-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, StsRAR81obFlPNHzQ7KrxPZynrgVaTvOBdkHhkrweu3dsWQwVOLdfjdWvg+kow91 c6u9O+a+Ks0h7trT2JmtcA== 0000932440-01-500166.txt : 20010809 0000932440-01-500166.hdr.sgml : 20010809 ACCESSION NUMBER: 0000932440-01-500166 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UCAR INTERNATIONAL INC CENTRAL INDEX KEY: 0000931148 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 061385548 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13888 FILM NUMBER: 1700717 BUSINESS ADDRESS: STREET 1: 3102 WEST END AVENUE SUITE 1100 STREET 2: J-4 CITY: NASHVILLE STATE: TX ZIP: 37203 BUSINESS PHONE: 6157068227 MAIL ADDRESS: STREET 1: 3102 WEST END AVENUE SUITE 1100 STREET 2: J-4 CITY: NASHVILLE STATE: TN ZIP: 37203 10-Q 1 ucarform10q_8-2001.txt FORM 10-Q FOR 06/30/2001 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-Q --------------- (MARK ONE) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 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) --------------- 3102 WEST END AVENUE SUITE 1100 37203 NASHVILLE, TENNESSEE (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 760-8227 --------------- 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 [ ] As of June 30, 2001, 45,407,724 shares of common stock, par value $.01 per share, were outstanding. ================================================================================ TABLE OF CONTENTS PART I. FINANCIAL INFORMATION: ITEM 1. FINANCIAL STATEMENTS: Consolidated Balance Sheets at December 31, 2000 and June 30, 2001........................................... Page 2 Consolidated Statements of Operations for the Three Months and Six Months ended June 30, 2000 and 2001................. Page 3 Consolidated Statements of Cash Flows for the Six Months ended June 30, 2000 and 2001................................ Page 4 Consolidated Statement of Stockholders' Equity (Deficit) for the Six Months ended June 30, 2001...................... Page 5 Notes to Consolidated Financial Statements................... Page 6 INTRODUCTION TO PART I, ITEM 2, AND PART II, ITEM 1............... Page 25 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................. Page 31 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.............................................. Page 54 PART II. OTHER INFORMATION: ITEM 1. LEGAL PROCEEDINGS.......................................... Page 56 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........ Page 63 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................... Page 64 SIGNATURE............................................................. Page 66 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED)
DECEMBER 31, JUNE 30, ASSETS 2000 2001 ---- ---- CURRENT ASSETS: Cash and cash equivalents..................................... $ 47 $ 35 Notes and accounts receivable................................. 121 97 Inventories: Raw materials and supplies................................. 41 42 Work in process............................................ 103 111 Finished goods............................................. 31 37 --------- -------- 175 190 Prepaid expenses and deferred income taxes.................... 18 18 --------- -------- Total current assets................................ 361 340 --------- -------- Property, plant and equipment.................................... 1,043 937 Less: accumulated depreciation................................... 652 630 --------- -------- Net fixed assets.................................... 391 307 Other assets..................................................... 156 188 --------- -------- Total assets........................................ $ 908 $ 835 ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable.............................................. $ 99 $ 96 Short-term debt............................................... 3 2 Payments due within one year on long-term debt................ 27 42 Accrued income and other taxes................................ 41 37 Other accrued liabilities..................................... 90 81 --------- -------- Total current liabilities........................... 260 258 --------- -------- Long-term debt................................................... 705 651 Other long-term obligations...................................... 209 222 Deferred income taxes............................................ 36 35 Minority stockholders' equity in consolidated entities........... 14 23 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, 47,491,009 shares issued at December 31, 2000, 48,156,536 shares issued at June 30, 2001.............................. - - Additional paid-in capital.................................... 525 537 Accumulated other comprehensive income (loss)................. (241) (249) Retained earnings (deficit)................................... (515) (551) Treasury stock at cost, 2,319,482 shares at December 31, 2000 and 2,322,412 at June 30, 2001.............................. (85) (85) Common stock held in employee benefits trust, 426,400 shares at June 30, 2001............................................ - (6) --------- -------- Total stockholders' equity (deficit)............................. (316) (354) --------- -------- Total liabilities and stockholders' equity (deficit)............. $ 908 $ 835 ========= ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------- -------------- 2000 2001 2000 2001 ---- ---- ---- ---- Net sales................................... $ 199 $ 171 $ 394 $ 342 Cost of sales............................... 143 120 281 242 --------- ---------- ---------- --------- Gross profit............................ 56 51 113 100 Research and development.................... 2 3 5 6 Selling, administrative and other expenses.. 23 19 47 40 Restructuring charge........................ - 5 6 5 Impairment charge........................... - 53 - 53 Antitrust investigations and related lawsuits and claims..................... - 10 - 10 Securities class action and stockholder derivative lawsuits..................... (1) - (1) - Other (income) expense (net)................ (1) - (1) - --------- ---------- ---------- --------- Operating profit (loss)................. 33 (39) 57 (14) Interest expense............................ 18 16 39 35 --------- ---------- ---------- --------- Income (loss) before provision for income taxes, minority interest and extraordinary items................... 15 (55) 18 (49) Provision (benefit) for income taxes......... 4 (16) 4 (14) --------- ---------- ---------- --------- Income (loss) of consolidated entities before minority interest and extraordinary items.................. 11 (39) 14 (35) Less: Minority stockholders' share of income. - - 1 1 --------- ---------- ---------- --------- Income (loss) before extraordinary item 11 (39) 13 (36) Extraordinary item, net of tax.............. - - 13 - --------- ---------- ---------- --------- Net income (loss)....................... $ 11 $ (39) $ - $ (36) ========= ========== ========== ========= BASIC EARNINGS (LOSS) PER COMMON SHARE: Income (loss) before extraordinary item. $ 0.24 $ (0.87) $ 0.28 $ (0.80) Extraordinary item, net of tax.......... - - (0.28) - --------- ---------- --------- --------- Net income (loss) per share............. $ 0.24 $ (0.87) $ - $ (0.80) Weighted average common shares outstanding (in thousands)....................... 45,138 45,346 45,127 45,284 ========= ========== ========= ========= DILUTED EARNINGS (LOSS) PER COMMON SHARE: Income (loss) before extraordinary item. $ 0.24 $ (0.87) $ 0.28 $ (0.80) Extraordinary item, net of tax.......... - - (0.28) - --------- ---------- --------- --------- Net income (loss) per share............. $ 0.24 $ (0.87) $ - $ (0.80) Weighted average common and common equivalent shares outstanding (in thousands)....................... 45,734 45,346 45,959 45,284 ========= ========== ========= =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN MILLIONS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2000 2001 ---- ---- CASH FLOW FROM OPERATING ACTIVITIES: Net income (loss).............................................. $ - $ (36) Extraordinary item, net of tax................................. 13 - Non-cash charges to net income (loss): Depreciation and amortization.............................. 22 19 Deferred income taxes...................................... 9 (21) Antitrust investigations and related lawsuits and claims... - 10 Restructuring charge....................................... 6 - Impairment charge.......................................... - 53 Other non-cash charges (credits)........................... 8 (3) Working capital *.............................................. (33) (21) Long-term assets and liabilities............................... - - ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES............... 25 1 ------- ------- CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditures........................................... (23) (11) Sale of assets................................................. - 4 Maturity of short-term investments............................. 2 - Purchase of investment......................................... (1) - ------- ------- NET CASH USED IN INVESTING ACTIVITIES................... (22) (7) ------- ------- CASH FLOW FROM FINANCING ACTIVITIES: Short-term debt borrowings (reductions), net................... 1 (1) Revolving credit facility borrowings, net...................... 63 13 Long-term debt borrowings...................................... 641 1 Long-term debt reductions...................................... (688) (29) Minority interest investment................................... - 9 Sale of common stock - stock options........................... - 2 Financing costs................................................ (26) - ------- ------- NET CASH USED IN FINANCING ACTIVITIES................... (9) (5) ------- ------- Net increase (decrease) in cash and cash equivalents............... (6) (11) Effect of exchange rate changes on cash and cash equivalents....... - (1) Cash and cash equivalents at beginning of period................... 17 47 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD......................... $ 11 $ 35 ======= ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Net cash paid during the period for: Interest expense........................................... $ 50 $ 33 ======= ======= Income taxes............................................... $ 1 $ 15 ======= ======= * Net change in working capital due to the following components: (Increase)decrease in current assets: Notes and accounts receivable............................ $ 14 $ 18 Inventories.............................................. (8) (26) Prepaid expenses......................................... (1) (1) Increase (decrease) in accounts payable and accruals....... (18) 1 Antitrust investigations and related lawsuits and claims... (16) (8) Restructuring payments..................................... (4) (5) ------- ------- WORKING CAPITAL......................................... $ (33) $ (21) ======= =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (DOLLARS IN MILLIONS) (UNAUDITED)
ACCUMULATED OTHER COMMON STOCK TOTAL ADDITIONAL COMPREHENSIVE RETAINED HELD IN STOCKHOLDERS' COMMON PAID-IN INCOME EARNINGS TREASURY EMPLOYEE EQUITY STOCK CAPITAL (LOSS) (DEFICIT) STOCK BENEFITS TRUST (DEFICIT) ----- ------- ------ -------- --------- -------------- -------- BALANCE AT DECEMBER 31, 2000 $ - $ 525 $ (241) $ (515) $ (85) $ - $ (316) Comprehensive income (loss): Net income (loss)....... - - - (36) - - (36) Foreign currency translation adjustments........... - - (8) - - - (8) --- ------ ------- ------- ------- -------- -------- Total comprehensive loss............. - - (8) (36) - - (44) Sale of 2.5% of Graftech.... - 4 - - - - 4 Common stock issued to employee benefits trust... - 6 - - - (6) - Sale of common stock - stock options............. - 2 - - - - 2 --- ------ ------- ------- ------- -------- -------- BALANCE AT JUNE 30, 2001.... $ - $ 537 $ (249) $ (551) $ (85) $ (6) $ (354) === ====== ======= ======= ======= ======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) INTERIM FINANCIAL PRESENTATION The interim Consolidated Financial Statements are unaudited; however, in the opinion of management, they have been prepared in accordance with Rule 10-01 of Regulation S-X adopted by the SEC and reflect all adjustments (all of which are of a normal, recurring nature) which are necessary for a fair presentation of financial position, results of operations and cash flows for the periods presented. Results of operations for the six months ended June 30, 2001 are not necessarily indicative of the results of operations that may be expected for the entire year ending December 31, 2001. IMPORTANT TERMS We use the following terms to identify various companies or groups of companies in the Consolidated Financial Statements. "UCAR" refers to UCAR International Inc. only. UCAR is our public parent company and 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 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 previously outstanding 12% senior subordinated notes due 2005 (the "SUBORDINATED NOTES") and was the primary borrower under our prior senior secured credit facilities (the "PRIOR SENIOR FACILITIES"). "UCAR FINANCE" refers to UCAR Finance Inc. only. UCAR Finance is a direct, wholly owned special purpose finance subsidiary of UCAR and the borrower under our new senior secured bank credit facilities (as amended, the "NEW SENIOR FACILITIES"). "GRAFTECH" refers to Graftech Inc. only. Graftech is our 97.5% owned (wholly owned prior to June 5, 2001) subsidiary engaged in the development, manufacture and sale of natural graphite-based products. "CARBONE SAVOIE" refers to Carbone Savoie S.A.S. only. Carbone Savoie is our 70% owned subsidiary engaged in the development, manufacture and sale of graphite and carbon cathodes. "SUBSIDIARIES" refers to those companies which, at the relevant time, are or were majority owned or wholly owned directly or indirectly by UCAR or its predecessors to the extent that those predecessors' activities related to the graphite and carbon 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, 1998 through June 30, 2001, except for: 6 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS o our German subsidiary, which was acquired in early 1997 and 70% owned until early 1999, when it became wholly owned; o Carbone Savoie, which has been and is 70% owned; and o Graftech, which was 100% owned until June 5, 2001 when it became 97.5% owned. Our 100% owned Brazilian cathode manufacturing operations were contributed to Carbone Savoie, and as a result became 70% owned, on March 31, 2001. "WE," "US" or "OUR" refer collectively to UCAR and its subsidiaries or, if the context so requires, UCAR, UCAR Global or UCAR Finance, individually. FOREIGN CURRENCY TRANSLATION Generally, except for operations in Russia where high inflation has existed, unrealized gains and losses resulting from translating assets and liabilities of foreign operations into dollars are accumulated in other comprehensive income (loss) on the Consolidated Balance Sheets until such time as the operations are sold or substantially or completely liquidated. Translation gains and losses relating to operations where high inflation has existed or which predominantly used the dollar for their purchases and sales are included in other (income) expense (net) in the Consolidated Statements of Operations. Our Mexican subsidiary began using the dollar as its functional currency during 1999 because its sales and purchases are predominantly dollar-denominated. Accordingly, since January 1, 1999, translation gains and losses of its operations are included in income in the Consolidated Statements of Operations, regardless of inflation in Mexico. Prior to August 1, 2000, our Swiss subsidiary used the dollar as its functional currency. Beginning August 1, 2000, our Swiss subsidiary began using the euro as its functional currency because its sales and purchases became predominantly euro-denominated. OTHER ACCOUNTING MATTERS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") 141, "Business Combinations," and SFAS 142, "Goodwill and Other Intangible Assets", both of which are effective for all fiscal years beginning after December 15, 2001. These statements establish accounting and reporting standards for business combinations, goodwill, and intangible assets. We are currently evaluating the impact of SFAS 141 and SFAS 142 on our results of operations, cash flows and financial position. In September 2000, the FASB issued SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," a replacement of SFAS 125, which has the same title. SFAS 140 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings, and requires certain additional 7 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS disclosures. SFAS 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001, and is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. We believe that SFAS 140 will not impact our results of operations, cash flows or financial position. (2) EARNINGS PER SHARE Basic and diluted earnings per share are calculated using the following share data:
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------- -------------- 2000 2001 2000 2001 ---- ---- ---- ---- Weighted average common shares outstanding for basic calculation....... 45,137,732 45,345,828 45,126,619 45,284,211 Add: Effect of stock options............... 596,407 - 832,177 - ---------- ---------- ---------- ---------- Weighted average common shares outstanding, adjusted for diluted calculation............................. 45,734,139 45,345,828 45,958,796 45,284,211 ========== ========== ========== ==========
Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the sum of the weighted average number of common shares outstanding plus all additional common shares that would have been outstanding if potentially dilutive securities had been issued. As a result of the net loss from operations reported for the three months and six months ended June 30, 2001, 986,196 and 898,781, respectively, of potential common shares have been excluded from the calculation of diluted earnings (loss) per share because their effect would reduce the loss per share. In addition, the calculation of weighted average common shares outstanding for the diluted calculation excludes the consideration of stock options covering 4,337,647 and 4,305,447 shares in each of the three months ended June 30, 2000 and 2001, respectively, and 3,074,499 and 4,311,847 shares in each of the six months ended June 30, 2000 and 2001, respectively, because the exercise of these options would not have been dilutive for those periods due to the fact that the exercise prices were greater than the weighted average market price of our common stock for each of those periods. (3) SEGMENT REPORTING Beginning in the 2001 first quarter, we have realigned our businesses into two new reportable segments: our Graphite Power Systems Division; and our Advanced Energy Technology Division. Our Graphite Power Systems Division includes our graphite and carbon 8 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS electrode and cathode businesses serving primarily the steel, aluminum and ferroalloy industries. Our Advanced Energy Technology Division includes Graftech, our Advanced Carbon and Graphite Materials business unit, which includes our former graphite and carbon specialties businesses, and a new business unit called HT2 that markets technical solutions. These two segments are managed separately because of the different markets they serve and the different products and services they sell. We evaluate the performance of our segments based on gross profit. Intersegment sales and transfers are not material. The following table summarizes financial information concerning our reportable segments.
THREE MONTHS ENDED JUNE SIX MONTHS ENDED JUNE 30 JUNE 30 ------- ------- 2000 2001 2000 2001 ---- ---- ---- ---- (DOLLARS IN MILLIONS) Net sales to external customers: Graphite Power Systems Division........ $ 170 $ 137 $ 331 $ 273 Advanced Energy Technology Division.... 29 34 63 69 -------- ------- -------- -------- Consolidated net sales............... $ 199 $ 171 $ 394 $ 342 ======== ======= ======== ======== Gross profit: Graphite Power Systems Division........ $ 49 $ 41 $ 98 $ 79 Advanced Energy Technology Division.... 7 10 15 21 -------- ------- -------- -------- Consolidated gross profit............ $ 56 $ 51 $ 113 $ 100 ======== ======= ======== ========
(4) RESTRUCTURING CHARGES In the 2001 second quarter, we recorded a $58 million charge for restructuring and asset impairment related to the shutdown of our graphite electrode manufacturing operations in Clarksville and Columbia, Tennessee. Graphite machining operations in Clarksville will continue using products from our other facilities. The $58 million charge includes restructuring charges of $2 million for severance and related benefits associated with a work force reduction of 171 people and $3 million in plant shutdown and related costs. The shutdown is expected to be completed by the end of the 2001 third quarter. In the 2000 fourth quarter, we recorded a charge of $4 million in connection with a corporate restructuring, mainly for severance and related benefits associated with a workforce reduction of 85 people. The functional areas affected include finance, accounting, sales, marketing and administration. In the 2001 first half, we paid about $0.5 million of these expenses. 9 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In the 2000 first quarter, we recorded a restructuring charge of $6 million in connection with a restructuring of our graphite specialties business. Key elements of the restructuring included elimination of certain product lines and rationalization of operations to reduce costs and improve profitability of remaining product lines. This rationalization included discontinuing certain manufacturing processes at one of our facilities in the U.S. that will be performed at our other facilities in the future. Based on subsequent developments in the 2000 third quarter, we decided not to demolish certain buildings. Therefore, we reversed the $4 million of the charge that related to demolition and related environmental costs. The $2 million balance of the charge included estimated severance costs for 65 employees. The restructuring was completed in 2000. In September 1998, we recorded a restructuring charge of $86 million in connection with a global restructuring and rationalization plan. The principal actions of the plan involved the closure of manufacturing operations at our facilities in Canada and Germany and the centralization and consolidation of administrative and financial functions. These actions eliminated 371 administrative and manufacturing positions. During 1999, we determined that severance related costs and plant closure costs would be lower than originally estimated. Therefore, we reversed the $6 million of the charge that related thereto. Our German plant ceased production activities in 1998 and our Canadian plant ceased production activities in April 1999. The relocation of our corporate headquarters to Nashville, Tennessee was completed during 1999. In the 2001 first quarter, we paid $3 million related to pension obligations of our Canadian subsidiary. The following table summarizes activity relating to the accrued expense in connection with the restructuring charges.
