the Issuing Bank or the Swingline Lender, as the case may be,
and (B) any waiver, amendment or modification of this Agreement that by
its terms affects the rights or duties under this Agreement of the
Revolving Lenders (but not the Tranche A Lenders and Tranche B
Lenders), the Tranche A Lenders (but not the Revolving Lenders and
Tranche B Lenders) or the Tranche B Lenders (but not the Revolving
Lenders and Tranche A Lenders) may be effected by an agreement or
agreements in writing entered into by UCAR, Global, the Borrower and
requisite percentage in interest of the affected Class of Lenders that
would be required to consent thereto under this Section if such Class
of Lenders were the only Class of Lenders hereunder at the time.
Notwithstanding the foregoing, any provision of this Agreement may be
amended by an agreement in writing entered into by UCAR, Global, the
Borrower, the Required Lenders and the Administrative Agent (and, if
their rights or obligations are affected thereby, the Issuing Bank and
the Swingline Lender) if (i) by the terms of such agreement the
Commitment of each Lender not consenting to the amendment provided for
therein shall terminate upon the effectiveness of such amendment and
(ii) at the time such amendment becomes effective, each Lender not
consenting thereto receives payment in full of the principal of and
interest accrued on each Loan made by it and all other amounts owing to
it or accrued for its account under this Agreement.
SECTION 10.03. EXPENSES; INDEMNITY; DAMAGE WAIVER.
(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Agents and their Affiliates, including the reasonable
fees, charges and disbursements of counsel for the Agents, in
connection with the syndication of the credit facilities provided for
herein, the preparation and administration of the Loan Documents or any
amendments, modifications or waivers of the provisions thereof (whether
or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by
the Issuing Bank in connection with the issuance, amendment, renewal or
extension of any Letter of Credit or any demand for payment thereunder
and (iii) all out-of-pocket expenses incurred by the Administrative
Agent, the Collateral Agent, the Issuing Bank or any Lender, including
the reasonable fees, charges and disbursements of any counsel for the
Administrative Agent, the Collateral Agent, the Issuing Bank or any
Lender, in connection with the enforcement or protection of its rights
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in connection with the Loan Documents, including its rights under this
Section, or in connection with the Loans made or Letters of Credit
issued hereunder, including all such out-of-pocket expenses incurred
during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit.
(b) The Borrower shall indemnify the Administrative
Agent, the Collateral Agent, the Issuing Bank and each Lender, and each
Related Party of any of the foregoing persons (each such person being
called an "INDEMNITEE") against, and hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related
expenses, including the reasonable fees, charges and disbursements of
any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i)
the execution or delivery of any Loan Document or any other agreement
or instrument contemplated hereby, the performance by the parties to
the Loan Documents of their respective obligations thereunder or the
consummation of the Transactions or any other transactions contemplated
hereby, (ii) any Loan, Letter of Credit, Intercompany Loan or the use
of the proceeds therefrom (including any refusal by the Issuing Bank to
honor a demand for payment under a Letter of Credit if the documents
presented in connection with such demand do not strictly comply with
the terms of such Letter of Credit), (iii) any actual or alleged
presence or release of Hazardous Materials on or from any Mortgaged
Property or any other property currently or formerly owned or operated
by UCAR, Global, the Borrower or any of the Subsidiaries, or any
Environmental Claim related in any way to Global, the Borrower or any
of the Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the
foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; PROVIDED that
such indemnity shall not, as to any Indemnitee, be available to the
extent that such losses, claims, damages, liabilities or related
expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence
or wilful misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any
amount required to be paid by it to the Administrative Agent, the
Collateral Agent, the Issuing Bank or the Swingline Lender under
paragraph (a) or (b) of this Section, each Lender severally agrees to
pay to the Administrative Agent, the Collateral Agent, the Issuing Bank
or the Swingline Lender, as the case may be, such Lender's pro rata
share (determined as of the time that the applicable unreimbursed
expense or indemnity payment is sought) of such unpaid amount; PROVIDED
that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or
asserted against the Administrative Agent, the Collateral Agent, the
Issuing Bank or the Swingline Lender in its capacity as such. For
purposes hereof, a Lender's "pro rata share" shall be determined based
upon its share of the sum of the total Revolving Exposures, outstanding
Term Loans and unused Commitments at the time.
(d) To the extent permitted by applicable law,
neither UCAR, Global nor the Borrower shall assert, and each hereby
waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to
direct or actual damages) arising out of, in connection with, or as a
result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan, Intercompany Loan or Letter of
Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be
payable not later than 10 days after written demand therefor.
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SECTION 10.04. SUCCESSORS AND ASSIGNS. (a) The
provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any Affiliate of the Issuing Bank
that issues any Letter of Credit), except that none of UCAR, Global and
the Borrower may assign or otherwise transfer any of its rights or
obligations hereunder (or under any Guarantee Agreement) without the
prior written consent of each Lender (and any attempted assignment or
transfer by any of them without such consent shall be null and void).
Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any person (other than the parties hereto, their respective
successors and assigns permitted hereby (including any Affiliate of the
Issuing Bank that issues any Letter of Credit) and, to the extent
expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the Collateral Agent, the Issuing Bank and the
Lenders) any legal or equitable right, remedy or claim under or by
reason of this Agreement.
(b) Any Lender may assign to one or more assignees
all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the time
owing to it); PROVIDED in connection with each such assignment other
than assignments effected under the Second Closing Assignment that (i)
except in the case of an assignment to a Lender or an Affiliate of a
Lender, each of the Borrower and the Administrative Agent (and, in the
case of an assignment of all or a portion of a Revolving Commitment or
any Lender's obligations in respect of its LC Exposure or Swingline
Exposure, the Issuing Bank and the Swingline Lender) must give their
prior written consent to such assignment (which consent shall not be
unreasonably withheld), (ii) except in the case of an assignment to a
Lender or an Affiliate of a Lender or an assignment of the entire
remaining amount of the assigning Lender's Commitment or Loans, the
amount of the Commitment or Loans of the assigning Lender subject to
each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than EUR2,500,000, or
$2,500,000, as applicable, or in the case of an assignment of Tranche B
Loans, $1,000,000, unless each of the Borrower and the Administrative
Agent otherwise consent, (iii) each partial assignment shall be made as
an assignment of a proportionate part of all the assigning Lender's
rights and obligations under this Agreement, except that this clause
(iii) shall not be construed to prohibit the assignment of a
proportionate part of all the assigning Lender's rights and obligations
in respect of one Class of Commitments or Loans, (iv) the parties to
each assignment shall execute and deliver to the Administrative Agent
an Assignment and Acceptance, together with a processing and
recordation fee of $3,500 (or in the case of an assignment relating
solely to Tranche B Loans, $2,500), and (v) the assignee, if it shall
not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire; and PROVIDED FURTHER that any consent of
the Borrower otherwise required under this paragraph shall not be
required if an Event of Default under clause (h) or (i) of Article VIII
has occurred and is continuing. Subject to acceptance and recording
thereof pursuant to paragraph (d) of this Section, from and after the
effective date specified in each Assignment and Acceptance the assignee
thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering
all of the assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16
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and 10.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this
paragraph shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in
accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose
as an agent of the Borrower, shall maintain at one of its offices in
Delaware a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders,
and the Commitment of, and principal amount of the Loans and LC
Disbursements owing to, each Lender pursuant to the terms hereof from
time to time (the "REGISTER"). The entries in the Register shall be
conclusive, and UCAR, Global, the Borrower, the Administrative Agent,
the Collateral Agent, the Issuing Bank and the Lenders may treat each
person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available
for inspection by the Borrower, the Collateral Agent, the Issuing Bank
and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment
and Acceptance executed by an assigning Lender and an assignee, the
assignee's completed Administrative Questionnaire (unless the assignee
shall already be a Lender hereunder), the processing and recordation
fee referred to in paragraph (b) of this Section and any written
consent to such assignment required by paragraph (b) of this Section,
the Administrative Agent shall accept such Assignment and Acceptance
and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it
has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the
Borrower, the Administrative Agent, the Collateral Agent, the Issuing
Bank or the Swingline Lender, sell participations to one or more banks
or other entities (a "PARTICIPANT") in all or a portion of such
Lender's rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans owing to it); PROVIDED that
(i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (iii)
UCAR, Global, the Borrower, the Agents, the Issuing Bank and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells
such a participation shall provide that such Lender shall retain the
sole right to enforce the Loan Documents and to approve any amendment,
modification or waiver of any provision of the Loan Documents; PROVIDED
that such agreement or instrument may provide that such Lender will
not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the first proviso to Section
10.02(b) that affects such Participant. Subject to paragraph (f) of
this Section, the Borrower agrees that each Participant shall be
entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same
extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section. To the extent
permitted by law, each Participant also shall be entitled to the
benefits of Section 10.08 as though it were a Lender, provided such
Participant agrees to be subject to Section 2.17(c) as though it were a
Lender.
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(f) A Participant shall not be entitled to receive
any greater payment under Section 2.14 or 2.16 than the applicable
Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrower's prior
written consent. A Participant that would be a Foreign Lender if it
were a Lender shall not be entitled to the benefits of Section 2.16
unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the
Borrower, to comply with Section 2.16(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this
Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this
Section shall not apply to any such pledge or assignment of a security
interest; PROVIDED that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party
hereto.
SECTION 10.05. SURVIVAL. All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan
Documents and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan
Document shall be considered to have been relied upon by the other
parties hereto and shall survive the execution and delivery of the Loan
Documents and the making of any Loans and issuance of any Letters of
Credit, regardless of any investigation made by any such other party or
on its behalf and notwithstanding that the Administrative Agent, the
Collateral Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the
time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any
Loan or any fee or any other amount payable under this Agreement is
outstanding and unpaid or any Letter of Credit is outstanding and so
long as the Commitments have not expired or terminated. The provisions
of Sections 2.14, 2.15, 2.16 and 10.03 and Article IX shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the
expiration or termination of the Letters of Credit and the Commitments
or the termination of this Agreement or any provision hereof.
SECTION 10.06. COUNTERPARTS; INTEGRATION;
EFFECTIVENESS. This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which
shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement, the other Loan
Documents and any separate letter agreements with respect to fees
payable to the Agents constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to
the subject matter hereof. Except as provided in Section 5.01, this
Agreement shall become effective when it shall have been executed by
the Administrative Agent and when the Administrative Agent shall have
received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as
delivery of a manually executed counterpart of this Agreement.
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SECTION 10.07. SEVERABILITY. Any provision of this
Agreement held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such invalidity, illegality or unenforceability without
affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a
particular jurisdiction shall not invalidate such provision in any
other jurisdiction.
SECTION 10.08. RIGHT OF SETOFF. If an Event of
Default shall have occurred and be continuing, each Lender and each of
its Affiliates is hereby authorized at any time and from time to time,
to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final)
at any time held and other obligations at any time owing by such Lender
or Affiliate to or for the credit or the account of any Loan Party
against any of and all the obligations of the Borrower and the LC
Subsidiaries now or hereafter existing under this Agreement held by
such Lender, irrespective of whether or not such Lender shall have made
any demand under this Agreement and although such obligations may be
unmatured. The rights of each Lender under this Section are in addition
to other rights and remedies (including other rights of setoff) which
such Lender may have.
SECTION 10.09. GOVERNING LAW; JURISDICTION; CONSENT
TO SERVICE OF PROCESS. (a) This Agreement shall be construed in
accordance with and governed by the law of the State of New York.
(b) Each of UCAR, Global and the Borrower hereby
irrevocably and unconditionally submits, for itself and its property,
to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District
Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or
relating to any Loan Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law. Nothing in this
Agreement or any other Loan Document shall affect any right that the
Administrative Agent, the Collateral Agent, the Issuing Bank or any
Lender may otherwise have to bring any action or proceeding relating to
this Agreement or any other Loan Document against UCAR, Global, the
Borrower or its properties in the courts of any jurisdiction.
(c) Each of UCAR, Global and the Borrower hereby
irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Document
in any court referred to in paragraph (b) of this Section. Each of the
parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents
to service of process in the manner provided for notices in Section
10.01. Nothing in this Agreement or any other Loan Document will affect
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the right of any party to this Agreement to serve process in any other
manner permitted by law.
SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY
HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 10.11. HEADINGS. Article and Section
headings and the Table of Contents used herein are for convenience of
reference only, are not part of this Agreement and shall not affect the
construction of, or be taken into consideration in interpreting, this
Agreement.
SECTION 10.12. CONFIDENTIALITY. Each of the
Administrative Agent, the Collateral Agent, the Issuing Bank and the
Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its and
its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that
the persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any
regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any
other party to this Agreement, (e) in connection with the exercise of
any remedies hereunder or any suit, action or proceeding relating to
this Agreement or any other Loan Document or the enforcement of rights
hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to any
assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement,
(g) with the consent of any Loan Party or (h) to the extent such
Information (i) becomes publicly available other than as a result of a
breach of this Section or (ii) becomes available to the Administrative
Agent, the Issuing Bank or any Lender on a nonconfidential basis from a
source other than UCAR, Global or the Borrower. For the purposes of
this Section, "INFORMATION" means all information received from UCAR,
Global or the Borrower relating to UCAR, Global or the Borrower or its
business, other than any such information that is available to the
Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by UCAR, Global or the
Borrower; PROVIDED that, in the case of information received from UCAR,
Global or the Borrower after the date hereof, such information is
clearly identified at the time of delivery as confidential. Any person
required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation
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to do so if such person has exercised the same degree of care to
maintain the confidentiality of such Information as such person would
accord to its own confidential information.
SECTION 10.13. INTEREST RATE LIMITATION.
Notwithstanding anything herein to the contrary, if at any time the
interest rate applicable to any Loan, together with all fees, charges
and other amounts which are treated as interest on such Loan under
applicable law (collectively the "CHARGES"), shall exceed the maximum
lawful rate (the "MAXIMUM RATE") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect
of such Loan hereunder, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent
lawful, the interest and Charges that would have been payable in
respect of such Loan but were not payable as a result of the operation
of this Section shall be cumulated and the interest and Charges payable
to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to
the date of repayment, shall have been received by such Lender.
SECTION 10.14. RELEASE OF LIENS AND GUARANTEES. In
the event that any Loan Party or other Subsidiary disposes of any asset
in a transaction not prohibited by Section 7.05, the Agents are hereby
directed and authorized to take such action and execute such documents
as the Borrower may reasonably request, at the Borrower's sole expense,
to release any Lien on such asset created by any Loan Document and, if
the asset disposed of is all the Capital Stock of any Guarantor that is
owned by the Loan Parties and the Subsidiaries, to release any
Guarantee of such Guarantor under any Guarantee Agreement. Any
representation, warranty or covenant contained in any Loan Document
relating to any such Capital Stock, assets, property or Subsidiary
shall no longer be deemed to be made once such Capital Stock, assets or
property is disposed of as described above. In addition, the
Administrative Agent and the Collateral Agent agree to take such
actions as are reasonably requested by the Borrower and at the
Borrower's expense to terminate the Liens and security interests
created by the Loan Documents when all the Obligations have been paid
in full and all Letters of Credit and Commitments have been terminated
or have expired.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
UCAR INTERNATIONAL INC.,
by
/S/ NANCY M. FALLS
--------------------------------
Name: Nancy M. Falls
Title: Treasurer
UCAR GLOBAL ENTERPRISES INC.,
by
/S/ NANCY M. FALLS
--------------------------------
Name: Nancy M. Falls
Title: Treasurer
UCAR FINANCE INC.,
by
/S/ NANCY M. FALLS
--------------------------------
Name: Nancy M. Falls
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, individually and
as Administrative Agent, Collateral
Agent, Issuing Bank and Swingline
Lender,
by
/S/ DEBORAH DESANTIS
--------------------------------
Name: Deborah DeSantis
Title: Vice President
THE CHASE MANHATTAN BANK,
individually and as Syndication
Agent,
by
/S/ JAMES H. RAMAGE
----------------------------------
Name: James H. Ramage
Title: Managing Director
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CREDIT SUISSE FIRST BOSTON,
individually and as Syndication
Agent,
by
/S/ JOEL GLODOWSKI
---------------------------------
Name: Joel Glodowski
Title: Managing Director
by
/S/ KATHLEEN D. O'BRIEN
---------------------------------
Name: Kathleen D. O'Brien
Title: Director
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Witnesses:
1. /S/ CHERYLYN BRANDT 2. /S/ CHIANN BAO
------------------------------ ----------------------------------------
Name: Cherylyn Brandt Name: Chiann Bao
Identity Card No.: Identity Card No.:
CPF/MF No.: CPF/MF No.:
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SCHEDULE A
- ------------------------------------- ------------------------------------------
LEVERAGE RATIO AMOUNT
- ------------------------------------- ------------------------------------------
greater than or equal to 2.75:1.0 $75,000,000
- ------------------------------------- ------------------------------------------
greater than or equal to 2.5:1.0 $75,000,000
and less than 2.75:1.0
- ------------------------------------- ------------------------------------------
greater than or equal to 2.0:1.0 $100,000,000
and less than 2.5:1.0
- ------------------------------------- ------------------------------------------
less than 2.0:1.0 $125,000,000
- ------------------------------------- ------------------------------------------
The amount set forth below the caption "Amount" in the table above for any date
shall be determined by reference to the Leverage Ratio as of the last day of the
fiscal quarter most recently ended as of such date and for the period (the
"MEASURED PERIOD") referred to in Section 7.12 for which such last day is the
measuring date (and computed as provided in Section 7.12 with respect to each
such Measured Period), and any change shall become effective upon the delivery
to the Administrative Agent of a certificate of Global signed by a Responsible
Officer of Global (which officer's certificate may be delivered prior to
delivery of the relevant financial statements) with respect to the financial
statements to be delivered pursuant to Section 6.04 for the most recently ended
fiscal quarter (a) setting forth in reasonable detail the calculation of the
Leverage Ratio for such Measured Period and at the end of such fiscal quarter
and (b) stating that the signer has reviewed the terms of this Agreement and the
other Loan Documents and has made, or caused to be made under his or her
supervision, a review in reasonable detail of the transactions and condition of
UCAR, Global, the Borrower and the Subsidiaries during such Measured Period, and
that the signer does not have knowledge of the existence as at the date of such
officer's certificate of any Event of Default or Default. It is understood that
such officer's certificate shall be permitted to be delivered prior to, but in
no event later than, the time of the actual delivery of the financial statements
required to be delivered pursuant to Section 6.04. Notwithstanding the
foregoing, at any time during which the Borrower has failed to deliver the
compliance certificate required under Section 6.04(c) with respect to a fiscal
quarter following the date the delivery thereof is due, the Leverage Ratio shall
be deemed, solely for the purposes of this Schedule A, to be greater than
2.75:1.0, until such time as Global shall deliver such compliance certificate.
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CONFORMED COPY
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT, dated as of February 22, 2000, made
by UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"),
UCAR GLOBAL ENTERPRISES INC., a Delaware corporation
("GLOBAL"), UCAR FINANCE INC., a Delaware corporation (the
"BORROWER"), and each Domestic Subsidiary (UCAR, Global, the
Borrower and each Domestic Subsidiary collectively referred to
as the "GUARANTORS"), in favor of MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as collateral agent for the Secured
Parties (such term and each other capitalized term used but
not defined herein having the meaning given it in Article I of
the Credit Agreement dated as of February 22, 2000, among
UCAR, Global, the Borrower, the LC Subsidiaries from time to
time party thereto, the Lenders from time to time party
thereto and Morgan Guaranty Trust Company of New York, as
Administrative Agent, Collateral Agent and Issuing Bank (as
the same may be amended, supplemented or otherwise modified
from time to time, the "CREDIT AGREEMENT")).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans and the Issuing Bank has agreed to issue
Letters of Credit, upon the terms and subject to the conditions set forth
therein;
WHEREAS, UCAR directly or indirectly owns all of the issued
and outstanding stock of the Borrower, Global and each Domestic
Subsidiary;
WHEREAS, the proceeds of the Loans and the availability of the
Letters of Credit will be used to enable the Borrower to make Intercompany
Loans to some of the other Guarantors in connection with the operation of
their respective businesses;
WHEREAS, the Borrower and the other Guarantors are engaged in
related businesses, and each Guarantor will derive substantial direct and
indirect benefit from the making of the Loans and the availability of the
Letters of Credit; and
WHEREAS, it is a condition precedent to the obligations of the
Lenders to make the Loans and the Issuing Bank to issue the Letters of
Credit that the Guarantors shall have executed and delivered this
Guarantee to the Collateral Agent for the ratable benefit of the Secured
Parties.
<PAGE>
2
NOW, THEREFORE, in consideration of the premises and to induce
the Secured Parties to enter into the Credit Agreement and to induce the
Lenders to make their respective Loans and the Issuing Bank and to issue
Letters of Credit, each of the Guarantors hereby agrees with the
Collateral Agent, for the ratable benefit of the Secured Parties, as
follows:
1. DEFINED TERMS. (a) Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have the
meanings given in the Credit Agreement.
(b) "GUARANTEE": this Guarantee Agreement, as the same
may be amended, supplemented or otherwise modified from time to time.
(c) "OBLIGATIONS": (a) the due and punctual payment of (i) the
principal of and premium, if any, and interest (including interest
accruing during the pendency of any bankruptcy, insolvency, receivership
or other similar proceeding, regardless of whether allowed or allowable in
such proceeding) on the Loans, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, (ii)
each payment required to be made under the Credit Agreement in respect of
any Letter of Credit, when and as due, including payments in respect of
reimbursement of disbursements, interest thereon and obligations to
provide cash collateral and (iii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of UCAR, Global, the Borrower and the
Subsidiaries under the Credit Agreement and the other Loan Documents
(including, without limitation, all monetary obligations of the
Intercompany Borrowers under the Intercompany Notes and Intercompany
Borrower Agreements, but only for so long as the Intercompany Notes and
the rights of the Borrower under the Intercompany Borrower Agreements are
pledged to the Collateral Agent under one or more Pledge Agreements as
security for the other Obligations), (b) the due and punctual performance
of all covenants, agreements, obligations and liabilities of the Loan
Parties under or pursuant to the Credit Agreement and the other Loan
Documents, (c) unless otherwise agreed upon in writing by the applicable
Lender party thereto, the due and punctual payment and performance of all
obligations of the Borrower and the Subsidiaries, monetary or otherwise,
under each Interest/Exchange Rate Protection Agreement entered into with
any counterparty that (i) was a Lender (or an Affiliate thereof) at the
time such Interest/Exchange Rate Protection Agreement was entered into or
(ii) (A) was a "Lender" (or an Affiliate thereof) as defined in the
Existing Credit Agreements at the time such Interest/Exchange Rate
Protection Agreement was entered into and (B) was one of the initial
Lenders under the Credit Agreement (or an Affiliate thereof) and (d) all
obligations of the Guarantors under the Guarantee Agreements;
(d) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Guarantee shall refer to this Guarantee
<PAGE>
3
as a whole and not to any particular provision of this Guarantee, and
section references are to this Guarantee unless otherwise specified. The
words "include", "includes" and "including" shall be deemed to be followed
by the phrase, "without limitation".
(e) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. GUARANTEE. (a) Subject to the provisions of Section 2(b),
each Guarantor hereby, jointly and severally, unconditionally and
irrevocably, as a primary obligor and not merely as a surety, guarantees
to the Collateral Agent, for the ratable benefit of the Secured Parties
and their respective successors, endorsees, transferees and assigns, the
due, punctual and complete payment and performance by the other Loan
Parties and the LC Subsidiaries, when and as due, whether at the stated
maturity, by acceleration, upon one or more dates set for prepayment, or
otherwise of the Obligations.
(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor
hereunder and under the other Loan Documents shall in no event exceed the
amount which can be guaranteed by such Guarantor under applicable Federal
and state laws relating to the insolvency of debtors (giving effect to the
right of contribution set forth in Section 3 and in the Indemnity,
Subrogation and Contribution Agreement).
(c) Each Guarantor further agrees to pay any and all
reasonable expenses (including all reasonable fees and disbursements of
counsel) which may be paid or incurred by any Secured Party in enforcing,
or obtaining advice of counsel in respect of, any rights with respect to,
or collecting, any or all of the Obligations and/or enforcing any rights
with respect to, or collecting against, such Guarantor under this
Guarantee. This Guarantee shall remain in full force and effect until the
Obligations are paid in full, no Letters of Credit are outstanding and the
Commitments are terminated, notwithstanding that from time to time prior
thereto while the Commitments are in effect any Loan Party or any LC
Subsidiary may be free from any Obligations.
(d) Each Guarantor agrees that the Obligations may at any time
and from time to time exceed the maximum amount of the liability of such
Guarantor hereunder without impairing this Guarantee or affecting the
rights and remedies of the Collateral Agent or any Secured Party
hereunder.
(e) Each Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Collateral Agent for the
benefit of any Secured Party on account of its liability hereunder, it
will notify the Collateral Agent in writing that such payment is made
under this Guarantee for such purpose, provided that the failure of such
Guarantor to provide such notice shall not preclude the application of
such payment to the complete or partial satisfaction of such Guarantor's
obligations hereunder following such Guarantor's notice to the Collateral
Agent of such payment.
<PAGE>
4
3. RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that to
the extent that any Guarantor shall have paid more than its proportionate
share of any payment made hereunder, such Guarantor shall have the rights
with respect to such amounts set forth in the Indemnity, Subrogation and
Contribution Agreement. Each Guarantor's right of contribution shall be
subject to the terms and conditions of Section 4 hereof. The provisions of
this Section shall in no respect limit the obligations and liabilities of
any Guarantor to the Secured Parties, and each Guarantor shall (subject to
Section 2(b)) remain liable to the Secured Parties for the full amount
guaranteed by such Guarantor hereunder.
4. NO SUBROGATION. Notwithstanding any payment or payments
made by any of the Guarantors hereunder or any setoff or application of
funds of any of the Guarantors by any Secured Party, no Guarantor shall be
entitled to be subrogated to any of the rights of any Secured Party
against any Credit Party or any other Guarantor or any collateral security
or guarantee or right of offset held by any Secured Party for the payment
of the Obligations, nor shall any Guarantor seek or be entitled to seek
any contribution or reimbursement from any Credit Party or any other
Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Secured Parties by any Credit Party on account of
the Obligations are paid in full, no Letters of Credit are outstanding and
the Commitments are terminated. If any amount shall be paid to any
Guarantor on account of such subrogation rights at any time when all of
the Obligations shall not have been paid in full, Letters of Credit are
outstanding and the Commitments shall not have been terminated, such
amount shall be held by such Guarantor in trust for the Secured Parties,
segregated from other funds of such Guarantor, and shall forthwith upon
receipt by such Guarantor be turned over to the Collateral Agent in the
exact form received by such Guarantor (duly endorsed by such Guarantor to
the Collateral Agent, if required), to be applied against the Obligations,
whether matured or unmatured, at such time and in such order as the
Collateral Agent may determine.
5. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF
RIGHTS. Each Guarantor shall remain obligated hereunder notwithstanding
that, without any reservation of rights against any Guarantor and without
notice to or further assent by any Guarantor, any demand for payment of
any of the Obligations made by any Secured Party may be rescinded by such
party and any of the Obligations continued, and the Obligations, or the
liability of any other party upon or for any part thereof, or any
collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered
or released by any Secured Party, and the Credit Agreement, any other Loan
Document, any Interest/Exchange Rate Protection Agreement and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the
Collateral Agent (or the Required Lenders, as the case may be) or the
relevant Secured Party (in the case of any such Interest/Exchange Rate
Protection Agreement) may deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by any
Secured Party for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. No Secured Party shall have any
<PAGE>
5
obligation to protect, secure, perfect or insure any Lien at any time held
by it as security for the Obligations or for this Guarantee or any
property subject thereto. When making any demand hereunder against any of
the Guarantors, any Secured Party may, but shall be under no obligation
to, make a similar demand on any Credit Party or any other Guarantor or
guarantor, and any failure by any Secured Party to make any such demand or
to collect any payments from any Credit Party or any such other Guarantor
or guarantor or any release of any Credit Party or such other Guarantor or
guarantor shall not relieve any of the Guarantors in respect of which a
demand or collection is not made or any of the Guarantors not so released
of their several obligations or liabilities hereunder, and shall not
impair or affect the rights and remedies, express or implied, or as a
matter of law, of any Secured Party against any of the Guarantors.
6. SECURITY. Each of the Guarantors authorizes each of the
other Secured Parties, in accordance with the terms and subject to the
conditions set forth in the Security Documents to which such Guarantor is
a party, to (a) take and hold security for the payment of this guarantee
or the Obligations and exchange, enforce, waive and release any such
security, (b) apply such security and direct the order or manner of sale
thereof as they in their sole discretion determine and (c) release or
substitute any one or more endorsees, other guarantors or other obligors.
7. GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by any Secured Party
upon this Guarantee or acceptance of this Guarantee; the Obligations, and
any of them, shall conclusively be deemed to have been created, contracted
or incurred, or renewed, extended, amended or waived, in reliance upon
this Guarantee; and all dealings between any Credit Party and any of the
Guarantors, on the one hand, and any of the Secured Parties, on the other
hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon this Guarantee. Each Guarantor waives
diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon any Credit Party or any of the Guarantors with
respect to the Obligations. Each Guarantor understands and agrees that
this Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment, and not of collection, and without
regard to (a) the validity, regularity or enforceability of the Credit
Agreement, any other Loan Document, any Interest/Exchange Rate Protection
Agreement, any of the Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time
or from time to time held by any Secured Party, (b) any defense, set-off
or counterclaim (other than a defense of payment or performance) which may
at any time be available to or be asserted by any Credit Party against any
Secured Party, or (c) any other circumstance whatsoever (with or without
notice to or knowledge of any Secured Party, any Credit Party or such
Guarantor) which may or might in any manner or to any extent vary the risk
of the Guarantor or otherwise constitutes, or might be construed to
constitute, an equitable or legal discharge of any Credit Party for the
Obligations, or of such Guarantor under this Guarantee, in bankruptcy or
in any other instance. When pursuing its rights and remedies hereunder
<PAGE>
6
against any Guarantor, any Secured Party may, but shall be under no
obligation to, pursue such rights and remedies as it may have against any
Credit Party or any other person (including any other Guarantor) or
against any collateral security or guarantee for the Obligations or any
right of offset with respect thereto, and any failure by any Secured Party
to pursue such other rights or remedies or to collect any payments from
any Credit Party or any such other person (including any other Guarantor)
or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of any Credit Party or
any such other person (including any other Guarantor) or any such
collateral security, guarantee or right of offset, shall not relieve such
Guarantor of any liability hereunder, and shall not impair or affect the
rights and remedies, whether express, implied or available as a matter of
law, of any Secured Party against such Guarantor. This Guarantee shall
remain in full force and effect and be binding in accordance with and to
the extent of its terms upon each Guarantor and the successors and assigns
thereof, and shall inure to the benefit of each Secured Party, and its
successors, indorsees, transferees and assigns, until all the Obligations
and the obligations of the Guarantor under this Guarantee shall have been
satisfied by payment in full, no Letters of Credit shall be outstanding
and the Commitments shall have been terminated, notwithstanding that from
time to time while the Commitments are in effect during the term of the
Credit Agreement any Credit Party may be free from any Obligations.
8. REINSTATEMENT. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment,
or any part thereof, of any of the Obligations is rescinded or must
otherwise be restored or returned by any Secured Party for any reason
whatsoever, including, without limitation, upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of any Credit Party
or any Guarantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, any
Credit Party or any Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
9. PAYMENTS. Each Guarantor hereby guarantees that
payments hereunder will be paid to the Collateral Agent without setoff
or counterclaim in Dollars at the office of the Collateral Agent c/o
J.P. Morgan Services, Inc., Morgan Christiana Center, 500 Stanton
Christiana Road, Newark, DE 19713-2107.
10. INFORMATION. Each of the Guarantors assumes all
responsibility for being and keeping itself informed of the Credit
Parties' financial condition and assets and of all other circumstances
bearing upon the risk of nonpayment of the Obligations and the nature,
scope and extent of the risks that such Guarantor assumes and incurs
hereunder, and agrees that none of the Secured Parties will have any duty
to advise any of the Guarantors of information known to it or any of them
regarding such circumstances or risks.
<PAGE>
7
11. REPRESENTATIONS AND WARRANTIES. Each Guarantor
represents and warrants to and with each Secured Party that all
representations and warranties in the Loan Documents that relate to
such Guarantor are true and correct in all material respects.
12. COVENANTS. Each of the Guarantors covenants and agrees
with the Secured Parties that, from and after the date of this Guarantee
until the earlier to occur of (i) the date upon which the Obligations are
paid in full, no Letters of Credit are outstanding and the Commitments are
terminated and (ii) the date that such Guarantor is released from its
guarantee hereunder in accordance with Section 15, unless the Required
Lenders shall otherwise consent in writing, it will comply with each
covenant set forth in Articles VI and VII of the Credit Agreement to the
extent that it relates to such Guarantor.
13. AUTHORITY OF COLLATERAL AGENT. Each Guarantor acknowledges
that the rights and responsibilities of the Collateral Agent under this
Guarantee with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, right,
request, judgment or other right or remedy provided for herein or
resulting or arising out of this Guarantee shall, as between the
Collateral Agent and the other Secured Parties, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Collateral Agent and
each Guarantor, the Collateral Agent shall be conclusively presumed to be
acting as agent for the other Secured Parties with full and valid
authority so to act or refrain from acting.
14. NOTICES. All notices, requests and demands to or upon
any Secured Party or any Guarantor under this Guarantee shall be given
or made in accordance with Section 10.01 of the Credit Agreement and
addressed as follows:
(a) if to any Secured Party, UCAR, Global or the Borrower, at
its address or transmission number for notices provided in Section
10.01 of the Credit Agreement; and
(b) if to any other Guarantor, at its address or transmission
number for notices set forth on Schedule I hereto.
The Collateral Agent, each Secured Party and each Guarantor
may change its address and transmission numbers for notices by notice in
the manner provided in this Section.
15. RELEASE. Each Guarantor (other than UCAR, Global and the
Borrower) shall be released from its guarantee hereunder in the event that
all of the capital stock of such Guarantor shall be sold, transferred or
otherwise disposed of, in accordance with the terms of the Credit
Agreement, by Global or any other person that shall own such stock, to a
person that is not UCAR, Global, the Borrower or a Subsidiary.
<PAGE>
8
16. COUNTERPARTS. This Guarantee may be executed by one
or more of the Guarantors in any number of separate counterparts, and
all of said counterparts taken together shall be deemed to constitute
one and the same instrument. A set of the counterparts of this
Guarantee signed by all the Guarantors shall be lodged with the
Collateral Agent.
17. SEVERABILITY. Any provision of this Guarantee or any other
Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. The parties shall endeavor in good-faith
negotiations to replace the prohibited or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible
to that of the prohibited or unenforceable provisions.
18. RIGHT OF SETOFF. If an Event of Default shall have
occurred and be continuing under the Credit Agreement, each Secured Party
is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Secured Party to or
for the credit or the account of any Guarantor against any of and all the
obligations of such Guarantor now or hereafter existing under this
Guarantee irrespective of whether or not such Secured Party shall have
made any demand under this Guarantee and although such obligations may be
unmatured. The rights of each Secured Party under this Section 18 are in
addition to other rights and remedies (including other rights of setoff)
and such Secured Party may have.
19. INTEGRATION. This Guarantee represents the agreement
of each Guarantor with respect to the subject matter hereof and there
are no promises or representations by any Guarantor or any Secured
Party relative to the subject matter hereof not reflected herein.
20. AMENDMENTS IN WRITING; NO WAIVER, CUMULATIVE Remedies.
None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed
by each Guarantor and the Collateral Agent, provided that any provision of
this Guarantee may be waived by the Required Lenders pursuant to a letter
or agreement executed by the Collateral Agent or by telecopy transmission
from the Collateral Agent.
(b) No Secured Party shall by any act (except by a written
instrument pursuant to Section 20(a) hereof) or delay be deemed to have
waived any right or remedy hereunder or to have acquiesced in any Default
or Event of Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the part
of any Secured Party, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right,
<PAGE>
9
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver
by any Secured Party of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which such Secured
Party would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
21. SECTION HEADINGS. The section headings used in this
Guarantee are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the
interpretation hereof.
22. SUCCESSORS AND ASSIGNS. This Guarantee shall be binding
upon the successors and assigns of each Guarantor and shall inure to the
benefit of each Guarantor and each Secured Party and their successors and
assigns; PROVIDED that this Guarantee may not be assigned by any Guarantor
without the prior written consent of the Collateral Agent.
23. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK.
24. SUBMISSION TO JURISDICTION; WAIVERS. Each Guarantor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Guarantee and the other Loan Documents
to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of
the United States of America for the Southern District of New York,
and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered
or certified mail (or any substantially similar form of mail),
postage prepaid, to such Guarantor at its address set forth in
Section 14 or at such other address of which the Collateral Agent
shall have been notified pursuant thereto;
<PAGE>
10
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.
25. ADDITIONAL GUARANTORS. Pursuant to Section 6.11 of the
Credit Agreement, each Domestic Subsidiary that was not in existence or
not a Domestic Subsidiary on the date thereof is required to enter into
this Agreement as a Guarantor upon becoming a Domestic Subsidiary. Upon
execution and delivery, after the date hereof, by the Collateral Agent and
such Domestic Subsidiary of an instrument in the form of Annex 1, such
Domestic Subsidiary shall become a Guarantor hereunder with the same force
and effect as if originally named as a Guarantor hereunder. The execution
and delivery of any such instrument shall not require the consent of any
Guarantor hereunder. The rights and obligations of each Guarantor
hereunder shall remain in full force and effect notwithstanding the
addition of any new Guarantor as a party to this Guarantee.
26. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE
OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 26.