SEVERANCE AND PLANT SHUTDOWN POST SHUTDOWN RELATED AND RELATED MONITORING AND COSTS COSTS RELATED COSTS TOTAL ----- ----- -------------- ----- (DOLLARS IN MILLIONS) BALANCE AT DECEMBER 31, 1998........ $ 30 $ 18 $ 9 $ 57 Payments in 1999.................... (16) (3) (4) (23) Change in estimate and impact of exchange rate changes in 1999.... (1) (5) - (6) ------ ------- -------- -------- BALANCE AT DECEMBER 31, 1999........ 13 10 5 28 Restructuring charges in 2000....... 6 3 1 10 Payments in 2000.................... (5) (1) (1) (7) Change in estimate and impact of exchange rate changes in 2000.... (1) (3) (1) (5) ------ ------- -------- --------
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PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEVERANCE AND PLANT SHUTDOWN POST SHUTDOWN RELATED AND RELATED MONITORING AND COSTS COSTS RELATED COSTS TOTAL ----- ----- -------------- ----- (DOLLARS IN MILLIONS) BALANCE AT DECEMBER 31, 2000........ 13 9 4 26 Restructuring charges in 2001....... 2 3 - 5 Payments in 2001.................... (5) - - (5) ------ ------- -------- -------- BALANCE AT JUNE 30, 2001............ $ 10 $ 12 $ 4 $ 26 ====== ======= ======== ========
The restructuring accrual is included in other accrued liabilities on the Consolidated Balance Sheets. (5) LONG-TERM DEBT AND LIQUIDITY The following table summarizes our long-term debt: AT DECEMBER 31, AT JUNE 30, 2000 2001 ---- ---- (DOLLARS IN MILLIONS) New Senior Facilities: Tranche A euro facility.............. $ 239 $ 194 Tranche A USD facility............... 54 48 Tranche B USD facility............... 346 345 Revolving facility................... 88 101 ---------- ------- Total New Senior Facilities........ 727 688 ---------- ------- Swiss mortgage and other European debt... 5 5 ---------- ------- Subtotal............................. 732 693 Less: payments due within one year...... 27 42 ---------- ------- Total................................ $ 705 $ 651 ========== ======= In February 2000, we completed a debt recapitalization. We obtained the New Senior Facilities and used the net proceeds to repay and terminate the Prior Senior Facilities, to redeem the Subordinated Notes at a redemption price of 104.5% of the principal amount redeemed, plus accrued interest, to repay certain other debt and to pay related expenses. In October 2000, the New Senior Facilities were amended to, among other things, increase the maximum leverage ratio permitted thereunder through June 30, 2001. In connection therewith, we paid an amendment fee of $2 million and the margin which is added to either euro LIBOR or the alternate base rate in order to determine the interest rate payable thereunder increased by 25 basis points. 11 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In April 2001, the New Senior Facilities were amended to, among other things, exclude certain expenses incurred in connection with the lawsuit initiated by us against our former parents (up to a maximum of $20 million, but not more than $3 million in any quarter) and certain charges and payments in connection with antitrust fines, settlements and expenses from the calculation of financial covenants. Charges (over and above the $340 million charge recorded in 1997) recorded on or before June 30, 2002 for antitrust fines, settlements and expenses are excluded from the calculation of financial covenants (until paid) up to a maximum of $130 million (reduced by the amount of certain debt incurred by us that is not incurred under the New Senior Facilities, $5 million of which debt was outstanding at June 30, 2001). The fine assessed by the antitrust authority of the European Union and the additional $10 million charge described in Note 7 and any payments related to such fine (including payments within the $340 million charge recorded in 1997) are excluded from the calculation of financial covenants through June 30, 2002. In July 2001, the New Senior Facilities were amended to, among other things, change our financial covenants so that they will be less restrictive through 2006 than would otherwise have been the case. In connection therewith, we have agreed that our investments in Graftech and any of our other unrestricted subsidiaries after this amendment will be made in the form of secured loans, which will become collateral under the New Senior Facilities, and the maximum amount of capital expenditures permitted under the New Senior Facilities will be reduced in 2001 and 2002. We do not expect that our capital expenditures will exceed such maximums. In connection therewith, we paid an amendment fee of $2 million and the margin which is added to either euro LIBOR or the alternate base rate in order to determine the interest rate payable thereunder increased by 25 basis points. The New Senior Facilities, as amended, consist of: o A Tranche A Facility providing for initial term loans of $137 million and of [euro] 161 million (equivalent to $158 million at February 22, 2000) to UCAR Finance. The Tranche A Facility amortizes in quarterly installments over six years, commencing June 30, 2000, with quarterly installments ranging from about [euro] 2 million in 2000 to about [euro] 17 million in 2005, with the final installment payable on December 31, 2005. In October 2000, we converted $78 million of these term loans from dollar-denominated to euro-denominated loans. 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. 12 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS o A Revolving Facility providing for dollar and euro-denominated revolving and swingline loans to, and the issuance of 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 [euro] 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). After initial application of the net proceeds from our public offering of common stock in July 2001, the aggregate principal payments (based on euro to dollar exchange rates at June 30, 2001) due on the Tranche A Term Loans and Tranche B Term Loans are $42 million in 2002, $55 million in 2003, $59 million in 2004, $59 million in 2005, $149 million in 2006 and $155 million in 2007. We are 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 certain UCAR equity securities (60%, in the case of the net proceeds from our public offering of common stock in July 2001). 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 13 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 foreign subsidiaries have not guaranteed intercompany loan obligations of our U.S. 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 euro LIBOR plus a margin ranging from 1.00% to 3.00% (depending on our leverage ratio) or the alternate base rate plus a margin ranging from 0.00% to 2.00% (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 3.25% (depending on our leverage ratio) or the alternate base rate plus a margin ranging from 1.50% to 2.25% (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. At June 30, 2001, the interest rates on our outstanding debt under the New Senior Facilities was: Tranche A Euro Facility, 7.31%; Tranche A USD Facility, 6.50%; Tranche B Facility, 7.16%; and Revolving Facility, 6.98%. The weighted average interest rate on the New Senior Facilities was 8.38% during the 2001 first half. 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 under the New Senior Facilities. The New Senior Facilities contain a number of significant covenants that, among other things, significantly restrict our ability to sell assets, incur additional debt, repay or refinance other debt or amend other debt instruments, create liens on assets, enter into sale and lease back transactions, make investments or acquisitions, engage in mergers or consolidations, make capital expenditures, make intercompany dividend payments to UCAR, pay intercompany debt owed to UCAR, engage in transactions with affiliates, pay dividends to stockholders of UCAR or make other restricted payments and that otherwise significantly restrict corporate activities. In addition, we are required to comply with specified minimum interest coverage and maximum 14 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS leverage ratios, which become more restrictive over time, beginning with the quarter beginning October 1, 2002. 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 permitted to pay dividends and make loans to UCAR, and repurchase UCAR Global common stock from UCAR, for these purposes. UCAR Global is also permitted to pay dividends to UCAR after February 22, 2000 of up to $15 million for the purpose of making investments in Graftech and may also distribute the capital stock of Graftech to UCAR. In addition, UCAR may sell to third parties or distribute to UCAR's stockholders the capital stock of Graftech. 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. In the 2000 third quarter, pursuant to our debt recapitalization in February 2000, our Italian subsidiary entered into a [euro]17 million (about $15 million at currency exchange rates in effect on September 30, 2000) long-term debt arrangement with a third party lender. We also placed on deposit with the third party lender funds in the same amount, which secure the debt. Since we have the legal right to set-off, and the intent to do so, such amounts have been netted and are not reflected separately in the Consolidated Balance Sheets. We are highly leveraged. As discussed in Note 7, we also have substantial obligations in connection with antitrust investigations, lawsuits and claims. At June 30, 2001, we had total debt of $695 million and a stockholders' deficit of $354 million. A majority of our debt has variable interest rates. To minimize interest expense, except for our Brazilian subsidiary prior to mid-1999, we attempt to operate on a "zero-cash" basis. This means that we use, and are dependent on, funds available under our revolving credit facility, including continued compliance with the financial covenants under the New Senior Facilities, as well as monthly or quarterly cash flow from operations as our primary sources of liquidity. Our high leverage and substantial obligations in connection with antitrust investigations, lawsuits and claims could have a material impact on our liquidity. Cash flow from operations services payment of our debt and these obligations, thereby reducing funds available to us for 15 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS other purposes. Our leverage and these obligations make us more vulnerable to economic downturns and make us more vulnerable in the event that these obligations are greater or the timing of payment is sooner than expected. Our ability to service our debt, as it comes due, including maintaining compliance with the covenants under the New Senior Facilities, and to 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 conditions affecting our industry, changes in global and regional economic conditions, changes in interest and currency exchange rates, developments in antitrust investigations, lawsuits and claims involving us and inflation in raw material, energy and other costs. Even if we are able to meet our debt service and other obligations when due, we may not be able to comply with the financial covenants under the New Senior Facilities. A failure to so comply, unless waived by the lenders thereunder, would be a default thereunder. This would permit the lenders to accelerate the maturity of substantially all of our debt. 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 debt to the lenders, the lenders could proceed against the collateral securing the New Senior Facilities and exercise all other rights available to them. The New Senior Facilities require us to, among other things, comply with specified minimum interest coverage and maximum leverage ratios, which become more restrictive over time, beginning in October 2002. At June 30, 2001, we were in compliance with those financial covenants. While our revolving credit facility provides for maximum borrowings of up to [euro] 250 million, our current ability to borrow under this facility is effectively substantially less than the maximum due to the impact additional borrowings under this facility would have on our compliance with the maximum leverage ratio permitted under the New Senior Facilities. While no assurances can be made, we believe that we will comply with the covenants under the New Senior Facilities at least through 2002. If we subsequently believe that we will not continue to comply with such covenants, we will seek an appropriate waiver or amendment from the lenders thereunder. There can be no assurance that we will be able to obtain such waiver or amendment on acceptable terms or at all. EXTRAORDINARY ITEM In February 2000, we recorded an extraordinary charge of $21 million ($13 million after tax) related to our debt recapitalization. The extraordinary charge includes $5 million of bank 16 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and third party fees and expenses, $9 million of redemption premium on the Subordinated Notes, and write-off of $7 million of deferred debt issuance costs. (6) FINANCIAL INSTRUMENTS Certain of our subsidiaries sold receivables totaling $119 million in the 2001 first half and $52 million in the 2000 first half. None of the receivables sold were recorded on the Consolidated Balance Sheets at June 30, 2001 and December 31, 2000. (7) CONTINGENCIES In June 1997, we were 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 had been any violation of U.S. federal antitrust law by producers of graphite electrodes. Concurrently, the antitrust enforcement authority of the European Union (the "EU COMPETITION AUTHORITY") visited the offices of one of our French subsidiaries for purposes of gathering information in connection with an investigation as to whether there had 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 April 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 U.S. resulting in agreements to fix prices and allocate market shares in the U.S. and elsewhere, to restrict co-conspirators' capacity and to restrict non-conspiring producers' access to manufacturing technology for graphite electrodes. In addition, in April 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 "DOJ FINE"). 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 plea agreement was approved by the court and, as a result, under the plea agreement, we will not be subject to prosecution by the DOJ with respect to any other violations of U.S. federal antitrust law occurring prior to 1998. The payments due in 1998, 1999 and 2000 were timely made. At our request, the due date of each of the remaining three payments has been deferred by one year. In the 2000 first quarter, pursuant to a plea agreement with the DOJ, our former chief executive officer and our former chief operating officer, both of whom retired and resigned from all positions with us 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 January 2000, a former director, export sales Europe, was 17 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS indicted by the DOJ on similar charges. We do 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. In January 2000, Mitsubishi Corporation, one of our former parents, was indicted by the DOJ on a one count charge of aiding and abetting violations of U.S. federal antitrust law in connection with the sale of graphite electrodes. Mitsubishi entered a plea of not guilty. In February 2001, a jury found Mitsubishi guilty of the charge. Mitsubishi has entered into a sentencing agreement with the DOJ, which has been approved by the court, pursuant to which Mitsubishi has agreed to pay a fine of $134 million and not appeal its conviction. In April 1998, we became aware that the Canadian Competition Bureau (the "COMPETITION BUREAU") had commenced a criminal investigation as to whether there had 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 relevant Canadian court approved the plea agreement and, as a result, under the plea 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 plea agreement. The fine was timely paid. In June 1998, we became aware that the Japanese antitrust enforcement authority had commenced an investigation as to whether there had been any violation of Japanese antitrust law by producers and distributors of graphite electrodes. We have no facilities or employees in Japan. We believe that, among other things, we have good defenses to any claim that we are subject to the jurisdiction of the Japanese antitrust 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 October 1999, we became aware that the Korean antitrust authority had commenced an investigation as to whether there had been any violations of Korean antitrust law by producers and distributors of graphite electrodes. We have no facilities or employees in Korea. We have received requests for information from the Korean antitrust authority. 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. On July 18, 2001, the EU Competition Authority issued its decision regarding the allegations. Under the decision, the EU Competition Authority assessed a fine of [euro] 50.4 million (about $43 million) against UCAR. 18 Seven other graphite electrode producers were also fined under the decision, with fines ranging up to [euro] 80.2 million (about $69 million). From the initiation of its investigation, we have cooperated with the EU Competition Authority. As a result of our cooperation, our fine reflects a 40% reduction from the amount that otherwise would have been assessed. The policy of the EU Competition Authority is to negotiate appropriate terms of payment of antitrust fines, including extended payment terms. We are discussing payment terms with the EU Competition Authority. In the second quarter of 2001, we learned that the Brazilian antitrust authorities have requested written information from various steelmakers in Brazil. We have not received a request for information from the Brazilian antitrust authorities. 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 Korean antitrust authority in its continuing investigation. In connection therewith, we have produced and are producing information, documents or witnesses. It is possible that antitrust investigations seeking, among other things, to impose fines and penalties could be initiated by authorities in other jurisdictions. ANTITRUST LAWSUITS In 1997, we and other producers of graphite electrodes were served with complaints commencing various antitrust class action lawsuits. Subsequently, the complaints were either withdrawn without prejudice to refile or consolidated into a single complaint (the "ANTITRUST CLASS ACTION LAWSUIT"). 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, 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") was certified. In 1998 and 1999, we and other producers of graphite electrodes were served with complaints and petitions by steelmakers in the U.S. and Canada commencing nine separate civil antitrust lawsuits in various courts (the "OTHER INITIAL LAWSUITS"). In the complaints and petitions, the plaintiffs allege that the defendants violated U.S. federal, Texas and Canadian antitrust laws and Canadian conspiracy law in connection with the sale of graphite electrodes. In 1999 and 2000, we and other producers of graphite electrodes were served with three complaints commencing three separate civil antitrust lawsuits (the "FOREIGN CUSTOMER LAWSUITS"). The first complaint was filed by 26 steelmakers and related parties, all but one of whom are located outside the U.S. The second complaint was filed by 4 steelmakers, all of whom are located outside the U.S. The third complaint was filed by a steelmaker who is located outside the U.S. In each complaint, the plaintiffs allege that the defendants violated U.S. federal 19 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS antitrust law in connection with the sale of graphite electrodes sold or sourced from the U.S. and those sold and sourced outside the U.S. The plaintiffs seek, among other things, an award of treble damages resulting from such alleged violations. We believe that we have strong defenses against claims alleging that purchases of graphite electrodes outside the U.S. are actionable under U.S. federal antitrust law. We have filed motions to dismiss the first and second complaints. In June 2001, our motion to dismiss the first and second complaints was granted with respect to substantially all of the plaintiffs' claims. In 1999 and 2000, we were served with three complaints commencing three civil antitrust lawsuits (the "CARBON ELECTRODE LAWSUITS"). In the complaints, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of carbon electrodes and seek, among other things, an award of treble damages resulting from such alleged violations. We filed motions to dismiss the second and third complaints. In May 2001, our motion to dismiss the second complaint was denied. The guilty pleas described above do not relate to carbon electrodes. Certain customers who purchased carbon electrodes or other products from us or who purchased graphite electrodes from us in various countries outside the U.S. and Canada have threatened to commence antitrust lawsuits against us in the U.S. or in other jurisdictions with respect to the subject matter of the investigations and lawsuits described above. Through June 30, 2001, 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 civil antitrust claims by certain other customers who negotiated directly with us. The settlements cover virtually all of the actual and potential claims against us by customers in the U.S. and Canada arising out of alleged antitrust violations occurring prior to the date of the respective settlements in connection with the sale of graphite electrodes. The settlement of the antitrust class action also covers the actual and potential claims against us by certain foreign customers arising out of alleged antitrust violations occurring prior to the date of the respective settlements in connection with the sale of graphite electrodes sourced from the U.S. Although each settlement is unique, in the aggregate they consist primarily of current and deferred cash payments with some product credits and discounts. All fines and settlement payments due have been timely paid. Through June 30, 2001, we have paid an aggregate of $241 million of fines and net settlement and expense payments and $11 million of imputed interest. At June 30, 2001, $109 million remained in the reserve, of which $57 million is for committed payments for fines and settlements, and the balance of which is for the fine assessed by the EU Competition Authority and other matters. The aggregate amount of remaining committed payments for imputed interest at June 30, 2001 was about $9 million. 20 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The foreign customer lawsuits and the carbon electrode lawsuits have not been settled and are still in their early stages. We have been vigorously defending, and intend to continue to vigorously defend, 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. It is possible that additional civil antitrust lawsuits seeking, among other things, to recover damages could be commenced against us in the U.S. and in other jurisdictions. 1997 AND 2001 SECOND QUARTER ANTITRUST EARNINGS CHARGES We recorded a pre-tax charge of $340 million against results of operations for 1997 and, as a result of the assessment of a fine by the EU Competition Authority, we recorded a pre-tax charge of an additional $10 million against results of operations for the 2001 second quarter, as a reserve for potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. The $350 million reserve is calculated on a basis net of, among other things, imputed interest on installment payments of the DOJ fine. Actual aggregate liabilities and expenses (including settled investigations, lawsuits and claims as well as the continuing investigations and unsettled pending, threatened and possible lawsuits and claims mentioned above) could be materially higher than $350 million and the timing of payment thereof could be sooner than anticipated. In the aggregate (including the assessment of the fine by the EU Competition Authority and the additional $10 million charge), the fines and settlements described above and related expenses, net, are within the amounts we used to evaluate the $350 million charge. To the extent that aggregate liabilities and expenses, net, are known or reasonably estimable, at June 30, 2001, $350 million continues to represent our estimate of these liabilities and expenses. The guilty pleas and the decision by the EU Competition Authority make it more difficult to defend against other investigations, lawsuits and claims. Our insurance has not and will not materially cover liabilities that have or may become due in connection with antitrust investigations or related lawsuits or claims. We believe that payment of the fine assessed by the EU Competition Authority will not interfere with the implementation of our business strategies or compliance with financial covenants in the New Senior Facilities. STOCKHOLDER DERIVATIVE AND SECURITIES CLASS ACTION LAWSUITS 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 October 1999, UCAR and the individual defendants entered into an agreement settling the lawsuit. The settlement became final in January 2000. 21 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 October 1999, UCAR and the individual defendants entered into an agreement settling the lawsuit. The settlement became final in February 2000. Under the settlements, 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 for 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, a new outside director, acceptable to both UCAR and the Florida State Board of Administration, the eighth largest state employees' pension fund, was added to UCAR's Board of Directors. We expected to incur about $2.0 million of unreimbursed expenses related to the lawsuits. These expenses, together with the $11.0 million, were recorded as a pre-tax charge of $13.0 million against results of operations in the 1999 third quarter. In the 2000 second quarter, we reversed $1 million of this charge because actual expenses were lower than expected. LAWSUIT INITIATED BY US AGAINST OUR FORMER PARENTS In February 2000, we commenced a lawsuit against our former parents, Mitsubishi Corporation and Union Carbide Corporation. The other defendants include 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. In the lawsuit, we allege, among other things, that certain payments made to our former parents in connection with the 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 us 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. The defendants have filed motions to dismiss this lawsuit and motions to disqualify certain of our counsel from representing us in this lawsuit. We are vigorously opposing those motions. We expect to incur $10 million to $20 million for legal expenses to pursue this lawsuit through trial. Through June 30, 2001, we had incurred about $4 million of these legal expenses. OTHER PROCEEDINGS AGAINST US We are involved in various other investigations, lawsuits, claims and other legal proceedings incidental to the conduct of our business. While it is not possible to determine the 22 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ultimate disposition of each of them, we do not believe that their ultimate disposition will have a material adverse effect on us. (8) OTHER TRANSACTIONS During the 2001 first quarter, we contributed our Brazilian cathode manufacturing operations with a net book value of $3 million to Carbone Savoie. Pechiney, the 30% minority owner of Carbone Savoie, contributed approximately $9 million to Carbone Savoie as part of this transaction. Prior to these contributions, all of Carbone Savoie's manufacturing operations were located in France. The cash contribution is being used to upgrade manufacturing operations in Brazil and France, which is expected to be completed in early 2002. Ownership in Carbone Savoie remains 70% by us and 30% by Pechiney. Under our now broadened alliance, Carbone Savoie holds our entire cathode manufacturing capacity, which is about 40,000 metric tons of cathodes annually. During the 2001 first quarter, we signed a ten year service contract with CGI Group Inc. pursuant to which CGI became the delivery arm for our global information technology services requirements, including the design and implementation of our global information and advanced manufacturing and demand planning processes, using J.D. Edwards software. Pursuant to the outsourcing provisions of the contract, CGI manages our data center services, networks, desktops, telecommunications and legacy systems operations. Twenty-four of our U.S. based employees were integrated into CGI's U.S. operations as part of the initial phase of services under this contract. The contract became effective April 16, 2001. In June 2001, our subsidiary, Graftech, entered into a new exclusive development and collaboration agreement and a new exclusive long-term supply agreement with Ballard. In addition, Ballard invested $5.0 million in shares of Ballard common stock for a 2.5% equity ownership interest in Graftech. As an investor in Graftech, Ballard has rights of first refusal with respect to certain equity ownership transactions, tag along and drag along rights and preemptive and other rights to acquire additional equity ownership under certain limited circumstances. In December 2000, we entered into a license and technical services agreement with Conoco Inc. to license our proprietary technology for use at the carbon fiber manufacturing facility that Conoco is building in Ponca City, Oklahoma. In addition, we will continue to provide a wide variety of technical services to Conoco. Under a separate tolling agreement, which was entered into in February 2001, we will provide manufacturing services to Conoco at our facility in Clarksburg, West Virginia for carbon fibers to be subsequently produced at Conoco's new facility. Under the tolling agreement, until Conoco's new facility commences operations, we will use raw materials provided by Conoco to manufacture the same type of carbon fibers that will be produced at Conoco's new facility. 23 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In 2001, we entered into a seven-year supply agreement with Conoco relating to petroleum coke. This agreement contains customary terms and conditions. (9) EMPLOYEE BENEFITS TRUST In March 2001, we issued 426,400 shares of common stock to the UCAR Carbon Benefits Protection Trust. These shares, if later sold, could be used for partial funding of our future obligations under certain of our compensation and benefits plans. The shares held in trust are not considered outstanding for purposes of calculating earnings per share until they are committed to be sold or otherwise used for funding purposes. (10) SUBSEQUENT EVENT: PUBLIC OFFERING On July 31, 2001, we sold an aggregate of 10,350,000 shares of our common stock in a registered public offering at a public offering price of $9.50 per share. The gross proceeds from that offering were about $98 million and the net proceeds to us were about $91 million. 60% of the net proceeds will be used to prepay term loans under the New Senior Facilities. Prepayments will be applied against scheduled maturities of term loans in the order in which they are due. The balance of the net proceeds will be used to fund growth and expansion of our Advanced Energy Technology Division, including growth and expansion through acquisitions, and, pending use, will be applied to reduce the outstanding balance under our revolving credit facility. 24 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES INTRODUCTION TO PART I, ITEM 2, AND PART II, ITEM 1 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 our public parent company and the issuer of the publicly traded common stock covered by this Report. "UCAR GLOBAL" refers to UCAR Global Enterprises Inc. only. UCAR Global is a 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 previously outstanding 12% senior subordinated notes due 2005 (the "SUBORDINATED NOTES") and was the primary borrower under our prior senior secured credit facilities (the "PRIOR SENIOR FACILITIES"). "UCAR FINANCE" refers to UCAR Finance Inc. only. UCAR Finance is a direct, wholly owned special purpose finance subsidiary of UCAR and the borrower under our new senior secured bank credit facilities (as amended, the "NEW SENIOR FACILITIES"). "GRAFTECH" refers to Graftech Inc. only. Graftech is our 97.5% owned (wholly owned prior to June 5, 2001) subsidiary engaged in the development, manufacture and sale of natural graphite-based products. "CARBONE SAVOIE" refers to Carbone Savoie S.A.S. only. Carbone Savoie is our 70% owned subsidiary engaged in the development, manufacture and sale of graphite and carbon cathodes. "SUBSIDIARIES" refers to those companies which, at the relevant time, are or were majority owned or wholly owned directly or indirectly by UCAR or its predecessors to the extent that those predecessors' activities related to the graphite and carbon 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, 1998 through June 30, 2001, except for: o our German subsidiary, which was acquired in early 1997 and 70% owned until early 1999, when it became wholly owned; o Carbone Savoie, which has been and is 70% owned; and o Graftech, which was 100% owned until June 5, 2001 when it became 97.5% owned. Our 100% owned Brazilian cathode manufacturing operations were contributed to Carbone Savoie, and as a result became 70% owned, on March 31, 2001. 25 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES "WE," "US" or "OUR" refer collectively to UCAR and its subsidiaries or, if the context so requires, UCAR, UCAR Global or UCAR Finance, individually. "FREE TRADING MARKETS" refer: o in the case of the graphite electrode, natural, acid-treated and flexible graphite and graphite specialties industries, to the entire world excluding China; and o in the case of the carbon electrode, graphite and carbon cathode and carbon specialties industries, 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. "HOME MARKETS" refer to North America, Western Europe, Brazil and South Africa. We have major graphite electrode manufacturing facilities located in each of these markets, and these are our largest markets. All other markets are called "EXPORT MARKETS." Unless otherwise noted, references to "MARKET SHARES" are based on unit volumes in 2000 and references to "MAJOR PRODUCT LINES" mean graphite and carbon electrodes and cathodes and flexible graphite. 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 the financial information for our German subsidiary and Carbone Savoie, since their acquisitions, and Graftech are consolidated on each line of the Consolidated Financial Statements and the equity of the other owners in those subsidiaries is reflected on the lines entitled "minority stockholders' equity in consolidated entities" and "minority stockholders' share of income." Unless otherwise stated, when we refer to "EBITDA" we mean operating profit (loss), plus depreciation, amortization, impairment losses on long-lived assets, inventory write-downs and that portion of restructuring charges (credits) applicable to non-cash asset write-offs. 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 26 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES be comparable to methods used by other companies and is not the same as the method for calculating EBITDA under the New Senior Facilities. References to cost in the context of our low-cost supplier strategy do not include the impact of special, non-recurring or unusual charges or credits, such as those related to investigations, lawsuits or claims, restructurings, impairment losses, inventory write-downs or expenses incurred in connection with lawsuits initiated by us, or the impact of accounting changes. All cost savings and reductions are estimates based on a comparison to: o in the case of our global restructuring and rationalization plan adopted in September 1998 and enhancements thereto in October 1999, with respect to interest expense and provision for income taxes, costs in 1998 or, for all other costs, costs in the 1998 fourth quarter (annualized); o costs in 1999, in the case of actions taken in 2000; and o costs in 2000, in the case of actions taken in 2001. Unless otherwise specifically noted, market and market share data in this Report are our own estimates. Market data relating to the steel industry, our general expectations concerning such industry and our market position and market share within such industry, both domestically and internationally, are derived from publications by the International Iron and Steel Institute and other industry sources as well as assumptions made by us, based on such data and our knowledge of the industry. Market data relating to the fuel cell power generation industry, our general expectations concerning such industry and our market position and market share within such industry, both domestically and internationally, are derived from publications by securities analysts relating to Ballard Power Systems Inc. ("BALLARD"), other industry sources and public filings, press releases and other public documents of Ballard as well as assumptions made by us, based on such data and our knowledge of the industry. Market and market share data relating to the graphite and carbon industry as well as cost information relating to our competitors, our general expectations concerning such industry and our market position and market share within such industry, both domestically and internationally, are derived from the sources described above and public filings, press releases and other public documents of our competitors as well as assumptions made by us, based on such data and our knowledge of the industry. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under "Forward Looking Statements." We cannot guarantee the accuracy or completeness of this data and have not independently verified it. None of the sources mentioned above has consented to the disclosure or use of data in this Report. Unless otherwise noted, when we refer to dollars, we mean U.S. dollars. 27 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES The GRAFTECH logo, GRAFCELL(R), eGRAF(TM), GRAFOIL(R), GRAFGUARD(R) and GRAFSHIELD(R) are our trademarks and trade names. This Report also contains trademarks and tradenames belonging to other parties. Reference is made to UCAR's Annual Report on Form 10-K for the year ended December 31, 2000 (the "ANNUAL REPORT") for background information on various contingencies and other matters related to circumstances affecting our industry and us. Neither any statement in this Report nor any charge taken by us relating to any legal proceedings constitutes an admission as to any wrongdoing or liability. FORWARD LOOKING STATEMENTS 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 and sales of steel, aluminum, fuel cells, electronic devices and other products that incorporate our products or that are produced using our products; future prices and sales of and demand for graphite electrodes and other products; future operational and financial performance of various businesses; strategic plans and programs; impacts of regional and global economic conditions; restructuring, realignment, strategic alliance, supply chain, technology development and collaboration, investment, acquisition, joint venture, operating, integration, tax planning, rationalization, financial and capital projects; legal matters and related costs; consulting fees and related projects; potential offerings, sales and other actions regarding debt or equity securities of our subsidiaries; and future costs, working capital, revenue, business opportunities, values, debt levels, cash flow, cost savings and reductions, margins, earnings and growth. 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 affecting our products 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 or reductions in graphite electrode manufacturing capacity may not result in stable or increased demand for or price or sales volume of graphite electrodes; 28 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES o the possibility that economic or technological developments may adversely affect growth in the use of graphite cathodes in lieu of carbon cathodes in the aluminum smelting process; o the possibility of delays in or failure to achieve widespread commercialization of proton exchange membrane ("PEM") fuel cells which use natural graphite materials and components and the possibility that manufacturers of PEM fuel cells using those materials or components may obtain those materials or components or the natural graphite used in them from other sources; o the possibility of delays in or failure to achieve successful development and commercialization of new or improved electronic thermal management or other products; o the possibility of delays in meeting or failure to meet contractually specified development objectives and the possible inability to fund and successfully complete expansion of manufacturing capacity to meet growth in demand for new or improved products, if any; o the possibility that we may not be able to protect our intellectual property or that intellectual property used by us infringes the rights of others; o the occurrence of unanticipated events or circumstances relating to pending antitrust investigations, lawsuits or claims; o the commencement of new investigations, lawsuits or claims relating to the same subject matter as the pending investigations, lawsuits or claims; 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 counterclaims could be asserted against us, legal expenses and distraction of management could be greater than anticipated, or unanticipated events or circumstances may occur; o the possibility that expected cost savings from our enhanced global restructuring and rationalization plan, our POWER OF ONE initiative, the restructuring of our graphite and carbon specialties businesses, the shutdown of certain of our facilities and other cost reduction efforts will not be fully realized; o the possibility that anticipated benefits from the realignment of our businesses into two new divisions may be delayed or may not occur; 29 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES o the possibility that we may incur unanticipated health, safety or environmental compliance, remediation or other costs or experience unanticipated raw material or energy supply, manufacturing operations or labor difficulties; o the occurrence of unanticipated events or circumstances relating to strategic plans or programs or relating to restructuring, realignment, strategic alliance, supply chain, technology development, investment, acquisition, joint venture, operating, integration, tax planning, rationalization, financial or capital projects; o changes in interest or currency exchange rates, changes in competitive conditions, changes in inflation affecting our raw material, energy or other costs, development by others of substitutes for some of our products and other technological developments; o the possibility that changes in financial performance may affect our compliance with financial covenants under the New Senior Facilities; and o other risks and uncertainties, including those described elsewhere or incorporated by reference in this Report. No assurance can be given that any future transaction about which forward looking statements may be made will be completed or as to the timing or terms of any such transaction. All subsequent written and oral forward looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. Except as otherwise required to be disclosed in periodic reports required to be filed by public companies with the SEC pursuant to the SEC's rules, we have no duty to update these statements. 30 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL We are one of the world's largest providers of natural and synthetic graphite and carbon products and services. Our products provide energy solutions to customers in the steel, aluminum, fuel cell power generation, electronics, semiconductor and transportation industries. We have a global business, selling our products and engineering and technical services in more than 80 countries, with 15 manufacturing facilities strategically located in Brazil, France, Italy, Mexico, Russia, South Africa, Spain and the U.S. and a joint venture manufacturing facility located in China, which, subject to receipt of required Chinese governmental approvals, is expected to commence operations in 2002. As a result of our experience, technology and manufacturing capability, we believe that we have the largest worldwide market share in all of our major product lines. In June 1998, we began to implement management changes, which have resulted in a new senior management team. This team has actively lowered costs, reduced debt and developed growth initiatives. In early 2001, we launched a strategic initiative to strengthen our competitive position and to change our corporate vision from an industrial products company to an energy solutions company. In connection with this initiative, we have realigned our company and management around two new operating divisions, our Graphite Power Systems Division and our Advanced Energy Technology Division. GRAPHITE POWER SYSTEMS DIVISION Our Graphite Power Systems Division delivers high quality graphite and carbon electrodes and cathodes and related services that are key components of the conductive power systems used to produce steel, aluminum, and other non-ferrous metals. We are the leading producer of graphite and carbon electrodes and cathodes in the world. In 2000, net sales of this division were $651 million, with gross profit of $184 million. Graphite electrodes, which accounted for about 81% of this division's net sales in 2000, are a key component in the production of steel in electric arc furnaces, the steel making technology used by all "mini-mills," the higher growth sector of the steel industry. Electrodes act as conductors of electricity in a furnace, generating sufficient heat to melt scrap metal and other raw materials. We believe there is currently no commercially viable substitute for graphite electrodes in electric arc furnaces. They are the only product that combines the required level of electrical conductivity with the ability to withstand the high levels of heat generated during the production of steel in electric arc furnaces. Graphite electrodes are also used for refining steel in ladle furnaces and in other smelting processes. Carbon electrodes are used in a similar fashion in the production of silicon metal, a raw material used in the manufacture of aluminum. 31 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES Graphite and carbon cathodes are key components in the conductive power systems used in aluminum smelting furnaces. We have used our expertise in graphite technology and high temperature industrial applications together with the technology of our strategic partner, Pechiney, the world's leading provider of aluminum smelting technology, to develop significant improvements in graphite cathodes. Graphite cathodes are the preferred technology for new smelting furnaces in the aluminum industry because they allow for substantial improvements in process efficiency. We believe that our improved graphite cathodes position us well to receive incremental orders upon the commencement of operation of the new, more efficient aluminum smelting furnaces that are being built, even as older furnaces are being shut down. We believe that this division is positioned to benefit from the expected cyclical recovery in steel production which, coupled with our global network of manufacturing facilities strategically located in key markets, we expect to enhance our cash flow and earnings per share. In May 2001, we announced that we intend to shut down our graphite electrode manufacturing operations in our Clarksville and Columbia, Tennessee facilities for an undetermined period of time. The shutdown is part of our strategy of reducing costs and optimizing global production capacity, and reflects current graphite electrode market conditions. These operations are our highest cost graphite electrode manufacturing operations. The shutdown is expected to be completed by the end of the 2001 third quarter. These operations have capacity to manufacture about 40,000 tons of graphite electrodes annually. We expect to incrementally expand graphite electrode manufacturing capacity at our facilities in Mexico and Europe. After the shutdown and expansion our total annual graphite electrode manufacturing capacity will be reduced from 230,000 metric tons to 210,000 metric tons. We believe that the barriers to new entrants in the graphite and carbon electrode industries are high. There have been no significant new entrants since 1950. We believe that our average capital investment to increase our annual graphite electrode manufacturing capacity by about 15% would be about $500 per metric ton, which we estimate is less than 20% of the initial investment for "greenfield" capacity. The strategic goal of this division is to generate strong cash flow by pursuing the following strategies: o BEING THE LOW COST SUPPLIER. We have aggressively reduced our costs of production by closing higher cost facilities and migrating that capacity to lower cost facilities, reducing our average cost of sales per metric ton of graphite electrodes by about 15% since the end of 1998. We are continuing our efforts to aggressively reduce costs and recently announced our intention to shut down our highest cost graphite electrode manufacturing operations. We believe that this division's cost structure is currently among the lowest of all major producers of graphite electrodes and that the shutdown of these operations will further enhance our position as a low cost supplier. 32 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES o DELIVERING EXCEPTIONAL AND CONSISTENT QUALITY. We believe that we operate the world's premier electrode and cathode research and development laboratories and that our products are among the highest quality available. We have worked diligently in recent years to improve the consistent quality and uniformity of our products on a worldwide basis, providing the flexibility to source most orders from the facility that best satisfies customer needs and optimizes profitability. We believe that the consistently high quality of our products enables customers to achieve significant production efficiencies, which we believe provides us with an important competitive advantage. o PROVIDING SUPERIOR TECHNICAL SERVICE. We believe that we are the recognized industry leader in providing value added technical services to customers and that we have more technical service engineers, located in more countries, than any of our competitors. We believe that our superior service provides us with another important competitive advantage. o CAPITALIZING ON OUR GLOBAL PRESENCE AND EXECUTING OUR ASIAN GROWTH STRATEGY. We believe that this division has the number one market share in all of its major product lines. We are one of only two global producers of graphite and carbon electrodes and cathodes. We believe that our network of state-of-the-art manufacturing facilities in diverse geographic regions, including Brazil, France, Italy, Mexico, Russia, South Africa and Spain, coupled with our joint venture manufacturing facility located in China, which, subject to receipt of required Chinese governmental approvals, is expected to commence operations in 2002, provides us with significant operational flexibility and a significant competitive advantage. As the steel industry continues to consolidate, with the largest steel producers now operating in multiple countries, we believe that we are the producer of graphite electrodes best positioned to serve their global graphite electrode purchasing requirements. Our new joint venture with Jilin Carbon Co., Ltd. ("JILIN") in China is expected to provide us, for the first time, with access to graphite electrode manufacturing capability in Asia. To date, we believe that our share of the Asian market for graphite electrodes has been only about 4% as compared to our worldwide market share (excluding the Asian market) of about 31%. We believe that this low cost facility will provide us with an excellent platform to expand our market share, both in China and in the rest of Asia. ADVANCED ENERGY TECHNOLOGY DIVISION Our Advanced Energy Technology Division was established to develop high quality, highly engineered natural and synthetic graphite- and carbon-based energy technologies, products and services for high growth markets. We believe that we will be successful because of our proprietary technology related to graphite and carbon materials science and our processing and manufacturing technology. We currently sell natural and synthetic graphite- and carbon-based 33 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES products to the transportation, semiconductor, aerospace, fuel cell power generation, electronics and other markets. Due to the growth potential for fuel cell power generation, electronic thermal management and other identified markets, we are investing substantial resources in developing proprietary technologies and products for these markets. In addition, we are providing cost effective technical services for a broad range of markets and licensing our proprietary technology in markets where we do not anticipate engaging in manufacturing ourselves. This division currently holds about 140 of our issued patents and about 270 of our pending patent applications and perfected patent application priority rights worldwide. In 2000, net sales of this division were $125 million, with gross profit of $32 million. For the fuel cell power generation market, we are developing materials and components for PEM fuel cells and fuel cell systems, including flow field plates and gas diffusion layers. For the electronic thermal management market, we are developing and selling thermal interface products and developing and introducing prototype heat spreaders, heat sinks and heat pipes for computer, communications, industrial, military, office equipment and automotive electronic applications. Other identified markets include fire retardant products for transportation applications and building and construction materials applications, industrial thermal management products for high temperature process applications, and conductive products for batteries and supercapacitor power storage applications. Natural graphite-based products, including flexible graphite, are developed and manufactured by our subsidiary, Graftech. Our synthetic graphite- and carbon-based products are developed and manufactured by our Advanced Carbon and Graphite Materials business unit, which includes our former graphite and carbon specialties businesses. Our technology licensing and technical services are marketed and sold by our High Tech High Temp business unit. The strategic goal of this division is to create stockholder value through commercialization of proprietary technologies into high growth markets. To achieve this goal, we intend to leverage our strengths at: o developing and protecting intellectual property; o developing and commercializing prototype and next generation products and services; o establishing strategic alliances with customers, suppliers and other third parties; and o setting and achieving those milestones that are critical to the successful, timely commercialization of our technologies. We believe that our two largest growth opportunities are in the fuel cell power generation and electronic thermal management markets. 