<PAGE>
11
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee to be duly executed and delivered by its duly authorized officer
as of the day and year first above written.
EACH OF THE GUARANTORS
LISTED ON SCHEDULE I HERETO
by
/S/ NANCY M. FALLS
---------------------------------
Name: Nancy M. Falls
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
by
/S/ DEBORAH DESANTIS
---------------------------------
Name: Deborah DeSantis
Title: Vice President
WITNESSES:
1. ____________________________ 2. ___________________________
Name: Name:
Drivers License No.: ___________ Drivers License No.: __________
Social Security No.: ____________ Social Security No.: __________
<PAGE>
State of New York )
) ss.: New York
County of New York )
On this the day of February, 2000, before me, __________________________,
the undersigned officer, personally appeared
______________________________ and _______________________, known to me to
be the persons whose names are subscribed to the within instrument and
each acknowledged that he(she) executed the same for the purposes therein
contained.
IN WITNESS WHEREOF I hereunto set my hand.
----------------------------
Notary Public
My Commission expires ____________________.
<PAGE>
SCHEDULE I
TO GUARANTEE AGREEMENT
GUARANTORS
UCAR International Inc.
UCAR Global Enterprises Inc.
UCAR Finance Inc.
UCAR Carbon Company Inc.
UCAR Holdings II Inc.
UCAR Holdings III Inc.
UCAR International Trading Inc.
UCAR Composites Inc.
[Addresses and telecopy numbers for notices]
<PAGE>
SUPPLEMENT NO. dated as of [], to the Guarantee
Agreement dated as of February 2, 2000 (the "GUARANTEE
AGREEMENT"), among each of the Guarantors (such term and
each other capitalized term used but not defined having
the meaning given it in the Guarantee Agreement, and if
not defined therein, having the meaning given it in
Article I of the Credit Agreement) party thereto
(together with the Borrower, the "GUARANTORS") and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as collateral
agent (the "COLLATERAL AGENT") for the Secured Parties.
A. Reference is made to the Credit Agreement dated as of
February 22, 2000 (as the same may be amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT"), among UCAR
International Inc., a Delaware corporation ("UCAR"), UCAR Global
Enterprises Inc., a Delaware corporation ("GLOBAL"), 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 Morgan
Guaranty Trust Company of New York, as Administrative Agent, Collateral
Agent and Issuing Bank.
B. The Guarantors have entered into the Guarantee Agreement in
order to induce the Lenders to make Loans and induce the Issuing Bank to
issue Letters of Credit pursuant to, and upon the terms and subject to the
conditions specified in, the Credit Agreement. Pursuant to Section 6.11 of
the Credit Agreement, each Domestic Subsidiary that was not in existence
or not a Domestic Subsidiary on the date thereof is required to enter into
the Guarantee Agreement as a Guarantor upon becoming a Domestic
Subsidiary. Section 25 of the Guarantee Agreement provides that additional
Domestic Subsidiaries may become Guarantors under the Guarantee Agreement
by execution and delivery of an instrument in the form of this Supplement.
The undersigned (the "NEW GUARANTOR") is a Domestic Subsidiary and is
executing this Supplement in accordance with the requirements of the
Credit Agreement to become a Guarantor under the Guarantee Agreement in
order to induce the Lenders to make additional Loans and the Issuing Bank
to issue additional Letters of Credit and as consideration for Loans
previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree
as follows:
SECTION 1. In accordance with Section 25 of the Subsidiary
Guarantee Agreement, the New Guarantor by its signature below becomes a
Guarantor under the Guarantee Agreement with the same force and effect as
if originally named therein as a Guarantor and the New Guarantor hereby
<PAGE>
2
agrees to all the terms and provisions of the Guarantee Agreement
applicable to it as a Guarantor thereunder. Each reference to a
"GUARANTOR" and a "DOMESTIC SUBSIDIARY" in the Guarantee Agreement shall
be deemed to include the New Guarantor. The Guarantee Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the
Secured Parties that this Supplement has been duly authorized, executed
and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, subject
to the effects of applicable bankruptcy, insolvency or similar laws
effecting creditors' rights generally and equitable principles of general
applicability.
SECTION 3. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument. This
Supplement shall become effective when the Collateral Agent shall have
received counterparts of this Supplement that, when taken together, bear
the signatures of the New Guarantor and the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the
Subsidiary Guarantee Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in any
respect, neither party hereto shall be required to comply with such
provision for so long as such provision is held to be invalid, illegal or
unenforceable, but the validity, legality and enforceability of the
remaining provisions contained herein and in the Guarantee Agreement shall
not in any way be affected or impaired. The parties hereto shall endeavor
in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be
in writing and given as provided in the Credit Agreement. All
communications and notices hereunder to the New Guarantor shall be given
to it at the address set forth under its signature, with a copy to the
Borrower.
<PAGE>
3
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent
have duly executed this Supplement to the Subsidiary Guarantee Agreement
as of the day and year first above written.
[NAME OF NEW GUARANTOR],
by
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, Collateral Agent,
by
Name:
Title:
<PAGE>
CONFORMED COPY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of February 22, 2000, made by
UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR
GLOBAL ENTERPRISES INC., a Delaware corporation ("GLOBAL"), UCAR
FINANCE INC., a Delaware corporation (the "BORROWER"), and the
subsidiaries of UCAR from time to time party hereto (the "SUBSIDIARY
GRANTORS", and together with UCAR, Global and the Borrower, the
"GRANTORS") in favor of MORGAN GUARANTY TRUST COMPANY OF NEW YORK as
collateral agent for the Secured Parties (such term and each other
capitalized term used but not otherwise defined herein having the
meaning given it in Article I of the Credit Agreement dated as of
February 22, 2000 (as the same may be amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT") among
UCAR, Global, the Borrower, the LC Subsidiaries from time to time
party thereto, the Lenders from time to time party thereto and
Morgan Guaranty Trust Company of New York, as Administrative Agent,
Collateral Agent and Issuing Bank).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrower and the Issuing Bank has agreed
to issue Letters of Credit for the accounts of the LC Subsidiaries upon the
terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligations of the
Lenders to make the Loans and the Issuing Bank to issue the Letters of Credit
that the Grantors guarantee payment and performance of the obligations under the
Credit Agreement and the other Loan Documents;
WHEREAS, in satisfaction of such condition, the Grantors have
entered into certain Guarantee Agreements for the benefit of the Secured
Parties;
WHEREAS, it is a further condition precedent to the obligations of
the Lenders to make the Loans and the Issuing Bank to issue the Letters of
Credit that the Grantors shall have executed and delivered this Security
Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the premises and to induce the
Secured Parties to enter into the Credit Agreement and to induce the Lenders to
make their respective Loans and the Issuing Bank to issue Letters of Credit,
each of the Grantors hereby agrees with the Collateral Agent, for the ratable
benefit of the Secured Parties, as follows:
1. DEFINED TERMS.
1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given in the
Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Chattel Paper, Farm Products and Instruments.
(b) The following terms shall have the following meanings:
"ACCOUNT DEBTOR": any Person who may become obligated to any Grantor
under, with respect to or on account of an Account.
"ACCOUNTS": with respect to each Grantor, any and all right, title
and interest of such Grantor to payment for goods and services sold or
leased, including any such right evidenced by chattel paper, whether due
or to become due, whether or not it has been earned or performed, and
whether now or hereafter acquired or arising in the future, including,
without limitation, accounts receivable from Affiliates of such person.
"ACCOUNTS RECEIVABLE": with respect to each Grantor, all right,
title and interest of such Grantor to Accounts and all of its right, title
and interest in any returned goods, together with all rights, titles,
securities and guarantees with respect thereto, including any rights to
stoppage in transit, replevin, reclamation and resales, and all related
security interests, liens and pledges, whether voluntary or involuntary in
each case whether due or to become due, whether now or hereafter arising
in the future.
"AGREEMENT": this Security Agreement, as the same may be amended,
modified or otherwise supplemented from time to time.
"CODE": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"COLLATERAL": the meaning assigned to such term in Section 2 of this
Agreement.
"COLLATERAL ACCOUNT": any collateral account established by the
Collateral Agent as provided in Section 5.3 or Section 7.2.
<PAGE>
3
"COMMODITY ACCOUNT": an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a
Commodity Customer.
"COMMODITY CONTRACT": a commodity futures contract, an option on a
commodity futures contract, a commodity option or any other contract that,
in each case, is (a) traded on or subject to the rules of a board of trade
that has been designated as a contract market for such a contract pursuant
to the federal commodities laws or (b) traded on a foreign commodity board
of trade, exchange or market, and is carried on the books of a Commodity
Intermediary for a Commodity Customer.
"COMMODITY CUSTOMER": a Person for whom a Commodity Intermediary
carries a Commodity Contract on its books.
"COMMODITY INTERMEDIARY": (a) a Person who is registered as a
futures commission merchant under the federal commodities laws or (b) a
Person who in the ordinary course of its business provides clearance or
settlement services for a board of trade that has been designated as a
contract market pursuant to federal commodities laws.
"CONTRACTS": with respect to each Grantor, all rights of such
Grantor under contracts and agreements to which such Grantor is a party or
under which such Grantor has any right, title or interest or to which such
Grantor or any property of such Grantor is subject, as the same may from
time to time be amended, supplemented or otherwise modified, including,
without limitation, (a) all rights of such Grantor to receive moneys due
and to become due to it thereunder or in connection therewith, (b) all
rights of such Grantor to damages arising out of, or for, breach or
default in respect thereof and (c) all rights of such Grantor to exercise
all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its rights
under such contract or agreement is permitted without the consent of any
other person, or is permitted with consent if all necessary consents to
such grant of a security interest have been obtained from such other
person (it being understood that the foregoing shall not be deemed to
obligate such Grantor to obtain such consents); PROVIDED that the
foregoing limitation shall not affect, limit, restrict or impair the grant
by such Grantor of a security interest pursuant to this Agreement in any
Account or any money or other amounts due or to become due under any such
contract or agreement to the extent provided in Section 9-318 of the Code
as in effect on the date hereof.
<PAGE>
4
"DOCUMENTS": with respect to each Grantor, all Instruments, files,
records, ledger sheets, and documents covering or relating to any of the
Collateral.
"ENTITLEMENT HOLDER": a Person identified in the records of a
Securities Intermediary as the Person having a Security Entitlement
against the Securities Intermediary. If a Person acquires a Security
Entitlement by virtue of Section 8-501(b)(2) or (3) of the Uniform
Commercial Code, such Person is the Entitlement Holder.
"EQUIPMENT": with respect to each Grantor, all equipment, furniture
and furnishings, tools, accessories, parts and supplies of every kind and
description, wherever located, now or hereafter existing, and all
improvements, accessions or appurtenances thereto, including Fixtures, and
all other tangible personal property whether or not similar to any of the
foregoing items which are now or hereafter acquired by such Grantor (it
being understood that "Equipment" does not include Vehicles).
"FINANCIAL ASSET": (a) a Security, (b) an obligation of a Person or
a share, participation or other interest in a Person or in property or an
enterprise of a Person, which is, or is of a type, dealt with in or traded
on financial markets, or which is recognized in any area in which it is
issued or dealt in as a medium for investment or (c) any property that is
held by a Securities Intermediary for another Person in a Securities
Account if the Securities Intermediary has expressly agreed with the other
Person that the property is to be treated as a Financial Asset under
Article 8 of the Uniform Commercial Code. As the context requires, the
term Financial Asset shall mean either the interest itself or the means by
which a Person's claim to it is evidenced, including a certificated or
uncertificated Security, a certificate representing a Security or a
Security Entitlement.
"FIXTURES": with respect to each Grantor, all items that would
otherwise constitute items of Collateral, whether now owned or hereafter
acquired, that become so related to particular real estate that an
interest in them arises under any real estate law applicable thereto.
"GENERAL INTANGIBLES": with respect to each Grantor, the meaning
assigned to such term in the Uniform Commercial Code in effect in the
State of New York on the date hereof to the extent, in the case of any
General Intangibles arising under any contract or agreement, that the
grant by such Grantor of a security interest pursuant to this Agreement in
its rights under such contract or agreement is permitted without the
consent of any other person, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from such
other person (it being understood that the foregoing shall not be deemed
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5
to obligate such Grantor to obtain such consents); PROVIDED that the
foregoing limitation shall not affect, limit, restrict or impair the grant
by such Grantor of a security interest pursuant to this Agreement in any
Account or General Intangible or any money or other amounts due or to
become due under any such contract or agreement to the extent provided in
Section 9-318 of the Code as in effect on the date hereof; PROVIDED,
FURTHER, that "General Intangibles" shall not include any of the items
referred to in Section 2(h).
"INDEMNITEES": the Secured Parties and their respective officers,
directors, trustees, affiliates and controlling persons.
"INVENTORY": all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be
furnished by any Grantor under contracts of service, or consumed in any
Grantor's business, including raw materials, intermediates, work in
process, packaging materials, finished goods, semi-finished inventory,
scrap inventory, manufacturing supplies and spare parts, and all such
goods that have been returned to or repossessed by or on behalf of any
Grantor.
"INVESTMENT PROPERTY": all Securities (whether certificated or
uncertificated), Financial Assets, Security Entitlements, Securities
Accounts, Commodity Contracts and Commodity Accounts of any Grantor,
whether now owned or hereafter acquired by any Grantor.
"OBLIGATIONS": with respect to each Grantor, all obligations of UCAR
and its subsidiaries (including, without limitation, Global, the Borrower,
each LC Subsidiary and such Grantor) in respect of (a) the due and
punctual payment of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, (ii) each payment required to be made under the
Credit Agreement in respect of any Letter of Credit, when and as due,
including payments in respect of reimbursement of disbursements, interest
thereon and obligations to provide cash collateral and (iii) all other
monetary obligations, including fees, costs, expenses and indemnities,
whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding), of UCAR,
Global, the Borrower and the Subsidiaries under the Credit Agreement and
the other Loan Documents (including, without limitation, all monetary
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6
obligations of the Intercompany Borrowers under the Intercompany Notes and
Intercompany Borrower Agreements, but only for so long as the Intercompany
Notes and the rights of the Borrower under the Intercompany Borrower
Agreements are pledged to the Collateral Agent under one or more Pledge
Agreements as security for the Obligations), (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of
the Loan Parties under or pursuant to the Credit Agreement and the other
Loan Documents, (c) unless otherwise agreed upon in writing by the
applicable Lender party thereto, the due and punctual payment and
performance of all obligations of the Borrower and the Subsidiaries,
monetary or otherwise, under each Interest/Exchange Rate Protection
Agreement entered into with any counterparty that (i) was a Lender (or an
Affiliate thereof) at the time such Interest/Exchange Rate Protection
Agreement was entered into or (ii) (A) was a "Lender" (or an Affiliate
thereof) as defined in the Existing Credit Agreements at the time such
Interest/Exchange Rate Protection Agreement was entered into and (B) was
one of the initial Lenders under the Credit Agreement (or an Affiliate
thereof) and (d) all obligations of the Guarantors under the Guarantee
Agreements;
"PERFECTION CERTIFICATE": a certificate substantially in the form of
Annex I hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by a Financial Officer
and the chief legal officer of each of UCAR and the Borrower on behalf of
UCAR and the Borrower.
"PROCEEDS": with respect to each Grantor, any consideration received
from the sale, exchange or other disposition of any asset or property
which constitutes Collateral owned by it, any value received as a
consequence of the possession of any such Collateral and any payment
received from any insurer or other person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of
whatever nature of any asset or property which constitutes such
Collateral, and shall include, without limitation, (a) all cash and
negotiable instruments received or held on behalf of the Collateral Agent
pursuant to Section 5.3 and (b) any claim of such Grantor against a third
party for (and the right to sue and recover for and the rights to damages
or profits due or accrued arising out of or in connection with) any and
all amounts from time to time paid or payable under or in connection with
any of the Collateral.
"SECURITIES": any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an
enterprise of an issuer which (a) are represented by a certificate
representing a security in bearer or registered form, or the transfer of
which may be registered upon books maintained for that purpose by or on
behalf of the issuer, (b) are one of a class or series or by its terms is
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7
divisible into a class or series of shares, participations, interests or
obligations and (c)(i) are, or are of a type, dealt with or traded on
securities exchanges or securities markets or (ii) are a medium for
investment and by their terms expressly provide that they are a security
governed by Article 8 of the Uniform Commercial Code.
"SECURITIES ACCOUNT": an account to which a Financial Asset is or
may be credited in accordance with an agreement under which the Person
maintaining the account undertakes to treat the Person for whom the
account is maintained as entitled to exercise rights that comprise the
Financial Asset.
"SECURITIES ENTITLEMENTS": the rights and property interests of an
Entitlement Holder with respect to a Financial Asset.
"SECURITIES INTERMEDIARY": (a) a clearing corporation or (b) a
Person, including a bank or broker, that in the ordinary course of its
business maintains securities accounts for others and is acting in that
capacity.
"VEHICLES": all cars, trucks, trailers and other motor vehicles
covered by a certificate of title law of any state.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section references are to this Agreement unless otherwise
specified. The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation".
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
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8
2. GRANT OF SECURITY INTEREST. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest (the "SECURITY INTEREST") in, all of such Grantor's
right, title and interest in, to and under the all of the following property now
owned or at any time hereafter acquired by such Grantor, subject to Permitted
Liens (as defined below) (collectively, with respect to each Grantor, the
"COLLATERAL"):
(a) all Accounts Receivable;
(b) all Contracts;
(c) all Documents;
(d) all Equipment;
(e) all General Intangibles;
(f) all Instruments;
(g) all Inventory;
(h) all Investment Property;
(i) all books and records pertaining to the Collateral; and
(j) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing.
Notwithstanding anything contained in this Agreement or any Loan Document to the
contrary, "Collateral" shall not include any property of the type specified in
Sections 2(b), (d) (to the extent such Equipment constitutes Fixtures), (e), (f)
and (g) if the granting of a Lien by such Grantor hereunder would violate the
terms of, or otherwise constitute a default under, any document or instrument to
which any Loan Party is a party (other than those documents or instruments
between or among the Loan Parties and/or their Affiliates only) relating to the
ownership of, or pertaining to any rights or interests held in such property;
PROVIDED that the terms to be violated or default that would result in the event
of the granting of the Lien hereunder are typical or customary in connection
with the document or instrument to which they relate.
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9
Such security interests are granted as security only and shall not
subject any Secured Party to, or in any way alter or modify, any obligation or
liability of any Grantor with respect to or arising out of the Collateral.
3. REPRESENTATIONS AND WARRANTIES. Each Grantor hereby represents
and warrants, as to itself and the Collateral in which the security interest is
created by it hereunder, that:
3.1. TITLE AND AUTHORITY. Each Grantor has good and valid rights in
and title to the Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than
any consent or approval which has been obtained subject to Liens permitted
pursuant to Section 7.02 of the Credit Agreement (including any such Lien
expressly permitted pursuant to such Section 7.02 in respect of which a release
in a form acceptable to the Collateral Agent has been delivered to the
Collateral Agent) (the "PERMITTED LIENS").
3.2 FILINGS. The Perfection Certificate has been duly prepared,
completed and executed and the information set forth therein is correct and
complete in all material respects. Fully executed Uniform Commercial Code
financing statements or other appropriate filings, recordings or registrations
containing a description of the Collateral have been delivered to the Collateral
Agent for filing in each governmental, municipal or other office specified in
Schedule 6 to the Perfection Certificate, which are all the filings, recordings
and registrations that are necessary to publish notice of and protect the
validity of and to establish a legal, valid and perfected security interest in
favor of the Collateral Agent (for the ratable benefit of the Secured Parties)
in respect of all Collateral in which the Security Interest may be perfected by
filing, recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements.
3.3. VALIDITY OF SECURITY INTEREST. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations and (b) subject to the
filings described in Section 3.2 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United States (or
any political subdivision thereof) and its territories and possessions pursuant
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10
to the Uniform Commercial Code or other applicable law in such jurisdictions.
The Security Interest is and shall be prior to any other Lien on any of the
Collateral, other than Permitted Liens.
3.4. ABSENCE OF OTHER LIENS. The Collateral is owned by the Grantors
free and clear of any Lien except for Permitted Liens. The Grantor has not filed
or consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Collateral or (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for Permitted Liens.
4. COVENANTS. Each Grantor covenants and agrees with the Secured
Parties that, from and after the date of this Agreement until this Agreement is
terminated and the security interests created hereby are released:
4.1 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If an Event of
Default shall have occurred and be continuing and if any amount payable under or
in connection with any of the Collateral owned by such Grantor shall be or
become evidenced by any promissory note, other instrument or chattel paper, upon
the request of the Collateral Agent, such promissory note, instrument or Chattel
Paper shall be immediately delivered to the Collateral Agent, duly indorsed in a
manner reasonably satisfactory to the Collateral Agent, to be held as Collateral
pursuant to this Agreement.
4.2 MAINTENANCE OF INSURANCE. Such Grantor shall maintain insurance
policies in accordance with the requirements of Section 6.02 of the Credit
Agreement.
4.3 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER
DOCUMENTATION. (a) Such Grantor shall cause all filings and other actions listed
in SCHEDULE 6 to the Perfection Certificate to be taken. Such Grantor shall
maintain the security interests created by this Agreement as first perfected
security interests subject only to Permitted Liens and shall defend such
security interests against all claims and demands of all persons whomsoever
(other than those pursuant to Permitted Liens).
(b) At any time and from time to time, upon the written request of
the Collateral Agent, and at the sole expense of such Grantor, such Grantor
shall promptly and duly execute and deliver such further instruments and
documents and take such further action as the Collateral Agent may reasonably
request for the purpose of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under the
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11
Uniform Commercial Code in effect in any jurisdiction with respect to the
security interests created hereby.
4.4 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor shall not, except
(x) upon prior written notice to the Collateral Agent and delivery to the
Collateral Agent of a written supplement to the Perfection Certificate (duly
executed by a Financial Officer and the chief legal officer of each of UCAR and
the Borrower on behalf of UCAR and the Borrower) showing the additional location
or locations at which Collateral shall be maintained, and (y) if filings under
the UCC or otherwise have been made which maintain in favor of the Collateral
Agent a valid, legal and perfected security interest in such Collateral subject
to no liens, other than Permitted Liens,
(a) permit any of the Inventory or Equipment owned by it to be kept
at a location other than those listed in the Perfection Certificate,
except for Inventory and Equipment in transit between locations described
in this paragraph (a) or transferred to a foreign Subsidiary in a
transaction permitted by the Credit Agreement;
(b) change the location of its chief executive office and chief
place of business from that specified in Perfection Certificate; or
(c) change its (i) corporate name or any trade name used to identify
it in its conduct of business or in the ownership of its properties, (ii)
identity or (iii) corporate structure to such an extent that any financing
statement filed in favor of the Collateral Agent in connection with this
Agreement would become seriously misleading.
4.5 FURTHER IDENTIFICATION OF COLLATERAL. Such Grantor shall furnish
to the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral owned by it and such other reports in
connection with such Collateral as the Collateral Agent may reasonably request,
all in reasonable detail.
4.6 NOTICES. Such Grantor shall advise the Collateral Agent
promptly, in reasonable detail, at its address set forth in Section 10.01 of the
Credit Agreement of:
(a) any Lien (other than security interests created hereby or
Permitted Liens) on any material portion of the Collateral; and
(b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the security interests
created hereby or on the aggregate value of (i) the Collateral owned by it
and (ii) all other Collateral (as such term is defined in the other
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12
Security Documents) of the Borrower and its U.S. Subsidiaries taken as a
whole.
4.8 COLLATERAL AGENT'S LIABILITIES AND EXPENSES; INDEMNIFICATION.
(a) Notwithstanding anything to the contrary provided herein, the Collateral
Agent assumes no liabilities with respect to any claims regarding each Grantor's
ownership (or purported ownership) of, or rights or obligations (or purported
rights or obligations) arising from, the Collateral or any use (or actual or
alleged misuse) whether arising out of any past, current or future event,
circumstance, act or omission or otherwise, or any claim, suit, loss, damage,
expense or liability of any kind or nature arising out of or in connection with
the Collateral or the production, marketing, delivery, sale or provision of
goods or services under or in connection with any of the Collateral. All of such
liabilities shall, as between the Collateral Agent and the Grantors, be borne
exclusively by the Grantors.
(b) Each Grantor hereby agrees to pay all expenses of the Collateral
Agent and to indemnify the Collateral Agent with respect to any and all losses,
claims, damages, liabilities and related expenses in respect of this Agreement
or the Collateral in each case to the extent the Borrower is required to do so
pursuant to Section 10.03 of the Credit Agreement.
(c) Any amounts payable by a Grantor as provided hereunder shall be
additional Obligations of it secured hereby and by the other Security Documents.
Without prejudice to the survival of any other agreements contained herein, all
indemnification and reimbursement obligations contained herein shall survive the
payment in full of the principal and interest under the Credit Agreement, the
expiration of the Letters of Credit and the termination of the Commitments or
this Agreement.
4.9 USE AND DISPOSITION OF COLLATERAL. A Grantor shall not (i) make
or permit to be made an assignment, pledge or hypothecation of the Collateral
owned by it, and shall grant no other security interest in such Collateral
(other than pursuant hereto or except for any Permitted Liens) or (ii) make or
permit to be made any transfer of such Collateral, and shall remain at all times
in possession thereof other than transfers to the Collateral Agent pursuant to
the provisions hereof; notwithstanding the foregoing, such Grantor may use and
dispose of such Collateral in any lawful manner not in violation of the
provisions of this Agreement, the Credit Agreement or any other Loan Document to
which it is a party, unless the Collateral Agent shall, after an Event of
Default shall have occurred and during the continuance thereof, notify such
Grantor not to sell, convey, lease, assign, transfer or otherwise dispose of any
such Collateral other than Inventory in the ordinary course of business,
Permitted Foreign Transfers and other than any other transfers between the
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13
Borrower or a Wholly Owned Subsidiary that is a Grantor and a Borrower or a
Wholly Owned Subsidiary that is a Grantor.
5. PROVISIONS RELATING TO ACCOUNTS.
5.1 GRANTORS REMAIN LIABLE UNDER ACCOUNTS. Anything herein to the
contrary notwithstanding, a Grantor shall remain liable under each of the
Accounts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. No Secured Party shall have any
obligation or liability under any Account (or any agreement giving rise thereto)
by reason of or arising out of this Agreement or the receipt by the Collateral
Agent or any Secured Party of any payment relating to such Account pursuant
hereto, nor shall any Secured Party be obligated in any manner to perform any of
the obligations of a Grantor under or pursuant to any Account (or any agreement
giving rise thereto), to make any payment, to make any inquiry as to the nature
or the sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Account (or any agreement giving rise
thereto), to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
5.2 ANALYSIS OF ACCOUNTS. The Collateral Agent shall have the right
upon the occurrence and during the continuance of an Event of Default to make
test verifications of the Accounts in any manner and through any medium that it
considers reasonably advisable, and each Grantor shall furnish all such
assistance and information as the Collateral Agent may reasonably require in
connection with such test verifications. At any time and from time to time upon
the occurrence and during the continuance of an Event of Default, upon the
Collateral Agent's reasonable request and at the expense of each Grantor, each
Grantor shall cause independent public accountants or others reasonably
satisfactory to the Collateral Agent to furnish to the Collateral Agent reports
showing reconciliations, aging and test verifications of, and trial balances
for, the Accounts. Upon the occurrence and during the continuance of an Event of
Default, the Collateral Agent in its own name or in the name of others may
communicate with account debtors on the Accounts to verify with them to the
Collateral Agent's reasonable satisfaction the existence, amount and terms of
any Accounts.
5.3 COLLECTIONS ON ACCOUNTS. (a) The Collateral Agent hereby
authorizes each Grantor to collect the Accounts, and the Collateral Agent may
curtail or terminate said authority at any time after the occurrence and during
the continuance of an Event of Default. If required by the Collateral Agent at
any time after the occurrence and during the continuance of an Event of Default,
any payments of Accounts, when collected by a Grantor during the continuance of
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14
such an Event of Default, (i) shall be forthwith (and, in any event, within two
Business Days) deposited by such Grantor in the exact form received, duly
indorsed by such Grantor to the Collateral Agent if required, in a Collateral
Account maintained under the sole dominion and control of and on terms and
conditions reasonably satisfactory to the Collateral Agent, subject to
withdrawal by the Collateral Agent as provided in Section 7.3, and (ii) until so
turned over, shall be held by such Grantor in trust for the Secured Parties,
segregated from other funds of such Grantor.
(b) At the Collateral Agent's reasonable request after the
occurrence and during the continuance of an Event of Default, each Grantor shall
deliver to the Collateral Agent all original and other documents evidencing, and
relating to, the agreements and transactions which gave rise to the Accounts,
including, without limitation, all original orders, invoices and shipping
receipts.
5.4 REPRESENTATIONS AND WARRANTIES. (a) As of the date hereof, the
place where each Grantor keeps its records concerning the Accounts is at the
location listed in Section 2(b) of the Perfection Certificate.
(b) As of the date hereof, the amounts owing with respect to
Accounts of obligors which are Governmental Authorities do not constitute more
than 15% of the average aggregate amount owing on the Accounts owing to UCAR and
any Subsidiaries, taken as a whole, during the most recently ended period of
twelve consecutive calendar months.
5.5 COVENANTS. (a) The amount represented by each Grantor to the
Secured Parties from time to time as owing by each account debtor or by all
account debtors in respect of the Accounts shall at such time be in all material
respects the correct amount actually owing by such account debtor or debtors
thereunder.
(b) Upon the occurrence and during the continuance of an Event of
Default, a Grantor shall not grant any extension of the time of payment of any
of the Accounts Receivable, compromise, compound or settle the same for less
than the full amount thereof, release, wholly or partly, any person liable for
the payment thereof, or allow any credit or discount whatsoever thereon other
than extensions, credits, discounts, compromises or settlements granted or made
in the ordinary course of business if the Collateral Agent shall have instructed
the Grantors not to grant or make any such extension, credit, discount,
compromise, or settlement under any circumstances during the continuance of such
Event of Default.
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15
(c) Unless a Grantor shall deliver prior written notice, identifying
the change of location for its books and records, such Grantor shall not remove
its books and records from the location specified in Section 5.4(a).
6. PROVISIONS RELATING TO CONTRACTS.
6.1 GRANTORS REMAIN LIABLE UNDER CONTRACTS. Anything herein to the
contrary notwithstanding, each Grantor shall remain liable under each Contract
to observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with and pursuant to the terms and
provisions of such Contract. No Secured Party shall have any obligation or
liability under any Contract by reason of or arising out of this Agreement or
the receipt by any such Secured Party of any payment relating to such Contract
pursuant hereto, nor shall any Secured Party be obligated in any manner to
perform any of the obligations of a Grantor under or pursuant to any Contract,
to make any payment, to make any inquiry as to the nature or the sufficiency of
any payment received by it or as to the sufficiency of any performance by any
party under any Contract, to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times.
6.2 COMMUNICATION WITH CONTRACTING PARTIES. Upon the occurrence and
during the continuance of an Event of Default, the Collateral Agent in its own
name or in the name of others may communicate with parties to the Contracts to
verify with them to the Collateral Agent's satisfaction the existence, amount
and terms of any Contracts.
7. REMEDIES.
7.1 NOTICE TO ACCOUNT DEBTORS AND CONTRACT PARTIES. Upon the request
of the Collateral Agent at any time after the occurrence and during the
continuance of an Event of Default, a Grantor shall notify account debtors on
the Accounts and parties to the Contracts that the Accounts and the Contracts
have been assigned to the Collateral Agent for the ratable benefit of the
Secured Parties and that payments in respect thereof during the continuance of
such an Event of Default shall be made directly to the Collateral Agent.
7.2 PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT. In addition to
the rights of the Collateral Agent and the Secured Parties specified in Section
5.3 with respect to payments of Accounts, if an Event of Default shall occur and
be continuing, all Proceeds received by a Grantor consisting of cash, checks and
other near-cash items shall upon the Collateral Agent's request be held by such
Grantor in trust for the Secured Parties, segregated from other funds of such
Grantor, and shall, upon the Collateral Agent's request (it being understood
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16
that the exercise of remedies by the Secured Parties in connection with an Event
of Default under Sections VIII(h) and VIII(i) of the Credit Agreement shall be
deemed to constitute a request by the Collateral Agent for the purposes of this
sentence) forthwith upon receipt by such Grantor, be turned over to the
Collateral Agent in the exact form received by such Grantor (duly indorsed by
such Grantor to the Collateral Agent, if required) and held by the Collateral
Agent in a Collateral Account maintained under the sole dominion and control of
the Collateral Agent and on terms and conditions reasonably satisfactory to the
Collateral Agent. All Proceeds while held by the Collateral Agent in a
Collateral Account (or by such Grantor in trust for the Collateral Agent and the
Secured Parties) shall subject to Section 7.3 continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof until
applied as provided in Section 7.3.
7.3 APPLICATION OF PROCEEDS. If an Event of Default shall have
occurred and be continuing, and the Collateral Agent shall have requested a
Grantor to take any action set forth in Section 5.3(a) or 7.2 or the Collateral
Agent shall have taken any action pursuant to Section 7.4, the Collateral Agent
shall apply the proceeds as follows:
FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Collateral Agent (in its capacity as such
hereunder or under any other Loan Document) in connection with such
collection or sale or otherwise in connection with this Agreement or any
of the Obligations, including all reasonable court costs and the
reasonable fees and expenses of its agents and legal counsel, the
repayment of all advances made by the Collateral Agent hereunder or under
any other Loan Document on behalf of any Grantor and any other costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder or under any other Loan Document;
SECOND, to the payment of all amounts of the Obligations owed to the
Secured Parties in respect of Loans made by them and outstanding and
amounts owing in respect of any LC Disbursement or Letter of Credit or
under any Interest/Exchange Rate Protection Agreement, pro rata as among
the Secured Parties in accordance with the amount of such Obligations owed
to them;
THIRD, to the payment and discharge in full of the Obligations
(other than those referred to above), pro rata as among the Secured
Parties in accordance with the amount of such Obligations owed to them;
and
FOURTH, after payment in full of all Obligations, to the applicable
Grantor, or its successors or assigns, or to whomsoever may be lawfully
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17
entitled to receive the same or as a court of competent jurisdiction may
direct, any Collateral then remaining.
7.4 CODE REMEDIES. If an Event of Default shall have occurred and be
continuing, the Collateral Agent, on behalf of the Secured Parties may exercise,
in addition to all other rights and remedies granted to them in this Agreement
and in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Collateral Agent, without demand
of performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon a
Grantor or any other person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
any Secured Party or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. Any Secured Party shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of (to the extent permitted by law) any right or
equity of redemption in a Grantor, which right or equity is hereby, to the
extent permitted by law, waived or released. Each Grantor further agrees, at the
Collateral Agent's request, to assemble the Collateral and make it available to
the Collateral Agent at places which the Collateral Agent shall reasonably
select, whether at such Grantor's premises or elsewhere. The Collateral Agent
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses incurred therein or incidental to the care or safekeeping of any of
such Collateral or reasonably relating to such Collateral or the rights of the
Collateral Agent and the Secured Parties hereunder, including, without
limitation, reasonable attorneys' fees and disbursements, to the payment in
whole or in part of the Obligations, in accordance with Section 7.3, and only
after such application and after the payment by the Collateral Agent of any
other amount required by any provision of law, including, without limitation,
Section 9-504(1)(c) of the Code, need the Collateral Agent account for the
surplus, if any, to such Grantor. If any notice of a proposed sale or other
disposition of such Collateral shall be required by law, such notice shall be in
writing and deemed reasonable and proper if given at least 10 days before such
sale or other disposition.
The Collateral Agent shall have absolute discretion as to the time
of application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
<PAGE>
18
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
7.5 WAIVER; DEFICIENCY. Each Grantor waives and agrees not to assert
any rights or privileges it may acquire under Section 9-112 of the Code. Each
Grantor shall remain liable for any deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay (i) in the case of
each of UCAR and Global, its Obligations or those of the Borrower (including as
guarantor) and (ii) in the case of each other Grantor, the Obligations and the
reasonable fees and disbursements of any attorneys employed by any Secured Party
to collect such deficiency.
8. COLLATERAL AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT; COLLATERAL
AGENT'S PERFORMANCE OF GRANTORS' OBLIGATIONS.
8.1 POWERS. Each Grantor hereby irrevocably constitutes and appoints
the Collateral Agent and any officer or agent thereof, with full power of
substitution, during the continuance of an Event of Default, as its true and
lawful attorney-in-fact, with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name
from time to time in the Collateral Agent's discretion, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, such Grantor hereby gives the Collateral Agent
the power and right, on behalf of such Grantor, without notice to or assent by
such Grantor, to do the following upon the occurrence and during the continuance
of an Event of Default:
(a) in the name of such Grantor or its own name, or otherwise, to
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account, Instrument, General Intangible or Contract or with respect to any
other Collateral and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate
by the Collateral Agent for the purpose of collecting any and all such
moneys due under any Account, Instrument, General Intangible or Contract
or with respect to any other Collateral whenever payable;
<PAGE>
19
(b) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral (other than Permitted Liens), to effect
any repairs or any insurance called for by the terms of this Agreement and
to pay all or any part of the premiums therefor and the costs thereof,
(c) to execute, in connection with any sale provided for in Section
7.4 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(d)(i) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent
shall direct; (ii) to ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (iii) to
sign and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (iv) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any other right in
respect of any Collateral; (v) to defend any suit, action or proceeding
brought against any Grantor with respect to any Collateral; (vi) to
settle, compromise or adjust any such suit, action or proceeding and, in
connection therewith, to give such discharges or releases as the
Collateral Agent may deem appropriate; and (vii) generally, to use, sell,
transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the
Collateral Agent were the absolute owner thereof for all purposes, and to
do, at the Collateral Agent's option and at the expense of such Grantor,
at any time, or from time to time, all acts and things which the
Collateral Agent reasonably deems necessary to protect, preserve or
realize upon such Collateral and the Collateral Agent's and the Secured
Parties' security interests therein and to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
8.2 PERFORMANCE BY COLLATERAL AGENT OF GRANTOR'S OBLIGATIONS. If any
Grantor fails to perform or comply with any of its agreements contained herein,
the Collateral Agent, at its option, but without any obligation so to do, may
perform or comply, or otherwise cause performance or compliance, with such
agreement.
8.3 GRANTOR'S REIMBURSEMENT OBLIGATION. The expenses of the
Collateral Agent reasonably incurred in connection with actions undertaken as
provided in this Section 8, together with interest thereon at a rate per annum
<PAGE>
19
equal to the default rate of interest set forth in Section 2.12 of the Credit
Agreement, from the date payment is demanded by the Collateral Agent to the date
reimbursed by a Grantor, shall be payable by the Borrower to the Collateral
Agent on demand.
8.4 RATIFICATION; POWER COUPLED WITH AN INTEREST. Each Grantor
hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are released.
9. DUTY OF COLLATERAL AGENT. The Collateral Agent's sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the Code or otherwise, shall be to
deal with it in the same manner as the Collateral Agent deals with similar
property for its own account. No Secured Party nor any of its respective
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of a Grantor or any other person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Secured Parties hereunder are solely to protect the Secured
Parties' interests in the Collateral and shall not impose any duty upon any
Secured Party to exercise any such powers. The Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
10. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of
the Code, each Grantor authorizes the Collateral Agent to file financing
statements with respect to the Collateral without the signature of such Grantor
in such form and in such filing offices as the Collateral Agent reasonably
determines appropriate to perfect the security interests of the Collateral Agent
under this Agreement. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
11. AUTHORITY OF COLLATERAL AGENT. Each Grantor acknowledges that
the rights and responsibilities of the Collateral Agent under this Agreement
with respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Collateral Agent and the other
Secured Parties, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them but,
<PAGE>
21
as between the Collateral Agent and the Grantors, the Collateral Agent shall be
conclusively presumed to be acting as agent for the other Secured Parties with
full and valid authority so to act or refrain from acting.
12. NOTICES. All notices, requests and demands to or upon the
Secured Parties or the Grantors under this Agreement shall be given or made in
accordance with Section 10.01 of the Credit Agreement and addressed as follows:
(a) if to any Secured Party, UCAR, Global or the Borrower, in
accordance with Section 10.01 of the Credit Agreement;
(b) if to any other Grantor, at its address set forth under its
signature below.
13. SECURITY INTEREST ABSOLUTE. All rights of the Collateral Agent
hereunder, the security interest and all obligations of the Grantors hereunder
shall be absolute and unconditional.
14. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Secured Parties and shall survive the making by the
Lenders of the Loans, the execution and delivery to the Lenders of the Loan
Documents and the issuance of any Letters of Credit, regardless of any
investigation made by the Secured Parties or on their behalf, and shall continue
in full force and effect as long as the principal of or any accrued interest on
any Loan or L/C Disbursement, or any Fee or any other amount payable under or in
respect of this Agreement or any other Loan Document is outstanding and unpaid
and so long as any Letter of Credit is outstanding and so long as the
Commitments have not been terminated.
15. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
<PAGE>
22
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.
16. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each Grantor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any Loan Party or any
Secured Party may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against any Grantor or any Secured
Party or its properties in the courts of any jurisdiction.
(b) Each Grantor and each Secured Party hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 12. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
17. RELEASE. (a) This Agreement and the security interest created
hereunder shall terminate when all Obligations have been fully and indefeasibly
paid and when the Secured Parties have no further Commitments under the Credit
Agreement and no Letters of Credit are outstanding, at which time the Collateral
Agent shall execute and deliver to each Grantor, or to such person or persons as
such Grantor shall reasonably designate, all Uniform Commercial Code termination
statements and similar documents prepared by such Grantor at its expense which
such Grantor shall reasonably request to evidence such termination. Any
<PAGE>
23
execution and delivery of termination statements or documents pursuant to this
Section 17(a) shall be without recourse to or warranty by the Collateral Agent.
(b) A Subsidiary Grantor shall automatically be released from its
obligations hereunder and the Security Interest in the Collateral of such
Subsidiary Grantor shall be automatically released in the event that all the
Capital Stock of such Subsidiary Grantor shall be sold, transferred or otherwise
disposed of to a person that is not an Affiliate of UCAR in a transaction
permitted pursuant to Section 7.05 of the Credit Agreement. Any Collateral
granted hereunder shall be released (automatically and without further action on
the part of the Collateral Agent) upon the sale, transfer or other disposition
of such Collateral to a transferee who is not a "Grantor" hereunder, to the
extent that such sale, transfer or other disposition is permitted under the
Credit Agreement.
18. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. The parties hereunder
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
19. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES.
19.1 AMENDMENTS IN WRITING. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Grantors and the Collateral Agent; PROVIDED
that any provision of this Agreement may be waived by the Required Lenders
pursuant to a letter or agreement executed by the Collateral Agent or by
telecopy transmission from the Collateral Agent.
19.2 NO WAIVER BY COURSE OF CONDUCT. No Secured Party shall by any
act (except by a written instrument pursuant to Section 19.1 hereof) or delay be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the part of any
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by any Secured Party of any
<PAGE>
24
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which such Secured Party would otherwise have on any future
occasion.
20. REMEDIES CUMULATIVE. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
21. SECTION HEADINGS. The section and Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
22. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of each
Grantor and the Secured Parties and their successors and assigns; PROVIDED that
this Agreement may not be assigned by any Grantor without the prior written
consent of the Collateral Agent.
23. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
24. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.
25. ADDITIONAL GRANTORS. Pursuant to Section 6.11 of the Credit
Agreement, each Domestic Subsidiary that was not in existence or not a Domestic
Subsidiary on the date thereof is required to enter into this Agreement as a
Grantor upon becoming a Domestic Subsidiary. Upon execution and delivery, after
the date hereof, by the Collateral Agent and such Domestic Subsidiary of an
instrument in the form of Exhibit A-1, such Domestic Subsidiary shall become a
Grantor hereunder with the same force and effect as if originally named as a
Grantor hereunder. The execution and delivery of any such instrument shall not
require the consent of any Grantor hereunder. The rights and obligations of each
Grantor hereunder shall remain in full force and effect notwithstanding the
addition of any new Grantor as a party to this Agreement.
<PAGE>
25
IN WITNESS WHEREOF, the undersigned has caused this Security
Agreement to be duly executed and delivered as of the date first above written.
UCAR INTERNATIONAL INC.
by /S/ NANCY M. FALLS
----------------------------------------
Name: Nancy M. Falls
Title: Treasurer
UCAR GLOBAL ENTERPRISES INC.
by /S/ NANCY M. FALLS
-----------------------------------------
Name: Nancy M. Falls
Title: Treasurer
UCAR FINANCE INC.
by /S/ NANCY M. FALLS
-----------------------------------------
Name: Nancy M. Falls
Title: Treasurer
EACH OF THE SUBSIDIARY
GRANTORS LISTED ON SCHEDULE I HERETO
by /S/ NANCY M. FALLS
-----------------------------------------
Name: Nancy M. Falls
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Collateral Agent
by /S/ DEBORAH DESANTIS
----------------------------------------
Name: Deborah DeSantis
Title: Vice President
<PAGE>
SCHEDULE I
TO THE SECURITY AGREEMENT
SUBSIDIARY GRANTORS
UCAR Carbon Company Inc.
UCAR Holdings II Inc.
UCAR Holdings III Inc.
UCAR International Trading Inc.
UCAR Composites Inc.
<PAGE>
EXHIBIT A-1 TO
SECURITY AGREEMENT
SUPPLEMENT NO. dated as of [], to the Security Agreement
dated as of February 22, 2000 (the "SECURITY AGREEMENT"), made
by UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"),
UCAR GLOBAL ENTERPRISES INC., a Delaware corporation
("GLOBAL"), UCAR FINANCE INC., a Delaware corporation (the
"BORROWER"), and the subsidiaries of UCAR from time to time
party thereto (the "SUBSIDIARY GRANTORS", and together with
UCAR and the Borrower, the "GRANTORS") in favor of MORGAN
GUARANTY TRUST COMPANY OF NEW YORK as collateral agent for the
Secured Parties (such term and each other capitalized term
used but not defined herein having the meaning given it in
Article I of the Credit Agreement).
A. Reference is made to the Credit Agreement dated as of February
22, 2000 (as the same may be amended, supplemented or otherwise modified from
time to time, the "CREDIT AGREEMENT") among UCAR, Global, the Borrower, the LC
Subsidiaries from time to time party thereto, the Lenders from time to time
party thereto and Morgan Guaranty Trust Company of New York, as Administrative
Agent, Collateral Agent and Issuing Bank.
B. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Pursuant to Section 6.11 of the Credit Agreement, each
Domestic Subsidiary that was not in existence or not a Domestic Subsidiary on
the date thereof is required to enter into the Security Agreement as a Grantor
upon becoming a Domestic Subsidiary. Section 25 of the Security Agreement
provides that additional Domestic Subsidiaries may become Grantors under the
Security Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned (the "NEW GRANTOR") is a U.S. Subsidiary and is
executing this Supplement in accordance with the requirements of the Credit
Agreement to become a Grantor under the Security Agreement in order to induce
the Lenders to make additional Loans and the Issuing Bank to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as
follows:
<PAGE>
2
SECTION 1. In accordance with Section 25 of the Security Agreement,
the New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby agrees to all the terms and provisions of the
Security Agreement applicable to it as a Grantor thereunder. Each reference to a
"Grantor" in the Security Agreement shall be deemed to include the New Grantor.
The Security Agreement is hereby incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the Secured
Parties that this Supplement has been duly authorized, executed and delivered by
it and constitutes its legal, valid and binding obligation, enforceable against
it in accordance with its terms, subject to the effects of applicable
bankruptcy, insolvency or similar laws effecting creditors' rights generally and
equitable principles of general applicability.
SECTION 3. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Supplement shall
become effective when the Collateral Agent shall have received counterparts of
this Supplement that, when taken together, bear the signatures of the New
Grantor and the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement. All communications and
notices hereunder to the New Grantor shall be given to it at the address set
forth under its signature, with a copy to the Borrower.
<PAGE>
3
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have
duly executed this Supplement to the Security Agreement as of the day and year
first above written.
[NAME OF NEW GRANTOR],
by
Name:
Title:
Address:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Collateral Agent,
by
Name:
Title:
<PAGE>
ANNEX I
to the SECURITY AGREEMENT
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of February 22,
2000 (as the same may be amended, supplemented or otherwise modified from time
to time, the "CREDIT AGREEMENT") among UCAR International Inc., a Delaware
corporation ("UCAR"), UCAR Global Enterprises Inc., a Delaware corporation
("GLOBAL"), 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 Morgan Guaranty Trust Company of New York, as Administrative
Agent, Collateral Agent and Issuing Bank, and (b) the Security Agreement dated
as of the date hereof (the "SECURITY AGREEMENT"), among UCAR, Global, the
Borrower, the subsidiary grantors from time to time party thereto and the
Collateral Agent. Each capitalized term used but not defined herein shall have
the meaning assigned thereto in the Security Agreement, or, if not defined
therein, in the Credit Agreement.
The undersigned, a Financial Officer and the chief legal officer,
respectively, of each of UCAR and the Borrower, hereby certify to the Collateral
Agent and each other Secured Party as follows:
1. NAMES.
(a) The exact corporate name of each Grantor, as such name appears in its
respective certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name each Grantor has had in
the past five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, no Grantor has changed its
identity or corporate structure in any way within the past five years. Changes
in identity or corporate structure would include mergers, consolidations and
acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.
(d) The following is a list of all other names (including trade names or
similar appellations) used by each Grantor or any of its divisions or other
business units in connection with the conduct of its business or the ownership
of its properties at any time during the past five years:
<PAGE>
(e) Set forth below is the Federal Taxpayer Identification Number of each
Grantor:
2. CURRENT LOCATIONS.
(a) The chief executive office of each Grantor is located at the address
set forth opposite its name below:
GRANTOR MAILING ADDRESS COUNTY STATE
(b) Set forth below opposite the name of each Grantor are all locations
where such Grantor maintains any books or records relating to any Accounts
Receivable (with each location at which chattel paper, if any, is kept being
indicated by an "*"):
GRANTOR ADDRESS COUNTY STATE
(c) Set forth below opposite the name of each Grantor are all the places
of business of such Grantor not identified in paragraph (a) or (b) above:
Grantor ADDRESS COUNTY STATE
(d) Set forth below opposite the name of each Grantor are all the
locations where such Grantor maintains any Collateral not identified above:
GRANTOR ADDRESS COUNTY STATE
(e) Set forth below opposite the name of each Grantor are the names and
addresses of all persons other than such Grantor that have possession of any of
the Collateral of such Grantor:
GRANTOR NAME ADDRESS COUNTY STATE
3. UNUSUAL TRANSACTIONS. All Accounts Receivable have been originated by
the Grantors and all Inventory has been acquired by the Grantors in the ordinary
course of business.
<PAGE>
6
4. FILE SEARCH REPORTS. Attached hereto as Schedule 4(A) are true copies
of file search reports from the Uniform Commercial Code filing offices where
filings described in Section 3.19 of the Credit Agreement are to be made.
Attached hereto as Schedule 4(B) is a true copy of each financing statement or
other filing identified in such file search reports.
5. UCC FILINGS. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where a Grantor has
Collateral as identified in Section 2 hereof.
6. SCHEDULE OF FILINGS. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings described in Section 5 above, each
filing and the filing office in which such filing is to be made.
7. FILING FEES. All fees and taxes payable in connection with the
filings described in Section 5 above, other than nominal filing fees, have been
paid.
8. STOCK OWNERSHIP. Attached hereto as Schedule 8 is a true and correct
list of all the duly authorized, issued and outstanding equity interests of the
Borrower and each Subsidiary and the record and beneficial owners of such equity
interests. Also set forth on Schedule 8 is each equity investment of the
Borrower, Holdings and each Subsidiary that represents 50% or less of the equity
of the entity in which such investment was made.
9. NOTES. Attached hereto as Schedule 9 is a true and correct list of all
notes held by Holdings, the Borrower and each Subsidiary and all intercompany
notes between the Borrower, Holdings and each Subsidiary and between each
Subsidiary and each other such Subsidiary.
10. ADVANCES. Attached hereto as Schedule 10 is (a) a true and correct
list of all advances made by UCAR and any subsidiary of UCAR to UCAR or any
subsidiary of UCAR, which advances will be on and after the date hereof
evidenced by one or more intercompany notes pledged to the Collateral Agent
under one or more Pledge Agreements, and (b) a true and correct list of all
unpaid intercompany transfers of goods sold and delivered by or to UCAR or any
Subsidiary.
<PAGE>
7
11. MORTGAGE FILINGS. Attached hereto as Schedule 11 is a schedule setting
forth, with respect to each Mortgaged Property, (i) the exact corporate name of
the corporation that owns such property as such name appears in its certificate
of incorporation, (ii) if different from the name identified pursuant to clause
(i), the exact name of the current record owner of such property reflected in
the records of the filing office for such property identified pursuant to the
following clause and (iii) the filing office in which a Mortgage with respect to
such property must be filed or recorded in order for the Collateral Agent to
obtain a perfected security interest therein.
<PAGE>
8
IN WITNESS WHEREOF, the undersigned have duly executed this certificate on
this [ ] day of [ ].
UCAR INTERNATIONAL INC.,
by:
-----------------------------------------
Name:
Title: [Financial Officer]
by:
-----------------------------------------
Name:
Title: [Chief Legal Officer]
UCAR FINANCE INC.,
by:
-----------------------------------------
Name:
Title: [Financial Officer]
by:
-----------------------------------------
Name:
Title: [Chief Legal Officer]
<PAGE>
SCHEDULE 1
to the PERFECTION CERTIFICATE
CHANGES IN CORPORATE STRUCTURE AND IDENTITY
<PAGE>
SCHEDULE 4(A)
to the PERFECTION CERTIFICATE
FILE SEARCH REPORTS
Attached hereto.
<PAGE>
SCHEDULE 4(B)
to the PERFECTION CERTIFICATE
EXISTING FINANCING STATEMENTS AND LIENS
Attached hereto.
<PAGE>
SCHEDULE 5
to the PERFECTION CERTIFICATE
FORM OF FINANCING STATEMENT
Attached hereto.
<PAGE>
ANNEX I
to UCC Financing Statement
(a) The following types or items of property, whether now owned or
at any time hereafter acquired by the Debtor named in the Financing Statement to
which this Annex I is attached (the "DEBTOR") or in which the Debtor now has or
at any time in the future may acquire any right, title or interest, are covered
by the Financing Statement to which this Annex I is attached (collectively, the
"COLLATERAL"): all rights of the Debtor in Accounts Receivable, Additional
Collateral, Collateral Accounts, Contracts, Documents, Equipment, Fixtures,
General Intangibles, Intellectual Property, Investment Property, Inventory,
Pledged Securities, all books and records pertaining to the foregoing and all
Proceeds of any and all of the foregoing.
(b) The following terms shall have the following meanings:
"ACCOUNTS": any and all right, title and interest of the Debtor to
payment for goods and services sold or leased, including any such right
evidenced by chattel paper, whether due or to become due, whether or not
it has been earned or performed, and whether now or hereafter acquired or
arising in the future, including, without limitation, accounts receivable
from affiliates of the Debtor.
"ACCOUNTS RECEIVABLE": all right, title and interest of the Debtor
to Accounts and all of its right, title and interest in any returned
goods, together with all rights, titles, securities and guarantees with
respect thereto, including any rights to stoppage in transit, replevin,
reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary in each case whether due or
become due, whether now existing or hereafter arising in the future.
"ADDITIONAL COLLATERAL": all rights of the Debtor under any
guarantees, security agreements or other instruments or documents
guaranteeing or securing certain intercompany notes pledged pursuant to,
and more particularly described in, the Pledge Agreement (as the same may
be amended, supplemented or otherwise modified from time to time, the
"PLEDGE AGREEMENT") dated as of February 22, 2000, made by the Debtor and
certain other parties for the benefit of the Secured Parties.
"COLLATERAL ACCOUNT": any collateral account established by the
Secured Party named in the Financing Statement to which this Annex I is
attached (the "SECURED Party") as provided (i) in Section 5.3 or Section
7.2 of the Security Agreement (as the same may be amended, supplemented or
<PAGE>
otherwise modified from time to time, the "SECURITY AGREEMENT") dated as
of February 22, 2000, made by the Debtor and certain other parties for the
benefit of the Secured Parties or (ii) in Section 8(a) or Section 15 of
the Pledge Agreement.
"COMMODITY ACCOUNT": an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a
Commodity Customer.
"COMMODITY CONTRACT": a commodity futures contract, an option on a
commodity futures contract, a commodity option or any other contract that,
in each case, is (a) traded on or subject to the rules of a board of trade
that has been designated as a contract market for such a contract pursuant
to the federal commodities laws or (b) traded on a foreign commodity board
of trade, exchange or market, and is carried on the books of a Commodity
Intermediary for a Commodity Customer.
"COMMODITY CUSTOMER" : a Person for whom a Commodity Intermediary
carries a Commodity Contract on its books.
"COMMODITY INTERMEDIARY" : (a) a Person who is registered as a
futures commission merchant under the federal commodities laws or (b) a
Person who in the ordinary course of its business provides clearance or
settlement services for a board of trade that has been designated as a
contract market pursuant to federal commodities laws.
"CONTRACTS": all rights of the Debtor under contracts and agreements
to which the Debtor is a party or under which the Debtor has any right,
title or interest or to which the Debtor or any property of the Debtor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (a) all rights of the
Debtor to receive moneys due and to become due to it thereunder or in
connection therewith, (b) all rights of the Debtor to damages arising out
of, or for, breach or default in respect thereof and (c) all rights of the
Debtor to exercise all remedies thereunder, in each case to the extent the
grant by the Debtor of a security interest in its rights under such
contract or agreement is permitted without the consent of any other
person, or is permitted with consent if all necessary consents to such
grant of a security interest have been obtained from such other person (it
being understood that the foregoing shall not be deemed to obligate the
Debtor to obtain such consents); PROVIDED, that the foregoing limitation
shall not affect, limit, restrict or impair the grant by the Debtor of a
security interest in any Account or any money or other amounts due or to
become due under any such contract or agreement to the extent provided in
Section 9-318 of the Uniform Commercial Code of the State of New York as
in effect on February 22, 2000.
<PAGE>
3
"COPYRIGHTS": all of the following now or hereafter owned by the
Debtor: (a) all copyright rights in any work subject to the copyright laws
of the United States or any other country, whether as author, assignee,
transferee or otherwise, and (b) all registrations and applications for
registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations
and pending applications for registration in the United States Copyright
Office.
"COPYRIGHT LICENSE": any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by the Debtor or which the Debtor otherwise has the right
to license, or granting any right to the Debtor under any Copyright now or
hereafter owned by any third party, and all rights of the Debtor under any
such agreement.
"DOCUMENTS": all Instruments, files, records, ledger sheets, and
documents covering or relating to any of the Accounts, Equipment, General
Intangibles, Inventory and Proceeds.
"ENTITLEMENT HOLDER": a Person identified in the records of a
Securities Intermediary as the Person having a Security Entitlement
against the Securities Intermediary. If a Person acquires a Security
Entitlement by virtue of Section 8-501(b)(2) or (3) of the Uniform
Commercial Code, such Person is the Entitlement Holder.
"EQUIPMENT": all equipment, furniture and furnishings, tools,
accessories, parts and supplies of every kind and description, wherever
located, now or hereafter existing, and all improvements, accessions or
appurtenances thereto, including Fixtures, and all other tangible personal
property whether or not similar to any of the foregoing items which are
now or hereafter acquired by the Debtor (it being understood that
"Equipment" does not include cars, trucks, trailers and other motor
vehicles covered by a certificate of title law of any state).
"FINANCIAL ASSET": (a) a Security, (b) an obligation of a Person or
a share, participation or other interest in a Person or in property or an
enterprise of a Person, which is, or is of a type, dealt with in or traded
on financial markets, or which is recognized in any area in which it is
issued or dealt in as a medium for investment or (c) any property that is
held by a Securities Intermediary for another Person in a Securities
Account if the Securities Intermediary has expressly agreed with the other
Person that the property is to be treated as a Financial Asset under
Article 8 of the Uniform Commercial Code. As the context requires, the
term Financial Asset shall mean either the interest itself or the means by
<PAGE>
4
which a Person's claim to it is evidenced, including a certificated or
uncertificated Security, a certificate representing a Security or a
Security Entitlement.
"FIXTURES": all items that would otherwise constitute items of
Collateral, whether now owned or hereafter acquired, that become so
related to particular real estate that an interest in them arises under
any real estate law applicable thereto.
"GENERAL INTANGIBLES": as defined in the Uniform Commercial Code of
the State of New York in effect on February 22, 2000, including, all
intangible, intellectual or other similar property of the Debtor of any
kind or nature now owned or hereafter acquired by the Debtor, including
inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade
secrets, confidential or proprietary technical and business information,
know-how, show-how or other data or information, software and databases
and all embodiments or fixations thereof and related documentation,
registrations, franchises, and all other intellectual or other similar
property rights not otherwise described above, to the extent, in the case
of any General Intangibles arising under any contract or agreement, that
the grant by the Debtor of a security interest in its rights under such
contract or agreement is not prohibited without the consent of any other
person, or is permitted with consent if all necessary consents to such
grant of a security interest have been obtained from all such other
persons (it being understood that the foregoing shall not be deemed to
obligate the Debtor to obtain such consents), PROVIDED, that the foregoing
limitation shall not affect, limit, restrict or impair the grant by the
Debtor of a security interest in any Account or General Intangible or any
money or other amounts due or to become due under any such contract or
agreement to the extent provided in Section 9-318 of the Uniform
Commercial Code of the State of New York as in effect on April 22, 1998,
and provided, FURTHER, that "General Intangibles" shall not include any of
the books and records pertaining to the Collateral except to the extent
that the grant of a security interest in General Intangibles owed by
affiliates not incorporated or otherwise organized in the United States of
America would result in material adverse tax or legal consequences to the
Debtor.
"INSTRUMENTS": as defined in the Uniform Commercial Code of the
State of New York as in effect on February 22, 2000.
"INTELLECTUAL PROPERTY": all of the following, whether now owned or
hereafter acquired by Debtor: (a) Patents, including all granted Patents,
recordings and pending applications, (b) Trademarks, including all
registered Trademarks, registrations, recordings, and pending
applications, (c) Copyrights, including all registered Copyrights,
registrations, recordings, supplemental registrations and pending
<PAGE>
5
applications, (d) Licenses, (e) General Intangibles and (f) all products
and Proceeds (including insurance proceeds) of, and additions,
improvements and accessions to, and books and records describing or used
in connection with, any and all of the property described above.
"INVENTORY": all right, title and interest of the Debtor in and to
goods intended for sale or lease by such person, or consumed in such
person's business (including, without limitation, all operating parts and
supplies), together with all raw materials and finished goods, whether now
owned or hereafter acquired or arising.
"INVESTMENT PROPERTY": all Securities (whether certificated or
uncertificated), Financial Assets, Security Entitlements, Securities
Accounts, Commodity Contracts and Commodity Accounts of any Debtor,
whether now owned or hereafter acquired by any Debtor.
"LICENSE": any Patent License, Trademark License, Copyright License
or other similar license or sublicense as to which the Debtor is a party
(other than those license or sublicense agreements which by their terms
prohibit assignment or a grant of a security interest by the Debtor as
licensee thereunder).
"PATENT LICENSE": any written agreement, now or hereafter in effect,
granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by the Debtor or which the
Debtor otherwise has the right to license, is in existence, or granting to
the Debtor any right to make, use or sell any invention on which a Patent,
now or hereafter owned by any third party, is in existence, and all rights
of the Debtor under any such agreement.
"PATENTS": all the following now or hereafter owned by the Debtor:
(a) all letters patent of the United States or any other country,
including patents, design patents or utility models, all registrations and
recordings thereof, and all applications for letters patent of the United
States or any other country, including registrations, recordings and
pending applications in the United States Patent and Trademark Office or
any similar offices in any other country, and (b) all reissues,
continuations, divisions, continuations-in-part, renewals or extensions
thereof, and the inventions disclosed or claimed therein, including the
right to make, use and/or sell the inventions disclosed or claimed
therein.
"PLEDGED NOTES": all the promissory notes evidencing any debt of
any nature whatsoever that may be issued or granted by any issuer to the
<PAGE>
6
Debtor while the Pledge Agreement is in effect that are required to be
pledged under the Pledge Agreement.
"PLEDGED SECURITIES": the Pledged Stock and the Pledged Notes.
"PLEDGED STOCK": all the stock certificates, options or rights of
any nature whatsoever that may be issued or granted by any issuer to the
Debtor while the Pledge Agreement is in effect that are required to be
pledged under the Pledge Agreement.
"PROCEEDS": any consideration received from the sale, exchange or
other disposition of any asset or property which constitutes Collateral,
any value received as a consequence of the possession of any Collateral
and any payment received from any insurer or other person or entity as a
result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include, without limitation, (a) all cash and
negotiable instruments received or held on behalf of the Secured Party,
(b) any claim of the Debtor against a third party for (and the right to
sue and recover for and the rights to damages or profits due or accrued
arising out of or in connection with) (i) past, present or future
infringement of any Patent now or hereafter owned by the Debtor or
licensed under a Patent License, (ii) past, present or future infringement
or dilution of any Trademark now or hereafter owned by the Debtor or
licensed under a Trademark License or injury to the goodwill associated
with or symbolized by any Trademark now or hereafter owned by the Debtor,
(iii) past, present or future breach of any License, (iv) past, present or
future infringement of any Copyright now or hereafter owned by the Debtor
or licensed under a Copyright License and (v) any and all amounts from
time to time paid or payable under or in connection with any of the
Collateral and (c) all "proceeds" (as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New York
on February 22, 2000) of the Pledged Securities and any Additional
Collateral and all dividends or other income from the Pledged Securities,
collections thereon or distributions with respect thereto.
"SECURED PARTIES": the collateral agent, each lender, the issuing
bank and each other person to which any obligation is owed under the
Credit Agreement, the Pledge Agreement, the Security Agreement and any and
all other agreements and instruments executed or delivered in connection
with the credit facilities extended under the Credit Agreement.
<PAGE>
7
"SECURITY INTEREST": any interest in any type of asset including
without limitation personal property, real property, intellectual
property, goods, equipment, contract rights and rights of payment that has
been created, granted, pledged or conveyed under the laws of any
jurisdiction and that secures the payment or performance of an obligation.
"SECURITIES" : any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an
enterprise of an issuer which (a) are represented by a certificate
representing a security in bearer or registered form, or the transfer of
which may be registered upon books maintained for that purpose by or on
behalf of the issuer, (b) are one of a class or series or by its terms is
divisible into a class or series of shares, participations, interests or
obligations and (c)(i) are, or are of a type, dealt with or traded on
securities exchanges or securities markets or (ii) are a medium for
investment and by their terms expressly provide that they are a security
governed by Article 8 of the Uniform Commercial Code.
"SECURITIES ACCOUNT": an account to which a Financial Asset is or
may be credited in accordance with an agreement under which the Person
maintaining the account undertakes to treat the Person for whom the
account is maintained as entitled to exercise rights that comprise the
Financial Asset.
"SECURITY ENTITLEMENTS": the rights and property interests of an
Entitlement Holder with respect to a Financial Asset.
"SECURITIES INTERMEDIARY": (a) a clearing corporation or (b) a
Person, including a bank or broker, that in the ordinary course of its
business maintains securities accounts for others and is acting in that
capacity.
"TRADEMARK LICENSE": any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by the Debtor or that the Debtor otherwise has the right
to license, or granting to the Debtor any right to use any Trademark now
or hereafter owned by any third party, and all rights of the Debtor under
any such agreement.
<PAGE>
8
"TRADEMARKS": all of the following now or hereafter owned by the
Debtor: (a) all trademarks, service marks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
trade dress, logos, other source or business identifiers, prints and
labels on which any of the foregoing have appeared or appear, and all
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith,
including registrations, recordings and applications in the United States
Patent and Trademark Office, any State of the United States or any similar
offices in any other country or any political subdivision thereof, and all
extensions or renewals thereof, and (b) all goodwill associated therewith
or symbolized thereby, and (c) all other assets, rights and interests that
uniquely reflect or embody such goodwill.
<PAGE>
CONFORMED COPY
INDEMNITY, SUBROGATION
AND CONTRIBUTION AGREEMENT
INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT
dated as of February 22, 2000, among UCAR INTERNATIONAL INC.,
a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC.,
a Delaware corporation ("GLOBAL"), UCAR FINANCE INC., a
Delaware corporation, as borrower (the "BORROWER"), each of
the Domestic Subsidiaries party hereto (such Domestic
Subsidiaries and Global collectively, the "SUBSIDIARY
GUARANTORS"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as collateral agent for the Secured Parties (such term and
each other capitalized term used but not defined herein having
the meaning given it in Article I of the Credit Agreement).
Reference is made to Credit Agreement dated as of February 22,
2000 (as the same may be amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT") among
UCAR, Global, the Borrower, the LC Subsidiaries from time to
time party thereto, the Lenders from time to time party
thereto and Morgan Guaranty Trust Company of New York, as
Administrative Agent, Collateral Agent and Issuing Bank.
The Lenders and the Issuing Bank, respectively, have
agreed to make Loans and to issue Letters of Credit pursuant to, and
upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of the Subsidiary Guarantors has agreed to guarantee,
among other things, all the obligations of the Borrower and the LC
Subsidiaries under the Credit Agreement.
The obligations of the Lenders to make the Loans and
of the Issuing Bank to issue the Letters of Credit under the Credit
Agreement are conditioned upon, among other things, the execution and
delivery by the Subsidiary Guarantors of an indemnity, subrogation and
contribution agreement in the form hereof (the "AGREEMENT") to support
the due and punctual payment of, with respect to each Subsidiary
Guarantor, its obligations as obligor or guarantor in respect of (a)
the due and punctual payment of (i) the principal of and premium, if
any, and interest (including interest accruing during the pendency of
any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the
Loans, when and as due, whether at maturity, by acceleration, upon one
or more dates set for prepayment or otherwise, (ii) each payment
required to be made by the Borrower or any Subsidiary under the Credit
Agreement in respect of any Letter of Credit, when and as due,
including payments in respect of reimbursement of disbursements,
interest thereon and obligations to provide cash collateral and (iii)
all other monetary obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent, fixed or
otherwise (including monetary obligations incurred during the pendency
of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such
<PAGE>
2
proceeding), of UCAR, Global, the Borrower and the Subsidiaries
(including, without limitation, all monetary obligations of the
Intercompany Borrowers under the Intercompany Notes and Intercompany
Borrower Agreements, but only for so long as the Intercompany Notes and
the rights of the Borrower under the Intercompany Borrower Agreements
are pledged to the Collateral Agent under one or more Pledge Agreements
as security for the Obligations), (b) the due and punctual performance
of all covenants, agreements, obligations and liabilities of the Loan
Parties under or pursuant to the Credit Agreement and the other Loan
Documents, (c) unless otherwise agreed upon in writing by the
applicable Lender party thereto, the due and punctual payment and
performance of all obligations of the Borrower and the Subsidiaries,
monetary or otherwise, under each Interest/Exchange Rate Protection
Agreement entered into with any counterparty that (i) was a Lender (or
an Affiliate thereof) at the time such Interest/Exchange Rate
Protection Agreement was entered into or (ii) (A) was a "Lender" (or an
Affiliate thereof) as defined in the Existing Credit Agreements at the
time such Interest/Exchange Rate Protection Agreement was entered into
and (B) was one of the initial lenders under the Credit Agreement (or
an Affiliate thereof) and (d) all obligations of UCAR and Global under
the Guarantee Agreements (all of the foregoing obligations
collectively, the "OBLIGATIONS").
Accordingly, UCAR and the Borrower, each Subsidiary
Guarantor and the Collateral Agent agree as follows:
SECTION 1. INDEMNITY AND SUBROGATION. In addition to
all such rights of indemnity and subrogation as the Subsidiary
Guarantors may have under applicable law (but subject to Section 3),
UCAR and the Borrower agree that (a) in the event a payment shall be
made by any Subsidiary Guarantor under the Guarantee Agreement, UCAR
and the Borrower shall indemnify such Subsidiary Guarantor for the full
amount of such payment and such Subsidiary Guarantor shall be
subrogated to the rights of the person to whom such payment shall have
been made to the extent of such payment and (b) in the event any assets
of any Subsidiary Guarantor shall be sold pursuant to any applicable
security agreement or similar instrument or agreement to satisfy a
claim of any Secured Party, UCAR and the Borrower shall indemnify such
Subsidiary Guarantor in an amount equal to the greater of the book
value or the fair market value of the assets so sold.
SECTION 2. CONTRIBUTION AND SUBROGATION. Each
Subsidiary Guarantor agrees (subject to Section 3) that in the event a
payment shall be made by any Subsidiary Guarantor under the Guarantee
Agreement or assets of any Subsidiary Guarantor shall be sold pursuant
to any applicable security agreement or similar instrument or agreement
to satisfy a claim of any Secured Party, and such Subsidiary Guarantor
(the "CLAIMING SUBSIDIARY GUARANTOR") shall not have been indemnified
by UCAR or the Borrower as provided in Section 1, each other Subsidiary
Guarantor (a "CONTRIBUTING SUBSIDIARY GUARANTOR") shall indemnify the
Claiming Subsidiary Guarantor in an amount equal to the amount of such
payment or the greater of the book value or the fair market value of
such assets, as the case may be, multiplied by a fraction of which the
numerator shall be the net worth of the Contributing Subsidiary
Guarantor on the date hereof and the denominator shall be the aggregate
<PAGE>
3
net worth of all the Subsidiary Guarantors on the date hereof (or, in
the case of any Subsidiary Guarantor becoming a party hereto pursuant
to Section 16, the date of the Supplement hereto executed and delivered
by such Subsidiary Guarantor). Any Contributing Subsidiary Guarantor
making any payment to a Claiming Subsidiary Guarantor pursuant to this
Section 2 shall be subrogated to the rights of such Claiming Subsidiary
Guarantor under Section 1 to the extent of such payment.
SECTION 3. SUBORDINATION. Notwithstanding any
provision of this Agreement to the contrary, all rights of the
Subsidiary Guarantors under Sections 1 and 2 and all other rights of
indemnity, contribution or subrogation under applicable law or
otherwise shall be fully subordinated to the indefeasible payment in
full of the Obligations. No failure on the part of UCAR, the Borrower
or any Subsidiary Guarantor to make the payments required by Sections 1
and 2 (or any other payments required under applicable law or
otherwise) shall in any respect limit the obligations and liabilities
of any other Subsidiary Guarantor with respect to any Guarantee, and
each Subsidiary Guarantor shall remain liable for the full amount of
the Obligations that such Subsidiary Guarantor has otherwise
guaranteed.
SECTION 4. TERMINATION. This Agreement shall
terminate when all the Obligations have been indefeasibly paid in full,
no Letters of Credit are outstanding and the Secured Parties have no
further Commitments under the Credit Agreement.
SECTION 5. CONTINUED EFFECTIVENESS. UCAR, the
Borrower and each Subsidiary Guarantor further agree that this
Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of principal of or
interest on any Obligation is rescinded or must otherwise be restored
by any Secured Party or any Subsidiary Guarantor upon the bankruptcy or
reorganization of UCAR, the Borrower, any Subsidiary Guarantor or
otherwise.