34 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES FUEL CELL POWER GENERATION OPPORTUNITIES. Fuel cells provide power generation for transportation, stationary and portable applications. The use of fuel cells in the U.S. in light vehicles for transportation applications has been projected by Frost & Sullivan to reach 2.6 million vehicles by 2010. We believe that worldwide annual sales of fuel cells for non-transportation applications (stationary and portable) could reach over $2 billion by 2010. We have been working with Ballard since 1992 on developing natural graphite-based materials for use in Ballard fuel cells for power generation. Ballard is the world leader in developing PEM fuel cells, including direct methanol fuel cells, for power generation. In 1999, we entered into a collaboration agreement with Ballard to coordinate our respective research and development efforts on flow field plates and a supply agreement for flexible graphite materials. In 2000, Ballard launched its new Mark 900 PEM fuel cell stack and announced that it was the foundation for Ballard fuel cells for transportation, stationary and portable applications. The flow field plates used in Ballard Mark 900 PEM fuel cell stacks are made from our GRAFCELL(TM) advanced flexible graphite products. In June 2001, our subsidiary, Graftech, entered into a new exclusive development and collaboration agreement and a new exclusive long-term supply agreement with Ballard, which significantly expand the scope and term of the 1999 agreements. In addition, Ballard became a strategic investor in Graftech. ELECTRONIC THERMAL MANAGEMENT OPPORTUNITIES. As electronics manufacturers develop highly advanced integrated circuits, processing chips and power supplies, their ability to dissipate heat is constrained by the limitations of current thermal management products and technology. We are developing and introducing high quality, highly engineered products, designs and solutions for thermal management in computer, communications, industrial, military, office equipment and automotive electronic applications. We are targeting: o thermal interface products, with a projected market of about $400 million in annual sales by 2005 and an annual growth rate of about 17% through 2005, in each case as projected by Business Communications Company, Inc.; o heat sink products, with a projected market of about $850 million in annual sales by 2005 and an annual growth rate of about 10% through 2005, in each case as projected by Business Communications Company; and o heat spreader and heat pipe products, with a projected market of about $585 million in annual sales by 2005 and an annual growth rate of about 20% through 2005, in each case as projected by Business Communications Company. In December 2000, we announced the introduction of, and began selling, our new line of eGraf(TM) thermal management products designed to aid the cooling of chip sets and other heat generating components in computers, communications equipment and other electronic devices. We can provide custom or off-the-shelf thermal interface products, heat sinks, heat spreaders and heat pipes and sophisticated thermal solutions for cooling complex devices. Our new product line 35 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES offers advantages for mobile communications and other electronic devices over competitive products such as copper, aluminum and other current thermal interface materials. These advantages include our new products' excellent ability to conduct heat, their mechanical and thermal stability, their lightweight, compressible and conformable nature, their cost competitiveness, and their ease of handling. RECENT PUBLIC OFFERING In July 2001, we completed a public offering of 10,350,000 shares of our common stock at a public offering price of $9.50 per share. The gross proceeds from that offering were about $98 million and the net proceeds to us were about $91 million. 60% of the net proceeds will be used to prepay term loans under the New Senior Facilities. Prepayments will be applied against scheduled maturities of term loans in the order in which they are due. The balance of the net proceeds will be used to fund growth and expansion of our Advanced Energy Technology Division, including growth through acquisitions, and, pending use, will be applied to reduce the outstanding balance under our revolving credit facility. COST SAVINGS. UCAR's Board of Directors adopted a global restructuring and rationalization plan in September 1998 and we launched additional 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 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 economic conditions that have been 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. These savings are permanent on-going cost savings. The original plan included plant rationalization, plant cost reduction and overhead cost reduction. The original plan resulted in a restructuring charge of $86 million in the 1998 third quarter, of which $29 million was a non-cash charge. We also recorded an impairment loss on long-lived Russian assets of $60 million in the 1998 third quarter. As planned, we ceased manufacturing operations at our plant in Germany in 1998. Our Canadian 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 to our Swiss subsidiary. About 366 positions were eliminated pursuant to those elements of the plan. We achieved cost savings of about $73 million in 1999, exceeding our original target of $64 million. We achieved about $41 million of those savings in cost of sales. 36 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES We achieved cost savings of about $96 million in 2000, exceeding our original target of $93 million. We achieved about $64 million of those savings in cost of sales. 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 additional initiatives to add $30 million of further targeted cost savings to the plan by the end of 2002. Among other things, we increased the number of identified plant cost reduction projects from the more than 120 originally identified to more than 230. We evaluated every aspect of our supply chain and improved performance through 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%, or to about $180 million, and reducing our cash cycle time, by the end of 2002, by about one-third as compared to 1998. We have already achieved our inventory level target. Further, we completed a global benchmarking study during 1999 that identified opportunities for performance improvement and cost savings in certain key global administrative and transaction processing functions. Based on the study, work processes are being redesigned to seek to improve shared services for better global efficiencies and standardize enterprise wide resource and supply chain planning systems. We have evaluated and continue to refine our debt, working capital and organizational structures to improve cash management and reduce tax expense. We believe that our effective average annual tax rate will be about 45% in 2001. During late 1999 and into the 2000 first quarter, our graphite specialties business, which now is part of our Advanced Carbon and Graphite Materials business unit, experienced significant adverse change due to a decline in demand, particularly from certain segments of the semiconductor industry, the growth in supply due to expansion by other producers, a decline in prices and delays in bringing new or improved products to market. This change indicated the need for assessing the recoverability of the long-lived assets of this business. These assets were located primarily at our plant in Clarksburg, West Virginia. We 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, we recorded an impairment loss of $35 million in the 1999 fourth quarter 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. In 2000, we restructured the business. The key elements of the restructuring consisted of elimination of low profitability product lines, rationalization of operations to generate costs savings and improve profitability of the remaining product lines, and use of graphite specialties 37 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES technology to develop new, and expand existing, markets. Accordingly, in the 2000 first quarter, we recorded a restructuring charge of $6 million. In the 2000 third quarter, based on subsequent developments, we decided not to demolish certain buildings. Accordingly, we reversed $4 million of the charge related thereto. The $2 million balance of the charge related primarily to severance costs. We expect the restructuring to generate cost savings at an annual run rate of about $7 million by the end of 2001. In the 2000 third quarter, we recorded an impairment loss of $3 million on long-lived cathode assets in connection with the re-sourcing of our U.S. cathode production to our facilities in Brazil and France and the related reduction of certain graphite electrode manufacturing capacity in those facilities. This re-sourcing was undertaken to respond to growing global demand for graphite cathodes from the aluminum industry. In the 2000 fourth quarter, we recorded a $4 million charge in connection with a corporate restructuring involving a workforce reduction of about 85 employees. The functional areas affected include finance, accounting, sales, marketing and administration. The charge consists primarily of severance costs. The restructuring is expected to reduce spending by about $2 million in 2001 and about $6 million per year thereafter. We continue to target reducing selling and administrative expenses to about $76 million by the end of 2002, a reduction of about 26% as compared to 1998. In May 2001, we announced that we intend to shut down our graphite electrode manufacturing operations at our facilities in Clarksville and Columbia, Tennessee for an undetermined period of time. Graphite electrode machining operations in Clarksville will continue using products from our other facilities. The shutdown is part of our strategy of reducing costs and optimizing global production capacity and reflects current graphite electrode market conditions. These operations are our highest cost graphite electrode manufacturing operations. We expect that the shutdown will result in annual cost savings of $18 million beginning in 2002 and will enable us to avoid $9 million in otherwise necessary capital expenditures. We recorded restructuring, impairment and related charges of $58 million in the 2001 second quarter in connection with the shutdown, including $2 million of cash costs for severance and $3 million of cash costs related to the plant shutdown. The shutdown will affect 171 employees. The shutdown is expected to be completed by the end of the 2001 third quarter. We expect to incrementally expand graphite electrode manufacturing capacity at our facilities in Mexico and Europe for an expected capital investment of about $3 million. POWER OF ONE BUSINESS TRANSFORMATION INITIATIVE In support of our strategy, we are implementing 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 38 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES 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 enable us to achieve the successful completion of our previously announced cost reduction activities. Through June 30, 2001, our investment in the initiative included about $5 million in expenses and $3 million of capital expenditures, primarily for advanced planning and scheduling supply chain software and global treasury management information systems. We believe that most of the future investment for this initiative will be funded from realized cost savings. Effective April 2001, we entered into a ten year service contract with CGI Group Inc. pursuant to which CGI became the delivery arm for our global information technology service requirements, including the design and implementation of our global information and advanced manufacturing and demand planning processes, using J.D. Edwards software. Through this contract, we expect to transform our information technology service capability into an efficient, high quality enabler for our global supply chain initiatives as well as a contributor to our cost reduction objectives. Under the outsourcing provisions of this contract, CGI will manage our data center services, networks, desktops, telecommunications and legacy systems, with an anticipated annual cost savings of about $1 million. Through this contract, we believe that we will be able to leverage the resources of CGI to assist us in achieving our information technology goals and our targeted cost savings. STRATEGIC ALLIANCES We are pursuing strategic alliances that enhance or complement our existing or related businesses and have the potential to generate strong cash flow. Strategic alliances may be in the form of joint venture, licensing, supply or other arrangements that leverage our strengths to achieve cost savings, improve margins and cash flow, and increase net sales and earnings growth. In December 2000, we entered into a license and technical services agreement with Conoco Inc. to license our proprietary technology for use at the carbon fiber manufacturing facility that Conoco is building in Ponca City, Oklahoma. In addition, we will continue to provide a wide variety of technical services to Conoco. Under a separate tolling agreement, which was entered into in February 2001, we will provide manufacturing services to Conoco at our facility in Clarksburg, West Virginia for carbon fibers to be subsequently produced at Conoco's new facility. Under the tolling agreement, until Conoco's new facility commences operations, we will use raw materials provided by Conoco to manufacture the same type of carbon fibers that will be produced at Conoco's new facility. Conoco's new carbon fiber technology could be used in portable power applications, such as batteries for personal computers and cell phones, as well as a wide range of other electronic devices and automotive applications. In 2001, we entered into a seven-year supply agreement with Conoco relating to petroleum coke. 39 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES This agreement contains customary terms and conditions. We are working with Conoco to expand our strategic relationship in supply chain and other areas. In March 2001, we contributed our Brazilian cathode manufacturing operations with a book value of $3 million to Carbone Savoie. Pechiney, the 30% minority owner of Carbone Savoie, contributed approximately $9 million in cash to Carbone Savoie as part of this transaction. Prior to these contributions, all of Carbone Savoie's manufacturing operations were located in France. The cash contribution will be used to upgrade manufacturing operations in Brazil and France, which is expected to be completed in early 2002. Ownership in Carbone Savoie remains 70% by us and 30% by Pechiney. Under our now broadened alliance, Carbone Savoie holds our entire cathode manufacturing capacity, which is about 40,000 metric tons of cathodes annually. In April 2001, we entered into a joint venture agreement with Jilin to produce and sell high quality graphite electrodes in China, which we believe to be the largest market for graphite electrodes in the world. Jilin is the largest producer of graphite electrodes and other graphite and carbon products in China. The joint venture is expected to utilize renovated capacity at Jilin's main facility in Jilin City and to complete additions at another site in Changchun that were begun by Jilin. The first phase of renovations is expected to be completed by 2002. The joint venture is expected to have capacity to manufacture about 20,000 metric tons of graphite electrodes annually and to be configured so as to be expandable to about 30,000 metric tons. We will contribute $6 million of cash plus technical assistance for a 25% ownership interest in the joint venture. The completion of the parties' capital contributions to the joint venture is subject to the receipt of required Chinese governmental and corporate confirmations and approvals. We have been working with Ballard since 1992 on developing natural graphite-based materials for use in Ballard fuel cells for power generation. We expect commercialization of fuel cells to occur in the middle of this decade, particularly as countries around the world deal with environmental problems created from other sources of energy. We believe that advances in fuel cell technology, growth in worldwide power demand and deregulation of power utilities as well as environmental issues are driving the market for fuel cells. Potential fuel cell applications include transportation, stationary and portable applications. Ballard is the world leader in developing zero-emission fuel cells known as PEM fuel cells, including direct methanol fuel cells, for power generation. Eleven out of the fourteen prototype fuel cell vehicles in the California Fuel Cell Partnership are powered by Ballard fuel cells, including Ford's FC5 and Daimler Chrysler's NECAR 4A, Jeep Commander and, most recently, NECAR 5. In 2001, the California Air Resource Board reiterated its commitment that, beginning in 2003, a minimum of 10% of the vehicles sold in California meet low or zero-emission vehicle standards. 40 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES In 1999, we entered into a collaboration agreement with Ballard to coordinate our respective research and development efforts on flow field plates and a supply agreement for flexible graphite materials. In 2000, Ballard launched its new Mark 900 PEM fuel cell stack and announced that it was the foundation for Ballard's fuel cells for transportation, stationary and portable applications. The flow field plates used in Ballard Mark 900 PEM fuel cell stacks are made from our GRAFCELL(TM) advanced flexible graphite products. In June 2001, our subsidiary, Graftech, entered into a new exclusive development and collaboration agreement and a new exclusive long-term supply agreement with Ballard, which significantly expand the scope and term of the 1999 agreements. In addition, Ballard became a strategic investor in Graftech, investing $5 million in shares of Ballard common stock for a 2.5% equity ownership interest, to support the development and commercialization of natural graphite-based materials and components for PEM fuel cells. As an investor in Graftech, Ballard has rights of first refusal with respect to certain equity ownership transactions, tag along and drag along rights, and preemptive and other rights to acquire additional equity ownership under certain limited circumstances. The scope of the new exclusive development and collaboration agreement includes natural graphite-based materials and components, including flow field plates and gas diffusion layers, for use in PEM fuel cells and fuel cell systems for transportation, stationary and portable applications. The initial term of this agreement extends through 2011. As part of this agreement, we have agreed to develop and manufacture prototype graphitic materials and components and provide early stage testing of these prototypes in an on-site fuel cell testing center. Under the new supply agreement, we will be the exclusive manufacturer and supplier of natural graphite-based materials for Ballard fuel cells and fuel cell systems. We will also be the exclusive manufacturer of natural graphite-based components, other than those components that Ballard manufactures for itself. The initial term of this agreement, which contains customary terms and conditions, extends through 2016. We have the right to manufacture and sell, after agreed upon release dates, natural graphite-based materials and components for use in PEM fuel cells to other parties in the fuel cell industry. In connection with the manufacture and sale of components, Ballard will grant us a royalty-bearing license for related manufacturing process technology. REFINANCING AND DEBT RECAPITALIZATION. In November 1998, the Prior 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. Our new management team undertook this refinancing to enable us to pay antitrust fines, liabilities and expenses and to strengthen our financial condition by extending maturities of some of our debt. In February 2000, we completed a debt recapitalization. We obtained the New Senior Facilities, which were amended in October 2000, April 2001 and July 2001. The New Senior 41 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES Facilities consist of a [euro] 300 million six year term loan facility, a $350 million eight year term loan facility and a [euro] 250 million six year revolving credit facility. The six year term loan and revolving credit facilities are dollar/euro dual currency facilities. We used the net proceeds from the New Senior Facilities to repay and terminate the Prior Senior Facilities, to redeem the Subordinated Notes at a redemption price of 104.5% of the principal amount redeemed, plus accrued interest, to repay certain other debt and to pay related expenses. We recorded an extraordinary charge of $13 million, net of tax, in connection with our debt recapitalization. The charge includes the redemption premium on the Subordinated Notes, bank, legal, accounting, filing and other fees and expenses, and write-off of deferred debt issuance costs. The debt recapitalization lowered our average annual interest rate, extended the average maturities of our debt and replaced our financial and other covenants. In light of changes in conditions affecting our industry, changes in global and regional economic conditions, our recent financial performance and other factors, we closely monitor our compliance with those covenants. In October 2000, the New Senior Facilities were amended to, among other things, increase the maximum leverage ratio permitted there under through June 30, 2001. In connection therewith, we paid an amendment fee of $2 million and our interest rates increased by 25 basis points. In April 2001, the New Senior Facilities were amended to, among other things, exclude certain expenses incurred in connection with the lawsuit initiated by us against our former parents and certain charges and payments in connection with antitrust fines, settlements and expenses from the calculation of financial covenants through June 30, 2002 and in certain cases thereafter. In July 2001, the New Senior Facilities were amended to, among other things, change our financial covenants so that they will be less restrictive through 2006 than would otherwise have been the case. In connection therewith, we agreed that our investments in Graftech and any of our other unrestricted subsidiaries after this amendment will be made in the form of secured loans, which will become collateral under the New Senior Facilities, and that the maximum amount of capital expenditures permitted under the New Senior Facilities will be reduced in 2001 and 2002. We do not expect that our capital expenditures will exceed such maximums. In addition, we paid an amendment fee of $2 million and our interest rates increased by 25 basis points. LITIGATION AGAINST OUR FORMER PARENT COMPANIES INITIATED BY US In February 2000, we commenced a lawsuit against our former parents, Mitsubishi Corporation and Union Carbide Corporation. The other defendants include 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. In the lawsuit, we allege, 42 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES among other things, that certain payments made to our former parents in connection with the 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. The defendants have filed motions to dismiss this lawsuit and motions to disqualify certain of our counsel from representing us in this lawsuit. We are vigorously opposing those motions. We expect to incur $10 million to $20 million for legal expenses to pursue this lawsuit from the date of filing the complaint through trial. Through June 30, 2001, we had incurred about $4 million of these legal expenses. ANTITRUST AND OTHER LITIGATION AGAINST US Since 1997, we have been subject to antitrust investigations by antitrust authorities in the U.S., the European Union, Canada, Japan and Korea. In addition, we have learned that the Brazilian antitrust authorities have requested written information from various steel makers in Brazil. In addition, civil antitrust lawsuits have been commenced and threatened against us and other producers and distributors of graphite and carbon products in the U.S., Canada and elsewhere. We recorded a pre-tax 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 $20 million, $15 million, $15 million, $18 million, $21 million, and $21 million, commencing July 23, 1998 (the "DOJ FINE"). The payments due in 1998, 1999 and 2000 were timely made. At our request, the due date of each of the remaining three payments has been deferred by one year. Of the $110 million aggregate amount, $90 million is treated as a fine and $20 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 steel makers in the U.S. 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. There remain, however, certain pending lawsuits and claims. In October 1999, we became aware that the Korean antitrust authority had commenced an investigation as to whether there had been any violations of Korean antitrust law by producers and distributors of graphite electrodes. No fine has been assessed. The maximum fine, if any, for such a violation is five percent of a company's sales of the relevant product during the period of violation, a maximum fine of about $5.3 million in our case. Any such fine would be subject to reduction for cooperation. 43 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES In January 2000, the antitrust authority of the European Union issued a statement of objections initiating proceedings against us and other producers of graphite electrodes. The statement alleged 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. On July 18, 2001, that authority issued its decision. Under the decision, that authority assessed a fine of (euro) 50.4 million (about $43 million) against UCAR resulting from the role of our former management in a graphite electrode price fixing cartel. That authority also assessed fines against seven other graphite electrode producers under the decision, with fines ranging up to (euro) 80.2 million (about $69 million). As a result of the assessment of the fine against us, we recorded a pre-tax charge of $10 million against results of operations in the 2001 second quarter as an additional reserve for potential liabilities and expenses related to antitrust investigations and related lawsuits and claims. We are very pleased that this decision brings to a conclusion our last major pending antitrust liability. From the initiation of its investigation, we have cooperated with the antitrust authority of the European Union. As a result of our cooperation, our fine reflects a 40% reduction from the amount that otherwise would have been assessed. That authority's policy is to negotiate appropriate terms of payment of antitrust fines, including extended payment terms. Based on that policy and our recent discussions regarding payment terms with that authority, we believe that payment of the fine will not interfere with the implementation of our business strategies or compliance with financial covenants in the New Senior Facilities. We are continuing to cooperate with the DOJ and the Canadian antitrust authorities in their continuing investigations of other producers and distributors of graphite electrodes. We are also cooperating with the Korean antitrust authority in its continuing investigation. In connection therewith, we have produced and are producing information, documents or witnesses. It is possible that antitrust investigations seeking, among other things, to impose fines and penalties could be initiated by authorities in other jurisdictions. We cannot assure you that remaining liabilities and expenses in connection with antitrust investigations, lawsuits and claims will not materially exceed the remaining uncommitted balance of the reserve or that the timing of payment thereof will not be sooner than anticipated. At June 30, 2001, before taking into account the fine assessed by the antitrust authority of the European Union and any related payment terms, but after giving effect to the additional $10 million charge, the remaining uncommitted balance of the reserve was about $52 million. In the aggregate (including the assessment of the fine by the antitrust authority of the European Union and the additional $10 million charge), the fines and settlements described above and related expenses, net, were within the amounts we used to evaluate the $350 million charge. To the extent that aggregate liabilities and expenses, net, are known or reasonably estimable, $350 million represents our estimate of these liabilities and expenses. The guilty pleas and the decision by the antitrust authority of the European Union make it more difficult to defend against other investigations, lawsuits and claims. Our insurance has not and will not materially cover liabilities that have or may become due in connection with antitrust investigations or related lawsuits or claims. 