SECTION 6. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.
SECTION 7. WAIVERS; AMENDMENT. (a) No failure or
delay of the Collateral Agent, any Secured Party, or any Guarantor in
exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or
power or any abandonment or discontinuance of steps to enforce such a
right or power preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and the remedies of
the Secured Parties under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise
have. No waiver of any provisions of this Agreement or consent to any
departure by any Subsidiary Guarantor therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on
<PAGE>
4
any Subsidiary Guarantor in any case shall entitle such Subsidiary
Guarantor to any other or further notice or demand in similar or other
circumstances.
(b) Except for the operation of Section 16 of this
Agreement, neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement
entered into between the Subsidiary Guarantors and the Collateral
Agent, with the prior written consent of the Required Lenders.
SECTION 8. NOTICES. All communications and notices
hereunder shall be in writing and given as provided in the Credit
Agreement, except those to any Subsidiary Guarantor that is not an LC
Subsidiary, which shall be directed to the address set forth under its
signature below.
SECTION 9. BINDING AGREEMENT; ASSIGNMENTS. This
Agreement shall become effective as to each of UCAR, the Borrower or
any Subsidiary Guarantor when a counterpart hereof executed on behalf
of UCAR, the Borrower or such Subsidiary Guarantor shall have been
delivered to the Collateral Agent and a counterpart hereof shall have
been executed on behalf of the Collateral Agent, and thereafter shall
be binding upon each of UCAR, the Borrower or such Subsidiary Guarantor
and the Collateral Agent and their respective successors and permitted
assigns, and shall inure to the benefit of such Subsidiary Guarantor
and the Secured Parties, and their respective successors and permitted
assigns, except that no Subsidiary Guarantor shall have the right to
assign its rights hereunder or any interest herein (and any such
attempted assignment shall be void), except as expressly contemplated
by this Agreement or the other Loan Documents.
SECTION 10. SUCCESSORS AND ASSIGNS. Whenever in this
Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and permitted assigns of such
party, and all covenants, promises and agreements by or on behalf of
each of UCAR, the Borrower or any Subsidiary Guarantor or the
Collateral Agent that are contained in this Agreement shall bind and
inure to the benefit of their respective successors and permitted
assigns.
SECTION 11. SURVIVAL OF AGREEMENT; SEVERABILITY. (a)
All covenants, agreements, representations and warranties made by each
of UCAR, the Borrower and each Subsidiary Guarantor herein and in any
certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the Secured Parties and each
Subsidiary Guarantor and shall survive the making by the Lenders of the
Loans, the execution and delivery to the Lenders of the Loan Documents
and the issuance by the Issuing Bank of Letters of Credit, regardless
of any investigation made by the Secured Parties or on their behalf,
and shall continue in full force and effect as long as the principal of
or any accrued interest on any Loan or LC Disbursement or any Fee or
any other amount payable under, or in respect of, this Agreement or
under any of the other Loan Documents is outstanding and unpaid and so
long as any Letter of Credit is outstanding and so long as the
Commitments have not been terminated.
<PAGE>
5
(b) In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity
of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 12. COUNTERPARTS. This Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument.
SECTION 13. RULES OF INTERPRETATION. The rules of
interpretation specified in Section 1.03 of the Credit Agreement shall be
applicable to this Agreement.
SECTION 14. JURISDICTION; CONSENT TO SERVICE OF
PROCESS. (a) Each of UCAR, the Borrower and each Subsidiary Guarantor
hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court
or Federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment related to any such action
or proceeding, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any Loan Party or any Secured
Party may otherwise have to bring any action or proceeding relating to
this Agreement against UCAR, the Borrower or any Subsidiary Guarantor
or any Secured Party or their properties in the courts of any
jurisdiction.
(b) Each of UCAR, the Borrower, each Subsidiary
Guarantor and each Secured Party hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement
in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents
to service of process in the manner provided for notices in Section 8.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
<PAGE>
6
SECTION 15. WAIVER OF JURY TRIAL. EACH PARTY HERETO
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND
THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 15.
SECTION 16. ADDITIONAL SUBSIDIARY GUARANTORS.
Pursuant to Section 6.11 of the Credit Agreement, each Domestic
Subsidiary that was not in existence or not a Subsidiary on the date
thereof is required to enter into this Agreement as a Subsidiary
Guarantor upon becoming a Domestic Subsidiary. Upon execution and
delivery, after the date hereof, by the Collateral Agent and a Domestic
Subsidiary of an instrument in the form of Annex 1, such Domestic
Subsidiary shall become a Subsidiary Guarantor hereunder with the same
force and effect as if originally named as a Subsidiary Guarantor
hereunder. The execution and delivery of any such instrument shall not
require the consent of any Subsidiary Guarantor hereunder. The rights
and obligations of each Subsidiary Guarantor hereunder shall remain in
full force and effect notwithstanding the addition of any new
Subsidiary Guarantor as a party to this Agreement.
SECTION 17. HEADINGS. Article and Section headings
used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken
into consideration in interpretive, this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their duly authorized officers as of
the date first appearing above.
UCAR INTERNATIONAL INC.
by
/S/ NANCY M. FALLS
-------------------------------
Name: Nancy M. Falls
Title: Treasurer
<PAGE>
7
UCAR GLOBAL ENTERPRISES INC.
by
/S/ NANCY M. FALLS
--------------------------------
Name: Nancy M. Falls
Title: Treasurer
UCAR FINANCE INC.
by
/S/ NANCY M. FALLS
---------------------------------
Name: Nancy M. Falls
Title: Treasurer
EACH OF THE SUBSIDIARY GUARANTORS
LISTED ON SCHEDULE I HERETO
by
/S/ NANCY M. FALLS
---------------------------------
Name: Nancy M. Falls
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Collateral Agent
by
/S/ DEBORAH DESANTIS
---------------------------------
Name: Deborah DeSantis
Title: Vice President
<PAGE>
SCHEDULE I
TO INDEMNITY SUBROGATION
AND CONTRIBUTION AGREEMENT
SUBSIDIARY GUARANTORS
UCAR Carbon Company Inc.
UCAR Holdings II Inc.
UCAR Holdings III Inc.
UCAR International Trading Inc.
UCAR Composites Inc.
<PAGE>
ANNEX I TO
INDEMNITY, SUBROGATION
AND CONTRIBUTION AGREEMENT
SUPPLEMENT NO. dated as of [ ], to
the Indemnity, Subrogation and Contribution
Agreement dated February 22, 2000 (the
"INDEMNITY, SUBROGATION AND CONTRIBUTION
AGREEMENT"), among UCAR INTERNATIONAL INC.,
a Delaware corporation ("UCAR"), UCAR
FINANCE INC., a Delaware corporation (the
"BORROWER"), each of the Subsidiary
Guarantors (each capitalized term used but
not defined having the meaning given it in
the Indemnity, Subrogation and Contribution
Agreement or the Credit Agreement) party
thereto and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Collateral Agent for the
Secured Parties.
A. Reference is made to Credit Agreement dated as of
February 22, 2000 (as the same may be amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among
UCAR, UCAR Global Enterprises Inc., a Delaware corporation ("GLOBAL"),
the Borrower, the LC Subsidiaries from time to time party thereto, the
Lenders from time to time party thereto and Morgan Guaranty Trust
Company of New York, as Administrative Agent, Collateral Agent and
Issuing Bank.
B. Certain Subsidiary Guarantors have entered into
the Indemnity, Subrogation and Contribution Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters
of Credit pursuant to, and upon the terms and subject to the conditions
specified in, the Credit Agreement. Pursuant to Section 6.11 of the
Credit Agreement, promptly after its creation or acquisition, each
additional Domestic Subsidiary is required to become a party to the
Indemnity, Subrogation and Contribution Agreement as a Subsidiary
Guarantor. Section 16 of the Indemnity, Subrogation and Contribution
Agreement provides that additional Domestic Subsidiaries may become
Subsidiary Guarantors under the Indemnity, Subrogation and Contribution
Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned (the "NEW SUBSIDIARY GUARANTOR") is a
Domestic. Subsidiary and is executing this Supplement in accordance
with the requirements of the Credit Agreement to become a Subsidiary
Guarantor under the Indemnity, Subrogation and Contribution Agreement
in order to induce the Lenders to make additional Loans and the
Fronting Banks to issue additional Letters of Credit and as
consideration for Loans previously made and Letters of Credit
previously issued.
Accordingly, the Collateral Agent and the New
Subsidiary Guarantor agree as follows:
SECTION 1. In accordance with Section 16 of the
Indemnity, Subrogation and Contribution Agreement, the New Subsidiary
Guarantor by its signature below becomes a Subsidiary Guarantor under
<PAGE>
2
the Indemnity, Subrogation and Contribution Agreement with the same
force and effect as if originally named therein as a Subsidiary
Guarantor and the New Subsidiary Guarantor hereby agrees to all the
terms and provisions of the Indemnity, Subrogation and Contribution
Agreement applicable to it as a Subsidiary Guarantor thereunder. Each
reference to a "Subsidiary Guarantor" in the Indemnity, Subrogation and
Contribution Agreement shall be deemed to include the New Subsidiary
Guarantor. The Indemnity, Subrogation and Contribution Agreement is
hereby incorporated herein by reference.
SECTION 2. The New Subsidiary Guarantor represents
and warrants to the Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal,
valid and binding obligation, enforceable against it in accordance with
its terms, subject to the effects of applicable bankruptcy, insolvency
or similar laws affecting creditors' rights generally and equitable
principles of general applicability.
SECTION 3. This Supplement may be executed in two or
more counterparts, each of which shall constitute an original, but all
of which, when taken together, shall constitute but one instrument.
This Supplement shall become effective when the Collateral Agent shall
have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Subsidiary Guarantor and the
Collateral Agent.
SECTION 4. Except as expressly supplemented hereby,
the Indemnity, Subrogation and Contribution Agreement shall remain in
full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. If any one or more of the provisions
contained in this Supplement should be held invalid, illegal or
unenforceable in any respect, neither party hereto shall be required to
comply with such provision for so long as such provision is held to be
invalid, illegal or unenforceable, but the validity, legality and
enforceability of the remaining provisions contained herein and in the
Indemnity, Subrogation and Contribution Agreement shall not in any way
be affected or impaired. The parties hereto shall endeavor in
good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices hereunder
shall be in writing and given as provided in the Credit Agreement. All
communications and notices hereunder to the New Subsidiary Guarantor
shall be given to it at the address set forth under its signature, with
a copy to the Borrower.
<PAGE>
3
IN WITNESS WHEREOF, the New Subsidiary Guarantor and
the Collateral Agent have duly executed this Supplement to the
Indemnity, Subrogation and Contribution Agreement as of the day and
year first above written.
[NAME OF NEW SUBSIDIARY GUARANTOR],
by
Name:
Title:
Address:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Collateral Agent,
by
Name:
Title:
<PAGE>
CONFORMED COPY
DOMESTIC PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of February 22, 2000, by
UCAR INTERNATIONAL INC., a Delaware corporation
("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware
corporation ("GLOBAL"), UCAR FINANCE INC., a Delaware
corporation (the "BORROWER"), the direct and indirect
subsidiaries of UCAR that are signatories hereto
(together with UCAR, Global and the Borrower, the
"PLEDGORS"), in favor of MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as collateral agent for the Secured Parties
(as defined in Section 1 of this Pledge Agreement; each
other capitalized term used but not defined herein
having the meaning given it in Article I of the Credit
Agreement dated as of February 22, 2000, among UCAR,
Global, the Borrower, the LC Subsidiaries from time to
time party thereto, the Lenders from time to time party
thereto and Morgan Guaranty Trust Company of New York,
as Administrative Agent, Collateral Agent and Issuing
Bank (as the same may be amended, supplemented or
otherwise modified from time to time, the "CREDIT
AGREEMENT")).
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans and the Issuing Bank has agreed to issue
Letters of Credit, upon the terms and subject to the conditions set forth
therein; and
WHEREAS, it is a condition precedent to the obligations of the
Lenders to make the Loans and of the Issuing Bank to issue the Letters of
Credit that the Pledgors shall have executed and delivered this Pledge
Agreement.
NOW, THEREFORE, in consideration of the premises and to induce
the Secured Parties to enter into the Credit Agreement and to induce the
Lenders to make their respective Loans and the Issuing Bank to issue
Letters of Credit, each of the Pledgors hereby agrees with the Collateral
Agent, for the ratable benefit of the Secured Parties, as follows:
<PAGE>
2
1. DEFINED TERMS. (a) Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have the
meanings assigned to them in the Credit Agreement.
(b) The following terms shall have the following meanings:
"ADDITIONAL COLLATERAL" shall mean all rights of any
Pledgor under any Guarantees, security agreements or other
instruments or documents guaranteeing or securing any Intercompany
Notes or other Collateral.
"CODE" shall mean the Uniform Commercial Code from time
to time in effect in the State of New York.
"COLLATERAL" shall mean the Pledged Securities, the
Additional Collateral and all Proceeds thereof.
"COLLATERAL ACCOUNT": any account established to hold
money Proceeds, maintained under the sole dominion and control of
and on terms and conditions reasonably satisfactory to the
Collateral Agent, subject to withdrawal by the Collateral Agent for
the account of the Secured Parties and the Pledgors, as provided in
Section 8(a) and Section 15.
"ISSUERS" shall mean the companies identified on
SCHEDULE I attached hereto as the issuers of the Pledged Securities
and each issuer of any securities included in the Additional
Collateral.
"OBLIGATIONS": shall mean (a) the due and punctual
payment of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when
and as due, whether at maturity, by acceleration, upon one or more
dates set for prepayment or otherwise, (ii) each payment required to
be made by the Borrower or any Subsidiary under the Credit Agreement
in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest
thereon and obligations to provide cash collateral and (iii) all
other monetary obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the
pendency of any bankruptcy, insolvency, receivership or other
similar proceeding, regardless of whether allowed or allowable in
such proceeding), of UCAR, Global, the Borrower and the Subsidiaries
under the Credit Agreement and the other Loan Documents (including,
without limitation, all monetary obligations of the Intercompany
Borrowers under the Intercompany Notes and Intercompany Borrower
Agreements, but only for so long as the Intercompany Notes and the
<PAGE>
3
rights of the Borrower under the Intercompany Borrower Agreements
are pledged to the Collateral Agent under this Agreement as security
for the Obligations), (b) the due and punctual performance of all
covenants, agreements, obligations and liabilities of UCAR, Global,
the Borrower and the Subsidiaries under or pursuant to the Credit
Agreement and the other Loan Documents, (c) unless otherwise agreed
upon in writing by the applicable Lender party thereto, the due and
punctual payment and performance of all obligations of the UCAR,
Global, the Borrower and the Subsidiaries, monetary or otherwise,
under each Interest/Exchange Rate Protection Agreement entered into
with any counterparty that (i) was a Lender (or an Affiliate
thereof) at the time such Interest/Exchange Rate Protection
Agreement was entered into or (ii) (A) was a "Lender" (or an
Affiliate thereof) as defined in the Existing Credit Agreements at
the time such Interest/Exchange Rate Protection Agreement was
entered into and (B) was one of the initial Lenders under the Credit
Agreement (or an Affiliate thereof) and (d) all obligations of the
UCAR, Global, the Borrower and the Subsidiaries under the Guarantee
Agreements;
"PLEDGED NOTES" shall mean (a) the Intercompany Notes
and other notes listed on SCHEDULE I hereto and (b) all Intercompany
Notes and other instruments evidencing Indebtedness of UCAR, Global,
the Borrower, any Subsidiary or any other person that shall be owned
at any time or from time to time by any Pledgor.
"PLEDGED STOCK" shall mean all shares of Capital Stock
listed on SCHEDULE I hereto or hereafter acquired by any Pledgor,
together with all certificates from time to time evidencing such
Capital Stock.
"PLEDGED SECURITIES" shall mean the Pledged Notes and
the Pledged Stock.
"PROCEEDS" shall mean all "proceeds" (as such term is
defined in Section 9-306(1) of the Uniform Commercial Code in effect
in the State of New York on the date hereof) of any Collateral and,
in any event, shall include all interest, payments, prepayments,
collections, dividends or other distributions or other income on the
Pledged Stock or the Pledged Notes.
"SECURED PARTIES" shall mean the Agents, each Lender,
the Issuing Bank and each other person to which any of the
Obligations is owed. In the case of Obligations owed to the Borrower
by Foreign Subsidiaries, the term "Secured Parties" includes the
Borrower and all references herein to the "ratable benefit of the
Secured Parties" includes the Borrower to the extent necessary to
effect the Foreign Subsidiary Pledgors' pledges of Collateral to the
Borrower and the Borrower's assignment of such pledges contained in
Section 2(b).
"SECURITIES ACT": the Securities Act of 1933, as
amended.
<PAGE>
4
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement, and
section references are to this Agreement unless otherwise specified. The
words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation".
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. PLEDGE; GRANT OF SECURITY INTEREST; ASSIGNMENT OF SECURITY
INTERESTS. (a) Each Pledgor hereby pledges, charges and delivers to the
Collateral Agent, for the ratable benefit of the Secured Parties, and
hereby grants to the Collateral Agent, for the ratable benefit of the
Secured Parties, a first priority security interest in, all the Collateral
now or at any time hereafter owned by such Pledgor as collateral security
for the prompt and complete payment and performance when due (whether at
the stated maturity, by acceleration, upon one or more dates of prepayment
or otherwise) of (i) in the case of each Pledgor that is not a Foreign
Subsidiary, all of the Obligations, and (ii) in the case of each Pledgor
that is a Foreign Subsidiary, its own obligations (A) under the
Intercompany Notes and the Intercompany Borrower Agreements, (B) in
respect of Letters of Credit and (C) as a Guarantor of the obligations of
other Foreign Subsidiaries under the Guarantee Agreements. Each Pledgor
will (i) cause any shares of Capital Stock of the Borrower, Global or any
Subsidiary required to be pledged hereunder to be evidenced by duly
executed certificates that are pledged and delivered to the Collateral
Agent pursuant to the terms hereof and (ii) cause any Pledged Notes to be
delivered to the Collateral Agent pursuant to the terms hereof.
(b) Without limiting the grant set forth in paragraph (a)
above, the Borrower hereby assigns, pledges, and transfers to the
Collateral Agent for the ratable benefit of the Secured Parties, as
security for the Obligations, all the Intercompany Notes and all its
rights thereunder and under the related Intercompany Borrower Agreements
and any Guarantee Agreements guaranteeing or Security Documents securing
the Intercompany Notes or any of them. The Borrower agrees that, until the
Commitments under the Credit Agreement have been terminated and the
principal of and interest on each Loan, all fees referred to in the Credit
Agreement and all other expenses or amounts payable under any Loan
Document have been paid in full and all Letters of Credit have been
canceled or have expired and all amounts drawn thereunder have been
reimbursed in full, the Collateral Agent will have the right, to the
exclusion of the Borrower, to exercise all rights of the Borrower, and to
make all demands (except that the Borrower shall be entitled to make a
demand for payment to effect any prepayment that it is entitled to make
under Section 3.03(b)(ii) of the Credit Agreement) and give all notices to
be made or given by the Borrower, under the Intercompany Notes, the
Intercompany Borrower Agreements and such Guarantee Agreements and
Security Documents (and the Borrower agrees that any such demand or notice
made or given by the Borrower in violation of the provisions of this
paragraph shall be of no force or effect). Without limiting the foregoing,
<PAGE>
5
the Borrower agrees that at any time after the occurrence and during the
continuance of an Event of Default, the Collateral Agent may demand
payment of the principal of and interest accrued on each Intercompany
Note.
3. STOCK POWERS AND INSTRUMENTS OF TRANSFER. Concurrently with
the delivery to the Collateral Agent of each certificate representing one
or more shares of Pledged Stock and each Pledged Note, the applicable
Pledgor shall deliver an undated stock power or instrument of transfer
covering such certificate or such Pledged Note, duly executed in blank by
such Pledgor with, if the Collateral Agent so requests, signature
guaranteed.
4. REPRESENTATIONS AND WARRANTIES. Each Pledgor
represents and warrants, as to itself and the Collateral pledged by it
hereunder, that:
(a) The shares of Pledged Stock listed on SCHEDULE 1
constitute the portion of the issued and outstanding shares of all
classes of the Capital Stock of the applicable Issuer set forth on
Schedule I and the Pledged Notes evidence the obligations of the
applicable Issuer to the applicable Pledgor in aggregate principal
amounts as set forth on Schedule I.
(b) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(c) Subject to Section 21(b), each Pledgor is the legal,
record and beneficial owner of the Pledged Securities and of the
Additional Collateral, free of any and all Liens (other than Liens
permitted by Section 7.02 of the Credit Agreement) or options in
favor of, or claims of, any other person, except the security
interest created by this Agreement.
(d) All Capital Stock or other ownership interests in the
Domestic Subsidiaries will at all times constitute certificated
securities for purposes of Articles 8 and 9 of the Uniform
Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions.
(e) This Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a
legal, valid and enforceable security interest in the Collateral
and, when the Pledged Stock, Pledged Notes or Additional Collateral
shall be delivered to the Collateral Agent (or, as applicable in the
case of Capital Stock of foreign Subsidiaries, the requisite filings
or registrations are made), this Agreement will constitute a duly
perfected first priority Lien on, and security interest in, all
right, title and interest of the Pledgors thereunder in such Pledged
Stock, Pledged Notes or Additional Collateral, in each case prior
and superior in rights to any other person, subject to the
agreements listed in Schedule 4.08 of the Credit Agreement.
<PAGE>
6
5. COVENANTS. Each Pledgor, as to itself and the Collateral
pledged by it hereunder, covenants and agrees with the Secured Parties
that, from and after the date of this Agreement until this Agreement is
terminated and the security interest created hereby is released, subject
to Section 21(b):
(a) Any sums paid upon or in respect of the Pledged Stock,
Pledged Notes or Additional Collateral upon the liquidation or
dissolution (other than any liquidation or dissolution permitted by
Section 6.01(a) of the Credit Agreement) of any Issuer shall, upon
and during the continuance of an Event of Default, upon the written
request of the Collateral Agent, be paid over to the Collateral
Agent to be held and applied by it hereunder as provided in Section
8(a) and Section 15, and in case any distribution of capital shall
be made on or in respect of the Pledged Stock or Additional
Collateral or any property shall be distributed upon or with respect
to the Pledged Stock, Pledged Notes or Additional Collateral
pursuant to the recapitalization or reclassification of capital of
any Issuer or pursuant to the reorganization thereof, the property
so distributed shall, upon and during continuance of an Event of
Default, upon the written request of the Collateral Agent, be
delivered to the Collateral Agent to be held and applied by it
hereunder as provided in Section 8(a) and Section 15. If any sums of
money or property so paid or distributed in respect of the Pledged
Stock, Pledged Notes or Additional Collateral shall be received by
such Pledgor, such Pledgor shall, upon and during the continuance of
an Event of Default, upon the written request of the Collateral
Agent, until such money or property is paid or delivered to the
Collateral Agent, hold such money or property in trust for the
Secured Parties, segregated from other funds of such Pledgor, for
application in accordance with Section 8(a) and Section 15.
(b) Without the prior written consent of the Collateral Agent,
such Pledgor will not (i) vote to enable, or take any other action
to permit, any Issuer to issue any stock or other equity securities
of any nature or to issue any other securities convertible into or
granting the right to purchase or exchange for any stock or other
equity securities of any nature of any Issuer, except to the extent
the same are permitted to be issued under the Credit Agreement, (ii)
sell, assign, transfer, exchange, or otherwise dispose of, or grant
any option with respect to, the Collateral owned by it, except as
not prohibited under the terms of the Credit Agreement, (iii)
create, incur or permit to exist any Lien or option in favor of, or
any claim of any person with respect to, any of such Collateral, or
any interest therein, except as not prohibited under the terms of
the Credit Agreement and for the security interest created by this
Agreement or (iv) enter into any agreement or undertaking
restricting the right or ability of such Pledgor or the Collateral
Agent to sell, assign or transfer any of such Collateral, except as
not prohibited under the terms of the Credit Agreement.
<PAGE>
7
(c) Such Pledgor shall maintain the security interest created
by it under this Agreement as a first priority, perfected security
interest and shall defend such security interest against claims and
demands of all persons whomsoever. At any time and from time to
time, upon the written request of the Collateral Agent, and at the
sole expense of such Pledgor, such Pledgor shall promptly and duly
execute and deliver such further instruments and documents and take
such further actions as the Collateral Agent may reasonably request
for the purposes of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral
owned by such Pledgor shall be or become evidenced by any promissory
note, other instrument or chattel paper, such note, instrument or
chattel paper shall, if so requested by the Collateral Agent, be
immediately delivered to the Collateral Agent duly endorsed in a
manner reasonably satisfactory to the Collateral Agent, to be held
as Collateral pursuant to this Agreement, provided that the use of
the Proceeds of such Collateral shall nonetheless be governed by
Sections 6 and 7.
6. CASH DIVIDENDS; VOTING RIGHTS; PROCEEDS. (a) Unless an
Event of Default shall have occurred and be continuing and the Collateral
Agent shall have given notice to the Pledgors of the Collateral Agent's
intent to exercise its corresponding rights pursuant to Section 7 below,
the Pledgors shall be permitted to receive, retain and use all cash
dividends paid in accordance with the terms and conditions of the Credit
Agreement in respect of the Pledged Stock and, if applicable, Additional
Collateral and to exercise all voting and corporate rights with respect to
the Pledged Stock and, if applicable, Additional Collateral, PROVIDED,
HOWEVER, that no vote shall be cast or corporate right exercised or other
action taken (regardless of whether an Event of Default has occurred and
is continuing) which would materially and adversely affect the rights of
the Collateral Agent or the Secured Parties or their ability to exercise
same or result in any violation of any provision of the Credit Agreement,
this Agreement or any other Loan Document.
(b) Unless an Event of Default shall have occurred and be
continuing and the Collateral Agent shall have given notice to the
Pledgors of the Collateral Agent's intent to exercise its corresponding
rights pursuant to Section 7 below, the Pledgors shall be permitted to
receive, retain and use all other Proceeds (in addition to cash dividends
as provided under Section 6(a) above) from the Collateral.
7. RIGHTS OF THE SECURED PARTIES AND THE COLLATERAL Agent. If
an Event of Default shall occur and be continuing and the Collateral Agent
shall give notice of its intent to exercise such rights to the Pledgors,
(i) the Collateral Agent shall have the right to receive any and all
Proceeds paid in respect of the Pledged Securities or Additional
Collateral and any and all Proceeds of Proceeds and make application
thereof to the Obligations in the manner provided in Section 8(a) and
Section 15 and (ii) all shares of the Pledged Stock and, if applicable,
Additional Collateral shall be registered in the name of the Collateral
Agent or its nominee, and the Collateral Agent or its nominee may
thereafter exercise (1) all voting, corporate and other rights pertaining
<PAGE>
8
to such shares of the Pledged Stock and to such Additional Collateral at
any meeting of shareholders of any Issuer or otherwise and (2) any and all
rights of, conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged Stock and
to such Additional Collateral as if it were the absolute owner thereof
(including the right to exchange at its discretion any and all the Pledged
Stock and, if applicable, Additional Collateral upon the merger,
consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of any Issuer, or upon the exercise by a
Pledgor or the Collateral Agent of any right, privilege or option
pertaining to such shares of the Pledged Stock and to such Additional
Collateral, and in connection therewith, the right to deposit and deliver
any and all the Pledged Stock and, if applicable, Additional Collateral
with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Collateral Agent
may reasonably determine), all without liability except to account for
property actually received by it, but the Collateral Agent shall have no
duty to any Pledgor to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.
All Proceeds that are received by any Pledgor contrary to the provisions
of this Section 7 shall be received in trust for the benefit of the
Collateral Agent, shall be segregated from other property or funds of such
Pledgor and shall be forthwith delivered to the Collateral Agent in the
same form as so received (with any necessary endorsement). Any and all
money and other property paid over to or received by the Collateral Agent
pursuant to the provisions of this Section 7 shall be retained by the
Collateral Agent in a Collateral Account to be established by the
Collateral Agent upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 8(a) and Section 15.
After all Events of Default under the Credit Agreement have been cured or
waived, the Collateral Agent shall, within five Business Days after all
such Events of Default have been cured or waived, repay to each Pledgor
all cash dividends, interest or principal that such Pledgor would
otherwise be permitted to retain pursuant to the terms of Section 6 above,
but only to the extent such Proceeds remain in such Collateral Account.
8. REMEDIES. (a) If an Event of Default shall have
occurred and be continuing the Collateral Agent shall apply all or any
part of the Proceeds held in any Collateral Account in accordance with
Section 15.
(b) If an Event of Default shall have occurred and be
continuing, the Collateral Agent, on behalf of the Secured Parties, may
exercise, in addition to all other rights and remedies granted in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party
under the Code. Without limiting the generality of the foregoing, the
Collateral Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any
notice, required by law referred to below) to or upon the Pledgors or any
other person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part thereof (or
<PAGE>
9
contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, in the over-the-counter market, at any exchange,
broker's board or office of the Collateral Agent or any Secured Party or
elsewhere upon such terms and conditions as it may reasonably deem
advisable and at such prices as it may reasonably deem best, for cash or
on credit or for future delivery without assumption of any risk. The
Collateral Agent or any Secured Party shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of (to the extent permitted by law) any right or equity of
redemption in a Pledgor which right or equity is, to the extent permitted
by law, hereby waived or released. The Collateral Agent shall apply any
Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses incurred in respect thereof or
incidental to the care or safekeeping of any of the Collateral or
reasonably relating to the Collateral or the any or the rights of the
Collateral Agent and the Secured Parties hereunder, including reasonable
attorney's fees and disbursements of counsel to the Collateral Agent, to
the payment in whole or in part of the Obligations, in the order set forth
in Section 15. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be in writing and
deemed reasonable and proper if given at least 10 days before such sale or
other disposition. UCAR and the other Pledgors shall remain liable for any
deficiency if the proceeds of any sale or other disposition of Collateral
are insufficient to pay (i) in the case of each Pledgor other than UCAR,
its Obligations and the reasonable fees and disbursements of any attorneys
employed by the Collateral Agent or any Secured Party to collect such
deficiency in its Obligations and (ii) in the case of UCAR, its and the
Borrower's Obligations and pro rata shares of such fees and disbursements.
9. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the Collateral
Agent shall determine to exercise its right to sell any or all of the
Pledged Stock pursuant to Section 8 hereof, and if in the opinion of the
Collateral Agent it is necessary or advisable to have the Pledged Stock,
or that portion thereof to be sold, registered under the provisions of the
Securities Act, the Pledgor who owns such Pledged Stock will cause the
Issuer thereof to (i) execute and deliver, and cause the directors and
officers of such Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in
the reasonable opinion of the Collateral Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period expiring on the earlier of (A) one year from the
date of the first public offering of the Pledged Stock and (B) such time
that all of the Pledged Stock, or that portion thereof to be sold, is sold
and (iii) to make all amendments thereto and/or to the related prospectus
which, in the reasonable opinion of the Collateral Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act
and the rules and regulations of the Securities and Exchange Commission
applicable thereto. The Pledgor who owns such Pledged Stock agrees to
cause such Issuer to comply with the provisions of the securities or "Blue
Sky" laws of any and all jurisdictions which the Collateral Agent shall
<PAGE>
10
reasonably designate and to make available to its security holders, as
soon as practicable, an earnings statement (which need not be audited)
which will satisfy the provisions of Section 11(a) of the Securities Act.
Each Pledgor jointly and severally agrees to (x) indemnify, defend and
hold harmless Collateral Agent and the other Indemnitees from and against
all losses, liabilities, expenses, costs (including the reasonable fees
and expenses of legal counsel to the Collateral Agent) and claims
(including the costs of investigation) that they may incur insofar as any
such loss, liability, expense, cost or claim arises out of or is based
upon any alleged untrue statement of a material fact contained in any
prospectus, offering circular or similar document (or any amendment or
supplement thereto), or arises out of or is based upon any alleged
omission to state a material fact required to be stated therein or
necessary to make the statements in any writing thereof not misleading,
except insofar as the same may have been caused by any untrue statement or
omission based upon information furnished in writing to any Pledgor or the
Issuer of such Pledged Stock by the Collateral Agent or any other Secured
Party expressly for use therein, and (y) enter into an indemnification
agreement with any underwriter of or placement agent for any Pledged
Stock, on its standard form, to substantially the same effect. The
Pledgors will jointly and severally bear all costs and expenses of
carrying out their obligations under this Section 9.
(b) The Pledgors recognize that the Collateral Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason
of certain prohibitions contained in the Securities Act and applicable
state securities laws or otherwise, and may be compelled to resort to one
or more private sales thereof to a restricted group of purchasers which
will be obliged to agree, among other things, to acquire such securities
for their own account for investment and not with a view to the
distribution or resale thereof. Each Pledgor acknowledges and agrees that
any such private sale may result in prices and other terms less favorable
than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have
been made in a commercially reasonable manner. The Collateral Agent shall
be under no obligation to delay a sale of any of the Pledged Stock for the
period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable
state securities laws, even if such Issuer would agree do so.
(c) Each Pledgor further agrees to use its best efforts to do
or cause to be done all such other acts as may be reasonably necessary to
make such sale or sales of all or any portion of the Pledged Stock or
Additional Collateral owned by it pursuant to this Section valid and
binding and in compliance with any and all other applicable requirements
of the laws of any jurisdiction. Each Pledgor further agrees that a breach
of any of the covenants contained in this Section will cause irreparable
injury to the Collateral Agent and the Secured Parties, that the
Collateral Agent and the Secured Parties have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in the Section shall be specifically enforceable against such
Pledgor.
<PAGE>
11
10. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER. Each
Pledgor hereby authorizes and instructs each Issuer that has issued
Pledged Stock pledged by such Pledgor pursuant to Section 2 hereof to
comply with any instruction received by it from the Collateral Agent in
writing that (a) states that an Event of Default has occurred and (b) is
otherwise in accordance with the terms of this Agreement, without any
other or further instructions from such Pledgor, and agrees that each such
Issuer shall be fully protected in so complying.
11. COLLATERAL AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a)
Each Pledgor hereby irrevocably constitutes, and appoints the Collateral
Agent and any officer or agent of the Collateral Agent, with full
irrevocable power of substitution, as its true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead of such
Pledgor and in the name of such Pledgor or in the Collateral Agent's own
name, from time to time in the Collateral Agent's discretion upon and
during the continuance of an Event of Default, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Agreement,
including without limitation, any financing statements, endorsements,
assignments or other instruments of transfer.
(b) Each Pledgor hereby ratifies all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted
in Section 11(a). All powers, authorizations and agencies contained in
this Agreement are coupled with an interest and are irrevocable until this
Agreement is terminated and the security interests created hereby are
released.
12. DUTY OF COLLATERAL AGENT. The Collateral Agent's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to deal with it in the same manner as the Collateral
Agent deals with similar securities and property for its own account,
PROVIDED that investments shall be made at the option and sole discretion
of the Collateral Agent and PROVIDED FURTHER that the Collateral Agent
shall use reasonable efforts to make such investments. Neither the
Collateral Agent, any Secured Party nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so
or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgors or any other person or to take
any other action whatsoever with regard to the Collateral or any part
thereof.
13. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section
9-402 of the Code, each Pledgor authorizes the Collateral Agent to file
financing statements with respect to the Collateral owned by it without
the signature of such Pledgor in such form and in such filing offices as
the Collateral Agent reasonably determines appropriate to perfect the
security interests of the Collateral Agent under this Agreement. A carbon,
<PAGE>
12
photographic or other reproduction of this Agreement shall be sufficient
as a financing statement for filing in any jurisdiction.
14. AUTHORITY OF COLLATERAL AGENT. Each Pledgor acknowledges
that the rights and responsibilities of the Collateral Agent under this
Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out this Agreement shall, as between the Collateral
Agent and the Secured Parties, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time
among them, but, as between the Collateral Agent and such Pledgor, the
Collateral Agent shall be conclusively presumed to be acting as agent for
the Secured Parties with full and valid authority so to act or refrain
from acting.
15. APPLICATION OF PROCEEDS. The proceeds of any sale of
Collateral pursuant to Section 8(b), as well as any Collateral
consisting of cash under Section 8(a), shall be applied by the
Collateral Agent as follows:
FIRST, to the payment of the reasonable costs and expenses
of the Collateral Agent as set forth in Section 8(b);
SECOND, to the payment of all amounts of the Obligations owed
to the Secured Parties in respect of Loans made by them and
outstanding and amounts owing in respect of any LC Disbursement or
Letter of Credit or under any Interest/Exchange Rate Protection
Agreements, pro rata as among the Secured Parties in accordance with
the amount of such Obligations owed them;
THIRD, to the payment and discharge in full of the Obligations
(other than those referred to above), pro rata as among the Secured
Parties in accordance with the amount of such Obligations owed to
them; and
FOURTH, after payment in full of all Obligations, to the
applicable Pledgor, or the successors or assigns thereof, or to
whomsoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct, any Collateral then
remaining.
The Collateral Agent shall have absolute discretion as to the
time of application of any such proceeds, moneys or balances in accordance
with this Agreement. Upon any sale of the Collateral by the Collateral
Agent (including pursuant to a power of sale granted by statute or under a
judicial proceeding), the receipt of the Collateral Agent or of the
officer making the sale shall be a sufficient discharge to the purchaser
or purchasers of the Collateral so sold and such purchaser or purchasers
shall not be obligated to see to the application of any part of the
purchase money paid over to the Collateral Agent or such officer or be
answerable in any way for the misapplication thereof.
<PAGE>
13
16. SECURITY INTEREST ABSOLUTE. All rights of the
Collateral Agent hereunder, the security interests granted hereunder
and all obligations of the Pledgors hereunder shall be absolute and
unconditional.
17. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by any Pledgor herein and in the
certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the Secured Parties and shall
survive the making by the Lenders of the Loans, the execution and delivery
to the Lenders of the Loan Documents and the issuance by the Issuing Bank
of the Letters of Credit, regardless of any investigation made by the
Secured Parties, or on their behalf, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or
L/C Disbursement, or any Fee or any other amount payable under or in
respect of this Agreement or any other Loan Document is outstanding and
unpaid and so long as the Commitments have not been terminated.
18. COLLATERAL AGENT'S LIABILITIES AND EXPENSES;
INDEMNIFICATION. (a) Notwithstanding anything to the contrary provided
herein, the Collateral Agent assumes no liabilities with respect to any
claims regarding each Pledgor's ownership (or purported ownership) of, or
rights or obligations (or purported rights or obligations) arising from,
the Collateral or any use (or actual or alleged misuse) whether arising
out of any past, current or future event, circumstance, act or omission or
otherwise, or any claim, suit, loss, damage, expense or liability of any
kind or nature arising out of or in connection with the Collateral. All of
such liabilities shall, as between the Collateral Agent and the Pledgors,
be borne exclusively by the Pledgors.
(b) Each Pledgor hereby agrees to pay all reasonable expenses
of the Collateral Agent and to indemnify the Collateral Agent with respect
to any and all losses, claims, damages, liabilities and related expenses
in respect of this Agreement or the Collateral in each case to the extent
the Borrower is required to do so pursuant to Section 10.03 of the Credit
Agreement.
(c) Any amounts payable by a Pledgor as provided hereunder
shall be additional Obligations of it secured hereby and by its other
Security Documents. Without prejudice to the survival of any other
agreements contained herein, all indemnification and reimbursement
obligations contained herein shall survive the payment in full of the
principal and interest under the Credit Agreement, the expiration of the
Letters of Credit and the termination of the Commitments or this
Agreement.
19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
<PAGE>
14
LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE
OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.
20. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each
Pledgor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or the other Loan Documents,
or for recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in
such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that any Loan Party
or any Secured Party may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents against any Pledgor
or any Secured Party or its properties in the courts of any jurisdiction.
(b) Each Pledgor and each Secured Party hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or the other Loan Documents in any New York
State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 22
hereof. Nothing in this Agreement will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.
21. TERMINATION AND RELEASE. (a) This Agreement and the
security interest created hereunder shall terminate when all the
Obligations have been fully and indefeasibly paid and when the Secured
Parties have no further Commitments and no Letters of Credit are
outstanding, at which time the Collateral Agent shall reassign and deliver
to each Pledgor, or to such person or persons as each Pledgor shall
reasonably designate, against receipt, such of the Collateral owned by
<PAGE>
15
such Pledgor as shall have not been sold or otherwise applied by the
Collateral Agent pursuant to the terms hereof and shall still be held by
it hereunder, together with appropriate instructions of reassignment and
release. Any such reassignment shall be without recourse to or any
warranty by the Collateral Agent and at the expense of such Pledgor.
(b) All Collateral sold, transferred or otherwise disposed of,
in accordance with the terms of the Credit Agreement (including pursuant
to a waiver or amendment of the terms thereof), shall be sold, transferred
or otherwise disposed of free and clear of the Lien and the security
interest created hereunder. In connection with the foregoing, (i) the
Collateral Agent shall execute and deliver to each Pledgor with respect to
the Collateral owned by such Pledgor, or to such person or persons as such
Pledgor shall reasonably designate, against receipt, such Collateral sold,
transferred or otherwise disposed together with appropriate instructions
of reassignment and release, (ii) any representation, warranty or covenant
contained herein relating to the Collateral shall no longer be deemed to
be made with respect to such sold, transferred or otherwise disposed
Collateral and (iii) all schedules hereto shall be amended to delete the
name of the Issuer. Any such reassignment shall be without recourse or to
any warranty by the Collateral Agent and at the expense of such Pledgor.
22. NOTICES. All notices, requests and demands to or upon
the Secured Parties or the Pledgors under this Agreement shall be given
or made in accordance with Section 10.01 of the Credit Agreement and
addressed as follows:
(a) if to any Secured Party, UCAR Global or the Borrower,
at its address for notices provided in Section 10.01 of the
Credit Agreement;
(b) if to any Subsidiary, at its address set forth on
Schedule II hereof.
23. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition of
enforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid
provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
24. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE Remedies. (a)
None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed
by the Pledgors and the Collateral Agent, PROVIDED that any provision of
this Agreement may be waived by the Required Secured Parties pursuant to a
letter or agreement executed by the Collateral Agent or by telecopy
transmission from the Collateral Agent.
<PAGE>
15
(b) Neither the Collateral Agent nor any Secured Party shall
by any act (except by a written instrument pursuant in Section 24(a)
hereof) or delay be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default or in any breach of
any of the terms and conditions hereof. No failure to exercise, nor any
delay in exercising, on the part of any Secured Party, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise of any other right, power or privilege. A
waiver by any Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which such
Secured Party would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
25. SECTION HEADINGS. The section headings used in this
Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the
interpretation hereof.
26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the successors and assigns of the Pledgors and shall inure to the
benefit of the Pledgors, the Collateral Agent and the Secured Parties and
their successors and assigns, PROVIDED that this Agreement may not be
assigned by the Pledgors without the prior written consent of the
Collateral Agent and the Secured Parties.
27. COUNTERPARTS. This Agreement may be executed in two
or more original counterparts, each of which shall constitute an
original but all of which when taken together shall constitute but one
contract.
28. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK.
<PAGE>
17
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
UCAR INTERNATIONAL INC.
by /S/ NANCY M. FALLS
-------------------------------------
Name: Nancy M. Falls
Title: Treasurer
UCAR GLOBAL ENTERPRISES INC.
by /S/ NANCY M. FALLS
---------------------------------------
Name: Nancy M. Falls
Title: Treasurer
UCAR FINANCE INC.
by /S/ NANCY M. FALLS
---------------------------------------
Name: Nancy M. Falls
Title: Treasurer
EACH OF THE PLEDGOR SUBSIDIARIES LISTED
ON SCHEDULE II HERETO
by /S/ NANCY M. FALLS
---------------------------------------
Name: Nancy M. Falls
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Collateral Agent,
by /S/ DEBORAH DESANTIS
---------------------------------------
Name: Deborah DeSantis
Title: Vice President
WITNESSES:
1. /S/ CHERYLYN BRANDT 2. /S/ CHIANN BAO
-------------------------- ------------------------
Name:Cherylyn Brandt Name: Chiann Bao
Drivers License No.: ___________ Drivers License No.: __________
Social Security No.: ____________ Social Security No.: __________
<PAGE>
18
State of New York )
) ss.: New York
County of New York )
On this the day of February, 2000, before me, __________________________,
the undersigned officer, personally appeared
______________________________ and _______________________, known to me to
be the persons whose names are subscribed to the within instrument and
each acknowledged that he(she) executed the same for the purposes therein
contained.
IN WITNESS WHEREOF I hereunto set my hand.
----------------------------
Notary Public
My Commission expires ____________________.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I TO
PLEDGE AGREEMENT
============================================================================================
PLEDGED STOCK
-------------
PERCENTAGE
PLEDGOR* ISSUER* PLEDGED STOCK PLEDGED
------- ------ ------------- ----------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
UCAR International Inc. UCAR Global Enterprises 100 Shares 100%
Inc. (Certificate No. U0001)
- --------------------------------------------------------------------------------------------
UCAR International Inc. UCAR Finance Inc. 100 Shares 100%
(Certificate No. 1)
- --------------------------------------------------------------------------------------------
UCAR Global Enterprises Inc. UCAR Carbon S.A.(Brazil) No Certificates 65%
- --------------------------------------------------------------------------------------------
UCAR Global Enterprises Inc. UCAR Carbon Company Inc. 500 Shares 100%
(Certificate No. 2)
- --------------------------------------------------------------------------------------------
UCAR Global Enterprises Inc. UCAR Holdings II Inc. 100 Shares 100%
(Certificate No. 2)
- --------------------------------------------------------------------------------------------
UCAR Global Enterprises Inc. UCAR S.A. (Switzerland) 113,750 Shares 65%
(Certificate No. 5)
- --------------------------------------------------------------------------------------------
UCAR Global Enterprises Inc. UCAR Holding GmbH (Austria) No Certificates 65%
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. Unicarbon Comercial Ltda. No Certificates 65%
(Brazil)
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. UCAR Limited (UK) 5,249,999 Shares 65%
(Certificate No. 9)
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. Union Carbide Grafito, Inc. 25,000 preferred Shares 100%
(Certificate No. 26)
200 common Shares
(Certificate No. 2)
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. UCAR Carbon Foreign Sales 1 Share 65%
Corporation (Certificate No. 2)
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. UCAR Composites Inc. 800 Shares 100%
(Certificate No. A3)
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. UCAR International Trading 100 Shares 100%
Inc. (Certificate No. 1)
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. EMSA (Pty.) Ltd. (South 4,062,500 Shares 65%
Africa) (Certificate No. 36)
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. Carbographite Limited 2,600 Shares 65%
(South Africa) (Certificate No. 42)
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. UCAR Mexicana S.A. de C.V. 269,828,025 Shares 65%
(Mexico) (Certificate Nos. 1 and 5)
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. UCAR S.p.A. (Italy) No Certificates 65%
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. UCAR Electrodos S.L. 1 Share .1%
(Spain)
- --------------------------------------------------------------------------------------------
UCAR Carbon Company Inc. UCAR Carbon Mexicana, S.A. 27,231 Shares .1%
de C.V. (Mexico) (Certificate Nos. 1,3,4
- --------------------------------------------------------------------------------------------
UCAR Holdings II Inc. UCAR Inc. (Canada) 650 Shares 65%
(Certificate No. 3)
- --------------------------------------------------------------------------------------------
UCAR Holdings II Inc. UCAR Electrodos S.L. No Certificates 65%
(Spain)
- --------------------------------------------------------------------------------------------
UCAR Holdings II Inc. UCAR Holdings S.A. (France) No Certificates 65%
- --------------------------------------------------------------------------------------------
UCAR Holdings II Inc. UCAR Holdings III Inc. 100 Shares 100%
(Certificate No. 2)
- --------------------------------------------------------------------------------------------
UCAR Holdings II Inc. UCAR SNC (France) 1 Share .1%
No Certificates
- --------------------------------------------------------------------------------------------
UCAR S.A. (Switzerland) UCAR Holding GmbH (Austria) No Certificates 33.33%
- --------------------------------------------------------------------------------------------
UCAR Carbon S.A. (Brazil) UCAR Pordutos de Carbono No Certificates 99.97%
S.A. (Brazil)
- --------------------------------------------------------------------------------------------
<PAGE>
2
================================================================================================
PLEDGED STOCK
-------------
PERCENTAGE
PLEDGOR* ISSUER* PLEDGED STOCK PLEDGED
------- ------ ------------- ----------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
UCAR Carbon S.A.(Brazil) Unicarbon Comercial Ltda. No Certificates 2.33%
(Brazil)
- -------------------------------------------------------------------------------------------------
UCAR Mexicana, S.A. de C.V. UCAR Carbon Mexicana, S.A. 5,944,099 Shares 99.84%
(Mexico) de C.V. (Mexico) (Certificates 27, 28
and 29) -- certificates
to be provided or reissued
- --------------------------------------------------------------------------------------------------
UCAR S.p.A. (Italy) UCAR Energia S.r.l. (Italy) No Certificates 100%
- --------------------------------------------------------------------------------------------------
UCAR Holdings S.A. (France) UCAR SNC (France) No Certificates 100%
</TABLE>
PLEDGED NOTES
-------------
================================================================================
INTERCOMPANY NOTES
------------------
- --------------------------------------------------------------------------------
PLEDGOR* ISSUER* PRINCIPAL AMOUNT
-------- ------ ----------------
- --------------------------------------------------------------------------------
UCAR Finance Inc. UCAR Carbon Company Inc. $700,000,000
- --------------------------------------------------------------------------------
UCAR Finance Inc. UCAR S.A. $84,650,000
- --------------------------------------------------------------------------------
UCAR Finance Inc. UCAR Electrodos, S.L. 17,110,000
- --------------------------------------------------------------------------------
UCAR Finance Inc. UCAR S.p.A. 16,750,000
- --------------------------------------------------------------------------------
UCAR Finance Inc. UCAR Holdings S.A. 126,900,000
- --------------------------------------------------------------------------------
================================================================================
OTHER NOTES
-----------
- --------------------------------------------------------------------------------
PLEDGOR* ISSUER* PRINCIPAL AMOUNT
------- ------ ----------------
- --------------------------------------------------------------------------------
UCAR International Inc. UCAR Carbon Company Inc. $325,000,000
- --------------------------------------------------------------------------------
UCAR Global Enterprises Inc. UCAR International Inc. $511,600,000
- --------------------------------------------------------------------------------
UCAR Global Enterprises Inc. UCAR Inc. (Canada) $ 60,000,000
- --------------------------------------------------------------------------------
UCAR Carbon Company Inc. UCAR Global Enterprises Inc. $600,000,000
- --------------------------------------------------------------------------------
UCAR Carbon Mexicana, S.A. UCAR Global Enterprises Inc. $ 30,000,000
de C.V. (Mexico)
- --------------------------------------------------------------------------------
UCAR Holdings, S.A. (France) UCAR Carbon Company Inc. $100,000,000
- --------------------------------------------------------------------------------
UCAR S.p.A. (Italy) UCAR Carbon Company Inc. $40,000,000,000
Italian Lire
- --------------------------------------------------------------------------------
UCAR Electrodos S.L. (Spain) UCAR Carbon Company Inc. 7,000,000,000
Spanish Pesetas
- --------------------------------------------------------------------------------
UCAR Limited (U.K.) UCAR Carbon Company Inc. 30,000,000
British Pounds
- --------------------------------------------------------------------------------
EMSA (Pty.) Ltd. UCAR Carbon Company Inc. 300,000,000
(South Africa) South African Rand
- --------------------------------------------------------------------------------
UCAR S.A. (Switzerland) UCAR Global Enterprises Inc. $300,000,000
- --------------------------------------------------------------------------------
UCAR Carbon Mexicana S.A. de UCAR Global Enterprises Inc. $ 50,000,000
C.V.
- --------------------------------------------------------------------------------
* Jurisdictions of incorporation of non-United States entities are
identified in parentheses following the names of such entities.
<PAGE>
SCHEDULE II
PLEDGOR SUBSIDIARIES*
UCAR Carbon Company Inc.
UCAR Holdings II Inc.
UCAR S.A. (Switzerland)
UCAR Carbon S.A. (Brazil)
UCAR Mexicana, S.A. de C.V. (Mexico)
UCAR S.p.A. (Italy)
UCAR Holdings S.A. (France)
UCAR Inc. (Canada)
UCAR SNC (France)
UCAR Electrodos S.L. (Spain)
UCAR Limited (UK)
EMSA (Pty.) Ltd. (South Africa)
* Jurisdictions of incorporation of non-United States entities
are identified in parentheses following the names of such
entities.
<PAGE>
2
ACKNOWLEDGMENT AND CONSENT
Each of the undersigned hereby acknowledges receipt of a copy
of the Pledge Agreement dated as of February 22, 2000 (the "PLEDGE
AGREEMENT"), by UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"),
UCAR GLOBAL ENTERPRISES INC., a Delaware corporation ("Global"), the
subsidiaries of UCAR that are signatories thereto (together with UCAR
GLOBAL and the Borrower, the "PLEDGORS"), in favor of MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as collateral agent for the Secured Parties
(such term and each other capitalized term used but not defined herein
having the meaning given it in Article I of the Credit Agreement dated as
of February 22, 2000, among UCAR, Global, the Borrower, the LC
Subsidiaries from time to time party thereto, the Lenders from time to
time party thereto and Morgan Guaranty Trust Company of New York, as
Administrative Agent, Collateral Agent and Issuing Bank (as the same may
be amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT").
1. Each of the undersigned will be bound by the terms of the
Pledge Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.
2. Each of the undersigned will notify the Collateral Agent
promptly in writing of the occurrence of any of the events described in
subsection 5(a) of the Pledge Agreement.
3. The terms of subsection 9(c) of the Pledge Agreement shall
apply to it, MUTATIS MUTANDIS, with respect to all actions that may be
required of it under or pursuant to or arising out of Section 9 of the
Pledge Agreement.
EACH OF THE ISSUERS OF PLEDGED
SECURITIES LISTED ON SCHEDULE I TO
THE PLEDGE AGREEMENT (OTHER THAN
UCAR S.A. (SWITZERLAND))
By /S/ MICHELLE F. RIDER
--------------------------------
Name: Michelle F. Rider
Title: Attorney-In-Fact
<PAGE>
EXHIBIT B TO
PLEDGE AGREEMENT
ACKNOWLEDGMENT AND CONSENT
BY UCAR S.A. TO DOMESTIC PLEDGE AGREEMENT
UCAR S.A. of Route Pallatex 17, CH-1163 Etoy, Switzerland
("UCAR S.A."), hereby acknowledges receipt of a copy of the Domestic
Pledge Agreement dated as of February 22, 2000 (the "PLEDGE Agreement"),
by UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL
ENTERPRISES INC., a Delaware corporation ("Global"), the subsidiaries of
UCAR that are signatories thereto (together with UCAR GLOBAL and the
Borrower, the "PLEDGORS"), in favor of MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as collateral agent for the Secured Parties (such term and each
other capitalized term used but not defined herein having the meaning
given it in Article I of the Credit Agreement dated as of February 22,
2000, among UCAR, Global, the Borrower, the LC Subsidiaries from time to
time party thereto, the Lenders from time to time party thereto and Morgan
Guaranty Trust Company of New York, as Administrative Agent, Collateral
Agent and Issuing Bank (as the same may be amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT").
1. Subject to section 4 below, UCAR S.A. will be bound by
the terms of the Pledge Agreement and will comply with such terms
insofar as such terms are applicable to the undersigned.
2. UCAR S.A. will notify the Collateral Agent promptly in
writing of the occurrence of any of the events described in subsection
5(a) of the Pledge Agreement.
3. The terms of subsection 9(c) of the Pledge Agreement shall
apply to it, MUTATIS MUTANDIS, with respect to all actions that may be
required of it under or pursuant to or arising out of Section 9 of the
Pledge Agreement.
4. In relation to obligations of a Foreign Subsidiary (other
than UCAR S.A. or any of its subsidiaries), UCAR S.A. shall (a) only be
liable to the Collateral Agent and the Secured Parties to the extent and
in the maximum amount of the profits available for the distribution of
dividends (being the balance sheet profits and any reserves made for this
purpose, all in accordance with art. 675(2) of the Swiss Code of
Obligations) at any given time; (b)(i) deduct from any such payments Swiss
Anticipatory Tax (withholding tax) at the rate of 35 percent (or such
other rate as in force from time to time) and subject to any applicable
double taxation treaty; (ii) pay such deduction to the Swiss Federal Tax
Administration; and (iii) give evidence to the respective Secured Party of
such deduction in accordance with Section 2.16 of the Credit Agreement;
and (c) not gross-up pursuant to Section 2.16 of the Credit Agreement. Any
<PAGE>
2
and all indemnities and guarantees contained in the Loan Documents shall
be construed in a manner consistent with this paragraph.
UCAR S.A.
By /S/ NANCY M. FALLS
--------------------------------
Name: Nancy M. Falls
Title: Treasurer
Date: February 21, 2000
ACKNOWLEDGED AND AGREED BY:
THE COLLATERAL AGENT
Morgan Guaranty Trust Company of New York
By /S/ DEBORAH DESANTIS
--------------------
Name: Deborah DeSantis
Title: Vice President
Date: February 18, 2000
<PAGE>
CONFORMED COPY
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT dated as of February 22,
2000, made by UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"),
UCAR GLOBAL ENTERPRISES INC., a Delaware corporation ("GLOBAL"), UCAR
FINANCE INC., a Delaware corporation (the "BORROWER"), and the subsidiaries
of UCAR from time to time party hereto (the "SUBSIDIARY GRANTORS", and
together with UCAR, Global and the Borrower, the "Grantors") in favor of
MORGAN GUARANTY TRUST COMPANY OF NEW YORK as collateral agent for the
Secured Parties (such term and each other capitalized term used but not
defined herein having the meaning given it in Article I of the Credit
Agreement). Reference is made to the Credit Agreement dated as of February
22, 2000 (as the same may be amended, supplemented or otherwise modified
from time to time, the "CREDIT AGREEMENT") among UCAR, Global, the
Borrower, the LC Subsidiaries from time to time party thereto, the Lenders
from time to time party thereto and Morgan Guaranty Trust Company of New
York, as Administrative Agent, Collateral Agent and Issuing Bank.
The Lenders and the Issuing Banks, respectively, have agreed to make Loans
and to issue Letters of Credit pursuant to, and upon the terms and subject to
the conditions specified in, the Credit Agreement.
The obligations of the Lenders to make Loans and of the Fronting Banks to
issue Letters of Credit under the Credit Agreement are conditioned upon, among
other things, the execution and delivery by the Grantors of an intellectual
property security agreement in the form hereof to secure the due and punctual
payment of, with respect to each Grantor, its obligations as obligor or
guarantor in respect of (a) the due and punctual payment of (i) the principal of
and premium, if any, and interest (including interest accruing during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (ii) each payment required to be
made under the Credit Agreement in respect of any Letter of Credit, when and as
due, including payments in respect of reimbursement of disbursements, interest
thereon and obligations to provide cash collateral and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of UCAR, Global, the Borrower and the
Subsidiaries under the Credit Agreement and the other Loan Documents (including,
without limitation, all monetary obligations of the Intercompany Borrowers under
the Intercompany Notes and Intercompany Borrower Agreements, but only for so
long as the Intercompany Notes and the rights of the Borrower under the
Intercompany Borrower Agreements are pledged to the Collateral Agent under one
or more Pledge Agreements as security for the Obligations), (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Loan Parties under or pursuant to the Credit Agreement and the other Loan
Documents, (c) unless otherwise agreed upon in writing by the applicable Lender
party thereto, the due and punctual payment and performance of all obligations
<PAGE>
2
of the Borrower and the Subsidiaries, monetary or otherwise, under each
Interest/Exchange Rate Protection Agreement entered into with any counterparty
that (i) was a Lender (or an Affiliate thereof) at the time such
Interest/Exchange Rate Protection Agreement was entered into or (ii) (A) was a
"Lender" (or an Affiliate thereof) as defined in the Existing Credit Agreements
at the time such Interest/Exchange Rate Protection Agreement was entered into
and (B) was one of the intital Lenders under the Credit Agreement (or an
Affiliate thereof) and (d) all obligations of the Guarantors under the Guarantee
Agreements; (all the foregoing obligations collectively, the "OBLIGATIONS").
Accordingly, the Grantors and the Collateral Agent, on behalf of itself and
each other Secured Party (and each of their successors and assigns), hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITION OF TERMS USED HEREIN. All capitalized terms used
but not defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
SECTION 1.02. DEFINITION OF CERTAIN TERMS USED HEREIN. As used herein, the
following terms shall have the following meanings:
"AGREEMENT" shall mean this Intellectual Property Security Agreement.
"COLLATERAL" shall mean, with respect to each Grantor, all of the
following, whether now owned or hereafter acquired by such Grantor: (a) Patents,
including all granted Patents, recordings and pending applications, including
those listed on Schedule I attached hereto, (b) Trademarks, including all
registered Trademarks, registrations, recordings, and pending applications,
including those listed on Schedule II attached hereto, (c) Copyrights, including
all registered Copyrights, registrations, recordings, supplemental registrations
and pending applications, including those listed on Schedule III attached
hereto, (d) Licenses, including those listed on Schedule IV hereto, (e) General
Intangibles, and (f) all products and Proceeds (including insurance proceeds)
of, and additions, improvements and accessions to, and books and records
describing or used in connection with, any and all of the property described
above.
"COPYRIGHTS" shall mean, with respect to each Grantor, all of the following
now or hereafter owned by such Grantor: (i) all copyright rights in any work
subject to the copyright laws of the United States or any other country, whether
as author, assignee, transferee or otherwise, and (ii) all registrations and
applications for registration of any such copyright in the United States or any
other country, including registrations, recordings, supplemental registrations
and pending applications for registration in the United States Copyright Office.
"COPYRIGHT LICENSE" shall mean, with respect to each Grantor, any written
agreement, now or hereafter in effect, granting any right to any third party
under any Copyright now or hereafter owned by such Grantor or which such Grantor
otherwise has the right to license, or granting any right to such Grantor under
<PAGE>
3
any Copyright now or hereafter owned by any third party, and all rights of such
Grantor under any such agreement.
"GENERAL INTANGIBLES" shall mean, with respect to each Grantor, all
intangible, intellectual or other similar property of such Grantor of any kind
or nature now owned or hereafter acquired by such Grantor, including inventions,
designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential
or proprietary technical and business information, know-how, show-how or other
data or information, software and databases and all embodiments or fixations
thereof and related documentation, registrations, franchises, and all other
intellectual or other similar property rights not otherwise described above.
"INDEMNITEE" shall mean the Collateral Agent, the Secured Parties and their
respective officers, directors, trustees, affiliates and controlling persons.
"LICENSE" shall mean, with respect to each Grantor, any Patent License,
Trademark License, Copyright License or other license or sublicense as to which
such Grantor is a party (other than those license agreements which by their
terms prohibit assignment or a grant of a security interest by such Grantor as
licensee thereunder).
"PATENT LICENSE" shall mean, with respect to each Grantor, any written
agreement, now or hereafter in effect, granting to any third party any right to
make, use or sell any invention on which a Patent, now or hereafter owned by
such Grantor or which such Grantor otherwise has the right to license, is in
existence, or granting to such Grantor any right to make, use or sell any
invention on which a Patent, now or hereafter owned by any third party, is in
existence, and all rights of such Grantor under any such agreement.
"PATENTS" shall mean, with respect to each Grantor, all the following now
or hereafter owned by such Grantor: (a) all letters patent of the United States
or any other country, including patents, design patents or utility models, all
registrations and recordings thereof, and all applications for letters patent of
the United States or any other country, including registrations, recordings and
pending applications in the United States Patent and Trademark Office or any
similar offices in any other country, and (b) all reissues, continuations,
divisions, continuations-in-part, renewals or extensions thereof, and the
inventions disclosed or claimed therein.
"PROCEEDS" shall mean, with respect to each Grantor, any consideration
received from the sale, exchange, license, lease or other disposition of any
asset or property that constitutes Collateral owned by such Grantor, any value
received as a consequence of the possession of any such Collateral and any
payment received from any insurer or other person or entity as a result of the
destruction, loss, theft or other involuntary conversion of whatever nature of
any asset or property that constitutes such Collateral, any claim of such
Grantor against third parties for (and the right to sue and recover for and the
rights to damages or profits due or accrued arising out of or in connection
with) (a) past, present or future infringement of any Patent now or hereafter
owned by such Grantor or licensed under a Patent License, (b) past, present or
future infringement or dilution of any Trademark now or hereafter owned by such
Grantor or licensed under a Trademark License or injury to the goodwill
associated with or symbolized by any Trademark now or hereafter owned by such
Grantor, (c) past, present or future breach of any License, (d) past, present or
<PAGE>
4
future infringement of any Copyright now or hereafter owned by such Grantor or
licensed under a Copyright License, and (e) any and all other amounts from time
to time paid or payable under or in connection with any of such Collateral.
"TRADEMARK LICENSE" shall mean, with respect to each Grantor, any written
agreement, now or hereafter in effect, granting to any third party any right to
use any Trademark now or hereafter owned by such Grantor or that such Grantor
otherwise has the right to license, or granting to such Grantor any right to use
any Trademark now or hereafter owned by any third party, and all rights of such
Grantor under any such agreement.
"TRADEMARKS" shall mean, with respect to each Grantor, all of the following
now or hereafter owned by such Grantor: (a) all trademarks, service marks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, and all
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office, any State of the United States or any similar offices in any
other country or any political subdivision thereof, and all extensions or
renewals thereof, and (b) all goodwill associated therewith or symbolized
thereby, and (c) all other assets, rights and interests that uniquely reflect or
embody such goodwill.
SECTION 1.03. RULES OF INTERPRETATION. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
ARTICLE II
SECURITY INTEREST
SECTION 2.01. SECURITY INTEREST. As security for the payment or
performance, as the case may be, of the Obligations, each Grantor hereby
creates, mortgages, pledges, hypothecates and transfers to the Collateral Agent,
its successors and assigns, for the benefit of the Secured Parties, and hereby
grants to the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, a continuing first priority security interest in
all such Grantors' right, title and interest in, to and under the Collateral
subject to liens permitted under Section 7.02 of the Credit Agreement (the
"SECURITY INTEREST"). Without limiting the foregoing, the Collateral Agent is
hereby authorized to file one or more financing statements, continuation
statements, filings with the United States Patent and Trademark Office or United
States Copyright Office (or similar office in any other country), or any other
documents for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Security Interest granted by such Grantor, without the signature
of such Grantor, naming such Grantor as debtor and the Collateral Agent as
secured party.
Notwithstanding any other provision of this Agreement to the contrary, the
Collateral shall not include any License which by its terms or the terms
governing it prohibits assignment thereof or the grant of a security interest
<PAGE>
5
therein; PROVIDED that such term or terms are typical or customary in connection
with the document or instrument to which they relate.
Each Grantor agrees at all times to keep accurate and complete, in all
material respects, accounting records with respect to the Collateral and, on and
after the occurrence and during the continuance of a Default, a record of all
payments and Proceeds received in respect thereof.
SECTION 2.02. FURTHER ASSURANCES. Each Grantor agrees, at its own cost and
expense, to promptly execute, acknowledge, deliver and cause to be duly filed
all such further instruments and documents and take all such actions as the
Collateral Agent may from time to time reasonably request for the better
assuring, preserving and perfecting of the Security Interest and the rights and
remedies created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting of
the Security Interest created hereby, the filing of any financing statements or
other documents (including filings with the United States Patent and Trademark
Office and the United States Copyright Office or similar offices in any other
country) in connection herewith, and the execution and delivery of any document
required to supplement this Agreement with respect to any Patents, Trademarks
and/or Copyrights applied for, acquired, registered (or for which registration
applications are filed) or issued after the date hereof. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any promissory note or other instrument, upon the request of the Collateral
Agent, such note or instrument shall (to the extent not previously pledged and
delivered pursuant to the Pledge Agreements) be immediately pledged and
delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the
Collateral Agent. Each Grantor agrees promptly to notify the Collateral Agent if
any material portion of the Collateral is canceled or overturned, opposed,
misappropriated, injured, infringed, lost (other than due to expiration of any
issued Patent) or, if applicable, diluted.
SECTION 2.03. INSPECTION AND VERIFICATION. Without limiting the scope of
Section 6.07 of the Credit Agreement, the Collateral Agent and such
representatives as the Collateral Agent may reasonably designate shall have the
right to inspect, at any reasonable times or times, any of the Collateral, all
records related thereto (and to make extracts and copies from such records) and
the premises upon which any of the Collateral is located, to discuss any
Grantor's affairs with the officers of such Grantor and its independent
accountants and to verify under reasonable procedures the validity, amount,
quality, quantity, value, conditions, and status of or any other matter relating
to such Collateral, including, in the case of Collateral in the possession of
any third party (with, except after an Event of Default shall have occurred and
during the continuance thereof, the consent of such Grantor, which consent shall
not be unreasonably withheld), by contacting such person possessing such
Collateral for the purpose of making such a verification. The Collateral Agent
shall have the absolute right to share any information it gains from such
inspection or verification with any or all of the Secured Parties.
SECTION 2.04. TAXES; ENCUMBRANCES. At its option, the Collateral Agent may
discharge past due taxes, assessments, charges, fees, liens, security interests
or other encumbrances at any time levied or placed on any of the Collateral and
not permitted under this Agreement or other Loan Documents, and may pay for the
maintenance and preservation of any of the Collateral to the extent any Grantor
fails to do so to the extent required by this Agreement or the other Loan
Documents, and such Grantor agrees to reimburse the Collateral Agent on demand
for any payment made or any expense incurred by the Collateral Agent pursuant to
<PAGE>
6
the foregoing authorization; PROVIDED, HOWEVER, that nothing in this Section
2.04 shall be interpreted as excusing any Grantor from the performance of, or
imposing any obligation on the Collateral Agent or any other Secured Party to
cure or perform, any covenants or other promises of any Grantor with respect to
taxes, assessments, charges, fees, liens, security interests or other
encumbrances and maintenance as set forth herein or in the other Loan Documents.
SECTION 2.05. NO ASSUMPTION OF LIABILITY. The Security Interest is granted
as security only and shall not subject any Secured Party to, or in any way alter
or modify, any obligation or liability of any Grantor with respect to or arising
out of any of the Collateral.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants, as to
itself and the Collateral in which the Security Interest is created by it
hereunder, that:
SECTION 3.01. VALIDITY OF PATENTS, TRADEMARKS AND COPYRIGHTS. Each of the
Patents, Trademarks and Copyrights is subsisting and has not been adjudged
invalid or unenforceable, in whole or in part, except as could not reasonably be
expected to have a Material Adverse Effect.
SECTION 3.02. TITLE AND AUTHORITY. Each Grantor has rights in and good
title to the Collateral shown on the schedules hereto as being owned by it and
has full corporate power and authority to grant to the Collateral Agent (for the
benefit of the Secured Parties) the Security Interest in the Collateral pursuant
hereto and to execute, deliver and perform its obligations in accordance with
the terms of this Agreement, without the consent or approval of any other person
other than any consent or approval that has been obtained, except, in each case,
as could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.03. FILINGS. (a) Fully executed financing statements containing a
description of the Collateral shall promptly following the Closing Date be filed
of record in every governmental, municipal or other office in every jurisdiction
located within the United States and its respective territories and possessions
or such other analogous documents in other countries as are necessary to publish
notice of and protect the validity of and to establish a valid and perfected
security interest in favor of the Collateral Agent (for the benefit of the
Secured Parties) in respect of the Collateral in which a security interest may
be perfected by filing a financing statement or analogous document in the United
States and its political subdivisions, territories and possessions pursuant to
the Uniform Commercial Code or other applicable law in such jurisdictions or
pursuant to applicable law in other countries, and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under applicable law with
respect to the filing of continuation statements or other documents of similar
effect, except as contemplated by paragraph (b) below and filings with respect
to after-acquired Collateral, with respect to which all necessary actions will
be promptly taken subsequent to the acquisition of such after-acquired
Collateral.
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7
(b) Each Grantor shall ensure and warrants that fully executed security
agreements in the form hereof and containing a description of the Collateral
shall have been received and recorded within three months after the execution of
this Agreement with respect to United States Patents and United States
registered Trademarks (and Trademarks for which United States registration
applications are pending) and within one month after the execution of this
Agreement with respect to United States registered Copyrights by the United
States Patent and Trademark Office and the United States Copyright Office
pursuant to 35 U.S.C. ss. 261, 15 U.S.C. ss. 1060 or 17 U.S.C. ss. 205 and the
regulations thereunder, as applicable, and otherwise as may be required pursuant
to the laws of any other country or any political subdivision thereof, to
protect the validity and first priority of and to perfect a valid first priority
security interest (subject only to Liens permitted by Section 7.02 of the Credit
Agreement) in favor of the Collateral Agent (for the benefit of the Secured
Parties) in respect of the Collateral in which a security interest may be
perfected by filing in the United States and its political subdivisions,
territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements (other than such actions as are necessary to perfect
the Collateral Agent's first priority security interest with respect to any
Collateral (or registration or application for registration thereof) acquired or
developed after the date hereof).
SECTION 3.04. VALIDITY OF SECURITY INTERESTS. This Agreement is effective
to create in favor of the Collateral Agent, for the ratable benefit of the
Secured Parties, a legal, valid and enforceable security interest in the
Collateral, and, when financing statements in appropriate form are filed in the
offices specified on Schedule VI hereto and this Agreement is filed in the
United States Patent and Trademark Office and the United States Copyright
Office, this Agreement will constitute a duly perfected Lien on, and security
interest in, all right, title and interest of the Grantors in such Collateral
and, to the extent contemplated therein and subject to ss. 9-306 of the UCC, the
proceeds thereof, in each case prior and superior in right to any other person
(it being understood that subsequent recordings in the United States Patent and
Trademark Office and the United States Copyright Office may be necessary to
perfect a lien on registered trademarks, trademark applications and copyrights
acquired by the Grantors after the date hereof), other than with respect to the
rights of persons pursuant to Liens expressly permitted by Section 7.02 of the
Credit Agreement.
SECTION 3.05. INFORMATION REGARDING NAMES AND LOCATIONS. Each Grantor has
disclosed in writing to the Collateral Agent on Schedule IV any material trade
names used to identify it in its business or in the ownership of its properties
during the past five years.
SECTION 3.06. ABSENCE OF OTHER LIENS. The Collateral is owned by the
Grantors free and clear of any Lien of any nature whatsoever (except for Liens
expressly permitted by Section 7.02 of the Credit Agreement or hereby and any
liens of licenses listed on Schedule V). Other than as contemplated hereby and
by the other Loan Documents, and except as permitted therein, the Grantors have
not filed (a) any financing statement or analogous document under the Uniform
Commercial Code, (b) any assignment in which any Grantor assigns the Collateral,
any security agreement or any similar instrument covering any Collateral with
the United States Patent and Trademark Office, the United States Copyright
Office or any similar office in any other country or political subdivision
thereof and (c) any assignment in which any Grantor assigns the Collateral or
any security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office.