44 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES UCAR had been named as a 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 become final. We recorded a charge of $13 million, which included $2 million of expenses, in the 1999 third quarter, in connection with these settlements. In the 2000 second quarter, we reversed $1 million of this charge because expenses were lower than expected. CUSTOMER BASE We are a global company and serve all major geographic markets. Sales of our products to customers outside the U.S. accounted for about 69% of our net sales in 2000. Our customer base includes both steel makers and non-steel makers. In 2000, five of our ten largest customers were purchasers of non-graphite electrode products or purchasers of graphite electrodes for non-steel making purposes. In 2000, five of our ten largest customers were based in Europe, two were in the U.S. and one in each of Africa, Mexico and Brazil. No single customer or group of affiliated customers accounted for more than 4% of our net sales in 2000. GLOBAL ECONOMIC CONDITIONS AND OUTLOOK We are impacted in varying degrees, both positively and negatively, as country or regional conditions affecting the markets for our products fluctuate. Throughout 1998 and the 1999 first quarter, electric arc furnace steel production declined as a result of adverse global and regional economic conditions. A recovery began in the 1999 second quarter that lasted through mid-2000. Beginning in mid-2000, electric arc furnace steel production began to weaken in North America. The weakening became more severe in the 2000 fourth quarter and is expected to continue at least through the end of 2001, and may impact other regional economies. Notwithstanding that weakening, in 2000 estimated worldwide electric arc furnace steel production was a record 285 million metric tons (about 34% of total steel production). These fluctuations in electric arc furnace steel production resulted in corresponding fluctuations in demand for graphite electrodes. Overall pricing, however, weakened throughout most of this period. We estimate that worldwide graphite electrode demand increased by about 4% in 2000 as compared to 1999. Our volume of graphite electrodes sold increased by 5% in 2000 as compared to 1999. We implemented, and are continuing to implement, increases in local currency selling prices of our graphite electrodes announced in 2000 in Europe, the Asia Pacific region, the Middle East and South Africa. In April 2001, we implemented an additional 8% local currency selling price increase in Europe. In light of, among other things, the weakness in electric arc furnace steel production in North America, we believe that worldwide electric arc furnace steel production will decline in 2001 45 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES as compared to 2000. We expect that demand for our graphite electrodes will decline in 2001 as compared to 2000 due to the decline in electric arc furnace steel production and our efforts to implement those local currency selling price increases. Assuming no change in product mix, we expect average local currency selling prices of our graphite electrodes to increase slightly in 2001 as compared to 2000. In anticipation of lower demand in 2001 and consistent with our continuing efforts to reduce inventory levels, we initially reduced operating levels and laid off certain production employees at certain of our facilities in North America. We recently announced that we intend to shut down graphite electrode manufacturing operations at two of our facilities in the U.S. Assuming no change in product mix and no change in currency exchange rates from those in effect at December 31, 2000, we believe that lower production rates and higher energy and raw material costs will increase our graphite electrode costs of sales in 2001 as compared to 2000. We believe, however, that the impact of this shutdown will more than offset this increase by 2002. In 1998 and 1999, demand and prices for most of our other products sold to the metals industries were adversely affected by the same global and regional economic conditions that affected graphite electrodes. In the 1999 second quarter, however, worldwide demand by customers for many of our other products began to gradually recover. During 2000, demand for most of these products as a group was relatively stable. Overall pricing did not strengthen. The circumstances that impacted demand and prices for these products in 2000 are expected to continue in 2001. In April 2001, Conoco experienced an explosion at its petroleum coke plant in Humberside, England. Conoco produces petroleum coke at two plants, Humberside and Lake Charles, Louisiana. Conoco has placed customers of petroleum coke from its Humberside facility on allocation until August 2001. We are working with Conoco and other coke producers to minimize interruptions in deliveries to us. We currently expect that Conoco will begin to phase in increases in customer allocations in August as production is restored and that allocations will be fully restored by the end of 2001. We have not been materially adversely affected by this event to date and do not expect to be so affected in the future unless supply of coke from that plant continues to be interrupted for longer than currently expected. Our outlook could be significantly impacted by changes in global or regional economic conditions, including the impact of interest rate changes on the part of the U.S. Federal Reserve Board and changes in the automotive industry in North America. HIGHLIGHTS OF 2001 SECOND QUARTER AS COMPARED TO 2001 FIRST QUARTER The net sales of our Graphite Power Systems Division increased to $137 million in the 2001 second quarter from $136 million in the 2001 first quarter, primarily due to higher volume of graphite electrodes sold, partially offset by lower volume of carbon electrodes and cathodes sold. Volume of graphite electrodes sold was 46,000 metric tons in the 2001 second quarter as compared to 43,000 metric tons in the 2001 first quarter. The higher volume of graphite electrodes sold represented an increase of $7 million in net sales. Average sales revenue per metric ton of graphite electrodes in the 2001 second quarter was $2,367 as compared to the average in the 2001 first quarter of $2,419. The lower average sales revenue per metric ton represented a decrease of $2 million in net sales. The decrease in average selling prices was due to the impact of changes in currency exchange rates. The gross profit of the division in the 2001 second quarter was $41 million (29.8% of net sales), an increase from gross profit in the 2001 first quarter of $38 million (27.4% of net sales). The increase in gross profit was largely due to 46 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES the increase in net sales, plant costs reductions and lower costs due to the strengthening of the dollar. The net sales of our Advanced Energy Technology Division decreased to $34 million in the 2001 second quarter from $35 million in the 2001 first quarter, primarily due to lower volume of carbon refractories sold. The gross profit in the 2001 second quarter was $10 million (31.2% of net sales), a decrease from gross profit in the 2001 first quarter of $11 million (32.0% of net sales). The decrease in gross margin was primarily due to the decrease in net sales. Selling, administrative and other expenses were $19 million in the 2001 second quarter, a decrease of $2 million from $21 million in the 2001 first quarter. Interest expense was $16 million in the 2001 second quarter, a decrease of $3 million from the 2001 first quarter due to lower average interest rates and lower average debt outstanding. For the 2001 second quarter, the effective income tax rate before special charges was 48%, an increase from the 2001 first quarter effective income tax rate of 40%, primarily due to the fact that a higher percentage of our earnings was derived from higher tax jurisdictions. 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 use various off-balance sheet financial instruments. 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 use the dollar as their functional currency) 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 2000 and the 2001 first half, many of the currencies in which we manufacture and sell our products weakened against the dollar. The most significant consisted of the weakening of the euro, which devalued about 6% against the dollar during 2000 and about 10% in the 2001 47 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES first half, the weakening of the Brazilian currency, which devalued about 8% against the dollar during 2000 and devalued about 16% in the 2001 first half, and the weakening of the South African currency, which devalued about 19% during 2000 and about 6% in the 2001 first half. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2001 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2000. Net sales of $171 million in the 2001 second quarter represented a $28 million, or 14%, decrease from net sales of $199 million in the 2000 second quarter. Gross profit of $51 million in the 2001 second quarter represented a $5 million, or 9%, decrease from gross profit of $56 million in the 2000 second quarter. Gross profit margin was 29.9% in the 2001 second quarter as compared to 28.1% in the 2000 second quarter. The decrease in net sales and gross profit was primarily due to lower volume of graphite electrodes sold. Cost of sales declined primarily due to lower volumes sold. Cost of sales per metric ton decreased due to plant cost reductions and lower costs due to the strengthening of the dollar. The increase in gross profit margin was primarily due to the fact that the percentage decrease in net sales was less than the percentage decrease in cost of sales, some of which are essentially fixed. GRAPHITE POWER SYSTEMS DIVISION. Net sales declined to $137 million in the 2001 second quarter from $170 million in the 2000 second quarter, primarily due to lower volume of all products sold, particularly graphite electrodes. Volume of graphite electrodes sold was 46,000 metric tons during the 2001 second quarter as compared to 56,800 metric tons during the 2000 second quarter. The decrease in volume of graphite electrodes sold represented a reduction of $26 million in net sales. Average sales revenue per metric ton of graphite electrodes in the 2001 second quarter was $2,367 as compared to the average in the 2000 second quarter of $2,374. Unfavorable changes in currency exchange rates represented a reduction of $5 million in net sales of graphite electrodes, more than offsetting the benefits of increases in selling prices in local currencies. Cost of sales decreased to $96 million in the 2001 second quarter from $121 million in the 2000 second quarter. The decrease was primarily due to lower volume of electrodes sold. Plant cost reductions and lower costs due to the strengthening of the dollar resulted in a $27 lower average cost of sales per metric ton for the 2001 second quarter as compared to the 2000 second quarter. Gross profit in the 2001 second quarter was $41 million (29.8% of net sales), a decrease from gross profit in the 2000 second quarter of $49 million (28.7% of net sales). ADVANCED ENERGY TECHNOLOGY DIVISION. Net sales increased to $34 million in the 2001 second quarter from $29 million in the 2000 second quarter, primarily due to an increase in volume of refractories sold and an increase in technical service and technology license fees, partially offset by a decrease in volume of flexible graphite sold for gasket applications due to lower demand from the automotive industry. Cost of sales was $24 million in the 2001 second quarter as compared to $22 million in the 2000 second quarter. The increase was primarily due to higher volume of refractories sold. Gross profit in the 2001 second quarter was $10 million 48 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (31.2% of net sales), an increase from gross profit in the 2000 second quarter of $7 million (23.8% of net sales). OPERATING PROFIT FOR US AS A WHOLE. Operating loss in the 2001 second quarter was $39 million as compared to operating profit in the 2000 second quarter of $33 million, or 16.6% of net sales. Operating loss in the 2001 second quarter includes restructuring, impairment and antitrust charges aggregating $68 million that relate primarily to our graphite electrode business. Excluding the special charges, operating profit in the 2001 second quarter would have been $29 million or 17.0% of net sales. Selling, administrative and other expense decreased to $19 million in the 2001 second quarter from $23 million in the 2000 second quarter primarily due to reduced corporate spending. OTHER ITEMS AFFECTING US AS A WHOLE. Interest expense decreased to $16 million in the 2001 second quarter from $18 million in the 2000 second quarter. The decrease resulted from lower average annual interest rates and lower average total debt outstanding. Average outstanding total debt was $703 million in the 2001 second quarter as compared to $760 million in the 2000 second quarter. The average annual interest rate was 8.0% in the 2001 second quarter as compared to 8.6% in the 2000 second quarter. These average annual interest rates exclude imputed interest on the DOJ fine. Provision for income taxes before restructuring, impairment and antitrust charges was $6 million in the 2001 second quarter as compared to $4 million in the 2000 second quarter. The effective income tax rate for the 2001 second quarter was 48%, which was higher than the U.S. federal statutory income tax rate of 35%. The higher rate in the 2001 second quarter was primarily as a result of the fact that a substantial percentage of our earnings were derived from higher tax jurisdictions. The effective income tax rate for the 2000 second quarter was 25%. The rate for the 2000 second quarter was lower than the U.S. federal statutory income tax rate primarily as a result of tax planning strategies, earnings repatriation plans and earnings from consolidated entities with lower effective tax rates. As a result of the changes described above, net loss for the 2001 second quarter was $39 million as compared to net income for the 2000 second quarter of $11 million. SIX MONTHS ENDED JUNE 30, 2001 AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2000. Net sales of $342 million in the 2001 first half represented a $52 million, or 13%, decrease from net sales of $394 million in the 2000 first half. Gross profit of $100 million in the 2001 first half represented a $13 million, or 12%, decrease from gross profit of $113 million in the 2000 first half. Gross profit margin was 29.2% in the 2001 first half as compared to 28.7% in the 2000 first half. The decrease in net sales and gross profit was primarily due to lower volume of graphite electrodes sold. 49 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES Cost of sales declined primarily due to lower volumes sold. Cost of sales per metric ton decreased due to plant costs reductions and lower costs due to the strengthening of the dollar. The increase in gross profit margin was primarily due to the fact that the percentage decrease in net sales was less than the percentage decrease in cost of sales, some of which are essentially fixed. GRAPHITE POWER SYSTEMS DIVISION. Net sales declined to $273 million in the 2001 first half from $331 million in the 2000 first half, primarily due to lower volume of all products sold, particularly graphite electrodes. Volume of graphite electrodes sold was 89,000 metric tons during the 2001 first half as compared to 108,000 metric tons in the 2000 first half. The decrease in volume of graphite electrodes sold represented a reduction of $46 million in net sales. Average sales revenue per metric ton of graphite electrodes in the 2001 first half was $2,392 as compared to the average in the 2000 first half of $2,426. Unfavorable changes in currency exchange rates represented a reduction of $10 million in net sales of graphite electrodes, more than offsetting the benefits of increases in selling prices in local currencies. Cost of sales decreased to $194 million in the 2001 first half from $233 million in the 2000 first half. The decrease was primarily due to lower volume of electrodes sold. Plant cost reductions and lower costs due to the strengthening of the dollar resulted in a slightly lower average cost of sales per metric ton for the 2001 first half as compared to the 2000 first half. Gross profit in the 2001 first half was $79 million (28.6% of net sales), a decrease from gross profit in the 2000 first half of $98 million (29.8% of net sales). ADVANCED ENERGY TECHNOLOGY DIVISION. Net sales increased to $69 million in the 2001 first half from $63 million in the 2000 first half, primarily due to an increase in volume of refractories sold and an increase in technical service and technology license fees, partially offset by a decrease in volume of flexible graphite sold for gasket applications due to lower demand from the automotive industry. Cost of sales was $48 million in each period. Gross profit in the 2001 first half was $21 million (31.6% of net sales), an increase from gross profit in the 2000 first half of $15 million (23.2% of net sales). OPERATING PROFIT FOR US AS A WHOLE. Operating loss in the 2001 first half was $14 million as compared to operating profit in the 2000 first half of $57 million, or 14.5% of net sales. Operating profit in the 2001 first half includes aggregate restructuring, impairment and antitrust charges of $68 million that relate primarily to our graphite electrode business. Excluding the special charges, operating profit in the 2001 first half would have been $54 million, or 15.8% of net sales. Selling, administrative and other expense decreased to $40 million in the 2001 first half from $47 million in the 2000 first half primarily due to reduced corporate spending. OTHER ITEMS AFFECTING US AS A WHOLE. Interest expense decreased to $35 million in the 2001 first half from $39 million in the 2000 first half. The decrease resulted from lower average annual interest rates and lower average total debt outstanding. Average outstanding total debt was 50 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES $716 million in the 2001 first half as compared to $767 million in the 2000 first half. The average annual interest rate was 8.4% in the 2001 first half as compared to 9.4% in the 2000 first half. These average annual interest rates exclude imputed interest on the DOJ fine. Excluding the restructuring, impairment and antitrust charges, the provision for income taxes in the 2001 first half reflects a 45% effective income tax rate, which is higher than the U.S. Federal income tax rate of 35% primarily due to the fact that a higher percentage of our earnings was derived from higher tax jurisdictions. Excluding the restructuring charge, the provision for income taxes in the 2000 first half reflects a 25% effective rate, primarily due to the fact that a higher percentage of our earnings was derived from jurisdictions with lower effective income tax rates. As a result of the changes described above, net loss was $36 million in the 2001 first half, a decrease from net income before extraordinary item of $13 million in the 2000 first half. 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, capital expenditures and payment of fines, liabilities and expenses in connection with investigations, lawsuits and claims. We are highly leveraged and have substantial obligations in connection with antitrust investigations, lawsuits and claims. At June 30, 2001, we had total debt of $695 million and a stockholders' deficit of $354 million, as compared to total debt of $735 million and a stockholders' deficit of $316 million at December 31, 2000. Our leverage and obligations, as well as changes in conditions affecting our industry, changes in global and regional economic conditions and other factors, have adversely impacted our recent operating results. Cash and cash equivalents were $35 million at June 30, 2001 as compared to $47 million at December 31, 2000. Net debt (which is total debt, net of cash, cash equivalents and short-term investments) was $660 million at June 30, 2001 as compared to $688 million at December 31, 2000. In February 2000, we completed a debt recapitalization. We obtained the New Senior Facilities and used the net proceeds to repay and terminate the Prior Senior Facilities, to redeem the Subordinated Notes, to repay certain other debt and to pay related expenses. As a result of our high leverage and substantial obligations in connection with antitrust investigations, lawsuits and claims, changes in conditions affecting our industry, changes in global and regional economic conditions and other factors, we have placed high priority on efforts to manage cash and reduce debt. 51 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES To minimize interest expense, except for our Brazilian subsidiary prior to mid-1999, we attempt to operate on a "zero-cash" basis. This means that we use, and are dependent on, funds available under our revolving credit facility, including continued compliance with the financial covenants under the New Senior Facilities, as well as monthly or quarterly cash flow from operations as our primary sources of liquidity. We believe that our cost savings will, over the next one to two years, continue to 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 through improvements in sales and operations planning, cash management (including accounts payable and receivable management), production scheduling and inventory management. Improvements in cash flow from operations resulting from these initiatives are being partially offset by associated cash implementation costs while they are being implemented. Our high leverage and substantial obligations in connection with antitrust investigations, lawsuits and claims could have a material impact on our liquidity. Cash flow from operations services payment of our debt and these obligations, thereby reducing funds available to us for other purposes. Our leverage and these obligations make us more vulnerable to economic downturns and make us more vulnerable in the event that these obligations are greater or the timing of payment is sooner than expected. Our ability to service our debt, as it comes due, including maintaining compliance with the covenants under the New Senior Facilities, and to 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 conditions affecting our industry, changes in global and regional economic conditions, changes in interest and currency exchange rates, developments in antitrust investigations, lawsuits and claims involving us and inflation in raw material, energy and other costs. 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. Even if we are able to meet our debt service and other obligations when due, we may not be able to comply with the financial covenants under the New Senior Facilities. A failure to so comply, unless waived by the lenders thereunder, would be a default thereunder. This would permit the lenders to accelerate the maturity of substantially all of our debt. 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 debt to the lenders, the lenders could proceed against the collateral securing the New Senior Facilities and exercise all other rights available to them. In either such case, 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 obtain any such waiver or take any of such actions on favorable terms or at all. 52 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES We are dependent on our revolving credit facility and continuing compliance with the financial covenants under the New Senior Facilities for liquidity. The New Senior Facilities require us to, among other things, comply with specified minimum interest coverage and maximum leverage ratios which become more restrictive over time. In October 2000, April 2001 and July 2001 we obtained amendments to the New Senior Facilities. The amendments, among other things, change our financial covenants so that they will be less restrictive through 2006 than would otherwise be the case and exclude certain litigation and antitrust charges and payments from the calculation of financial covenants through June 30, 2002 and in certain cases thereafter. At June 30, 2001, we were in compliance with the financial covenants in the New Senior Facilities. While our revolving credit facility provides for maximum borrowings of up to [euro] 250 million, our current ability to borrow under this facility is effectively substantially less than the maximum due to the impact additional borrowings under this facility would have on our compliance with the maximum leverage ratio permitted under the New Senior Facilities. While no assurances can be made, we believe we will comply with the covenants under the New Senior Facilities at least through 2002. If we subsequently believe that we will not continue to comply with such covenants, we will seek an appropriate waiver or amendment from the lenders thereunder. There can be no assurance that we will be able to obtain such waiver or amendment on acceptable 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, our expected resolution of our remaining obligations in connection with antitrust investigations, lawsuits and claims, and existing capital resources, and taking into account our efforts to reduce costs and working capital needs, improve efficiencies and product quality, 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. CASH FLOW PROVIDED BY OPERATING ACTIVITIES. Cash flow provided by operating activities was $1 million in the 2001 first half as compared to cash flow provided by operating activities of $25 million in the 2000 first half. The decreased generation of cash flow of $24 million resulted primarily from a reduction of gross profit and non-cash charges included in net income (loss). CASH FLOW USED IN INVESTING ACTIVITIES. We used $7 million of cash flow for investing activities during the 2001 first half as compared to $22 million during the 2000 first half. This reduction of $15 million was primarily due to a reduction in cash flow used for capital expenditures. CASH FLOW PROVIDED BY FINANCING ACTIVITIES. Cash flow used in financing activities was $5 million for the 2001 first half as compared to cash flow used in financing activities of $9 53 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES million in the 2000 first half. During the 2001 first half, we received $9 million from an additional minority investment in connection with the broadening of our strategic alliance in the cathode business with Pechiney and made $16 million in net debt repayments. During the 2000 first half, we incurred $28 million of costs in connection with our debt recapitalization in February 2000, of which we paid $26 million in the 2000 first half, and had an increase in net borrowings of $17 million. ACCOUNTING CHANGES In July 2001, the FASB issued Statement of Financial Account Standards ("SFAS") 141, "Business Combinations," and SFAS 142, "Goodwill and Other Intangible Assets," both of which are effective for all fiscal years beginning after December 15, 2001. These statements establish accounting and reporting standards for business combinations, goodwill, and intangible assets. We are currently evaluating the impact of SFAS 141 and SFAS 142 on our results of operations, cash flows and financial position. In September 2000, FASB issued SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," a replacement of SFAS 125, which has the same title. SFAS 140 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings, and requires certain additional disclosures. SFAS 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001, and is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. We believe that SFAS 140 will not materially impact our results of operations, cash flows or financial position. ITEM 3. 