<PAGE>
8
ARTICLE IV
COVENANTS
SECTION 4.01. COVENANTS REGARDING PATENT, TRADEMARK AND COPYRIGHT
COLLATERAL. (a) Each Grantor (either itself or through licensees) will, for each
Patent, not do any act, or omit to do any act, whereby any Patent that is
material to the conduct of the Grantors' businesses, taken as a whole, may
become invalidated or dedicated to the public, and shall continue to mark, to
the extent consistent with past practices and good business judgment, any
products covered by a material Patent with the relevant patent number as
necessary and sufficient to establish and preserve such Grantor's material
rights under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of the Grantors'
businesses, taken as a whole, to the extent consistent with past practices and
good business judgment, (i) maintain such Trademark in full force free from any
material claim of abandonment or invalidity for nonuse, (ii) maintain the
quality of products and services offered under such Trademark to the extent that
the failure to do so would result in a Material Adverse Effect, (iii) display
such Trademark with notice of federal or foreign registration to the extent
necessary and sufficient to establish and preserve such Grantor's material
rights under applicable law and (iv) not knowingly use or knowingly permit the
use of such Trademark in violation of any material third-party rights.
(c) Each Grantor (either itself or through licensees) will, for each work
covered by a material Copyright, to the extent consistent with past practices
and good business judgment, continue to publish, reproduce, display, adopt and
distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve such Grantor's material rights under
applicable copyright laws.
(d) Each Grantor shall notify the Collateral Agent immediately if it knows
or has reason to know that any Patent, Trademark or Copyright material to the
conduct of the Grantors' businesses, taken as a whole, may become abandoned,
lost or dedicated to the public, or of any adverse determination or development
(including the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, United States
Copyright Office or any court or similar office of any country) regarding such
Grantor's ownership of any such Patent, Trademark or Copyright, its right to
register the same, or to keep and maintain the same.
(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, unless it promptly informs
the Collateral Agent, and, upon request of the Collateral Agent, executes and
delivers any and all agreements, instruments, documents and papers as the
Collateral Agent may reasonably request to evidence (and, in the case of
applications for Trademarks with the United States Patent and Trademark Office,
perfect) the Collateral Agent's security interest in such Patent, Trademark or
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9
Copyright of such Grantor and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby, and such Grantor hereby
appoints the Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable until the Obligations are paid in full.
(f) Each Grantor will take all necessary steps that are consistent with the
practice in any proceeding before the United States Patent and Trademark Office,
United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, to maintain and pursue each material application (and to
obtain the relevant grant or registration) relating to the Patents, Trademarks
and/or Copyrights which are material to the Grantors' businesses, taken as a
whole, to maintain each issued Patent and each registration of the Trademarks
and Copyrights that is material to the conduct of the Grantors' businesses,
taken as a whole, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if consistent with good business judgment, to initiate opposition,
interference and cancelation proceedings against third parties.
(g) In the event that any Collateral consisting of a Patent, Trademark or
Copyright material to the conduct of the Grantors' businesses, taken as a whole,
is believed by the Grantor that has created the Security Interest in such
Collateral pursuant hereto to have been infringed, misappropriated or diluted by
a third party in any material respect, such Grantor shall notify the Collateral
Agent promptly after it learns thereof and shall, if consistent with good
business judgment, promptly sue for infringement, misappropriation, or dilution
and to recover any and all damages for such infringement, misappropriation or
dilution, and take such other actions as are appropriate under the circumstances
to protect such Collateral.
SECTION 4.02. PROTECTION OF SECURITY. Each Grantor shall, at its own cost
and expense, take any and all reasonable actions necessary to defend title to
the Collateral against all persons, to properly maintain, protect and preserve
the Collateral and to defend the Security Interest of the Collateral Agent in
the Collateral and the priority thereof against any Lien not permitted under the
Credit Agreement in each case, except as otherwise permitted by the Credit
Agreement or this Agreement.
SECTION 4.03. CONTINUING OBLIGATIONS OF THE GRANTORS. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each License, contract, agreement, interest
or obligation relating to the Collateral, all in accordance with the terms and
conditions thereof, to the extent consistent with good business practice.
Without limiting the foregoing, the Collateral Agent shall have no obligation or
liability under any License by reason of or arising out of this Agreement or the
granting or the assignment to the Collateral Agent of the Security Interest or
the receipt by the Collateral Agent of any payment related to any License
pursuant hereto, nor shall the Collateral Agent be required or obligated in any
manner to perform or fulfill any of the obligations of any Grantor under or
pursuant to any License, or to make any payment, or to make any inquiry as to
the nature or the sufficiency of any payment received by it or the sufficiency
of any performance by any party under any License, or to present or file any
claim, or to take any action to collect or enforce any performance of the
payment of any amounts that may have been assigned to it or to which it may be
entitled at any time or times.
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10
SECTION 4.04. USE AND DISPOSITION OF COLLATERAL. A Grantor shall not (i)
make or permit to be made an assignment, pledge or hypothecation of the
Collateral, and shall grant no other security interest in the Collateral (other
than pursuant hereto or except for any Permitted Liens) or (ii) make or permit
to be made any transfer of the Collateral, and shall remain at all times in
possession thereof other than transfers to the Collateral Agent pursuant to the
provisions hereof; notwithstanding the foregoing, a Grantor may use and dispose
of the Collateral in any lawful manner permitted by the provisions of this
Agreement, the Credit Agreement or any other Loan Document, unless the
Collateral Agent shall, after an Event of Default shall have occurred and during
the continuance thereof, notify the Borrower not to sell, convey, lease, assign,
transfer or otherwise dispose of any Collateral except with respect to any
transfer between the Borrower or a Wholly Owned Subsidiary that is a Grantor and
the Borrower or a Wholly Owned Subsidiary that is a Grantor.
SECTION 4.05. LOCATIONS OF COLLATERAL; PLACE OF BUSINESS. (a) Each Grantor
agrees, at such time or times as the Collateral Agent may reasonably request,
promptly to prepare and deliver to the Collateral Agent a duly certified
schedule or schedules in form reasonably satisfactory to the Collateral Agent,
showing the identity, amount and location (to the extent practicable) of any and
all Collateral.
(b) Each Grantor agrees not to change, or permit to be changed, the
location of its chief executive office or chief place of business or the name or
names used to identify it in its business or in the ownership of its properties
unless all filings under the Uniform Commercial Code or under other applicable
laws that are required to be made with respect to the Collateral have been made
and the Collateral Agent has a valid, legal and perfected first priority
security interest in the Collateral, subject to no liens, other than Liens
permitted by Section 7.02 of the Credit Agreement and any liens or licenses
listed on Schedule V, and prior notice thereof has been given to the Collateral
Agent along with copies of all such filings to be made.
SECTION 4.06. FUTURE RIGHTS. (a) If, before the time that all Obligations
shall have been paid in full, no Letters of Credit are outstanding and the
Secured Parties no longer have Commitments under the Credit Agreement, any
Grantor shall obtain rights to any material asset or item that may be considered
Collateral, the provisions of Section 2.01 shall automatically apply thereto and
each Grantor shall give to the Collateral Agent prompt notice thereof in
writing.
(b) With respect to any such material asset or item that may be considered
Collateral as set forth in paragraph (a) above, each Grantor shall follow the
procedures set forth in Section 3.03, as applicable, to ensure that the
Collateral Agent's valid first priority security interest therein is perfected
(subject only to Liens permitted by Section 7.02 of the Credit Agreement).
SECTION 4.07 ASSIGNMENT OF LICENSES. Upon and during the continuance of an
Event of Default and at the reasonable request of the Collateral Agent, each
Grantor shall use its reasonable efforts to obtain all requisite consents or
approvals by the licensor of each Copyright License, Patent License or Trademark
License to effect the assignment of all of the Grantors' rights, title and
interest thereunder to the Collateral Agent or its designee.
SECTION 4.08. COLLATERAL AGENT'S LIABILITIES AND EXPENSES; INDEMNIFICATION.
(a) Notwithstanding anything to the contrary provided herein, the Collateral
Agent assumes no liabilities with respect to any claims regarding each Grantor's
ownership (or purported ownership) of, or rights or obligations (or purported
<PAGE>
11
rights or obligations) arising from, the Collateral or any use (or actual or
alleged misuse), license or sublicense thereof by any Grantor or any licensee of
such Grantor, whether arising out of any past, current or future event,
circumstance, act or omission or otherwise, or any claim, suit, loss, damage,
expense or liability of any kind or nature arising out of or in connection with
the Collateral or the production, marketing, delivery, sale or provision of
goods or services under or in connection with any of the Collateral. As between
the Secured Parties and the Grantors, all of such liabilities shall be borne
exclusively by the Grantors.
(b) Each Grantor hereby agrees to pay all expenses of the Collateral Agent
and to indemnify the Collateral Agent with respect to any and all losses,
claims, damages, liabilities and related expenses in respect of this Agreement
or the Collateral in each case to the extent the Borrower is required to do so
pursuant to Section 10.03 of the Credit Agreement.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. Without
prejudice to the survival of any other agreements contained herein, all
indemnification and reimbursement obligations contained herein shall survive the
payment in full of the principal and interest under the Credit Agreement, the
expiration of the Letters of Credit and the termination of the Commitments or
this Agreement.
ARTICLE V
REMEDIES
SECTION 5.01. POWER OF ATTORNEY. Upon the occurrence and during the
continuance of any Event of Default, subject to prior written notice to the
Borrower, the Collateral Agent shall have the right, as the true and lawful
attorney-in-fact of the Grantors, with power of substitution for the Grantors
and in the Grantors' names, the Collateral Agent's name or otherwise, for the
use and benefit of the Secured Parties (a) upon prior notice from the Collateral
Agent, to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Collateral or any part thereof; (b) to demand, collect, receive payment
of, give receipt for and give discharges and releases of all or any of the
Collateral; (c) to sign the name of any Grantor on any invoice relating to any
of the Collateral; (d) to commence and prosecute any and all suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect or otherwise realize on all or any of the Collateral or to enforce any
rights in respect of any Collateral; (e) to settle, compromise, compound, adjust
or defend any actions, suits or proceedings relating to or pertaining to all or
any of the Collateral; (f) to license or, to the extent permitted by any
applicable law, sublicense, whether general, special or otherwise, and whether
on an exclusive or non-exclusive basis, any of the Collateral throughout the
world for such term or terms, on such conditions, and in such manner, as the
Collateral Agent shall determine (other than in violation of any then existing
licensing arrangements to the extent that waivers or other adequate provision
cannot be secured therefor); and (g) generally to use, sell, assign, transfer,
pledge, make any agreement with respect to or otherwise deal with all or any of
the Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the Collateral
Agent were the absolute owner of the Collateral for all purposes; provided,
HOWEVER, that except as provided for by law or the Uniform Commercial Code as in
effect in the State of New York or its equivalent in other jurisdictions,
<PAGE>
12
nothing herein contained shall be construed as requiring or obligating the
Collateral Agent to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or any
property covered thereby, and no action taken by the Collateral Agent or omitted
to be taken with respect to the Collateral or any part thereof shall give rise
to any defense, counterclaim or offset in favor of any Grantor or to any claim
or action against the Collateral Agent. It is understood and agreed that the
appointment of the Collateral Agent as the attorney-in-fact of the Grantors for
the purposes set forth above in this Section 5.01 is coupled with an interest
and is irrevocable. The provisions of this Section 5.01 shall in no event
relieve the Grantors of any of their obligations hereunder or under the Credit
Agreement or any other Loan Document with respect to the Collateral or any part
thereof or impose any obligation on the Collateral Agent or the Secured Parties
to proceed in any particular manner with respect to the Collateral or any part
thereof, or in any way limit the exercise by the Collateral Agent or any Secured
Party of any other or further right that it may have on the date of this
Agreement or hereafter, whether hereunder or by law or by the Security
Agreement, or otherwise.
SECTION 5.02. OTHER REMEDIES UPON DEFAULT. Upon the occurrence and during
the continuance of an Event of Default, each Grantor expressly agrees that,
subject to prior written notice to the Borrower, the Collateral Agent on demand
shall have the right to take any or all of the following actions at the same or
different times: with or without legal process and with or without previous
notice or demand for performance, to take possession of all tangible
manifestations or embodiments of the Collateral and documentation relating
thereto and all business records, documents, files, prints and labels with
respect to the Collateral, and without liability for trespass to enter any
premises where such tangible manifestations or embodiments, business records,
documents, files, prints and labels with respect to the Collateral may be
located for the purpose of taking possession of or removing such tangible
manifestations or embodiments, business records, documents, files, prints and
labels with respect to the Collateral, and, generally, to exercise any and all
rights afforded to a secured party under the Uniform Commercial Code or other
law applicable to any part of the Collateral. Subject to and without limiting
the generality of the foregoing, each Grantor agrees that the Collateral Agent
shall have the right, subject to the mandatory requirements of applicable law,
to sell or otherwise dispose of all or any part of the Collateral, at public or
private sale or at any broker's board or on any securities exchange, for cash,
upon credit or for future delivery as the Collateral Agent shall deem
appropriate. The Collateral Agent shall be authorized at any such sale (if it
deems it advisable to do so) to restrict the prospective bidders or purchasers
to persons who will represent and agree that they are purchasing the Collateral
for their own account for investment and not with a view to the distribution or
sale thereof where the failure to obtain such a representation and agreement
could result in a violation of any applicable securities laws, and upon
consummation of any such sale the Collateral Agent shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the property
sold absolutely, free from any claim or right on the part of any Grantor, and
each Grantor hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal that such Grantor now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted.
The Collateral Agent shall give the Grantors at least 10 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
<PAGE>
13
intention to make any sale of Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix and state in the
notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Collateral Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice to the Grantors. At any public sale made
pursuant to this Section 5.02, the Collateral Agent or any Secured Party may bid
for or purchase, free from any right of redemption, stay, valuation or appraisal
on the part of any Grantor (all said rights being also hereby waived and
released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to the Collateral Agent or any Secured Party from any Grantor as
a credit against the purchase price, and the Collateral Agent or any Secured
Party may, upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to such Grantor therefor. As an
alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
this Agreement and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
SECTION 5.03. APPLICATION OF PROCEEDS OF SALE. The proceeds of any sale of
Collateral, as well as any Collateral consisting of cash, shall be applied by
the Collateral Agent as follows:
FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Collateral Agent (in its capacity as such
hereunder or under any other Loan Document) in connection with such
collection or sale or otherwise in connection with this Agreement or any of
the Obligations, including all reasonable court costs and the reasonable
fees and expenses of its agents and legal counsel, the repayment of all
advances made by the Collateral Agent hereunder or under any other Loan
Document on behalf of any Grantor and any other costs or expenses incurred
in connection with the exercise of any right or remedy hereunder or under
any other Loan Document;
SECOND, to the payment of all amounts of the Obligations owed to the
Secured Parties in respect of Loans made by them and outstanding and
amounts owing in respect of any LC Disbursement or Letter of Credit or
under any Interest/Exchange Rate Protection Agreement, pro rata as among
the Secured Parties in accordance with the amount of such Obligations owed
them;
<PAGE>
14
THIRD, to the payment and discharge in full of the Obligations (other
than those referred to above), pro rata as among the Secured Parties in
accordance with the amount of such Obligations owed to them; and
FOURTH, after payment in full of all Obligations, to the applicable
Grantor, or its successor or assign thereof, or to whomsoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, any Collateral then remaining.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
SECTION 5.04. GRANT OF LICENSE TO USE PATENT, TRADEMARK AND COPYRIGHT
COLLATERAL. For the purpose of enabling the Collateral Agent to exercise rights
and remedies under Article V hereof at such time as the Collateral Agent shall
be lawfully entitled to exercise such rights and remedies, each Grantor hereby
grants to the Collateral Agent an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to such Grantor)
to use, license or sublicense any of the Collateral now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored. The use of such license by the Collateral Agent shall
be exercised, at the option of the Collateral Agent for any purpose appropriate
in connection with the exercise of remedies hereunder, only upon the occurrence
and during the continuance of an Event of Default; PROVIDED that any license,
sublicense or other transaction entered into by the Collateral Agent in
accordance herewith shall be binding upon such Grantor notwithstanding any
subsequent cure of an Event of Default. The Collateral Agent agrees to apply the
net proceeds received from any license as provided in Section 5.03 hereof.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. THE COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Except as
otherwise provided herein, each Grantor hereby appoints the Collateral Agent the
attorney-in-fact of such Grantor, effective upon the occurrence and during the
continuance of an Event of Default, for the purposes of carrying out the
provisions of this Agreement, taking any action and executing any instrument
that the Collateral Agent may reasonably deem necessary or advisable to
accomplish the purposes hereof, and doing all other acts that such Grantor is
obligated to do hereunder. Such appointment is in each case irrevocable and
coupled with an interest. Each Grantor hereby ratifies all that such attorney
shall lawfully do or cause to be done by virtue hereof in accordance with this
Agreement.
SECTION 6.02. NOTICES. Notices and other communications provided for herein
shall be in writing and given (i) in the case of communications and notices to
UCAR, Global, the Borrower or any Secured Party, as provided in the Credit
<PAGE>
15
Agreement and (ii) in the case of communications and notices to any other
Grantor, as provided in the Subsidiary Guarantee Agreement.
SECTION 6.03. SUCCESSORS AND ASSIGNS. (a) Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party, and the terms "Lender", "Issuing
Bank" and "Secured Party" shall include each permitted successor and assignee of
any Lender, Issuing Bank or Secured Party permitted under Section 10.04 of the
Credit Agreement and all covenants, promises and agreements by or on behalf of
the Grantors or the Collateral Agent or that are contained in this Agreement
shall bind and inure to the benefit of their respective permitted successors and
permitted assigns referred to above.
(b) No Grantor shall assign or delegate any of its rights and duties
hereunder.
(c) The covenants, promises and agreements by the Grantors shall inure to
the benefit of each Secured Party and each assignee of any Secured Party
permitted under Section 10.04 of the Credit Agreement.
SECTION 6.04. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THAT FEDERAL LAW OR LAWS OF ANOTHER STATE OR FOREIGN JURISDICTION MAY
APPLY TO PATENTS, TRADEMARKS, COPYRIGHTS, OTHER COLLATERAL OR REMEDIES.
SECTION 6.05. WAIVERS; AMENDMENT. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other right or power. The rights and remedies of the Collateral
Agent hereunder and of other Secured Parties under the Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement or any other Loan
Document or consent to any departure by any Grantor therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on any Grantor in any case
shall entitle such Grantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into between any Grantor and the Collateral Agent, with the prior written
consent of the Required Secured Parties; PROVIDED, HOWEVER, that except as
provided herein or in the other Loan Documents, no such agreement shall amend,
modify, waive or otherwise affect the rights or duties of the Collateral Agent
hereunder without the prior written consent of the Collateral Agent.
SECTION 6.06. SECURITY INTEREST ABSOLUTE. All rights of the Collateral
Agent hereunder, the security interests granted hereunder and all obligations of
the Grantors hereunder shall be absolute and unconditional.
<PAGE>
16
SECTION 6.07. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Secured Parties and shall survive the making by the
Lenders of the Loans, the execution and delivery to the Lenders of the Loan
Documents and the issuance by the Fronting Banks of the Letters of Credit
regardless of any investigation made by the Secured Parties or on their behalf
and shall continue in full force and effect so long as the principal of or any
accrued interest on any Loan or L/C Disbursement or any Fee or any other amount
payable under or in respect of this Agreement or any other Loan Document is
outstanding and unpaid and so long as the Commitments have not been terminated.
SECTION 6.08. BINDING EFFECT; ASSIGNMENTS. This Agreement shall become
effective as to any Grantor when a counterpart hereof executed on behalf of such
Grantor shall have been delivered to the Collateral Agent, and thereafter shall
be binding upon such Grantor and its respective successors and assigns, and
shall inure to the benefit of such Grantor and the Secured Parties and their
respective successors and assigns, except that no Grantor shall have the right
to assign its rights hereunder or any interest herein (and any such attempted
assignment shall be void) except as expressly contemplated by this Agreement or
the other Loan Documents.
SECTION 6.09. TERMINATION; RELEASE. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations have been
indefeasibly paid in full, the Commitments have been terminated and no Letters
of Credit are outstanding.
(b) Upon any sale by any Grantor of any Collateral that is permitted under
the Credit Agreement or upon the effectiveness of any written consent to the
release of the Security Interest in any Collateral pursuant to Section 10.02 of
the Credit Agreement, the Security Interest in such Collateral shall be
automatically released.
(c) In connection with any termination or release pursuant to paragraphs
(a) and (b), the Collateral Agent shall execute and deliver to each Grantor, at
such Grantor's expense, all Uniform Commercial Code termination statements,
documents in order to terminate any United States Patent and Trademark Office
filings and similar documents that such Grantor shall reasonably request to
evidence such termination or release. Any execution and delivery of termination
statements or documents pursuant to this Section 6.09 shall be without recourse
to or warranty by the Collateral Agent.
SECTION 6.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
<PAGE>
17
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.10.
SECTION 6.11. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 6.12. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each Grantor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any Loan Party or Secured
Party may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against any Grantor or any Secured Party
or its properties in the courts of any jurisdiction.
(b) Each Grantor and each Secured Party hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 6.02. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
SECTION 6.13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together shall constitute but one instrument, and shall become effective
as provided in Section 6.08.
SECTION 6.14. HEADINGS. Article and Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
<PAGE>
18
SECTION 6.15. ADDITIONAL GRANTORS. Pursuant to Section 6.11 of the Credit
Agreement, each Domestic Subsidiary that was not in existence or not a Domestic
Subsidiary on the date thereof is required to enter into this Agreement as a
Grantor upon becoming a Domestic Subsidiary. Upon execution and delivery, after
the date hereof, by the Collateral Agent and such Domestic Subsidiary of an
instrument in the form of Annex 1, such Domestic Subsidiary shall become a
Grantor hereunder with the same force and effect as if originally named as a
Grantor hereunder. The execution and delivery of any such instrument shall not
require the consent of any Grantor hereunder. The rights and obligations of each
Grantor hereunder shall remain in full force and effect notwithstanding the
addition of any new Grantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
UCAR INTERNATIONAL INC.
by
/S/ NANCY M. FALLS
--------------------------------
Name: Nancy M. Falls
Title: Treasurer
UCAR GLOBAL ENTERPRISES INC.
by
/S/ NANCY M. FALLS
--------------------------------
Name: Nancy M. Falls
Title: Treasurer
UCAR FINANCE INC.
by
/S/ NANCY M. FALLS
--------------------------------
Name: Nancy M. Falls
Title: Treasurer
<PAGE>
19
EACH OF THE SUBSIDIARY GRANTORS LISTED
ON SCHEDULE VII HERETO
by
/S/ NANCY M. FALLS
--------------------------------
Name: Nancy M. Falls
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Collateral Agent
by
/S/ DEBORAH DESANTIS
--------------------------------
Name: Deborah DeSantis
Title: Vice President
<PAGE>
SCHEDULE I
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
PATENTS OWNED BY [NAME OF GRANTOR]
[Make a separate Schedule IV for each Grantor and if no patents owned so state.
List in numerical order by Patent No./Patent Application No.]
U.S. PATENT REGISTRATIONS
ISSUE DATE PATENT NUMBERS
---------- --------------
U.S. PATENT APPLICATIONS
FILING DATE PATENT APPLICATION NO.
----------- ----------------------
NON-U.S. PATENT REGISTRATIONS
[List in alphabetical order by country/numerical order by Patent No.]
COUNTRY ISSUE DATE PATENT NO.
------- ------------ ----------
NON-U.S. PATENT APPLICATIONS
[List in alphabetical order by country/numerical order by
Application No.]
COUNTRY FILING DATE PATENT APPLICATION NO.
------- ----------- ----------------------
<PAGE>
SCHEDULE II, page 1 of 2
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
TRADEMARK/TRADE NAMES OWNED BY [NAME OF GRANTOR]
[Make a separate Schedule V for each Grantor and if no trademark/trade names
owned so state. List in numerical order by trademark registration/application
no.]
U.S. TRADEMARK REGISTRATIONS
MARK REG. DATE REG. NO.
---- --------- --------
U.S. TRADEMARK APPLICATIONS
MARK FILING DATE APPLICATION NO.
---- ----------- ---------------
STATE TRADEMARK REGISTRATIONS
[List in alphabetical order by State/numerical order by trademark no.]
STATE MARK REG. DATE REG. NO.
----- ---- --------- --------
STATE TRADEMARK APPLICATIONS
[List in alphabetical order by State/numerical order by trademark no.]
STATE MARK FILING DATE APPLICATION NO.
----- ---- ----------- ---------------
NON-U.S. TRADEMARK REGISTRATIONS
[List in alphabetical order by country/numerical order by trademark no.]
COUNTRY MARK REG. DATE REG. NO.
------- ---- --------- --------
<PAGE>
SCHEDULE II, page 2 of 2
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
NON-U.S. TRADEMARK APPLICATIONS
[List in alphabetical order by country/numerical order by application no.]
COUNTRY MARK APPLICATION DATE APPLICATION NO.
------- ---- ---------------- ---------------
TRADE NAMES
COUNTRY(S) WHERE USED TRADE NAMES
--------------------- -----------
<PAGE>
SCHEDULE III
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
COPYRIGHTS OWNED BY [NAME OF GRANTOR]
[Make a separate Schedule II for each Grantor and if no copyrights owned
so state.]
U.S. COPYRIGHT REGISTRATIONS
[List in numerical order by Registration No.]
TITLE DATE PUB. AUTHOR REG. NO.
----- --------- ------ --------
PENDING U.S. COPYRIGHT APPLICATIONS FOR REGISTRATION
[List in chronological order by date published.]
TITLE DATE PUB. AUTHOR CLASS DATE FILED
----- --------- ------ ----- ----------
NON-U.S. COPYRIGHT REGISTRATIONS
[List in alphabetical order by country/numerical order by Registration No.]
COUNTRY TITLE DATE PUB. AUTHOR REG. NO.
------- ----- --------- ------- --------
NON-U.S. PENDING COPYRIGHT APPLICATIONS FOR REGISTRATION
[List in alphabetical order by country/chronological order by date published.]
COUNTRY TITLE DATE PUB. AUTHOR CLASS DATE FILED
------- ----- --------- ------ ----------------
<PAGE>
SCHEDULE IV, page 1 of 6
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
LICENSES
[Make a separate Schedule III for each Grantor, and if not a
licensor/licensee in a license/sublicense so state.]
PART I
LICENSES/SUBLICENSES OF [NAME OF GRANTOR] AS LICENSOR ON DATE HEREOF
A. COPYRIGHTS
U.S. COPYRIGHT REGISTRATIONS
[List in numerical order by Registration No.]
DATE OF
LICENSEE NAME LICENSE/ REG.
AND ADDRESS SUBLICENSE TITLE DATE PUB. AUTHOR NO.
----------- ---------- ----- --------- ------- ---
PENDING U.S. COPYRIGHT APPLICATIONS FOR REGISTRATION
[List in chronological order by date published.]
DATE OF
LICENSEE NAME LICENSE/ DATE
AND ADDRESS SUBLICENSE TITLE DATE PUB. AUTHOR FILED
----------- ---------- ----- --------- ------- -----
NON-U.S. COPY REGISTRATIONS
[List in alphabetical order by country/numerical order by Registration No.]
DATE OF
LICENSEE NAME LICENSE/ DATE REG.
COUNTRY AND ADDRESS SUBLICENSE TITLE PUB. AUTHOR NO.
------- ----------- ----------- ----- ----- ------- ---
NON-U.S. PENDING COPYRIGHT APPLICATIONS FOR REGISTRATION
[List in alphabetical order by country/chronological order by date published.]
DATE OF
LICENSEE NAME LICENSE/ DATE DATE
COUNTRY AND ADDRESS SUBLICENSE TITLE PUB. AUTHOR CLASS FILED
------- ----------- ----------- ----- ----- ------- -----------
<PAGE>
SCHEDULE IV, page 2 of 6
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
B. PATENTS
[List first in numerical order by U.S. patent nos. followed by U.S. patent
application nos. in numerical order, followed in alphabetical order by country,
its non-U.S. patent nos. in numerical order, followed by its non-U.S.
application nos. in numerical order.]
U.S. PATENTS
LICENSEE NAME DATE OF LICENSE/ PATENT
AND ADDRESS SUBLICENSE ISSUE DATE PATENT NO.
----------- ---------- ---------- ----------
U.S. PATENT APPLICATIONS
LICENSEE NAME DATE OF LICENSE/ DATE APPLICATION
AND ADDRESS SUBLICENSE APPL. FILED NO.
----------- ---------- ----------- ---
NON-U.S. PATENTS
DATE OF
LICENSEE NAME LICENSE/ PATENT NON-U.S.
COUNTRY AND ADDRESS SUBLICENSE ISSUE DATE PATENT NO.
------- ----------- ---------- ---------- ----------
NON-U.S. PATENT APPLICATIONS
DATE OF
LICENSEE NAME LICENSE/ DATE APPLICATION
COUNTRY AND ADDRESS SUBLICENSE APPL. NO.
------- ----------- ---------- ----- -----------
SUBLICENSE FILED
<PAGE>
SCHEDULE IV, page 3 of 6
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
C. TRADEMARKS
[List first in numerical order by U.S. patent nos. followed by U.S. patent
application nos. in numerical order, followed in alphabetical order by country,
its non-U.S. patent nos. in numerical order, followed by its non-U.S.
application nos. in numerical order.]
U.S. TRADEMARKS
DATE OF
LICENSEE NAME LICENSE/
AND ADDRESS SUBLICENSE U.S. MARK REG. DATE REG. NO.
----------- ---------- --------- --------- --------
U.S. TRADEMARK APPLICATIONS
DATE OF
LICENSEE NAME LICENSE/ APPLICATION
AND ADDRESS SUBLICENSE U.S. MARK DATE FILED NO.
----------- ---------- --------- ---------- ---
NON-U.S. TRADEMARKS
DATE OF
LICENSEE NAME LICENSE/ NON-U.S.
COUNTRY AND ADDRESS SUBLICENSE MARK REG. DATE REG. NO.
------- ----------- ---------- ---- --------- --------
NON-U.S. TRADEMARK APPLICATIONS
DATE OF
LICENSEE NAME LICENSE/ NON-U.S. APPLICATION
COUNTRY AND ADDRESS SUBLICENSE MARK DATE FILED NO.
------- ----------- ---------- ------- ---------- ---
D. OTHERS
DATE OF LICENSE/
LICENSE NAME AND ADDRESS SUBLICENSE SUBJECT MATTER
------------------------ ---------- --------------
<PAGE>
SCHEDULE IV, page 4 of 6
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
PART 2
LICENSES/SUBLICENSES OF [NAME OF GRANTOR] AS LICENSEE ON DATE HEREOF
A. COPYRIGHTS
U.S. COPYRIGHTS
[List in numerical order by Registration No.]
DATE OF
LICENSEE NAME LICENSE/ DATE REG.
AND ADDRESS SUBLICENSE TITLE PUB. AUTHOR NO.
----------- ---------- ----- ---- ------- ---
PENDING U.S. COPYRIGHT APPLICATIONS FOR REGISTRATION
[List in chronological order by date published.]
DATE OF
LICENSEE NAME LICENSE/ DATE DATE
AND ADDRESS SUBLICENSE TITLE PUB. AUTHOR CLASS FILED
----------- ----------- ----- ---- ------- ----- -----
NON-U.S. COPYRIGHTS
[List in alphabetical order by country/numerical order by Registration No.]
DATE OF
LICENSEE NAME LICENSE/ DATE REG.
COUNTRY AND ADDRESS SUBLICENSE TITLE PUB. AUTHOR NO.
------- ----------- ----------- ----- ---- ------- ---
NON-U.S. PENDING COPYRIGHT APPLICATIONS FOR REGISTRATION
[List in alphabetical order by country/chronological order by date published.]
DATE OF
LICENSEE NAME LICENSE/ DATE DATE
COUNTRY AND ADDRESS SUBLICENSE TITLE PUB. AUTHOR CLASS FILED
------- ----------- ----------- ----- ---- ------- ----- -----
<PAGE>
SCHEDULE IV, page 5 of 6
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
B. PATENTS
[List first in numerical order by U.S. patent nos. followed by U.S. patent
application nos. in numerical order, followed in alphabetical order by country,
its non-U.S. patent nos. in numerical order, followed by its non-U.S.
application nos. in numerical order.]
U.S. PATENTS
LICENSEE NAME DATE OF LICENSE/ PATENT
AND ADDRESS SUBLICENSE ISSUE DATE PATENT NO.
----------- ---------- ---------- ----------
U.S. PATENT APPLICATIONS
LICENSEE NAME DATE OF LICENSE/ DATE
AND ADDRESS SUBLICENSE APPL. FILED APPLICATION NO.
----------- ---------- ----------- ---------------
NON-U.S. PATENTS
DATE OF
LICENSEE NAME LICENSE/ PATENT NON-U.S.
COUNTRY AND ADDRESS SUBLICENSE ISSUE DATE PATENT NO.
------- ----------- ---------- ---------- ----------
NON-U.S. PATENT APPLICATIONS
DATE OF
LICENSEE NAME LICENSE/ DATE APPLICATION
COUNTRY AND ADDRESS SUBLICENSE APPL. FILED NO.
------- ----------- ---------- ----------- ---
<PAGE>
SCHEDULE IV, page 6 of 6
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
C. TRADEMARKS
[List first in numerical order by U.S. trademark nos. followed by U.S. trademark
application nos. in numerical order, followed in alphabetical order by country,
its non-U.S. trademark nos. in numerical order, followed by its non-U.S.
application nos. in numerical order.]
U.S. TRADEMARKS
DATE OF
LICENSEE NAME LICENSE/
AND ADDRESS SUBLICENSE U.S. MARK REG. DATE REG. NO.
----------- ---------- --------- --------- --------
U.S. TRADEMARK APPLICATIONS
DATE OF
LICENSEE NAME LICENSE/ APPLICATION
AND ADDRESS SUBLICENSE U.S. MARK DATE FILED NO.
----------- ---------- --------- ---------- ---
NON-U.S. TRADEMARKS
DATE OF
LICENSEE NAME LICENSE/ NON-U.S.
COUNTRY AND ADDRESS SUBLICENSE MARK REG. DATE REG. NO.
------- ----------- ---------- ---- ------------------
NON-U.S. TRADEMARK APPLICATIONS
DATE OF
Licensee Name LICENSE/ Non-U.S. Application
COUNTRY AND ADDRESS SUBLICENSE MARK DATE FILED NO.
------- ----------- ---------- ---- ---------- ---
D. OTHERS
DATE OF LICENSE/
LICENSE NAME AND ADDRESS SUBLICENSE SUBJECT MATTER
------------------------ ---------- --------------
<PAGE>
SCHEDULE V
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
LIENS ON
[None)
<PAGE>
SCHEDULE VI
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
Offices Where Financing Statements Need to be Filed
[See Perfection Certificate]
<PAGE>
SCHEDULE VII
TO INTELLECTUAL PROPERTY
SECURITY AGREEMENT
SUBSIDIARY GRANTORS
UCAR Carbon Company Inc.
UCAR Holdings II Inc.
UCAR Holdings III Inc.
UCAR International Trading Inc.
UCAR Composites Inc.
<PAGE>
EXHIBIT A-1 TO
INTELLECTUAL PROPERTY
SECURITY AGREEMENT
SUPPLEMENT NO. dated as of [], to the Intellectual Property
Security Agreement dated as of February 22, 2000 (the
"INTELLECTUAL PROPERTY SECURITY AGREEMENT"), made by UCAR
INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL
ENTERPRISES INC., a Delaware corporation ("GLOBAL"), UCAR FINANCE
INC., a Delaware corporation (the "BORROWER"), and the
subsidiaries of UCAR from time to time party thereto (the
"SUBSIDIARY GRANTORS", and together with UCAR, Global and the
Borrower, the "GRANTORS") in favor of MORGAN GUARANTY TRUST
COMPANY OF NEW YORK as collateral agent for the Secured Parties
(such term and each other capitalized term used but not defined
herein having the meaning given it in Article I of the Credit
Agreement).
A. Reference is made to Credit Agreement dated as of February 22, 2000 (as
the same may be amended, supplemented or otherwise modified from time to time,
the "CREDIT AGREEMENT") among UCAR, Global, the Borrower, the LC Subsidiaries
from time to time party thereto, the Lenders from time to time party thereto and
Morgan Guaranty Trust Company of New York, as Administrative Agent, Collateral
Agent and Issuing Bank.
B. The Borrower and the Domestic Subsidiaries have entered into the
Intellectual Property Security Agreement in order to induce the Lenders to make
Loans and the Issuing Banks to issue Letters of Credit pursuant to, and upon the
terms and subject to the conditions specified in, the Credit Agreement. Pursuant
to Section 6.11 of the Credit Agreement, each Domestic Subsidiary that was not
in existence or not a Domestic Subsidiary on the date thereof is required to
enter into the Intellectual Property Security Agreement as a Grantor upon
becoming a Domestic Subsidiary. Section 6.15 of the Intellectual Property
Security Agreement provides that additional Domestic Subsidiaries may become
Grantors under the Intellectual Property Security Agreement by execution and
delivery of an instrument in the form of this Supplement. The undersigned (the
"NEW GRANTOR") is a Domestic Subsidiary and is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Grantor
under the Intellectual Property Security Agreement in order to induce the
Lenders to make additional Loans and the Issuing Bank to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 6.15 of the Intellectual Property
Security Agreement, the New Grantor by its signature below becomes a Grantor
under the Intellectual Property Security Agreement with the same force and
effect as if originally named therein as a Grantor and the New Grantor hereby
agrees to all the terms and provisions of the Intellectual Property Security
Agreement applicable to it as a Grantor thereunder. Each reference to a
"GRANTOR" in the Intellectual Property Security Agreement shall be deemed to
include the New Grantor. The Intellectual Property Security Agreement is hereby
incorporated herein by reference.
<PAGE>
SECTION 2. The New Grantor represents and warrants to the Secured Parties
that this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to the effects of applicable bankruptcy,
insolvency or similar laws effecting creditors' rights generally and equitable
principles of general applicability.
SECTION 3. This Supplement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument. This Supplement shall become
effective when the Collateral Agent shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New Grantor and
the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Intellectual
Property Security Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Intellectual Property Security Agreement shall not in any way
be affected or impaired. The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing and
given as provided in the Credit Agreement. All communications and notices
hereunder to the New Grantor shall be given to it at the address set forth under
its signature, with a copy to the Borrower.
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Intellectual Property Security Agreement as of
the day and year first above written.
[NAME OF NEW GRANTOR],
by
Name:
Title:
Address:
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Collateral Agent,
by
Name:
Title:
<PAGE>
TAX SHARING AGREEMENT
AGREEMENT made as of February 16, 2000 among UCAR International Inc.
("UCAR"), and its subsidiaries UCAR Global Enterprises Inc. ("Issuer"), UCAR
Finance Inc. ("Finance Co."), UCAR Carbon Company Inc. ("Carbon"), UCAR
Holdings II Inc. ("Holdings II "), UCAR Holdings III ("Holdings III"), Union
Carbide Grafito, Inc. ("Grafito"), and UCAR Composites Inc. ("Composites")
(collectively, the "subsidiaries").
WHEREAS, UCAR owns all of the issued and outstanding shares of capital
stock of the Issuer and Finance Co., the only class of stock that the Issuer and
Finance Co. is authorized to issue; the Issuer owns all of the issued and
outstanding shares of capital stock of Carbon and of Holdings II, the only
classes of stock that Carbon and Holdings II are authorized to issue; Carbon
owns all of the issued and outstanding share of capital stock of Grafito and
Composites, the only classes of stock that Grafito and Composites are authorized
to issue; Holdings II owns all of the issued and outstanding share of capital
stock of Holdings III, the only class of stock that Holdings III is authorized
to issue; the companies have become members of an affiliated group within the
meaning of section 1504(a) of the Internal Revenue Code of which UCAR is the
common parent corporation (the "Affiliated Group"); and UCAR proposes to include
the subsidiaries in filing a consolidated federal income tax return for the
calendar year 1999 and thereafter; and,
WHEREAS, UCAR and the subsidiaries desire to establish a method for
allocating the consolidated tax liability of the Affiliated Group among its
members and for reimbursing UCAR for the payment of such tax liability;
NOW, THEREFORE, UCAR and the subsidiaries agree as follows:
1. CONSOLIDATED RETURN ELECTION.
If at any time and from time to time UCAR so elects, UCAR and the
subsidiaries will join in the filing of a consolidated federal income tax return
for the calendar year of 1999 and for any subsequent taxable period for which
the Affiliated Group is required or permitted to file such a return. UCAR and
the subsidiaries agree to file such consents, elections, and other documents and
take such other action as may be necessary or appropriate to carry out the
purpose of this Section 1. Any period for which the subsidiaries are included in
a consolidated federal income tax return filed by UCAR is referred to in this
Agreement as a "UCAR Consolidated Return Year."
2. SUBSIDIARIES' LIABILITY TO UCAR FOR UCAR CONSOLIDATED RETURN YEARS.
Within 120 days after the end of each UCAR Consolidated Return Year, the
subsidiaries shall pay to UCAR the amount (if any) of federal income taxes for
which the subsidiaries would have been liable for that year, computed as though
the subsidiaries each had filed a separate return for such Consolidated Return
Year and for all other Consolidated Return Years.
3. INTERIM ESTIMATED PAYMENTS.
Prior to the end of any UCAR Consolidated Return Year, the subsidiaries
shall advance to UCAR (within a reasonable period after request by UCAR) amounts
necessary to reimburse UCAR for that portion of any estimated federal income tax
payments attributable to the inclusion of the companies in the Affiliated Group.
Any amounts so paid in any year shall operate to reduce the amount payable to
<PAGE>
UCAR following the end of such year pursuant to Section 2, above, and any
negative balance resulting from such reduction shall promptly be refunded by
UCAR to the subsidiaries.
4. TAX ADJUSTMENTS.
In the event of any adjustment of the tax returns of UCAR and the
subsidiaries as filed (by reason of an amended return, claim for refund, or an
audit by the Internal Revenue Service), the liability of UCAR and the
subsidiaries under Section 2 and 3 shall be redetermined to give effect to any
such adjustment as if it has been made as part of the original computation of
tax liability, and payments between UCAR and the subsidiaries shall be made
within 120 days after any such payments are made or refunds are received, or, in
the case of contested proceedings, within 120 days after a final determination
of the contest.
If any subsidiary ceases to be a member of the Affiliated Group (a
"Deconsolidation Event"), then that subsidiary will indemnify UCAR with respect
to any federal, state or local income, franchise or other tax liability
(including any related interest, additions or penalties) imposed on UCAR as a
result of an audit or other adjustment with respect to any period prior to such
Deconsolidation Event that is attributable to UCAR or to the subsidiary or any
predecessor business thereof (computed as though the subsidiaries each had filed
a separate return for such Consolidated Return Year), but only to the extent
that any such tax liability exceeds any liability for taxes recorded on the
books of UCAR or a subsidiary with respect to any such period.
5. UCAR AND NEW SUBSIDIARIES
If at any time UCAR acquires or creates one or more corporations that are
includable corporations of the Affiliated Group, they shall be subject to this
Agreement and all references to UCAR herein shall thereafter interpreted to
refer to CUAR and such includable corporations as a group.
6. STATE INCOME TAX LIABILITY.
Principles similar to those set forth herein shall apply to allocate
consolidated, combined or unitary state income tax liability among UCAR and the
subsidiaries.
7. SUCCESSORS.
This Agreement shall be binding on and inure to the benefit of any
successor, by merger, acquisition of assets or otherwise, to any of the parties
hereto (including but not limited to any successor of UCAR or the subsidiaries
succeeding to their tax attributes under section 381 of the Internal Revenue
Code), to the same extent as if such successor had been an original party to the
Agreement.
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IN WITNESS WHEREOF, UCAR and the subsidiaries have executed this Agreement
by authorized officers thereof as of the date first above written.
DATED: February 16, 2000 UCAR International Inc.
By:/s/ Erick Asmussen
Its:Comtroller
UCAR Global Enterprises
By : /s/ Nancy M. Falls
Its: Treasurer
UCAR Finance Inc.
By: /s/ Nancy M. Falls
Its: Treasurer
UCAR Carbon Company, Inc.
By: /s/ Nancy M. Falls
Its: Treasurer
UCAR Holdings II, Inc.
By: /s/ Nancy M. Falls
Its: Treasurer
UCAR Holdings III, Inc.
By: /s/ Nancy M. Falls
Its: Treasurer
Union Carbide Grafito, Inc.
By: /s/ Karen G. Narwold
Its: President
UCAR Composites Inc.
By: /s/ Karen G. Narwold
Its: President
<PAGE>
UCAR INTERNATIONAL INC. COMPENSATION DEFERRAL PROGRAM
<PAGE>
UCAR INTERNATIONAL INC. COMPENSATION DEFERRAL PROGRAM
ARTICLE I
PURPOSE
1.1 The purpose of this Program is to (i) allow Eligible Employees
under the Variable Compensation Plans to defer up to 85% of their Variable
Compensation, (ii) allow Eligible Employees to defer up to 50% of their base
salary and (iii) allow Eligible Employees to defer a portion or all of their
lump sum payments otherwise payable from the SRIP, ERIP and/or Equalization
Plan.
1.2 This Program shall be effective for amounts payable on or
after January 1, 2000.
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ARTICLE II
DEFINITIONS
2.1 "Administrative Committee" means the Administrative
Committee for Non-Qualified Employee Benefit Plans of UCAR International Inc.,
as appointed by the Chairman and Chief Executive Officer of the Corporation.
2.2 "Aggregate Compensation" means the sum of a Participant's
Compensation and Deferred Compensation.
2.3 "Applicable Equity Investment Fund Rate" means the difference
between the value of each of the applicable investment funds under the Savings
Plan elected by a Participant under Section 8.2 of this Program: Vanguard 500
Index Fund, Vanguard/Windsor II Fund, Vanguard/PRIMECAP Fund, UAM ICM Small
Company Portfolio, Vanguard International Growth Fund, Vanguard LifeStrategy(TM)
Income Fund, Vanguard LifeStrategy(TM) Conservative Growth Fund, Vanguard
LifeStrategy(TM) Moderate Growth Fund and Vanguard LifeStrategy(TM) Growth Fund,
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 Equity 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. The value of a respective investment fund for purposes of this
Section 2.3, shall mean the net asset value of such investment fund as reported
by such fund. If the investment funds under the Savings Plan are changed,
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deleted or added to, then the Applicable Equity Investment Fund Rate shall be
changed to correspond to the investment funds offered under the Savings Plan,
effective on the date such change is made to the investment funds under the
Savings Plan.
2.4 "Beneficiary" means the person, persons or estate entitled (as
determined under Article VII) to receive payment under this Program following a
Participant's death.
2.5 "Board" shall mean the Board of Directors of the
Corporation.
2.6 "Change of Control" shall be deemed to occur if any of the
following circumstances shall occur:
(i) any "person" or "group" within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act becomes the "beneficial owner" as
defined in Rule 13d-3 under the Exchange Act of more than 22.5% of
the then outstanding voting securities of the Corporation;
(ii) any "person" or "group" within the meaning of Sections 13(d)
and 14(d)(2) of the Exchange Act acquires by proxy or otherwise the
right to vote for the election of directors, on any merger or
consolidation of the Corporation or for any other matter or question
with respect to more than 22.5% of either the then outstanding
common stock or the combined voting power of the then outstanding
voting securities of the Corporation;
(iii) Present Directors and New Directors cease for any reason to
constitute a majority of the Board (and, for these purposes,
"Present Directors" shall mean individuals who at the beginning of
any consecutive twenty-four month period were members of the Board
and "New Directors" shall mean individuals whose election as
directors by the Board or whose nomination for election as directors
by the Corporation's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who were Present
Directors or New Directors);
(iv) the stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation; or
(v) a consummation of:
(x) a reorganization, merger or consolidation of the
Corporation (a "Business Combination"), unless, following such
Business Combination, (a) all or substantially all of the
"beneficial owners", as defined in Rule 13d-3 under the Exchange
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Act, of the outstanding common stock and the combined voting power
of the outstanding voting securities of the Corporation,
respectively, immediately prior to such Business Combination
"beneficially own," as so defined directly or indirectly, more than
50% of the outstanding common equity securities and the combined
voting power of the outstanding voting securities of the entity
resulting from such Business Combination (including, without
limitation, an entity which as a result of such Business Combination
owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) respectively, in substantially the same proportions as
their ownership, immediately prior to such Business Combination of
the outstanding common stock of the Corporation and the combined
voting power of the outstanding voting securities of the
Corporation, respectively, (b) no "person" or "group," within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act
(excluding any entity resulting from such Business Combination and
any employee benefit plan (and related trust) of the Corporation,
its subsidiaries or such entity) is the "beneficial owner", as
defined in Rule 13d-3 under the Exchange Act of more than 22.5% of
either the then outstanding common equity securities of the entity
resulting from such Business Combination or the combined voting
power of the outstanding voting securities of such entity except to
the extent that such beneficial ownership existed immediately prior
to such Business Combination with respect to the common stock and
the combined voting power of the outstanding voting securities of
the Corporation and (c) at least a majority of the members of the
board of directors (or similar governing body) of the entity
resulting from such Business Combination were members of the Board
at the time of the execution of the initial agreement providing for
such Business Combination or the time of the action of the Board
approving such Business Combination, whichever is earlier; or
(y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Corporation, whether held
directly or indirectly through one or more subsidiaries (excluding
any grant of any pledge, mortgage or security interest or any
sale-leaseback or any similar transaction, but including any
foreclosure sale);
Provided, that, in the case of both clauses (x) and (y)
above, the divestiture of less than substantially all of the assets
of the Corporation in one transaction or a series of related
transactions, whether effected by sale, lease, exchange, transfer,
spin-off, sale of the stock of or merger or consolidation of a
subsidiary or otherwise, shall not constitute a Change of Control of
the Corporation.
Notwithstanding the foregoing, a Change of Control of the
Corporation shall not be deemed to occur: (A) pursuant to clauses
(i) and (ii) above, solely because more than 22.5% of the then
outstanding common stock or the combined voting power of the then
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outstanding voting securities of the Corporation is held or acquired
by one or more employee benefit plans (or related trusts) maintained
by the Corporation or its subsidiaries; or (B) pursuant to
Subparagraph (v)(y) above, if the Board determines that any sale,
lease, exchange or transfer does not involve substantially all of
the assets of the Corporation.
2.7 "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
2.8 "Compensation" means, solely for purposes of this Program, a
Participant's taxable base salary, taxable Variable Compensation awarded under a
Variable Compensation Plan and any compensation that is deferred by the
Participant to any other plan maintained by the Corporation which satisfies the
requirements of Code Sections 125 or 401(k).
2.9 "Compensation Committee" means the Organization, Compensation
and Pension Committee of the Board of Directors of the Corporation, or any
successor thereto.
2.10 "Corporation" means UCAR International Inc., a Delaware
Corporation, any predecessor thereof and any successor thereof by merger,
consolidation or otherwise and its 100% owned subsidiaries, except that UCAR
Graph-Tech, Inc. shall remain a subsidiary participating in this Plan until such
time that UCAR International Inc. owns, directly or indirectly, less than 50% of
the outstanding common stock of UCAR Graph-Tech, Inc.
2.11 "Date of Deferral" means (i) with respect to Variable
Compensation, the date on which the Corporation makes payments for Variable
Compensation awards for a given Service Year, (ii) with respect to base salary
deferral, the date on which the relevant salary would have been paid and (iii)
with respect to amounts which would otherwise have been paid from the SRIP, ERIP
or Equalization Plan, the date on which lump sum amounts would have otherwise
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been distributed in accordance with the terms of the SRIP, ERIP or Equalization
Plan.
2.12 "Deferred Compensation" means the amount of Compensation
deferred by a Participant under this Program pursuant to Section 5.3 of this
Program.
2.13 "Disability" shall mean the inability of a Participant to
perform in all material respects his or her duties and responsibilities to the
Corporation, or any subsidiary of the Corporation, by reason of a physical or
mental disability or infirmity which inability is reasonably expected to be
permanent and has continued (i) for a period of six consecutive months, or (ii)
such shorter period as the Corporation may determine. The Participant (or his or
her representative) shall furnish the Corporation with satisfactory medical
evidence documenting the Participant's disability or infirmity.
2.14 "Eligible Employee" means an individual who (i) on the date of
his or her election to participate in this Program as provided in Section 5-1,
is a participant in a Variable Compensation Plan and is employed with the
Corporation, or one of its 100% owned subsidiaries that is participating in this
Program, in the United 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) with respect to a deferral of all or a portion of his or
her lump sum payments otherwise payable from the SRIP, ERIP and/or Equalization
Plan, was employed with the Corporation, or one of its 100% owned subsidiaries
that is participating in the Program, in the United States (or outside the
United States to the extent such amounts would otherwise be included as income
for such person under the Code) during the year in which the deferral election
is made pursuant to Section 5.1.
2.15 "Equalization Plan" means the Equalization Benefit Plan for
Participants of the UCAR Carbon Retirement Plan, as may be amended from time to
time.
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2.16 "ERIP" means the UCAR Carbon Company Inc. Enhanced Retirement
Income Plan, as amended from time to time.
2.17 "Exchange Act" means the Securities Exchange Act of 1934 as
amended.
2.18 "Management Plan" means the UCAR International Inc.
Management Incentive Plan (effective January 1, 1999), as it may be amended from
time to time, or any successor plan.
2.19 "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 Program, (ii) elects in advance to defer a portion of his or her
Variable Compensation for a given Service Year under one of the Variable
Compensation Plans in accordance with Section 5.3 of this Program, 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 or (iii) elects in advance under this
Program to defer his or her lump sum distribution from the SRIP, ERIP or
Equalization Plan.
2.20 "Program" means this UCAR International Inc. Compensation
Deferral Program, as may be amended from time to time.
2.21 "Retirement" shall mean (a) with respect to any Participant,
the Participant's termination of employment with the Corporation when eligible
to receive an immediate pension benefit under the Retirement Program and (b) for
those Participants who are not participating in the Retirement Program, the date
on which such Participant (i) has attained age 50 with at least 10 years of
service with the Corporation and (ii) actually retires from employment with the
Corporation or a participating subsidiary.
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2.22 "Retirement Program" means the UCAR Carbon Retirement Plan, as
may be amended from time to time.
2.23 "Savings Plan" means the UCAR Carbon Savings Plan, as may be
amended from time to time.
2.24 "Service Year" means one of the calendar years on and 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 the Date of Deferral.
2.25 "SRIP" means the UCAR Carbon Company Inc. Supplemental
Retirement Income Plan, as may be amended from time to time.
2.26 "Stable Value Rate" means the rate of interest for the UCAR
Stable Value Fund under the Savings Plan, in effect from time to time.
2.27 "UCAR Stock Value Rate" means the difference between the unit
value of the Corporation's common stock as of the later of (i) the Date of
Deferral or the effective date of a Participant's election under Section 8.2(c)
pursuant to which earnings shall accrue at the UCAR Stock Value Rate and (ii)
the relevant date of determination of the amount of earnings in accordance with
Section 8.2 of this Program. Such value shall include the value of any
hypothetical dividends paid on the common stock during the period for which the
UCAR Stock Value Rate is being determined, as if such hypothetical dividends
were reinvested when payable in additional shares of the Corporation's common
stock. The unit value of the Corporation's common stock for purposes of this
Section 2.27 with respect to any relevant date of determination shall be
determined in the same manner as provided in the Savings Plan.
2.28 "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
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to him or her pursuant to Article VIII of this Program) under this Program were
not permitted. Whether a Participant has an Unforeseen Emergency shall be
determined by the Administrative Committee.
2.29 "Variable Compensation" means any amounts awarded in accordance
with one of the Variable Compensation Plans.
2.30 "Variable Compensation Plans" means, collectively, the
Management Plan, incentive plans of UCAR Composites Inc., the UCAR Graph-Tech,
Inc. Management Incentive Plan (but only so long as UCAR Graph-Tech, Inc.
participates in the Program) and any other variable compensation plan authorized
by the Administrative Committee to participate in this Program.
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ARTICLE III
ADMINISTRATION
3.1 Except as otherwise indicated, the Administrative Committee
shall supervise the administration and interpretation of this Program, may
establish administrative regulations to further the purpose of this Program and
shall take any other action necessary for the proper operation of this Program.
In carrying out their responsibilities under this Program, the Administrative
Committee and other Program fiduciaries shall have discretionary authority to
interpret the terms of this Program and to determine eligibility for entitlement
to benefits, in accordance with the terms of this Program. An interpretation
made pursuant to such discretionary 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.
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ARTICLE IV
ELIGIBILITY
4.1 To be eligible to participate in this Program 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 Program for that year.
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ARTICLE V
DEFERRALS
5.1 During each of the years this Program is in effect, Eligible
Employees shall be informed of the opportunity to participate in this Program.
An Eligible Employee choosing to participate in this Program must make an
election to do so on or before 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 Program with respect to
Variable Compensation shall become effective only on the Date of 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 Program).
Variable Compensation awards, if any, for services performed in
calendar years 1999 and 2000, must be deferred during the 1999 annual election
period except that if a Variable Compensation Plan is first adopted by the
Corporation in 2000 and covers services performed in 2000, then a Participant
may, within 31 days after such Plan is adopted by the Corporation, make an
election to defer amounts which may be paid under such Plan for services
performed in 2000. Variable Compensation awards, if any, for services performed
in calendar years 2001 and beyond, must be deferred during the annual election
period immediately preceding the calendar year in which such services will be
performed. Notwithstanding the foregoing, an Eligible Employee who becomes
eligible to participate in this Program after January 1, 2000 may elect to defer
a Variable Compensation award during the calendar year in which services will be
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performed; provided, however, he or she makes an election to defer within 31
days after becoming eligible to participate in this Program.
(b) An Eligible Employee must elect to defer his or her base salary
for services performed in calendar year 2000 during the 1999 annual election
period. Participation in this Program shall become effective only on the Date of
Deferral and only if the Eligible Employee is employed with the Corporation on
the date on which the Eligible Employee must make the election provided for in
this Article V. Base salary for services performed in calendar years 2001, and
beyond, must be deferred during the annual election period immediately preceding
the calendar year in which such 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 Program after
January 1, 2000, 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
Program.
(c) A Participant must elect to defer lump sum payments that he or
she would otherwise receive in accordance with the terms of the SRIP, ERIP or
Equalization Plan during the annual election period immediately preceding the
calendar year in which such payments would otherwise be received.
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),
(ii) up to 50% of his or her base salary (in 1% increments) and/or (iii) up to
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100% of his or her lump sum payment from the SRIP, ERIP or Equalization Plan (in
1% increments).
(b) 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,
Variable Compensation or lump sum payments from the SRIP, ERIP or Equalization
Plan in order to participate in this Program in any particular year.
Notwithstanding any provision in this Program to the contrary, if a Participant
fails to defer in the aggregate at least $1,000 of base salary, Variable
Compensation or lump sum payment from the SRIP, ERIP or Equalization Plan 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 Program in any particular year.
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ARTICLE VI
PAYMENTS TO PARTICIPANTS AND BENEFICIARIES
6.1 TIME OF PAYMENT. (a) Subject to subsections (b), (c), (d) and
(e) of this Section 6.1, a Participant shall begin to 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 Retirement or other termination of
employment.
(b) (i) Notwithstanding any provision in this Program 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. 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 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) shall instead be one year with respect to all
deferrals under this Program.
(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 Program 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
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Program; 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 Program 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 Program at such time as the Board determines
that a Change of Control has occurred. 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 Program upon the occurrence of a Change of
Control at any time prior to the date that the Board determines that a Change of
Control has occurred. Any payments made under this subsection (d) shall be made
in a lump sum within 45 days after the Change of Control has occurred.
(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 Program, 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 ten
percent (10%) of the amount distributed to him or her; and
(ii) If the Participant is still employed by the
Corporation, the Participant shall not be permitted to make deferral elections
into the Plan for two Plan years following the year of such a distribution.
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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 Corporation 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 lump sum as soon as administratively practicable.
6.2 FORM OF PAYMENTS. (a) A Participant may elect to receive
payments under this Program in annual or quarterly installments. Such
installments must commence as described in Section 6.1, and must be completed by
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, to be effective no earlier than the following
calendar year;
(ii) the election is subject to the consent of the
Administrative Committee.
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(e) 1. If a Participant dies at any time prior to
receiving any portion of his or her account balance under this Program, 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 Program
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 Program shall be paid in a lump sum payment as soon as practical
following the Participant's death.
2. If a Participant dies at any time after payment of
his or her account balance under this Program 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 Program would be disallowed in any part as a deduction to the Corporation
in accordance with Section 162(m) (or a successor Section) of the Internal
Revenue Code, the Administrative Committee may determine to distribute the
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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 Corporation's full tax deduction.
6.3 AMOUNT OF PAYMENT. (a) If a Participant is terminated by the
Corporation for Cause, he or she shall receive the lesser of (A) any amounts he
or she actually deferred under Article V, LESS any previous payments made or (B)
his or her account balance under this Program. Such payment shall be made in a
lump sum payment as soon as administratively practical following the
Participant's termination of employment; provided, however, that such
Participant will forfeit all earnings accruals credited to him or her pursuant
to Article VIII.
(b) If a Participant terminates employment voluntarily, such
Participant shall receive the full amount of his or her account balance in a
lump sum payment as soon as administratively practical 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.
(c) If a Participant terminates employment for any reason
other than termination by the Corporation for Cause or voluntary termination,
such Participant (or Beneficiary) shall receive the full amount of his or her
account balance (other than deferrals to a specific future date) in ten annual
installments commencing in the calendar year following the Participant's
termination of employment or a shorter schedule, including a lump sum payment,
if so elected by the Participant. 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.
19
<PAGE>
6.4 PAYMENT IN U.S. DOLLARS. All payments under this Program
shall be madein U.S. dollars.
6.5 REDUCTION OF PAYMENTS. All payments under this Program shall be
reduced by any and all amounts that the Corporation is required to withhold
pursuant to applicable law.
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 Corporation 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 Corporation's
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, 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 account
balance, as the Administrative Committee may consider appropriate. The
20
<PAGE>
Administrative Committee may rely upon any direction by the legal
representatives of the estate of a deceased Participant, without liability to
any other person.
21
<PAGE>
ARTICLE VIII
EARNINGS ACCRUALS
8.1 Each Participant's account balance under this Program shall be
credited with earnings from the Date of Deferral through 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.
8.2 (a) Earnings accruing in accordance with Section 8.1 shall
accrue at (i) the Stable Value Rate, (ii) the Applicable Equity Investment Fund
Rate, (iii) the UCAR Stock Value Rate or (iv) a combination of the three rates.
(b) Subject to subparagraph (c), a Participant shall
designate at the time of his or her election to defer any amounts under this
Program which accrual rate or rates shall apply to his or her deferrals;
provided such elections must 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 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 Program.
(d) Notwithstanding subparagraph (b) above, 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 UCAR Stock Value Rate at the time of his or her election to defer
any amounts under this Program; 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.
22
<PAGE>
(e) A Participant may elect to have his or her deferral
amounts rebalanced on a quarterly basis to accrual rate percentage allocation
elections as specified by the Participant.
23
<PAGE>
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 Program shall be null and void and shall be
disregarded, except to the extent required by law.
9.2 PROGRAM NOT TO BE FUNDED. The Corporation is not required to,
and will not, for the purpose of funding this Program, 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 creditor of the
Corporation, and the right of a Participant or Beneficiary to receive a payment
under this Program shall be no greater than the right of an unsecured general
creditor of the Corporation.
9.3 EFFECT OF PARTICIPATION. Neither selection as a Participant, nor
an election to participate or participation in this Program, shall entitle a
Participant to receive awards under the Variable Compensation Plans, SRIP, ERIP
or Equalization Plan, or affect the Corporation's right to discharge a
Participant.
9.4 COMMUNICATIONS TO BE IN WRITING. All elections, requests and
communications to the Corporation from Participants and Beneficiaries, and all
communications to such persons from the Corporation, shall be in writing, and in
such form and manner, and within such time, as the Corporation shall determine.
In lieu of the foregoing, the Corporation 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
Corporation shall be personally liable for any acts or omission to act under
24
<PAGE>
this Program 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 Program.
9.7 DELAWARE LAW TO GOVERN. All questions pertaining to the
construction, regulation, validity and effect of the provisions of this Program
shall be determined in accordance with Delaware law.
9.8 AMENDMENT. The Compensation Committee may amend this Program 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. In addition, the Administrative Committee may authorize any
amendment which, either by itself or when aggregated with other amendments
adopted during the calendar year, does not increase the Corporation's annual
cost of any past or future benefits under this Program by more than $500,000.
9.9 PROGRAM TERMINATION. The Compensation Committee may terminate
this Program for any reason and at any time. In the event of such termination,
the accounts of each Participant or Beneficiary under this Program shall become
immediately payable in accordance with Section 6.1; provided that the
Compensation Committee, in its sole discretion, upon Program termination or at
any time thereafter, may decide to make lump sum payments in lieu of annual
payments.
25
<PAGE>
UCAR INTERNATIONAL INC.
By: _________________________________
26
<PAGE>
UCAR INTERNATIONAL INC.
MANAGEMENT INCENTIVE PLAN
(Amended and Restated as of January 1, 1999)
<PAGE>
TABLE OF CONTENTS
TITLE PAGE
----
SECTION 1: PURPOSE..........................................................2
SECTION 2: EFFECTIVE DATE...................................................2
SECTION 3: DEFINITIONS......................................................2
SECTION 4: ADMINISTRATION...................................................2
SECTION 5: AWARDS...........................................................5
SECTION 6: PAYMENT OF AWARDS................................................6
SECTION 7: TERMINATION OF EMPLOYMENT........................................2
SECTION 8: CHANGE OF POSITION DURING A PLAN YEAR............................2
SECTION 9: BENEFICIARY DESIGNATION..........................................2
SECTION 10: GENERAL PROVISIONS..............................................2
SECTION 11: AMENDMENT, SUSPENSION OR TERMINATION............................2
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<PAGE>
UCAR INTERNATIONAL INC.
MANAGEMENT INCENTIVE PLAN
SECTION 1: PURPOSE
The purpose of the Plan is to: (a) provide incentives and rewards to
Officers and Eligible Employees of the Corporation; (b) assist the Corporation
in attracting, retaining, and motivating Officers and Eligible Employees of high
caliber and experience; and (c) make the Corporation's compensation program
competitive with those of other major employers.
SECTION 2: EFFECTIVE DATE
This Plan constitutes an amendment, restatement and combining of the
UCAR International Inc. Management Incentive Plan and the UCAR International
Inc. Officers Incentive Plan. This amended, restated and combined Plan shall be
effective as of January 1, 1999.
SECTION 3: DEFINITIONS
3.1 "Award" shall mean the amount of annual incentive compensation,
authorized by the Board, if necessary, payable to a Participant for a Plan Year.
3.2 "Beneficiary" shall mean a Participant's deemed beneficiary
pursuant to Section 9.1 hereof.
3.3 "Board" shall mean the Board of Directors of UCAR International
Inc.
3.4 "CEO" shall mean the Chief Executive Officer of the Corporation.
3.5 "Controlled Affiliates" shall mean UCAR International Inc. and
each of its direct or indirect subsidiaries and affiliates.
3.6 "Corporation" shall mean UCAR International Inc. and its
Controlled Affiliates.
-3-
<PAGE>
3.7 "Department" shall mean the Corporate Human Resources Department
of the Corporation.
3.8 "Disability" or "Disabled" shall mean a Participant's inability
to engage in any substantial gainful activity because of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of six (6) months or longer.
3.9 "Eligible Employee" shall mean any employees in positions in
Grades 13 and above or equivalent, other than Officers.
3.10 "Officer" shall mean any officer of the Corporation or any
Participant designated as an officer by the CEO for purposes of this Plan.
3.11 "Participant" shall mean any Eligible Employee authorized by
the CEO to participate in the Plan or any Officer authorized by the Board to
participate in the Plan.
3.12 "Plan" shall mean this UCAR International Inc.Management
Incentive Plan, as it may be amended from time to time.
3.13 "Plan Year" shall mean the calendar year.
3.14 "Retirement" shall mean termination of employment by the
Corporation, or by a Controlled Affiliate participating in the Plan, with the
right under the UCAR Carbon Retirement Plan to receive a non-actuarially reduced
pension immediately upon separation from service. If a Participant does not
participate in the UCAR Carbon Retirement Plan, "Retirement" means termination
of employment after (i) attaining age 65, (ii) attaining age 62 and completing
at least 10 years of employment, or (iii) having accumulated 85 points, where
each year of age and each year of employment count for one point.
3.15 "Savings Plan" shall mean the UCAR Carbon Savings Plan.
-4-
<PAGE>
SECTION 4: ADMINISTRATION
4.1 With respect to Eligible Employees, the Plan shall be
administered by the Department which, subject to Section 5.1 hereof, shall have
full power and authority to construe and interpret the Plan, establish and amend
administrative regulations to further the purpose of the Plan, select or
authorize the selection criteria of Eligible Employees, authorize Award levels,
and take any other action necessary to administer the Plan. The Department's
decisions, actions, and interpretations regarding the Plan shall be final and
binding upon all Eligible Employees and Beneficiaries.
4.2 With respect to Officers, the Plan shall be administered by the
Board, which shall have full power and authority to construe and interpret the
Plan, establish and amend administrative regulations to further the purpose of
the Plan, select or authorize the selection of Officers, authorize Awards, and
take any other action necessary to administer the Plan. The Board's decisions,
actions, and interpretations regarding the Plan shall be final and binding upon
all Officers and Beneficiaries.
4.3 The Department shall: (i) formulate and recommend to the Board
such changes in the Plan as may facilitate the administration of the Plan; (ii)
maintain summary records of Awards; (iii) prepare reports and data required by
the Corporation and government agencies; (iv) obtain necessary consents and
approvals by government agencies; (v) obtain any data requested by the Board;
and (vi) take such other actions requested by the Board as are necessary for the
effective implementation of the Plan.
SECTION 5: AWARDS
5.1 The Board shall determine the aggregate amount to be awarded for
each Plan Year. That determination shall be based upon an evaluation of the
performance of the Corporation during the Plan Year and such other factors as
the Board shall determine.
-5-
<PAGE>
5.2 The Department shall, subject to the approval of the CEO,
determine the amount of the Award granted to each Eligible Employee. The
Department shall consider the extent to which an Eligible Employee achieves,
during a Plan Year, specific measures of performance established from time to
time during the Plan Year. The Department shall provide a report to the Board of
the actual Awards to Eligible Employees made under the Plan each year.
5.3 The Board shall determine the amount of the Award granted to
each Officer. The Board shall consider the extent to which an Officer achieves,
during a Plan Year, specific measures of performance established from time to
time during the Plan Year.
SECTION 6: PAYMENT OF AWARDS
6.1 The Board shall authorize Awards for a Plan Year at such time
after the end of such Plan Year as the Board in its discretion may determine.
The Board, in its discretion, may authorize the payment of Awards in cash,
stock, or a combination thereof.
6.2 The Board reserves the right to defer payment of some or all
Awards, in whole or in part, upon such terms and conditions as the Board in its
discretion may determine. The Board's decision regarding the deferral of an
Award shall be final and binding on all Participants and Beneficiaries.
SECTION 7: TERMINATION OF EMPLOYMENT
7.1 If a Participant's employment with the Corporation is terminated
during a Plan Year, by the Corporation without cause, or because of the death,
Disability or Retirement of the Participant, then the Award to such Participant
shall equal the amount which would have been granted to such Participant under
the Plan had such Participant's employment with the Corporation not been
terminated multiplied by a fraction the numerator of which is the number of
months during such Plan Year that such Participant was employed by the
Corporation and the denominator of which is 12.
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<PAGE>
7.2 If a Participant's employment with the Corporation is terminated
during a Plan Year, by the Corporation for cause, or for any reason other than
death, Disability or Retirement, then such Participant shall not be entitled to
an Award for such Plan Year. However, the CEO may, however, in his or her
discretion, determine that it is in the best interests of the Corporation to
authorize an Award to such a Participant. If the CEO shall so authorize an
Award, then such Award shall be determined pursuant to the guidelines set forth
in section 7.1. In addition, the Board may, in its discretion, determine that it
is in the best interests of the Corporation to authorize an Award to an Officer.
If the Board shall so authorize an Award, then such Award shall be determined
pursuant to the guidelines set forth in section 7.1.
7.3 A Participant whose employment with the Corporation is
terminated for any reason shall be deemed to have terminated employment with the
Corporation on the last day of the month in which the termination occurs.
SECTION 8: CHANGE OF POSITION DURING A PLAN YEAR
8.1 If a Participant is reassigned to a different position within
the Plan during a Plan Year, the total Award will be determined proportionally
based on the relative performance and time in each position.
SECTION 9: BENEFICIARY DESIGNATION
9.1 The beneficiary or beneficiaries designated by the Participant
or deemed to have been designated by the Participant under the Savings Plan
shall be deemed to be the Participant's Beneficiary and a deceased Participant's
unpaid Award shall be paid to the Beneficiary. If a Participant does not
participate in the Savings Plan or if a Participant does participate in the
Savings Plan and has not designated or been deemed to have designated a
beneficiary thereunder, then a deceased Participant's unpaid Award shall be
distributed to the Participant's estate. If a Beneficiary does not survive the
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<PAGE>
Participant, then a deceased Participant's unpaid Award shall be distributed to
the Participant's estate. If the Beneficiary of a deceased Participant survives
the Participant, and dies before such Participant's Award is distributed, then
such unpaid Award shall be distributed to the Beneficiary's estate.
SECTION 10: GENERAL PROVISIONS
10.1 An Eligible Employee may not assign an Award without the
Department's prior written consent. Likewise, an Officer may not assign an Award
without the Board's prior written consent. Any attempted assignment without such
consent shall be null and void. For purposes of this paragraph, any designation
of, or payment to, a Beneficiary shall not be deemed an assignment.
10.2 The Plan is intended to constitute an unfunded incentive
compensation arrangement for a select group of key personnel. Nothing contained
in the Plan, and no action taken pursuant to the Plan, shall create or be
construed to create a trust of any kind. A Participant's right to receive an
Award shall be no greater than the right of an unsecured general creditor of the
Corporation. All Awards shall be paid from the general funds of the Corporation,
and no special or separate fund shall be established and no segregation of
assets shall be made to assure payment of such Awards.
10.3 Nothing contained in the Plan shall give any Participant the
right to continue in the employment of the Corporation, or affect the right of
the Corporation to discharge a Participant.
10.4 The Plan shall be construed and governed in accordance with the
laws of the State of DELAWARE.
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<PAGE>
SECTION 11: AMENDMENT, SUSPENSION OR TERMINATION
11.1 The Board reserves the right to amend, suspend, or terminate
the Plan at any time; provided, however, that any amendment, suspension or
termination shall not adversely affect the rights of Participants or
Beneficiaries to receive Awards granted prior to such action.
UCAR INTERNATIONAL INC.
Dated: ___________ ___, 1999 By:_____________________________
<PAGE>
UCAR CARBON
EQUALIZATION BENEFIT PLAN
(Amended and Restated as of October 1, 1998)
<PAGE>
EQUALIZATION BENEFIT PLAN
GENERAL
This is an excess benefit plan for participants in the Retirement
Plan who receive a benefit from the Retirement Plan which is limited by Code
Section 415. This Plan has been established primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees.