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 or speculative purposes or to generate income. Our exposure to changes in interest rates results primarily from variable or floating rate long-term debt where the interest rate is determined based on 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. At June 30, 2001, we had an interest rate cap on $100 million of debt, limiting the floating interest rate factor on this debt to 5.0% through June 29, 2002, and we had interest rate caps on [euro] 200 million of debt, limiting the floating interest rate factor on this debt to 5.0% through February 27, 2002. 54 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES 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. 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 for the purpose of hedging against these risks with an aggregate notional amount of about $83 million at June 30, 2001 and $69 million at December 31, 2000. All of our contracts mature within one year. All of our contracts are marked-to-market monthly and, accordingly, transaction gains and losses are reflected in the Consolidated Statements of Operations. Unrealized gains and losses on our outstanding contracts were a $2 million unrealized loss at June 30, 2001 and nil at December 31, 2000. 55 PART II UCAR INTERNATIONAL INC. AND SUBSIDIARIES ITEM 1. LEGAL PROCEEDINGS ANTITRUST INVESTIGATIONS In June 1997, we were served with subpoenas issued by the U.S. 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 investigation as to whether there had 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 the offices of one of our French subsidiaries for purposes of gathering information in connection with an investigation as to whether there had 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 April 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 U.S. resulting in agreements to fix prices and allocate market shares in the U.S. and elsewhere, to restrict co-conspirators' capacity and to restrict non-conspiring producers' access to manufacturing technology for graphite electrodes. In addition, in April 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 plea agreement was approved by the District Court and, as a result, under the plea agreement, we will not be subject to prosecution by the DOJ with respect to any other violations of U.S. federal antitrust law occurring prior to April 1998. The payments due in 1998, 1999 and 2000 were timely made. At our request, the due date of each of the remaining three payments has been deferred by one year. 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 a similar charge. 56 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES 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 January 2000, Mitsubishi Corporation, one of our former parents, was indicted by the DOJ on a one count charge of aiding and abetting violations of U.S. federal antitrust law in connection with the sale of graphite electrodes. Mitsubishi entered a plea of not guilty. In February 2001, a jury found Mitsubishi guilty of the charge. Mitsubishi has entered into a sentencing agreement with the DOJ, which has been approved by the District Court, pursuant to which Mitsubishi has agreed to pay a fine of $134 million and not appeal its conviction. In April 1998, we became aware that the Canadian Competition Bureau (the "COMPETITION BUREAU") had commenced a criminal investigation as to whether there had 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 relevant Canadian court approved the plea agreement and, as a result, under the plea 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 plea agreement. The fine was timely paid. In June 1998, we became aware that the Japanese antitrust enforcement authority had commenced an investigation as to whether there had been any violation of Japanese antitrust law by producers and distributors of graphite electrodes. We have no facilities or employees in Japan. We believe that, among other things, we have good defenses to any claim that we are subject to the jurisdiction of the Japanese antitrust 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 letter to us, the warning letter issued to the Japanese producers did reference us as a member of an alleged cartel. In October 1999, we became aware that the Korean antitrust authority had commenced an investigation as to whether there had been any violations of Korean antitrust law by producers and distributors of graphite electrodes. We have no facilities or employees in Korea. We have received requests for information from the Korean antitrust authority. 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. On July 18, 2001, the EU Competition Authority issued its decision regarding the allegations. Under the decision the EU Competition Authority assessed a fine of [euro] 50.4 million (about $43 million) against UCAR. Seven other graphite electrode producers were also fined under the decision, with fines ranging up to [euro] 80.2 million (about $69 million). From the initiation of its investigation, we have cooperated with the EU Competition Authority. As a result of our cooperation, our fine reflects a 40% reduction from the amount that otherwise would have been assessed. The policy of the EU 57 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES Competition Authority is to negotiate appropriate terms of payment of antitrust fines, including extended payment terms. We are discussing payment terms with the EU Competition Authority. Assessment of the fine is subject to appeal before the Court of First Instance in Luxembourg. Any appeal would need to be filed within three months after the fine was assessed and the fine or collateral security therefor would typically be required to be paid or provided at about the time the appeal was filed. We have not decided whether to appeal the assessment of the fine. In the second quarter of 2001, we learned that the Brazilian antitrust authorities have requested written information from various steelmakers in Brazil. We have not received a request for information from the Brazilian antitrust authorities. 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 Korean antitrust authority in its continuing investigation. In connection therewith, we have produced and are producing information, documents or 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 and the decision by the EU Competition Authority make it more difficult for us to defend against other investigations as well as civil lawsuits and claims. We have been vigorously protecting, and intend to continue to vigorously protect, our interests in connection with the investigations described above. We may, however, at any time settle any possible unresolved charges. ANTITRUST LAWSUITS In 1997, we and other producers of graphite electrodes were served with complaints commencing various antitrust class action lawsuits. Subsequently, the complaints were either withdrawn without prejudice to refile or consolidated into a single complaint in the District Court (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. 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 and 1999, we and other producers of graphite electrodes were served by steelmakers in the U.S. and Canada with complaints and petitions commencing nine separate civil antitrust lawsuits in various courts (the "OTHER INITIAL LAWSUITS"). In the complaints and petitions, the plaintiffs allege that the defendants violated U.S. federal, Texas and Canadian antitrust laws and Canadian conspiracy law in connection with the sale of graphite electrodes. In 1999 and 2000, we and other producers of graphite electrodes were served with three complaints commencing three separate civil antitrust lawsuits in the District Court (the "FOREIGN CUSTOMER LAWSUITS"). The first complaint, entitled FERROMIN INTERNATIONAL TRADE CORPORATION, 58 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES ET AL. V. UCAR INTERNATIONAL INC., ET AL. was filed by 26 steelmakers and related parties, all but one of whom are located outside the U.S. The second complaint, entitled BHP NEW ZEALAND LTD. ET AL. V. UCAR INTERNATIONAL INC., ET AL. was filed by 4 steelmakers, all of whom are located outside the U.S. The third complaint, entitled SAUDI IRON AND STEEL COMPANY V. UCAR INTERNATIONAL INC., ET AL., was filed by a steelmaker who is located outside the U.S. 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. We believe that we have strong defenses against claims alleging that purchases of graphite electrodes outside the U.S. are actionable under U.S. federal antitrust law. We have filed motions to dismiss the first and second complaints. In June 2001, our motion to dismiss the first and second complaints was granted with respect to substantially all of the plaintiffs' claims. In 1999 and 2000, we were served with three complaints commencing three civil antitrust lawsuits (the "CARBON ELECTRODE LAWSUITS"). The first complaint, filed in the District Court, is entitled GLOBE METALLURGICAL, INC. V. UCAR INTERNATIONAL INC., ET AL. The second complaint, filed in U.S. Bankruptcy Court for the Northern District of Ohio, is entitled IN RE SIMETCO, INC. The third complaint, filed in the U.S. District Court for the Southern District of West Virginia, is entitled ELKEM METALS COMPANY INC and ELKEM METALS COMPANY ALLOY LLP V. UCAR CARBON COMPANY INC., ET AL. SGL Carbon AG is also named as a defendant in the first complaint and SGL Carbon Corporation is also named as a defendant in the first and third complaints. In the complaints, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of carbon electrodes and seek, among other things, an award of treble damages resulting from such alleged violations. We filed motions to dismiss the second and third complaints. In May 2001, our motion to dismiss the second complaint was denied. The guilty pleas described above do not relate to carbon electrodes. Certain customers who purchased carbon electrodes or other products from us or who purchased graphite electrodes from us in various countries outside the U.S. and Canada have threatened to commence antitrust lawsuits against us in the U.S. or in other jurisdictions with respect to the subject matter of the investigations and lawsuits described above. We are aware that Messrs. Krass and Hart were or are named as defendants in certain civil antitrust lawsuits. We do not intend to reimburse them for any of their liabilities or expenses in connection therewith. Through June 30, 2001, 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 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. The settlement of the antitrust class action also covers the actual and potential claims against us by certain foreign customers arising out of alleged antitrust violations occurring prior to the date of the respective settlements 59 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES in connection with the sale of graphite electrodes sourced from the U.S. Although each settlement is unique, in the aggregate they consist primarily of current and deferred cash payments with some product credits and discounts. All fines and settlement payments due thereunder have been timely made. The foreign customer lawsuits and the carbon electrode lawsuits have not been settled and are still in their early stages. We have been vigorously defending, and intend to continue to vigorously defend, 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. The guilty pleas and the decision by the EU Competition Authority make it more difficult to defend against civil 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 U.S. and in other jurisdictions. 1997 AND 2001 SECOND QUARTER ANTITRUST EARNINGS CHARGES We recorded a pre-tax charge of $340 million against results of operations for 1997 and, as a result of the assessment of a fine by the EU Competition Authority, we recorded a pre-tax charge of an additional $10 million against results of operations for the 2001 second quarter, as a reserve for potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. The $350 million reserve is calculated on a basis net of, among other things, imputed interest on installment payments of the DOJ fine. Actual aggregate liabilities and expenses (including settled investigations, lawsuits and claims as well as the continuing investigations and unsettled pending, threatened and possible lawsuits and claims mentioned above) could be materially higher than $350 million and the timing of payment thereof could be sooner than anticipated. In the aggregate (including the assessment of the fine by the EU Competition Authority and the additional $10 million charge), the fines and net settlements and expenses are within the amounts we used to evaluate the $350 million charge. To the extent that aggregate liabilities and expenses, net, are known or reasonably estimable, at June 30, 2001, $350 million continues to represent our estimate of these liabilities and expenses. Through June 30, 2001, we have paid an aggregate of $241 million of fines and net settlement and expense payments and $11 million of imputed interest. At June 30, 2001, $109 million remained in the reserve, of which $57 million is for committed payments for fines and settlements, and the balance of which is for the fine assessed by the EU Competition Authority and other matters. The aggregate amount of remaining committed payments for imputed interest at June 30, 2001 was about $9 million. During the 2001 first quarter, at our request, we obtained an agreement from the DOJ to defer the due date of each of our three remaining annual payments of the DOJ fine by one year. 60 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES STOCKHOLDER DERIVATIVE AND SECURITIES CLASS ACTION LAWSUITS 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 were named as defendants. UCAR was named as a nominal defendant. In October 1999, UCAR and the individual defendants entered into an agreement settling the lawsuit. The settlement became final in January 2000. In April and May 1998, UCAR was served with complaints commencing securities class actions 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 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 October 1999, UCAR and the individual defendants entered into an agreement settling the lawsuit. The settlement became final in February 2000. Under the settlements, 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 Florida State Board of Administration, the eighth largest state employees' pension fund, was added to UCAR's Board of Directors. We expected to incur about $2.0 million of unreimbursed expenses related to the lawsuits. These expenses, together with the $11.0 million, were recorded as a pre-tax charge of $13.0 million against results of operations in the 1999 third quarter. In the 2000 second quarter, we reversed $1 million of this charge because actual expenses were lower than expected. OTHER PROCEEDINGS AGAINST US We are involved in various other investigations, lawsuits, claims and other legal proceedings incidental to the conduct of our business. While it is not possible to determine the ultimate disposition of each of them, we do not believe that their ultimate disposition will have a material adverse effect on us. LAWSUIT INITIATED BY US AGAINST OUR FORMER PARENTS In February 2000, at the direction of a special committee of independent directors of 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 Corporation and Union Carbide Corporation. The other defendants named in the lawsuit include 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 1995, Hiroshi Kawamura and Robert D. 61 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES 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. In January 2000, Mitsubishi was indicted by the DOJ on a one count charge of aiding and abetting violations of U.S. federal antitrust law in connection with the sale of graphite electrodes. Mitsubishi entered a plea of not guilty. In February 2001, a jury found Mitsubishi guilty of the charge. Mitsubishi has entered into a sentencing agreement with the DOJ, which has been approved by the District Court, pursuant to which Mitsubishi has agreed to pay a fine of $134 million and not appeal its conviction. Mitsubishi has also been named as a defendant in several civil antitrust lawsuits commenced by electric arc furnace steel producers with respect to its alleged participation in those activities. In addition, we allege that, in January 1995, 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. The defendants have filed motions to dismiss this lawsuit and motions to disqualify certain of our counsel from representing us in this lawsuit. We are vigorously opposing those motions. 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 intend to vigorously pursue this lawsuit to trial. Litigation such as this lawsuit is complex. 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 expensed as incurred. Through June 30, 2001, we had incurred $4 million of these expenses. This lawsuit is in its earliest stages. The ultimate outcome of this lawsuit is subject to many uncertainties, both substantive and procedural, including statute of limitation and other defenses, claims for indemnification and other counterclaims as well as those motions to dismiss and motions to disqualify. We may at any time settle this lawsuit. 62 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 8, 2001, UCAR held its annual meeting of stockholders in Nashville, Tennessee. The stockholders elected the following directors with corresponding votes for and withheld: NUMBER OF PERCENTAGE OF NUMBER OF NAME OF DIRECTOR SHARES VOTED FOR VOTES CAST FOR SHARES WITHHELD - ---------------- ---------------- -------------- ---------------- R. Eugene Cartledge 38,935,324 98.89 436,060 Mary B. Cranston 39,013,249 99.09 358,135 John R. Hall 38,935,324 98.89 436,060 Thomas Marshall 38,963,772 98.96 407,612 Michael C. Nahl 38,967,872 98.98 403,512 Gilbert E. Playford 38,912,473 98.83 458,911 63 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS The exhibits listed in the following table have been filed as part of this Quarterly Report on Form 10-Q. EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 10.52 Underwriting Agreement, dated as of July 25, 2001, among J.P. Morgan Securities Inc., Credit Suisse First Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and the other underwriters named therein and UCAR International Inc. 10.53 Second Amendment dated as of April 25, 2001 to the 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 a party thereto, the Lenders a party thereto and Morgan Guaranty Trust of New York, an Administrative Agent, Collateral Agent and Issuing Bank. 10.54 Third Amendment dated as of July 10, 2001 to the 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 a party thereto, the Lenders a party thereto and Morgan Guaranty Trust of New York, an Administrative Agent, Collateral Agent and Issuing Bank. 10.55* Outsourcing Services Agreement, dated as of March 30, 2001, effective April 2001, by and between CGI Information Systems and Management Consultants, Inc. and UCAR International Inc. 10.56* Joint Development and Collaboration Agreement, effective June 5, 2001, among UCAR Carbon Company Inc., Graftech Inc., and Ballard Power Systems Inc. 10.57* Master Supply Agreement, effective June 5, 2001, between UCAR Carbon Company Inc. and Ballard Power Systems Inc. 10.58* Agreement, effective as of January 1, 2001. 10.59* Agreement, effective as of January 1, 2001. - ---------- * Confidential treatment requested as to certain portions. 64 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (B) REPORTS ON FORM 8-K The following Reports on Form 8-K were filed during the quarter ended June 30, 2001: a) Report on Form 8-K dated May 15, 2001 as filed by UCAR International Inc., relating to a change in the certifying accountants of UCAR International Inc. from KPMG LLP to Deloitte & Touche LLP. b) Report on Form 8-K dated June 5, 2001 as filed by UCAR International Inc., filing a press release dated May 15, 2001 announcing the shutdown of certain U.S. graphite electrode manufacturing operations. No financial statements were filed with such Reports on Form 8-K. 65 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES 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. Date: August 7, 2001 By: /S/ CORRADO F. DE GASPERIS ----------------------------- Corrado F. De Gasperis VICE PRESIDENT, CHIEF FINANCIAL OFFICER & CHIEF INFORMATION OFFICER 66 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 10.52 Underwriting Agreement, dated as of July 25, 2001, among J.P. Morgan Securities Inc., Credit Suisse First Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and the other underwriters named therein and UCAR International Inc. 10.53 Second Amendment dated as of April 25, 2001 to the 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 a party thereto, the Lenders a party thereto and Morgan Guaranty Trust of New York, an Administrative Agent, Collateral Agent and Issuing Bank. 10.54 Third Amendment dated as of July 10, 2001 to the 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 a party thereto, the Lenders a party thereto and Morgan Guaranty Trust of New York, an Administrative Agent, Collateral Agent and Issuing Bank. 10.55* Outsourcing Services Agreement, dated as of March 30, 2001, effective April 2001, by and between CGI Information Systems and Management Consultants, Inc. and UCAR International Inc. 10.56* Joint Development and Collaboration Agreement, effective June 5, 2001, among UCAR Carbon Company Inc., Graftech Inc., and Ballard Power Systems Inc. 10.57* Master Supply Agreement, effective June 5, 2001, between UCAR Carbon Company Inc. and Ballard Power Systems Inc. 10.58* Agreement, effective as of January 1, 2001. 10.59* Agreement, effective as of January 1, 2001. - ---------- * Confidential treatment requested as to certain portions. EX-10 3 ucar_underwriteagree-10q.txt EXHIBIT 10.52 Exhibit 10.52 EXECUTION COPY UCAR International Inc. 9,000,000 Shares of Common Stock ($0.01 par value) Underwriting Agreement July 25, 2001 J.P. Morgan Securities Inc. Credit Suisse First Boston Corporation Merrill Lynch, Pierce, Fenner & Smith Incorporated As representatives of the several underwriters listed in Schedule I hereto c/o J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 Ladies and Gentlemen: UCAR International Inc., a Delaware corporation (the "Company"), proposes to issue and sell to you and the other underwriters listed on Schedule I hereto (the "Underwriters") an aggregate of 9,000,000 shares of common stock, par value $0.01 per share, of the Company (the "Underwritten Shares") and, for the sole purpose of covering over-allotments in connection with the sale of the Underwritten Shares, at the option of the Underwriters, up to an additional 1,350,000 shares of common stock, par value $0.01 per share, of the Company (the "Option Shares"). The Underwritten Shares and the Option Shares are herein referred to as the "Shares". The shares of common stock, par value $0.01 per share, of the Company to be outstanding after giving effect to the sale of the Shares are herein referred to as the "Stock". The Stock, including the Shares, will have attached thereto rights (the "Rights") to purchase one one-thousandth of a share of preferred stock, par value $0.01 per share, of the Company (the "Preferred Stock") when the rights become exercisable pursuant to a Rights Agreement, dated as of August 7, 1998 and as amended on November 11, 2000 (the "Rights Agreement"), between the Company and Computershare Investor Services, LLC, as successor to The Bank of New York, as rights agent. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Securities Act"), a registration statement, including a form of prospectus, relating to the Shares and Rights. The registration statement as amended at the time when it shall become effective including information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act is referred to in this Agreement as the "Registration Statement", and the prospectus in the form first used to confirm sales of Shares is referred to in this Agreement as the "Prospectus". If the Company has filed an abbreviated registration statement pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration Statement"), then any reference herein to the term "Registration Statement" shall be deemed to include such Rule 462 Registration Statement. Any reference in this Agreement to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act, as of the effective date of the Registration Statement or the date of such preliminary prospectus or the Prospectus, as the case may be, and any reference to "amend", "amendment" or "supplement" with respect to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Exchange Act") that are deemed to be incorporated by reference therein. The Company hereby agrees with the Underwriters as follows: 1. The Company agrees to issue and sell the Underwritten Shares to the several Underwriters as hereinafter provided, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees to purchase, severally and not jointly, from the Company the respective number of Underwritten Shares set forth opposite such Underwriter's name in Schedule I hereto at a purchase price per share of $9.00 (the "Purchase Price"). In addition, the Company agrees to issue and sell the Option Shares to the several Underwriters as hereinafter provided, and the Underwriters on the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, shall have the option to purchase, severally and not jointly, from the Company up to an aggregate of 1,350,000 Option Shares at the Purchase Price, for the sole purpose of covering over-allotments (if any) in the sale of Underwritten Shares by the several Underwriters. If any Option Shares are to be purchased, the number of Option Shares to be purchased by each Underwriter shall be the number of Option Shares which bears the same ratio to the aggregate number of Option Shares being purchased as the number of Underwritten Shares set forth opposite the name of such Underwriter in Schedule I hereto (or such number increased as set forth in Section 9 hereof) bears to the aggregate number of Underwritten Shares being purchased from the Company by the several Underwriters, subject, however, to such adjustments to eliminate any fractional Shares as the Underwriters in their sole discretion shall make. J.P. Morgan Securities Inc. may exercise the option to purchase any or all of the Option Shares at any time (but not more than once) on or before the thirtieth day following the date of this Agreement by written notice from J. P. Morgan Securities Inc. to the Company. Such notice shall set forth the aggregate number of Option Shares as to which the option is being exercised and the date and time when the Option Shares are to be delivered and paid for which may be the same date and time as the Closing Date (as hereinafter defined) but shall not be earlier than the Closing Date nor later than the tenth full Business Day (as hereinafter defined) after the date of such notice (unless such time and date are postponed in accordance with the provisions of 2 Section 9 hereof). Any such notice shall be given at least two Business Days prior to the date and time of delivery specified therein. 2. The Company understands that the Underwriters intend (i) to make a public offering of the Shares as soon after (A) the Registration Statement has become effective and (B) the parties hereto have executed and delivered this Agreement, as in the judgment of the Underwriters is advisable and (ii) initially to offer the Shares upon the terms set forth in the Prospectus. 3. Payment for the Shares shall be made by wire transfer in immediately available funds to the account specified by the Company to the Underwriters in the case of the Underwritten Shares, on July 31, 2001, or at such other time on the same or such other date, not later than the fifth Business Day thereafter, as the Underwriters and the Company may agree upon in writing or, in the case of the Option Shares, on the date and time specified by the Underwriters in the written notice of the Underwriters' election to purchase such Option Shares. The time and date of such payment for the Underwritten Shares is referred to herein as the "Closing Date" and the time and date for such payment for the Option Shares, if other than the Closing Date, is herein referred to as the "Additional Closing Date". For purposes of Rule 15c6-1 under the Exchange Act, the Closing Date (if later than the otherwise applicable settlement date) shall be the settlement date for payment of funds and delivery of securities for all the Shares sold pursuant to the offering. As used herein, the term "Business Day" means any day other than a day on which banks are permitted or required to be closed in New York City. Payment for the Shares to be purchased on the Closing Date or the Additional Closing Date, as the case may be, shall be made against delivery to the Underwriters for the respective accounts of the several Underwriters of the Shares to be purchased on such date registered in such names and in such denominations as the Underwriters shall request in writing not later than two full Business Days prior to the Closing Date or the Additional Closing Date, as the case may be, with any transfer taxes payable in connection with the transfer to the Underwriters of the Shares duly paid by the Company. The certificates for the Shares will be made available for inspection and packaging by the Underwriters at the office of J.P. Morgan Securities Inc. set forth above not later than 1:00 P.M., New York City time, on the Business Day prior to the Closing Date or the Additional Closing Date, as the case may be. 4. The Company represents and warrants to each Underwriter that: (a) no order preventing or suspending the use of any preliminary prospectus has been issued by the Commission, and each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter expressly for use therein; 3 (b) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been instituted or, to the knowledge of the Company, threatened by the Commission; and the Registration Statement and Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) comply, or will comply, as the case may be, as of the applicable effective date as to the Registration Statement and as of the date of the Prospectus, in all material respects with the Securities Act and do not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto and as of the date of the Prospectus and any amendment or supplement thereto, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and the Prospectus, as amended or supplemented, if applicable, at the Closing Date or Additional Closing Date, as the case may be, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; except that the foregoing representations and warranties shall not apply to statements or omissions in the Registration Statement or the Prospectus made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter expressly for use therein; (c) the documents incorporated by reference in the Prospectus, when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Prospectus, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act, and will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (d) the financial statements, and the related notes thereto, included or incorporated by reference in the Registration Statement and the Prospectus present fairly in all material respects, the consolidated financial position of the Company and its consolidated subsidiaries as of the dates indicated and the results of their operations and their consolidated cash flows for the periods specified; and said financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout such periods, and the supporting schedules included or incorporated by reference in the Registration Statement present fairly in all material respects the information required to be stated therein; (e) since the date of the latest audited financial statements included in the Registration Statement and the Prospectus, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries, or any material adverse change, or any development involving a prospective material adverse change, in or affecting the condition (financial or other), business, properties, financial position or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Prospectus; and except as set forth or contemplated in the Prospectus neither the Company 4 nor any of its subsidiaries has entered into any transaction or agreement (not in the ordinary course of business) material to the Company and its subsidiaries taken as a whole; (f) there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or the Underwriters for a brokerage commission, finder's fee or other like payment in connection with the offering; (g) the Company and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "Intellectual Property Rights") necessary to conduct the business now operated by them, or presently employed by them, except where the failure to possess or acquire such intellectual property rights could not, individually or in the aggregate, reasonably be expected to have a material adverse effect upon the Company and its subsidiaries, taken as a whole, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property Rights that, if determined adversely to the Company or any of its subsidiaries, could, individually or in the aggregate, reasonably be expected to have a material adverse effect upon the Company and its subsidiaries, taken as a whole; (h) on the Closing Date, Amendment No. 3 (the "Amendment") to the credit agreement dated February 22, 2000 (the "Credit Agreement") among the Company, UCAR Global Enterprises Inc. ("UCAR Global"), UCAR Finance Inc. ("UCAR Finance"), Morgan Guaranty Trust Company of New York, J.P. Morgan Securities Inc., Credit Suisse First Boston and the other banks named therein will have been duly authorized, executed and delivered by the Company, UCAR Global and UCAR Finance and will conform in all material respects to the description thereof in the Prospectus; and on the Closing Date, assuming the due authorization, execution, and delivery by the agents and lenders thereunder, the Amendment will constitute the valid and legally binding obligations of the Company, UCAR Global and UCAR Finance, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles (regardless of whether considered in a proceeding in equity or law); (i) the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts business, so as to require such qualification, other than where the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (j) each of the Company's subsidiaries has been duly incorporated and is validly existing as a corporation under the laws of its jurisdiction of incorporation, with appropriate power and authority to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business 5 and is in good standing (or the equivalent thereof under analogous principles of applicable foreign law in the case of any foreign subsidiary) under the laws of each jurisdiction in which it owns or leases properties, or conducts business, so as to require such qualification, other than where the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole; and all the outstanding shares of capital stock of each subsidiary of the Company have been duly authorized and validly issued, are fully-paid and non-assessable (or the equivalent thereof under analogous principles of applicable foreign law in the case of any foreign subsidiary), and (except, in the case of foreign subsidiaries, for directors' qualifying shares) are owned by the Company, directly or indirectly, free and clear of all liens, encumbrances, security interests and claims, other than those created by the Security Agreements (as defined in the Credit Agreement) and in existence on the Closing Date, EXCEPT that the Company owns, directly or indirectly, approximately 98% of the outstanding shares of capital stock of UCAR Carbon S.A., 99% of the outstanding shares of capital stock of UCAR Carbon Mexicana, S.A. de C.V., 97% of the outstanding shares of capital stock of Graftech Inc., 99% of the outstanding shares of capital stock of UCAR Grafit OAO, 99% of the outstanding shares of capital stock of UCAR Productos de Carbono S.A. and 70% of the outstanding shares of capital stock of Carbone Savoie S.A.S.; (k) this Agreement has been duly authorized, executed and delivered by the Company; (l) the Company has an authorized capitalization as set forth in the Prospectus and such authorized capital stock conforms to the description thereof set forth in the Prospectus, and all of the outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully-paid and non-assessable and are not subject to any pre-emptive or similar rights; and, except as described in or expressly contemplated by the Prospectus, there are no outstanding rights (including, without limitation, pre-emptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any shares of capital stock or other equity interest in the Company or any of its subsidiaries, or any contract, commitment, agreement, understanding or arrangement of any kind relating to the issuance of any capital stock of the Company or any such subsidiary, any such convertible or exchangeable securities or any such rights, warrants or options; (m) the Shares to be issued and sold by the Company hereunder have been duly authorized, and, when issued and delivered to and paid for by the Underwriters in accordance with the terms of this Agreement, will be duly issued and will be fully paid and non-assessable and will conform to the descriptions thereof in the Prospectus; and the issuance of the Shares is not subject to any preemptive or similar rights; (n) the Rights Agreement has been duly authorized, executed and delivered by the Company; the Rights have been duly authorized by the Company and, when issued upon issuance of the Shares, will be validly issued, and the Preferred Stock has been duly authorized by the Company and validly reserved for issuance and, when issued upon exercise in accordance with the terms of the Rights Agreement, will be validly issued, fully paid and non-assessable; (o) neither the Company nor any of its subsidiaries is, or with the giving of notice or lapse of time or both would be, in violation of or in default under, its Amended and 6 Restated Certificate of Incorporation (the "Certificate of Incorporation") or Amended and Restated By-Laws (the "By-Laws") or any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them or any of their respective properties is bound, except for violations and defaults which individually and in the aggregate are not material to the Company and its subsidiaries taken as a whole; the issue and sale of the Shares and the performance by the Company of its obligations under this Agreement and the consummation of the transactions contemplated herein will not (i) conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the Certificate of Incorporation or the By-Laws of the Company or (iii) result in any violation of any applicable law or statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company, its subsidiaries or any of their respective properties, except, in the case of clauses (i) and (iii), for such conflicts, breaches, defaults and violations which could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole; and no consent, approval, authorization, order, license, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except such consents, approvals, authorizations, orders, licenses, registrations or qualifications as have been obtained under the Securities Act and as may be required under state securities or Blue Sky Laws in connection with the purchase and distribution of the Shares by the Underwriters; (p) other than as set forth or contemplated in the Prospectus, there are no legal or governmental investigations, actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries or any of their respective properties or to which the Company or any of its subsidiaries is or may be a party or to which any property of the Company or any of its subsidiaries is or may be the subject which, if determined adversely to the Company or any of its subsidiaries, could, individually or in the aggregate, have, or reasonably be expected to have, a material adverse effect on the condition (financial or other), business, properties, financial position or results of operations of the Company and its subsidiaries, taken as a whole, and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (q) there are no statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required; (r) the Company and its subsidiaries have good and marketable title in fee simple (or the equivalent thereof under analogous principles of applicable foreign law) to all items of real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except for those created by the Security Agreements (as defined in the Credit Agreement) and in existence on the Closing Date or such as are described or referred to in the Prospectus or such as do not materially affect the 7 value of such property and do not interfere with the use made or proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, existing and enforceable leases with such exceptions as are not material and do not interfere with the use made or proposed to be made of such property and buildings by the Company or its subsidiaries; (s) no relationship, direct or indirect, exists between or among the Company or any or its subsidiaries on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its subsidiaries on the other hand, which is required by the Securities Act to be described in the Registration Statement and the Prospectus which is not so described; (t) no person has the right to require the Company to register any securities for offering and sale under the Securities Act by reason of the filing of the Registration Statement with the Commission or the issue and sale of the Shares; (u) the Company is not and, after giving effect to the offering and sale of the Shares, will not be an "investment company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"); (v) KPMG LLP who have certified certain financial statements of the Company and its subsidiaries and Deloitte & Touche LLP are independent public accountants as required by the Securities Act; (w) the Company and its subsidiaries have filed all material federal, state, local and foreign tax returns which have been required to be filed and have paid all taxes shown thereon and all assessments received by them or any of them to the extent that such taxes have become due and are not being contested in good faith; and, except as disclosed in the Registration Statement and the Prospectus, there is no material tax deficiency which has been or might reasonably be expected to be asserted or threatened against the Company or any subsidiary; (x) the Company has not taken nor will it take, directly or indirectly, any action designed to, or that might be reasonably expected to, cause or result in stabilization or manipulation of the price of the Common Stock; (y) each of the Company and its subsidiaries owns, possesses or has obtained all licenses, permits, certificates, consents, orders, approvals and other authorizations from, and has made all declarations and filings with, all federal, state, local and other governmental authorities (including foreign regulatory agencies), all self-regulatory organizations and all courts and other tribunals, domestic or foreign, necessary to own or lease, as the case may be, and to operate its properties and to carry on its business as conducted as of the date hereof, except where such failure could not, individually or in the aggregate, be reasonably expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole; and neither the Company nor any such subsidiary has received any actual notice of any proceeding relating to revocation or modification of any such license, permit, certificate, consent, order, approval or other authorization, except as described in the Registration Statement and the Prospectus or 8 where such revocation or modification, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole; and each of the Company and its subsidiaries is in compliance with all laws and regulations relating to the conduct of its business as conducted as of the date hereof, except where such noncompliance could not, individually or in the aggregate, be reasonably expected to result in a material adverse effect on the Company and its subsidiaries, taken as a whole; (z) there are no existing or, to the best knowledge of the Company, threatened labor disputes with the employees of the Company or any of its subsidiaries which are likely to have a material adverse effect on the Company and its subsidiaries, taken as a whole; (aa) the Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws, regulations, orders and directives relating to the protection of human health and safety, the environment or hazardous or toxic materials, substances or wastes ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses, (iii) are in compliance with all terms and conditions of any such permit, license or approval and (iv) are aware of no conditions relating to hazardous or toxic materials, substances or wastes on any property or facility currently or formerly owned or operated by the Company or any of its subsidiaries that could reasonably be expected to require investigation, remediation or monitoring under Environmental Laws except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals, failure to comply with the terms and conditions of such permits, licenses or approvals or investigation, remediation or monitoring would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole; and (bb) in the ordinary course of its business, the Company conducts a periodic review of the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole; (cc) with respect to each employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is maintained, administered or contributed to by the Company or any other person or entity that, together with the Company, is treated as a single employer under Section 414 of the Internal Revenue Code of 1986, as amended (the "Code") (each such person or entity, an "ERISA Affiliate"), the Company, each such ERISA Affiliate and each such plan complies in all material respects with all applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code, and each such plan has been administered and operated in accordance with its terms. None of the Company or any of its ERISA Affiliates has incurred any material liability to any such plan (including any multiemployer plan (within the meaning of Section 3(37) of ERISA)) or to the Pension Benefit Guaranty Corporation that has not been fully paid. No 9 prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code has occurred with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption and no reportable event (within the meaning of Section 4043 of ERISA) has occurred for which the 30-day reporting requirement has not been waived. For each such plan which is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no "accumulated funding deficiency" as defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market value of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeded the present value of all benefits accrued under such plan determined using reasonable actuarial assumptions. 5. The Company covenants and agrees with each of the several Underwriters as follows: (a) to use its best efforts to cause the Registration Statement to become effective at the earliest possible time and, if required, to file the final Prospectus with the Commission within the time periods specified by Rule 424(b) and Rule 430A under the Securities Act and to file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Shares; and to furnish copies of the Prospectus to the Underwriters in New York City prior to 10:00 a.m., New York City time, on the Business Day next succeeding the date of this Agreement in such quantities as the Underwriters may reasonably request; (b) to deliver, at the expense of the Company, to the Underwriters four signed copies of the Registration Statement (as originally filed) and each amendment thereto, in each case including exhibits and documents incorporated by reference therein, and to each other Underwriter a conformed copy of the Registration Statement (as originally filed) and each amendment thereto, in each case without exhibits but including the documents incorporated by reference therein and, during the period mentioned in paragraph (e) below, to each of the Underwriters as many copies of the Prospectus (including all amendments and supplements thereto) and documents incorporated by reference therein as the Underwriters may reasonably request; (c) before filing any amendment or supplement to the Registration Statement or the Prospectus, whether before or after the time the Registration Statement becomes effective, to furnish to the Underwriters a copy of the proposed amendment or supplement for review and not to file any such proposed amendment or supplement to which the Underwriters reasonably object; (d) to advise the Underwriters promptly, and to confirm such advice in writing (i) when the Registration Statement has become effective, (ii) when any amendment to the Registration Statement has been filed or becomes effective, (iii) when any supplement to the Prospectus or any amended Prospectus has been filed and to furnish the Underwriters with copies thereof, (iv) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for any additional information, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration 10 Statement or of any order preventing or suspending the use of any preliminary prospectus or the Prospectus or the initiation or threatening of any proceeding for that purpose, (vi) of the occurrence of any event, within the period referenced in paragraph (e) below, as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, and (vii) of the receipt by the Company of any notification with respect to any suspension of the qualification of the Shares for offer and sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and to use its best efforts to prevent the issuance of any such stop order, or of any order preventing or suspending the use of any preliminary prospectus or the Prospectus, or of any order suspending any such qualification of the shares, or notification of any such order thereof and, if issued, to obtain as soon as possible the withdrawal thereof; (e) if, during such period of time after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters a prospectus relating to the Shares is required by law to be delivered in connection with sales by the Underwriters or any dealer, any event shall occur as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Prospectus to comply with law, forthwith to prepare and furnish, at the expense of the Company, to the Underwriters and to the dealers (whose names and addresses the Underwriters will furnish to the Company) to which Shares may have been sold by the Underwriters on behalf of the Underwriters and to any other dealers upon request, such amendments or supplements to the Prospectus as may be necessary so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus will comply with law; (f) to endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Underwriters shall reasonably request and to continue such qualification in effect so long as reasonably required for distribution of the Shares; PROVIDED that the Company shall not be required to qualify to do business in any jurisdiction where it is not so qualified or to file a general consent to service of process in any jurisdiction; (g) to make generally available to its security holders and to the Underwriters as soon as practicable (but not later than (i) the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes the effective date, or (ii) if such fourth fiscal quarter is the last quarter of the Company's fiscal year, the 90th day after the end of such fourth fiscal quarter) an earnings statement covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the effective date of the Registration Statement, which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder; (h) so long as the Shares are outstanding, to furnish to the Underwriters copies of all reports or other communications (financial or other) furnished to holders of the Shares, and copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange; 11 (i) for a period of 90 days after the date of the final Prospectus relating to the Shares not to (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any shares of Stock or any securities convertible into or exercisable or exchangeable for Stock or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Stock or such other securities, in cash or otherwise without the prior written consent of J. P. Morgan Securities Inc., other than (i) the sale and issuance of the Shares to be sold hereunder, (ii) contributions, sales and issuances of Stock to the Company's employee benefits protection trust or under the Company's employee savings plan in the ordinary course, (iii) grants of stock options and other awards under the Company's employee and director equity incentive or stock option plans in the ordinary course or as otherwise described in the Prospectus, (iv) sales and issuances of Stock upon the exercise of stock options and other awards granted prior to the date hereof or as permitted by the preceding clause (iii), and (v) filing of registration statements relating to Stock described in the preceding clauses (ii), (iii) and (iv); (j) to use the net proceeds received by the Company from the sale of the Shares pursuant to this Agreement in the manner specified in the Prospectus under the caption "Use of Proceeds"; (k) to use its best efforts to list, subject to notice of issuance, the Shares on the New York Stock Exchange (the "Exchange"); (l) whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all costs and expenses incident to the performance of its obligations hereunder, including without limiting the generality of the foregoing, all costs and expenses (i) incident to the preparation, issuance, execution and delivery of the Shares, (ii) incident to the preparation, printing and filing under the Securities Act of the Registration Statement, the Prospectus and any preliminary prospectus (including in each case all exhibits, amendments and supplements thereto), (iii) incurred in connection with the registration or qualification of the Shares under the laws of such jurisdictions as the Underwriters may designate (including fees of counsel for the Underwriters and its disbursements), (iv) in connection with the listing of the Shares on the Exchange, (v) related to the filing with, and clearance of the offering by, the National Association of Securities Dealers, Inc., (vi) in connection with the printing (including word processing and duplication costs) and delivery of this Agreement, the Preliminary and Supplemental Blue Sky Memoranda and the furnishing to the Underwriters and dealers of copies of the Registration Statement and the Prospectus, including mailing and shipping, as herein provided, (vii) any expenses incurred by the Company in connection with a "road show" presentation to potential investors, (viii) the cost of preparing stock certificates and (ix) the cost and charges of any transfer agent and any registrar. 