Specifically, the purpose of this Plan is to provide a retirement
benefit, equal to the excess of :
(1) the retirement benefit which would be provided by the
Retirement Plan determined without regard to Code Section 415,
OVER
(2) the retirement benefit actually provided by the Retirement
Plan.
This Plan is completely separate from the Retirement Plan, the
Enhanced Retirement Income Plan and the Supplemental Retirement Income Plan, is
unfunded for purposes of Title I of the Employee Retirement Income Security Act
of 1974, as amended and is not qualified for special tax treatment under the
Code.
- 1 -
<PAGE>
ARTICLE I
ELIGIBILITY
SECTION 1. A Participant, or survivor of a Participant who has not
declined the coverage of a survivor's benefit under the Retirement Plan shall be
eligible to participate in this Plan if such Participant receives a retirement
benefit from the Retirement Plan which is limited by Code Section 415.
ARTICLE II
ADMINISTRATION
SECTION 1. (a) The Compensation Committee shall have the authority
to administer this Plan. The Compensation Committee may adopt such rules as it
may deem necessary for the proper administration of this Plan and its decision
in all matters involving the interpretation and application of the Plan shall be
final, conclusive, and binding on all parties.
(b) The Compensation Committee may, in its sole discretion,
designate any persons(s) or committee to administer this Plan. To the extent
provided by the Compensation Committee, such person(s) or committee designated
to administer this Plan shall have the same powers and responsibilities as the
Compensation Committee.
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<PAGE>
ARTICLE III
AMOUNT OF BENEFIT
SECTION 1. (a) The monthly amount of Equalization Retirement
Income payable to a Participant shall be the excess, if any, of:
(i) the Participant's monthly retirement benefit, computed by
using the applicable benefit formula provided in Article V of
the Retirement Plan and determined without regard to the
limitations of Code Sections 415,
OVER
(ii) the monthly amount of such Participant's or surviving
spouse's retirement benefit payable under the Retirement Plan.
(b) Any benefits either payable under, or which have been satisfied
through, the purchase of non-qualified annuities in connection with this Plan
shall be deducted from the amounts payable pursuant to subparagraph (a) above.
SECTION 2. For purposes of calculating the amount of a Participant's
Equalization Retirement Income pursuant to Section 1 of this Article III, the
amount of a Participant's monthly retirement benefit under the Retirement Plan
shall be determined without any adjustment on account of (i) a survivor's
benefit or (ii) an election to receive level retirement income.
SECTION 3. If a Participant does not decline the coverage of a
survivor's benefit, the monthly amount of Equalization Retirement Income which
such Participant would otherwise have received shall be reduced by applying the
same factors used in the Retirement Plan in connection with calculating a
survivor's benefit.
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<PAGE>
SECTION 4. The monthly amount of Equalization Retirement Income
payable to the survivor of a Participant shall be calculated in the same manner
that such survivor's benefit is calculated under the Retirement Plan.
ARTICLE IV
VESTING
SECTION 1. A Participant shall be vested in such Participant's right
to receive Equalization Retirement Income under this Plan in the same manner and
to the same extent as provided under the Retirement Plan .
ARTICLE V
PAYMENTS
SECTION 1. A Participant or such Participant's survivor shall
commence receiving Equalization Retirement Income at such time as the
Participant or survivor commences benefits under the Retirement Plan. Unless a
Participant or survivor elects otherwise, the normal form of payment of a
Participant's Equalization Retirement Income is as follows:
(a) in the calendar year in which the Participant or survivor
is eligible to commence benefits, the Participant or survivor shall begin to
receive monthly payments.
(b) 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 Equalization Retirement Income.
(c) Notwithstanding the foregoing, a Participant or survivor
may elect during the calendar year in which the Participant or survivor
- 4 -
<PAGE>
commences benefits to forgo the lump sum payment payable in the following year
and may elect to continue receiving monthly payments. Alternatively, a
Participant or survivor may elect in the calendar year preceding the
Participant's or survivor's commencement of benefits to forgo receiving monthly
payments, in which case the Participant or survivor shall receive a lump sum in
the calendar year in which the Participant or survivor is eligible to commence
benefits.
(d) Upon a Participant's death, the Participant's survivor may
cancel any existing election and may make a new one, provided (i) an election to
receive a lump sum payment is made by December 31 prior to the calendar year in
which such lump sum payment is to be made and (ii) an election to revoke the
right to receive a lump sum payment is made by December 31 prior to the calendar
year in which such lump sum was to be paid.
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. Notwithstanding the provisions of Section 1 of this
Article V, a Participant or survivor may elect at any time immediately preceding
commencement of benefits to receive substantially equal installments over a
period of at least 2 but not more than 10 years commencing as of the January 1
of the calendar year following such election. If a Participant elects a series
of payments over a period from 2 to 10 years, this election is irrevocable. This
election shall be the same as that made pursuant to the Supplemental Retirement
Income Plan and the Enhanced Retirement Income Plan.
- 5 -
<PAGE>
If a Participant elects a monthly annuity as in the Retirement Plan,
he or she may again elect a series of payments over a period of from 2 to 10
years when the calculation of the lump sum benefit changes. The calculation of
the benefit may change: (i) because of profit sharing or awards paid in the year
following the last year worked or (ii) because the interest rate used to
calculate the lump sum is not available until the November after the monthly
annuity benefit is recalculated.
The lump sum payment or installment payments described above shall
be calculated using (A) a discount rate for the month of October of the calendar
year preceding the payment of the lump sum or installments equal to the average
of the Moody's Municipal 10 year Aaa Bond Yield Averages and the Moody's
Municipal Long Term Aaa Bond Yield Averages, and (B) the UP-94G Mortality Table.
The Compensation Committee or its designee shall determine the procedures for
such elections and the time and method of payment for payments in accordance
with this Section 3. For Participants who make the election described in this
Section 3, the provisions of Sections 1 and 2 of this Article V shall not apply.
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
Corporation or any of its subsidiaries, such Equalization Retirement Income
shall thereupon be terminated.
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<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 1. Unless otherwise defined in this Plan, all defined terms
shall have the same meaning as set forth in the Retirement Plan.
(a) "Code" means the Internal Revenue Code of 1986, as
amended.
(b) "Compensation Committee" means the Organization and
Compensation Committee of the Board of Directors of the Corporation.
(c) "Corporation" means UCAR Carbon Company Inc.
(d) "Enhanced Retirement Income Plan" means the UCAR Carbon
Enhanced Retirement Income Plan.
(e) "Equalization Retirement Income" means the benefit payable
to a Participant pursuant to Article III of this Plan.
(f) "Participant" means an employee of the Corporation who is
eligible to participate in the Plan pursuant to Article I.
(g) "Plan" means this UCAR Carbon Equalization Benefit Plan,
as amended and restated as of October 1, 1998.
(h) "Retirement Plan" as used in this Plan means the UCAR
Carbon Retirement Plan.
(i) "Supplemental Retirement Income Plan" means the UCAR
Carbon Supplemental Retirement Income Plan.
SECTION 2. The Corporation may amend or terminate this Plan at any
time, but any such amendment or termination shall not adversely affect the
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<PAGE>
rights of any Participant or survivor of any Participant then receiving benefits
under this Plan, or the vested rights of any Participant or survivor.
SECTION 3. Except to the extent required by law, no assignment of
the rights and interests of a Participant or survivor of a Participant under
this Plan shall be permitted nor shall such rights be subject to attachment or
other legal processes for debts.
SECTION 4. This Plan is intended to be unfunded for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended and
the rights of a Participant and survivor of a Participant shall be no greater
than the right of an unsecured general creditor of the Corporation.
SECTION 5. The Corporation may satisfy all or any part of its
obligation to provide benefits under this Plan by purchasing, and distributing
to a Participant or survivor of a Participant, an annuity from an insurance
carrier to provide such benefits.
SECTION 6. Neither selection as a Participant nor participation in
this Plan shall affect the Corporation's right to discharge any Participant.
UCAR CARBON COMPANY INC.
By:______________________________
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<PAGE>
FIRST AMENDMENT TO THE
UCAR CARBON
EQUALIZATION BENEFIT PLAN
-------------------------
The UCAR Carbon Equalization Benefit Plan (Amended and Restated
as of October 1, 1998) ("Plan") is hereby amended as follows:
1. Section 3 of Article V of the Plan is amended in its entirety
to read as follows:
"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."
2. Section 1(f) of Article VI of the Plan is amended to insert
the following after the word "Corporation": "or any other Employer that has
adopted the Retirement Plan for its employees,"
3. The provisions of paragraph 1 of this First Amendment to the
Plan shall be effective with respect to distribution elections received by the
Compensation Committee on or after January 1, 2000.
4. The provisions of paragraph 2 of this First Amendment to the
Plan shall be effective as of October 1, 1998.
UCAR CARBON COMPANY, INC.
By: /s/ John C. Arnold
-----------------------------------
<PAGE>
UCAR CARBON
SUPPLEMENTAL RETIREMENT
INCOME PLAN
(Amended and Restated as of July 1, 1998)
<PAGE>
SUPPLEMENTAL RETIREMENT INCOME PLAN
GENERAL
This is a supplemental retirement income plan for participants in
the Retirement Plan who receive compensation in excess of the compensation which
may be considered by the Retirement Plan under Code Section 401(a)(17). This
Plan has been established primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees.
Specifically, the purpose of this Plan is to provide a retirement
benefit, equal to the excess of:
(1) the retirement benefit which would be provided by the Retirement
Plan determined without regard to Code Section 415 or Code Section
401(a)(17),
OVER
(2) the retirement benefit actually provided by the Retirement
Plan and the Equalization Benefit Plan.
This Plan is completely separate from the Retirement Plan, the
Enhanced Retirement Income Plan and the Equalization Benefit Plan, is unfunded
for purposes of Title I of the Employee Retirement Income Security Act of 1974,
as amended and is not qualified for special tax treatment under the Code.
<PAGE>
ARTICLE I
ELIGIBILITY
SECTION 1. A Participant, or the survivor of a Participant who has
not declined the coverage of a survivor's benefit, shall be eligible to
participate in this Plan if such Participant (i) participates in the Retirement
Plan and (ii) receives compensation in excess of the compensation which may be
considered by the Retirement Plan under Code Section 401(a)(17).
ARTICLE II
ADMINISTRATION
SECTION 1. (a) The Compensation Committee shall have the authority
to administer this Plan. The Compensation Committee may adopt such rules as it
may deem necessary for the proper administration of this Plan and its decision
in all matters involving the interpretation and application of the Plan shall be
final, conclusive, and binding on all parties.
(b) The Compensation Committee may, in its sole discretion,
designate any persons(s) or committee to administer this Plan. To the extent
provided by the Compensation Committee, such person(s) or committee designated
to administer this Plan shall have the same powers and responsibilities as the
Compensation Committee.
-2-
<PAGE>
ARTICLE III
AMOUNT OF SUPPLEMENTAL RETIREMENT INCOME
SECTION 1 (a) A Participant's monthly amount of Supplemental
Retirement Income shall be the excess, if any, of:
(i) the Participant's monthly retirement benefit, computed by using
the applicable benefit formula provided in Article V of the
Retirement Plan and determined without regard to the limitations of
Code Sections 401(a)(17) and 415,
OVER
(ii) the monthly amount of such Participant's retirement benefit
actually payable under the Retirement Plan and the Equalization
Benefit Plan.
(b) Any benefits either payable under, or which have been satisfied
through the purchase of, non-qualified annuities in connection with this
Supplemental Retirement Income Plan and/or the Equalization Benefit Plan shall
be deducted from the amounts payable pursuant to subparagraph (a) above.
SECTION 2. For purposes of calculating the amount of a Participant's
Supplemental Retirement Income pursuant to Section 1 of this Article III, the
amount of a Participant's monthly retirement benefit under the Retirement Plan
and the Equalization Benefit Plan shall be determined without any adjustment on
account of (i) a survivor's benefit or (ii) an election to receive level
retirement income.
SECTION 3. If a Participant does not decline the coverage of a
-3-
<PAGE>
survivor's benefit, the monthly amount of Supplemental Retirement Income which
such Participant would otherwise have received shall be reduced by applying the
same factors used in the Retirement Plan in connection with calculating a
survivor's benefit.
SECTION 4. The monthly amount of Supplemental Retirement Income
payable to the survivor of a Participant shall be calculated in the same manner
that such survivor's benefit is calculated under the Retirement Plan.
ARTICLE IV
VESTING
SECTION 1. A Participant shall be vested in such Participant's right
to receive Supplemental Retirement Income under this Plan in the same manner and
to the same extent as provided under the Retirement Plan.
ARTICLE V
PAYMENTS
SECTION 1. A Participant or such Participant's survivor shall
commence receiving Supplemental Retirement Income at such time as the
Participant or survivor commences benefits under the Retirement Plan. Unless a
Participant or survivor elects otherwise, the normal form of payment of a
Participant's Supplemental Retirement Income is as follows:
(a) in the calendar year in which the Participant or survivor
is eligible to commence benefits, the Participant or survivor shall begin to
receive monthly payments.
(b) 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
-4-
<PAGE>
the Participant's or survivor's Supplemental Retirement Income.
(c) Notwithstanding the foregoing, a Participant or survivor
may elect during the calendar year in which the Participant or survivor
commences benefits to forgo the lump sum payment payable in the following year
and may elect to continue receiving monthly payments. Alternatively, a
Participant or survivor may elect in the calendar year preceding the
Participant's or survivor's commencement of benefits to forgo receiving monthly
payments, in which case the Participant or survivor shall receive a lump sum in
the calendar year in which the Participant or survivor is eligible to commence
benefits.
(d) Upon a Participant's death, the Participant's survivor may
cancel any existing election and may make a new one, provided (i) an election to
receive a lump sum payment is made by December 31 prior to the calendar year in
which such lump sum payment is to be made and (ii) an election to revoke the
right to receive a lump sum payment is made by December 31 prior to the calendar
year in which such lump sum was to be paid.
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. Notwithstanding the provisions of Section 1 of this
Article V, a Participant or survivor may elect at any time immediately preceding
-5-
<PAGE>
commencement of benefits to receive substantially equal installments over a
period of at least 2 but not more than 10 years commencing as of the January 1
of the calendar year following such election. If a Participant elects a series
of payments over a period from 2 to 10 years, this election is irrevocable. This
election shall be the same as that made pursuant to the Equalization Benefit
Plan and the Enhanced Retirement Income Plan.
If a Participant elects a monthly annuity as in the Retirement Plan,
he or she may again elect a series of payments over a period of from 2 to 10
years when the calculation of the lump sum benefit changes. The calculation of
the benefit may change: (i) because of profit sharing or awards paid in the year
following the last year worked or (ii) because the interest rate used to
calculate the lump sum is not available until the November after the monthly
annuity benefit is recalculated.
The lump sum payment or installment payments described above shall
be calculated using (A) a discount rate for the month of October of the calendar
year preceding the payment of the lump sum or installments equal to the average
of the Moody's Municipal 10 year Aaa Bond Yield Averages and the Moody's
Municipal Long Term Aaa Bond Yield Averages, and (B) the UP-94G Mortality Table.
The Compensation Committee or its designee shall determine the procedures for
such elections and the time and method of payment for payments in accordance
with this Section 3. For Participants who make the election described in this
Section 3, the provisions of Sections 1 and 2 of this Article V shall not apply.
SECTION 4. Notwithstanding anything in this Plan to the contrary,
-6-
<PAGE>
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
Corporation or any of its subsidiaries, such Supplemental Retirement Income
shall thereupon be terminated.
ARTICLE VI
MISCELLANEOUS
SECTION 1. Unless otherwise defined in this Plan, all defined terms
shall have the same meaning as set forth in the Retirement Plan.
(a) "Code" means the Internal Revenue Code of 1986, as
amended.
(b) "Compensation Committee" means the Organization and
Compensation Committee of the Board of Directors of the Corporation.
(c) "Corporation" means UCAR Carbon Company Inc.
(d) "Enhanced Retirement Income Plan" means the UCAR Carbon
Enhanced Retirement Income Plan.
(e) "Equalization Benefit Plan" means the UCAR Carbon
Equalization Benefit Plan.
(f) "Participant" means an employee of the Corporation who is
-7-
<PAGE>
eligible to participate in the Plan pursuant to Article I.
(g) "Plan" means the UCAR Carbon Supplemental Retirement
Income Plan, as amended and restated as of July 1, 1998.
(h) "Retirement Plan" means the UCAR Carbon Retirement
Plan.
(i) "Supplemental Retirement Income" as used in this Plan
means the benefit payable to a Participant pursuant to Article III of this Plan.
SECTION 2. The Corporation may amend or terminate this Plan at any
time, but any such amendment or termination shall not adversely affect the
rights of any Participant or survivor, of any Participant then receiving
benefits under this Plan, or the vested rights of any Participant or survivor.
SECTION 3. Except to the extent required by law, no assignment of
the rights and interests of a Participant or survivor of a Participant under
this Plan shall be permitted nor shall such rights be subject to attachment or
other legal processes for debts.
SECTION 4. This Plan is intended to be unfunded for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended and
the rights of a Participant and a survivor of a Participant shall be no greater
than the right of an unsecured general creditor of the Corporation.
SECTION 5. The Corporation may satisfy all or any part of its
obligation to provide benefits under this Plan by purchasing, and distributing
to a Participant or survivor of a Participant, an annuity from an insurance
carrier to provide such benefits.
-8-
<PAGE>
SECTION 6. Neither selection as a Participant nor participation in
this Plan shall affect the Corporation's right to discharge any Participant.
UCAR CARBON COMPANY INC.
By:___________________________
-9-
<PAGE>
FIRST AMENDMENT TO THE
UCAR CARBON
SUPPLEMENTAL RETIREMENT
INCOME PLAN
------------------------
The UCAR Carbon Supplemental Retirement Income Plan (Amended and
Restated as of July 1, 1998) ("Plan"), is hereby amended as follows:
1. Section 3 of Article V of the Plan is amended in its entirety
to read as follows:
"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."
2. Section 1(f) of Article VI of the Plan is amended to insert
the following after the word "Corporation":
"or any other Employer that has adopted the Retirement Plan for
its employees,"
3. The provisions of paragraph 1 of this First Amendment to the
Plan shall be effective with respect to distribution elections received by the
Compensation Committee on or after January 1, 2000.
4. The provisions of paragraph 2 of this First Amendment to the
Plan shall be effective as of July 1, 1998.
UCAR CARBON COMPANY, INC.
By: /s/ John C. Arnold
-----------------------------------
<PAGE>
UCAR CARBON
ENHANCED RETIREMENT
INCOME PLAN
(Amended and restated as of July 1, 1998)
<PAGE>
ENHANCED RETIREMENT INCOME PLAN
GENERAL
This is an enhanced retirement income plan for participants in the
Retirement Plan who receive a retirement benefit under the Retirement Plan which
is limited by Code Section 415 or Code Section 401(a)(17). This Plan has been
established primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees.
Specifically, the purpose of this Plan is to provide a retirement
benefit equal to the excess of:
(1) the retirement benefit which would be provided by the Retirement
Plan, determined without regard to Code Section 415 or Code Section 401(a)(17),
if
(a) average monthly Compensation included Awards and base salary
deferred pursuant to the terms of the Compensation Deferral
Program or any succesor or predecessor program, and/or
(b) all Awards, whether deferred or not, were averaged
separately from Base Compensation (as defined in the
Retirement Plan);
OVER
(2) the retirement benefit actually provided by the Retirement Plan,
the Equalization Benefit Plan and the Supplemental Retirement Income Plan.
This Plan is completely separate from the Retirement Plan, the
Supplemental Retirement Income Plan and the Equalization Benefit Plan, is
unfunded for purposes of Title I of the Employee Retirement Income Security Act
<PAGE>
of 1974, as amended, and is not qualified for special tax treatment under the
Code.
ARTICLE I
ELIGIBILITY
SECTION 1. A Participant, or the survivor of a Participant who has
not declined the coverage of a survivor's benefit, shall be eligible to
participate in this Plan if such Participant receives a retirement benefit from
the Retirement Plan which is limited by Code Section 401(a)(17) or Code Section
415, or is a participant in the Compensation Deferral Program.
ARTICLE II
ADMINISTRATION
SECTION 1. (a) The Compensation Committee shall have the authority
to administer this Plan. The Compensation Committee may adopt such rules as it
may deem necessary for the proper administration of this Plan and its decision
in all matters involving the interpretation and application of the Plan shall be
final, conclusive, and binding on all parties.
(b) The Compensation Committee may, in its sole discretion,
designate any person(s) or committee to administer this Plan. To the extent
provided by the Compensation Committee, such person(s) or committee designated
to administer this Plan shall have the same powers and responsibilities as the
Compensation Committee.
2
<PAGE>
ARTICLE III
AMOUNT OF ENHANCED RETIREMENT INCOME
SECTION 1.
(a) A Participant's monthly Enhanced Retirement Income shall be
computed by using the applicable formula provided in Article V of the Retirement
Plan; provided, however, that average monthly Compensation shall be determined
without regard to Code Section 415 and Code Section 401(a)(17) and shall be
computed by determining the sum of the following amounts:
(i) the larger of:
(I) 1/36 of a Participant's Base Salary related to the three
full calendar years in which such Base Salary was largest
during the ten full calendar years next preceding the
date of death or retirement, or
(II) 1/36 of a Participant's Base Salary for the thirty-six
(36) full calendar months next preceding the date of
death or retirement; and
(ii) 1/36 of the Participant's Awards related to the three full
calendar years in which such Awards were the largest during
the ten full calendar years next preceding the date of death
or retirement; provided, that the calendar years in which the
Participant was hired or terminated employment shall each be
considered a full calendar year for the purposes of this
clause (ii); REDUCED BY
(iii) the monthly amount of such Participant's retirement benefit
actually payable under the Retirement Plan, the Equalization
Benefit Plan and the Supplemental Retirement Income Plan.
3
<PAGE>
(b) For purposes of this Section 1, an "Award" will be related to the
calendar year in which a Participant performed the services for which the Award
was paid.
(c) For purposes of this Section 1, the amount of "Base Salary"
received in any calendar month shall be calculated in the same manner in which
average monthly Compensation used to compute pension benefits under the
Retirement Plan is calculated (determined without regard to Incentive
Compensation, as defined therein); provided, however, that Base Salary shall
also include any base salary deferred by a Participant pursuant to the terms of
the Compensation Deferral Program, in the calendar year in which it would
otherwise have been paid.
(d) Any benefits either payable under, or which have been satisfied
through the purchase of, non-qualified annuities in connection with this
Enhanced Retirement Income Plan, the Supplemental Retirement Income Plan and/or
the Equalization Benefit Plan shall be deducted from the amounts payable
pursuant to subparagraph (a) above.
(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 Corporation 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 III, the monthly amount of Enhanced
Retirement Income payable hereunder shall be recalculated after such Award is
granted (whether or not deferred).
SECTION 3. For purposes of calculating the amount of a Participant's
Enhanced Retirement Income pursuant to Section 1 of this Article III, the amount
of a Participant's monthly retirement income and monthly pension under the
Retirement Plan, the Equalization Benefit Plan and the Supplemental Retirement
4
<PAGE>
Income shall be determined without any adjustment on account of (i) a survivor's
benefit or (ii) an election to receive level retirement income.
SECTION 4. If a Participant does not decline the coverage of a
survivor's benefit, the monthly amount of Enhanced Retirement Income which such
Participant would otherwise have received shall be reduced by applying the same
factors used in the Retirement Plan in connection with calculating a survivor's
benefits.
SECTION 5. The monthly amount of Enhanced Retirement Income payable
to the eligible survivor of a Participant shall be calculated in the same manner
that such survivor's benefit is calculated under the Retirement Plan.
ARTICLE IV
VESTING
SECTION 1. A Participant will be vested in such Participant's right
to receive Enhanced Retirement Income under the Plan in the same manner and to
the same extent as provided under the Retirement Plan.
ARTICLE V
PAYMENTS
SECTION 1. A Participant or such Participant's survivor shall
commence receiving Enhanced Retirement Income at such time as the Participant or
survivor commences benefits under the Retirement Plan. Unless a Participant or
survivor elects otherwise, the normal form of payment of a Participant's
Enhanced Retirement Income is as follows:
5
<PAGE>
(a) in the calendar year in which the Participant or survivor
is eligible to commence benefits, the Participant or survivor shall begin to
receive monthly payments.
(b) 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.
(c) Notwithstanding the foregoing, a Participant or survivor
may elect during the calendar year in which the Participant or survivor
commences benefits to forgo the lump sum payment payable in the following year
and may elect to continue receiving monthly payments. Alternatively, a
Participant or survivor may elect in the calendar year preceding the
Participant's or survivor's commencement of benefits to forgo receiving monthly
payments, in which case the Participant or survivor shall receive a lump sum in
the calendar year in which the Participant or survivor is eligible to commence
benefits.
(d) Upon a Participant's death, the Participant's survivor may
cancel any existing election and may make a new one, provided (i) an election to
receive a lump sum payment is made by December 31 prior to the calendar year in
which such lump sum payment is to be made and (ii) an election to revoke the
right to receive a lump sum payment is made by December 31 prior to the calendar
year in which such lump sum was to be paid.
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.
6
<PAGE>
SECTION 3. Notwithstanding the provisions of Section 1 of this
Article V, a Participant or survivor may elect at any time immediately preceding
commencement of benefits to receive substantially equal installments over a
period of at least 2 but not more than 10 years commencing as of the January 1
of the calendar year following such election. If a Participant elects a series
of payments over a period from 2 to 10 years, this election is irrevocable. This
election shall be the same as that made pursuant to the Equalization Benefit
Plan and the Supplemental Retirement Income Plan.
If a Participant elects a monthly annuity as in the Retirement Plan,
he or she may again elect a series of payments over a period of from 2 to 10
years when the calculation of the lump sum benefit changes. The calculation of
the benefit may change: (i) because of profit sharing or awards paid in the year
following the last year worked or (ii) because the interest rate used to
calculate the lump sum is not available until the November after the monthly
annuity benefit is recalculated.
The lump sum payment or installment payments described above shall
be calculated using (A) a discount rate for the month of October of the calendar
year preceding the payment of the lump sum or installments equal to the average
of the Moody's Municipal 10 year Aaa Bond Yield Averages and the Moody's
Municipal Long Term Aaa Bond Yield Averages, and (B) the UP-94G Mortality Table.
The Compensation Committee or its designee shall determine the procedures for
such elections and the time and method of payment for payments in accordance
with this Section 3. For Participants who make the election described in this
Section 3, the provisions of Sections 1 and 2 of this Article V shall not apply.
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.
7
<PAGE>
SECTION 5. If the Board of Directors determines, after a hearing,
that a Participant who is eligible to receive or is receiving Enhanced
Retirement Income has engaged in any activities which, in the opinion of the
Board, are detrimental to the interests of, or are in competition with the
Corporation or any of its subsidiaries, such Enhanced Retirement Income shall
thereupon be terminated.
ARTICLE VI
MISCELLANEOUS
SECTION 1. Unless otherwise defined in this Plan, all defined terms
shall have the same meaning as set forth in the Retirement Plan.
(a) "Award" means those awards which are made: (i) under any cash
award plan and (ii) under any other variable compensation plans (whether or not
deferred) designated by the Board of Directors.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Compensation Committee" means the Organization and
Compensation Committee of the Board of Directors of the Corporation.
(d) "Compensation Deferral Program" as used in this Plan means
the UCAR International Inc. Compensation Deferral Program.
(e) "Corporation" means UCAR Carbon Company Inc.
(f) "Enhanced Retirement Income" means the benefit payable to a
Participant pursuant to Article III of this Plan.
(g) "Equalization Benefit Plan" means the UCAR Carbon Equalization
Benefit Plan.
8
<PAGE>
(h) "Participant" means an employee who is eligible to participate
in this Plan pursuant to Article I.
(i) "Plan" means this UCAR Carbon Enhanced Retirement Income Plan,
as amended and restated July 1, 1998.
(j) "Retirement Plan" means the UCAR Carbon Retirement Plan.
(k) "Supplemental Retirement Income Plan" means the UCAR Carbon
Supplemental Retirement Income Plan.
SECTION 2. The Corporation may amend or terminate this Plan at any
time, but any such amendment or termination shall not adversely affect the
rights of any Participant or survivor of any Participant then receiving benefits
under this Plan, or the vested rights of any Participant or survivor.
SECTION 3. Except to the extent required by law, no assignment of
the rights and interests of a Participant or survivor under this Plan will be
permitted nor shall such rights be subject to attachment or other legal
processes for debts.
SECTION 4. This Plan is intended to be unfunded for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended and
the right of a Participant and a survivor of a Participant shall be no greater
than the right of an unsecured general creditor of the Corporation.
SECTION 5. The Corporation may satisfy all or any part of its
obligation to provide benefits hereunder by purchasing, and distributing to a
Participant, or survivor, an annuity from an insurance carrier to provide such
benefits.
SECTION 6. Neither selection as a Participant or participation in
this Plan shall affect the Corporation's right to discharge any Participant.
9
<PAGE>
UCAR CARBON COMPANY INC.
By:______________________________
10
<PAGE>
FIRST AMENDMENT TO THE
UCAR CARBON
ENHANCED RETIREMENT
INCOME PLAN
--------------------------------------
The UCAR Carbon Enhanced Retirement Income Plan (Amended and
Restated as of July 1, 1998) ("Plan"), the Plan is hereby amended as follows:
1. Section 3 of Article V of the Plan is amended in its entirety
to read as follows:
"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."
2. Section 1(h) of Article VI of the Plan is amended to insert
the following after the word "employee": "of the Corporation or any other
Employer that has adopted the Retirement Plan for its employees,"
3. The provisions of paragraph 1 of this First Amendment to the
Plan shall be effective with respect to distribution elections received by the
Compensation Committee on or after January 1, 2000.
4. The provisions of paragraph 2 of this First Amendment to the
Plan shall be effective as of July 1, 1998.
UCAR CARBON COMPANY, INC.
By: /s/ John C. Arnold
-----------------------------------
<PAGE>
Subsidiaries of UCAR International Inc.
<TABLE>
<CAPTION>
Ownership by UCAR
Name of Subsidiary Jurisdiction of Incorporation International Inc.
- ------------------ ----------------------------- ------------------
<S> <C> <C>
1. UCAR Global Enterprises Delaware 100%
Inc.
2. UCAR Finance Inc. Delaware 100%
Ownership by UCAR
Name of Subsidiary Jurisdiction of Incorporation Enterprises Inc.
- ------------------ ----------------------------- ------------------
3. UCAR Carbon Company Delaware 100%
Inc.
4. UCAR Holdings II Inc. Delaware 100%
5. UCAR Carbon S.A. Brazil 95.3% (a)
6. UCAR S.A. Switzerland 100%(b)
7. UCAR Holding GmbH Austria 67% (c)
Ownership by UCAR
Name of Subsidiary Jurisdiction of Incorporation Company Inc.
- ------------------ ----------------------------- ------------------
8. UCAR Limited United Kingdom 100%(d)
9. EMSA (Pty.) Ltd. South Africa 100%
10. Carbographite Limited South Africa 100%
11. UCAR International Delaware 100%
Trading Inc.
12. UCAR Carbon Foreign Virgin Islands 100%
Sales Corporation
13. UCAR Composites Inc. California 100%
14. Union Carbide Grafito, New York 100%
Inc.
15. Unicarbon Comercial Brazil 100%
Ltda.
16. UCAR Carbon (Malaysia) Malaysia 100%
Sdn. Bhd.
17. UCAR Graph-Tech Inc. Delaware 100%
18. UCAR Mexicana, S.A. de Mexico 100%
C.V.
19. UCAR S.p.A. Italy 100%
<PAGE>
Ownership by UCAR
Name of Subsidiary Jurisdiction of Incorporation Holdings II Inc.
- ------------------ ----------------------------- ------------------
20. UCAR Holdings III Inc. Delaware 100%
21. UCAR Electrodos, S.L. Spain 100%(e)
22. UCAR Inc. Canada 100%
Ownership by UCAR
Name of Subsidiary Jurisdiction of Incorporation Holding GmbH
- ------------------ ----------------------------- ------------------
23. UCAR Grafit OAO Russia 99%
Ownership by UCAR
Name of Subsidiary Jurisdiction of Incorporation Holdings S.A.
- ------------------ ----------------------------- ------------------
24. UCAR S.N.C. France 100%(f)
25. Carbone Savoie France 70%
Ownership by UCAR
Name of Subsidiary Jurisdiction of Incorporation Mexicana, S.A. de C.V.
- ------------------ ----------------------------- ----------------------
26. UCAR Carbon Mexicana, Mexico 100%(g)
S.A. de C.V.
Ownership by UCAR
Name of Subsidiary Jurisdiction of Incorporation Mexicana, S.A. de C.V.
- ------------------ ----------------------------- ----------------------
27. Servicios Administratoes Mexico 100%(h)
Carmex, S.A. de C.V.
28. Servicios DYC, S.A. de
C.V. Mexico 100%(i)
Name of Subsidiary Jurisdiction of Incorporation Ownership by UCAR S.p.A.
- ------------------ ----------------------------- ------------------------
29. UCAR Energia S.r.l. Italy 100%
30. UCAR Specialties S.r.l. Italy 100%
Ownership by UCAR Carbon
Name of Subsidiary Jurisdiction of Incorporation S.A.
- ------------------ ----------------------------- -------------------------
31. UCAR Produtos de Brazil 99.9%(j)
Carbono S.A.
2
<PAGE>
Ownership by Unicarbon
Name of Subsidiary Jurisdiction of Incorporation Commercial Ltd.
- ------------------ ----------------------------- -------------------------
32. UCAR Carbon S.A. Brazil 2.33%(k)
Name of Subsidiary Jurisdiction of Incorporation Ownership by UCAR S.A.
- ------------------ ----------------------------- -------------------------
33. UCAR Holding GmbH Austria 33%(l)
Onwership by UCAR
Name of Subsidiary Jurisdiction of Incorporation Holdings II Inc.
- ------------------ ----------------------------- -------------------------
34. UCAR Holdings S.A. France 100%(m)
</TABLE>
(a) 95.3% owned by UCAR Global Enterprises Inc. 2.33% owned by Unicarbon
Comercial Ltda. Third parties own the other shares of UCAR Carbon S.A.
(b) 99.9% owned by UCAR Global Enterprises Inc. Nominees own the other
three shares of UCAR S.A.
(c) 67% owned by UCAR Global Enterprises Inc. UCAR S.A. owns the other
shares of UCAR Holding GmbH.
(d) 99.9% owned by UCAR Carbon Company Inc. A nominee owns the other
share of UCAR Limited.
(e) 99.9% owned by UCAR Holdings II Inc. UCAR Carbon Company Inc. owns
the other 0.1% of UCAR Electrodos S.L.
(f) 99.9% owned by UCAR Holdings S.A. UCAR Holdings III Inc. owns the
other share of UCAR S.N.C.
(g) 99.9% owned by UCAR Mexicana, S.A. de C.V. UCAR Carbon Company Inc.
owns the other 0.1% of UCAR Carbon Mexicana, S.A. de C.V.
(h) 99.9% owned by UCAR Carbon Mexicana, S.A. de C.V. A nominee owns the
other shares of Servicios Administratoes Carmex, S.A. de C.V.
(i) 99.9% owned by UCAR Carbon Mexicana, S.A. de C.V. A nominee owns the
other shares of Servicios DYC, S.A. de C.V.
(j) 99.9% owned by UCAR Carbon S.A. Third parties own the other shares of
UCAR Productos de Carbono S.A.
(k) See note (a).
3
<PAGE>
(l) 33% owned by UCAR S.A. UCAR Global Enterprises Inc. owns the other
shares of UCAR Holding GmbH.
(m) 99.4% owned by UCAR Holdings II Inc. UCAR International Inc., UCAR
Global Enterprises Inc., UCAR Carbon Company Inc. and three nominees
own the other shares of UCAR Holdings S.A.
4
<PAGE>
The Board of Directors
UCAR International Inc.
We consent to the incorporation by reference in each of the Registration
Statements of UCAR International Inc. on Form S-3 (Nos. 333-26097 and
333-82417), and on Form S-8 (Nos. 33-95546, 33-95548, 33-95550, 333-02560,
333-02598, 333-36653, 333-82393 and 333-82411) of our report dated February 11,
2000, except as to Note 19, which is as of February 23, 2000, relating to the
consolidated balance sheets of UCAR International Inc. and subsidiaries as of
December 31, 1998 and 1999,and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the years
in the three-year period ended December 31, 1999, which report appears in the
December 31, 1999 Annual Report on Form 10-K of UCAR International Inc.
/s/ KPMG LLP
Nashville, Tennessee
March 30, 2000
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED FINANCIAL STATEMENTS OF UCAR INTERNATIONAL, INC., INCLUDED IN
ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 17
<SECURITIES> 3
<RECEIVABLES> 176
<ALLOWANCES> 5
<INVENTORY> 204
<CURRENT-ASSETS> 420
<PP&E> 1,071
<DEPRECIATION> 673
<TOTAL-ASSETS> 933
<CURRENT-LIABILITIES> 315
<BONDS> 640
0
0
<COMMON> 0
<OTHER-SE> (293)
<TOTAL-LIABILITY-AND-EQUITY> 933
<SALES> 831
<TOTAL-REVENUES> 831
<CGS> 573
<TOTAL-COSTS> 573
<OTHER-EXPENSES> 38
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 84
<INCOME-PRETAX> 46
<INCOME-TAX> 1
<INCOME-CONTINUING> 45
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42
<EPS-BASIC> 0.94
<EPS-DILUTED> 0.91
</TABLE>