6. The several obligations of the Underwriters hereunder to purchase the Shares on the Closing Date or the Additional Closing Date, as the case may be, are subject to the performance by the Company of its obligations hereunder and to the following additional conditions: 12 (a) the Registration Statement shall have become effective (or if a post-effective amendment is required to be filed under the Securities Act, such post-effective amendment shall have become effective) not later than 5:00 P.M., New York City time, on the date hereof; and no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment shall be in effect, and no proceedings for such purpose shall be pending before or threatened by the Commission; the Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Securities Act and in accordance with Section 5(a) hereof; and all requests for additional information shall have been complied with to the satisfaction of the Underwriters; (b) the representations and warranties of the Company contained herein are true and correct on and as of the Closing Date or the Additional Closing Date, as the case may be, as if made on and as of the Closing Date or the Additional Closing Date, as the case may be, and the Company shall have complied with all agreements and all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date or the Additional Closing Date, as the case may be; (c) subsequent to the execution and delivery of this Agreement and prior to the Closing Date or the Additional Closing Date, as the case may be, there shall not have occurred any downgrading, nor shall any notice have been given of (i) any downgrading, (ii) any intended or potential downgrading or (iii) any review or possible change that does not indicate an improvement, in the rating accorded any securities of or guaranteed by the Company by any "nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; (d) since the date of the latest audited financial statements included or incorporated by reference in the Prospectus there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the condition (financial or other), business, properties, financial position or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Prospectus, the effect of which in your judgment makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares on the Closing Date or the Additional Closing Date, as the case may be, on the terms and in the manner contemplated in the Prospectus; and neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; (e) the Underwriters shall have received on and as of the Closing Date or the Additional Closing Date, as the case may be, a certificate of an executive officer of the Company, with specific knowledge about the Company's financial matters, satisfactory to the Underwriters to the effect set forth in subsections (a) through (d) (with respect to the respective representations, warranties, agreements and conditions of the Company) of this Section and to the further effect that there has not occurred any material adverse change, or any development 13 involving a prospective material adverse change, in or affecting the condition (financial or other), business, properties, financial position or results of operations of the Company and its subsidiaries, taken as a whole, from that set forth or contemplated in the Registration Statement; (f) Kelley Drye & Warren LLP, counsel for the Company, shall have furnished to the Underwriters their written opinion, dated the Closing Date or the Additional Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, to the effect that: (i) the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; (ii) the Company has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts business, so as to require such qualification, other than where the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole; (iii) each of the Company's domestic subsidiaries has been duly incorporated and is validly existing as a corporation under the laws of its jurisdiction of incorporation with appropriate power and authority to own its properties and conduct its business as described in the Prospectus and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts business, so as to require such qualification, other than where the failure to be so qualified and in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole; (iv) such counsel does not know of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required; (v) the Amendment has been duly authorized, executed and delivered by the Company, UCAR Global and UCAR Finance and conforms in all material respects to the description thereof in the Prospectus; and assuming the due authorization, execution, and delivery by the agents and lenders thereunder, the Amendment constitutes the valid and legally binding obligations of the Company, UCAR Global and UCAR Finance except as may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles (regardless of whether considered in a proceeding in equity or at law); (vi) this Agreement has been duly authorized, executed and delivered by the Company; (vii) the authorized capital stock of the Company conforms to the description thereof contained in the Prospectus; 14 (viii) the shares of capital stock of the Company outstanding prior to the issuance of the Shares to be sold by the Company have been duly authorized and are validly issued, fully paid and non-assessable; (ix) the Shares to be issued and sold by the Company hereunder have been duly authorized, and when delivered to and paid for by the Underwriters in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable and the issuance of the Shares is not subject to any preemptive or similar rights; (x) the statements in the Prospectus under "Certain U.S. Tax Consequences for Non-U.S. Investors" and "Underwriting", the statements in the Prospectus relating to the Company's common stock incorporated by reference from the description of the Company's common stock in the Company's registration statement on Form 8-A dated July 28, 1995, the statements in the Prospectus relating to the Company's preferred stock purchase rights incorporated by reference from the description of the Company's preferred stock purchase rights in the Company's registration statement on Form 8-A dated September 10, 1998, the statements in the Prospectus relating to the Company's legal proceedings incorporated by reference from the description of the Company's legal proceedings from Item 3 of Part 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000 and the statements in the Registration Statement under "Indemnification of Directors and Officers" in Item 15, insofar as such statements constitute a summary of the terms of the Stock, the Preferred Stock, legal matters, documents or proceedings referred to therein, fairly present in all material respects the information called for with respect to such terms, legal matters, documents or proceedings; (xi) such counsel is of the opinion that the Registration Statement and the Prospectus and any amendments and supplements thereto (other than the financial statements and related schedules therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Securities Act and believes that (other than the financial statements and related schedules therein, as to which such counsel need express no belief) the Registration Statement and the prospectus included therein at the time the Registration Statement became effective did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that the Prospectus, as amended or supplemented, if applicable, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (xii) no consent, approval, authorization, order, license, registration or qualification of or with any court or governmental agency or body is required for the issue and sale of the Shares or the consummation of the other transactions contemplated by this Agreement, except such consents, approvals, authorizations, orders, licenses, registrations or qualifications as have been obtained under the Securities Act and as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; 15 (xiii) the Company is not and, after giving effect to the offering and sale of the Shares, will not be an "investment company" or entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act; (xiv) the documents incorporated by reference in the Prospectus or any further amendment or supplement thereto made by the Company prior to the Closing Date or the Additional Closing Date, as the case may be (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they became effective or were filed with the Commission, as the case may be, complied as to form in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder; and they have no reason to believe that any of such documents, when such documents became effective or were so filed, as the case may be, contained, in the case of a registration statement which became effective under the Securities Act, an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or, in the case of other documents which were filed with the Commission under the Exchange Act, an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading; and (xv) the Rights Agreement has been duly authorized, executed and delivered by the Company; the Rights have been duly authorized by the Company and, when issued upon issuance of the Shares, will be validly issued, and the Preferred Stock has been duly authorized by the Company and validly reserved for issuance upon the exercise of the Rights and, when issued upon such exercise in accordance with the terms of the Rights Agreement, will be validly issued, fully paid and non-assessable. In rendering such opinions, such counsel may rely (A) as to matters involving the application of laws other than the laws of the United States and the State of New York and the General Corporation Law of the State of Delaware to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to Underwriters' counsel) of other counsel reasonably acceptable to the Underwriters' counsel, familiar with the applicable laws; and (B) as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of the Company and certificates or other written statements of officials of jurisdictions having custody of documents respecting the corporate existence or good standing of the Company. The opinion of such counsel for the Company shall state that the opinion of any such other counsel upon which they relied is in form satisfactory to such counsel and, in such counsel's opinion, the Underwriters and they are justified in relying thereon. With respect to the matters to be covered in subparagraphs (xi) and (xiv) above counsel may state their opinion and belief is based upon their participation in the preparation of the Registration Statement and the Prospectus and any document incorporated by reference therein and any amendment or supplement thereto and review and discussion of the contents thereof but is without independent check or verification except as specified. The opinion of Kelley Drye & Warren LLP described above shall be rendered to the Underwriters at the request of the Company and shall so state therein. 16 (g) Karen G. Narwold, General Counsel of the Company, shall have furnished to the Underwriters her written opinion, dated the Closing Date or the Additional Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, to the effect that: (i) each of the Company's foreign subsidiaries has been duly incorporated and is validly existing as a corporation under the laws of its jurisdiction of incorporation with appropriate power and authority to own its properties and conduct its business as described in the Prospectus and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts business, so as to require such qualification, other than where the failure to be so qualified and in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole; (ii) all of the outstanding shares of capital stock of each subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable (or the equivalent thereof under analogous principles of foreign law in the case of any foreign subsidiary), and (except, in the case of foreign subsidiaries, for directors' qualifying shares) are owned by the Company, directly or indirectly, free and clear of all liens, encumbrances, security interests and claims other than those created by the Security Agreements and in existence on the Closing Date, EXCEPT that the Company owns, directly or indirectly, approximately 98% of the outstanding shares of capital stock of UCAR Carbon S.A., 99% of the outstanding shares of capital stock of UCAR Carbon Mexicana S.A. de C.V., 97% of the outstanding shares of capital stock of Graftech Inc., 99% of the outstanding shares of capital stock of UCAR Grafit OAO, 99% of the outstanding shares of capital stock of UCAR Produtos de Carbono S.A. and 70% of the outstanding shares of capital stock of Carbone Savoie S.A.S.; (iii) other than as set forth or contemplated in the Prospectus, there are no legal or governmental investigations, actions, suits or proceedings pending or, to the best of such counsel's knowledge, threatened against or affecting the Company or any of its subsidiaries or any of their respective properties or to which the Company or of its subsidiaries is or may be a party or to which any property of the Company or its subsidiaries is or may be the subject which, if determined adversely to the Company or any of its subsidiaries, could, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties, financial position or results of operations of the Company and its subsidiaries, taken as a whole; and to the best of such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (iv) neither the Company nor any of its subsidiaries is, or with the giving of notice or lapse of time or both would be, in violation of or in default under, its Certificate of Incorporation or By-Laws or any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which the Company or any of its subsidiaries is a party or by which it or any of them or any of their respective properties is bound, except for violations and defaults which, individually and in the aggregate, are not material to the Company and its subsidiaries, taken as a whole; the issue and sale of the Shares being delivered on the Closing Date or the Additional Closing Date, as the case may be, and the performance by the Company of its obligations under this Agreement and the consummation of the transactions contemplated herein will not (A) conflict with or result in a 17 breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (B) result in any violation of the provisions of the Certificate of Incorporation or the By-Laws of the Company or (C) result in any violation of any applicable law or statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company, its subsidiaries or any of their respective properties, except, in the case of clauses (A) and (C), for such conflicts, breaches, defaults and violations which could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole; (v) each of the Company and its subsidiaries owns, possesses or has obtained all licenses, permits, certificates, consents, orders, approvals and other authorizations from, and has made all declarations and filings with, all federal, state, local and other governmental authorities (including foreign regulatory agencies), all self-regulatory organizations and all courts and other tribunals, domestic or foreign, necessary to own or lease, as the case may be, and to operate its properties and to carry on its business as conducted as of the date hereof, except where such failure could not, individually or in the aggregate, be reasonably expected to result in a material adverse effect on the Company and its subsidiaries, taken as a whole; and neither the Company nor any such subsidiary has received any actual notice of any proceeding relating to revocation or modification of any such license, permit, certificate, consent, order, approval or other authorization, except as described in the Registration Statement and the Prospectus or which, individually or in the aggregate, could not reasonably be expected to result in a material adverse effect on the Company and its subsidiaries, taken as a whole; and each of the Company and its subsidiaries is in compliance with all laws and regulations relating to the conduct of its business as conducted as of the date of the Prospectus, except where such noncompliance could not, individually or in the aggregate, be reasonably expected to result in a material adverse effect on the Company and its subsidiaries, taken as a whole. In rendering such opinions, such counsel may rely (A) as to matters involving the application of laws other than the laws of the United States and the State of Connecticut and the General Corporation Law of the State of Delaware to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to Underwriters' counsel) of other counsel reasonably acceptable to the Underwriters' counsel, familiar with the applicable laws; and (B) as to matters of fact to the extent such counsel deems proper, on certificates of responsible officers of the Company and certificates or other written statements of officials of jurisdictions having custody of documents respecting the corporate existence or good standing of the Company. The opinion of such counsel for the Company shall state that the opinion of any such other counsel upon which they relied is in form satisfactory to such counsel and, in such counsel's opinion, the Underwriters, and they are justified in relying thereon. The opinion of Karen G. Narwold described above shall be rendered to the Underwriters at the request of the Company and shall so state therein. 18 (h) on the effective date of the Registration Statement and the effective date of the most recently filed post-effective amendment to the Registration Statement and also on the Closing Date or Additional Closing Date, as the case may be, KPMG LLP and Deloitte & Touche LLP shall have furnished to you letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, containing statements and information of the type customarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus; (i) the Underwriters shall have received on and as of the Closing Date or Additional Closing Date, as the case may be, an opinion of Cravath, Swaine & Moore, counsel to the Underwriters, with respect to the due authorization and valid issuance of the Shares, the Registration Statement, the Prospectus and other related matters as the Underwriters may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (j) the Shares to be delivered on the Closing Date or Additional Closing Date, as the case may be, shall have been approved for listing on the New York Stock Exchange, subject to official notice of issuance; (k) on or prior to the Closing Date or Additional Closing Date, as the case may be, the Company shall have furnished to the Underwriters such further certificates and documents as the Underwriters shall reasonably request; (l) the "lock-up" agreements, each substantially in the form of Exhibit A hereto, between you and certain officers and directors of the Company relating to sales and certain other dispositions of shares of Stock or certain other securities, delivered to you on or before the date hereof, shall be in full force and effect on the Closing Date or Additional Closing Date, as the case may be; and (m) the Amendment shall be in full force and effect and the Underwriters shall have received true and correct copies of all documents pertaining thereto and evidence reasonably satisfactory to the Underwriters of the effectiveness thereof. 7. The Company agrees to indemnify and hold harmless each Underwriter, each affiliate of any Underwriter which assists such Underwriter in the distribution of the Shares and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, the legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any related preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue 19 statement or omission made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter expressly for use therein; PROVIDED, that with respect to any untrue statement or alleged untrue statement in or omission or alleged omission from any preliminary prospectus the indemnity agreement contained in this paragraph shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages or liabilities purchased the Shares concerned, to the extent that a prospectus relating to such Shares was required to be delivered by such Underwriter under the Act in connection with such purchase and any such loss, claim, damage or liability of such Underwriter results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Shares to such person, a copy of the Prospectus correcting such untrue statement or alleged untrue statement or such omission or alleged omission if the Company had previously furnished copies thereof to such Underwriter. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person who controls the Company within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter expressly for use in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any preliminary prospectus. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such person (the "Indemnified Person") shall promptly notify the person against whom such indemnity may be sought (the "Indemnifying Person") in writing, but the omission to so notify the Indemnifying Person will not relieve it from any liability which it may have to any Indemnified Person except to the extent it is materially prejudiced by such failure, and the Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary, (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for the Underwriters, each affiliate of any Underwriter which assists such Underwriter in the distribution of the Shares and such control persons of Underwriters shall be designated in writing by J.P. Morgan Securities Inc. and any such separate firm for the Company, its directors, its officers who sign the Registration Statement and such control persons of the Company shall be designated in writing by the 20 Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested an Indemnifying Person to reimburse the Indemnified Person for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the Indemnifying Person agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding and does not include a statement as to, or an admission of fault, culpability or failure to act by or on behalf of an Indemnified Party. If the indemnification provided for in the first and second paragraphs of this Section 7 is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand shall be deemed to be in the same respective proportions as the net proceeds from the offering (before deducting expenses) received by the Company and the total underwriting discounts and the commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate public offering price of the Shares. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by PRO RATA allocation (even if the Underwriters were treated as one entity for such purposes) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the 21 losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 7 are several in proportion to the respective number of Shares set forth opposite their names in Schedule I hereto, and not joint. The remedies provided for in this Section 7 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. The indemnity and contribution agreements contained in this Section 7 and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter or by or on behalf of the Company, its officers or directors or any other person controlling the Company and (iii) acceptance of and payment for any of the Shares. 8. Notwithstanding anything herein contained, this Agreement (or the obligations of the several Underwriters with respect to the Option Shares) may be terminated in the absolute discretion of the Underwriters, by notice given to the Company, if after the execution and delivery of this Agreement and prior to the Closing Date (or, in the case of the Option Shares, prior to the Additional Closing Date) (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange or the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of or guaranteed by the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities, or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in the judgment of the Underwriters, is material and adverse and which, in the judgment of the Underwriters, makes it impracticable to market the Shares being delivered at the Closing Date or the Additional Closing Date, as the case may be, on the terms and in the manner contemplated in the Prospectus. 9. This Agreement shall become effective upon the later of (x) execution and delivery hereof by the parties hereto and (y) release of notification of the effectiveness of the Registration Statement (or, if applicable, any post-effective amendment) by the Commission. If on the Closing Date or the Additional Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they have agreed to 22 purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Shares set forth opposite their respective names in Schedule I bears to the aggregate number of Underwritten Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Underwriters may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; PROVIDED that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to Section 1 be increased pursuant to this Section 9 by an amount in excess of one-tenth of such number of Shares without the written consent of such Underwriter. If on the Closing Date or the Additional Closing Date, as the case may be, any Underwriter or Underwriters shall fail or refuse to purchase Shares which it or they have agreed to purchase hereunder on such date, and the aggregate number of Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Shares to be purchased on such date, and arrangements satisfactory to the Underwriters and the Company for the purchase of such Shares are not made within 36 hours after such default, this Agreement (or the obligations of the several Underwriters to purchase the Option Shares, as the case may be) shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either you or the Company shall have the right to postpone the Closing Date (or, in the case of the Option Shares, the Additional Closing Date), but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 10. If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement or any condition of the Underwriters' obligations cannot be fulfilled, the Company agrees to reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and expenses of its counsel) reasonably incurred by the Underwriter in connection with this Agreement or the offering contemplated hereunder; PROVIDED that the provisions of this Section 10 shall not apply in the event this Agreement is terminated by the Underwriters pursuant to Section 8 or 9. 11. This Agreement shall inure to the benefit of and be binding upon the Company, the Underwriters, each affiliate of any Underwriter which assists such Underwriter in the distribution of the Shares, any controlling persons referred to herein and their respective successors and assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person, firm or corporation any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. No purchaser of Shares from any Underwriter shall be deemed to be a successor by reason merely of such purchase. 23 12. Any action by the Underwriters hereunder may be taken jointly or by J.P. Morgan Securities Inc. alone on behalf of the Underwriters, and any such action taken jointly or by J.P. Morgan Securities Inc. alone shall be binding upon the Underwriters. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be given c/o J.P. Morgan Securities Inc., 270 Park Avenue, New York, New York 10017 (telefax: (212) 834-6648); Attention: Syndicate Department. Notices to the Company shall be given to it at UCAR International Inc., 3102 West End Avenue, Suite 1100, Nashville, TN 37203 (telefax: (615) 760-7624); Attention: General Counsel. 13. This Agreement may be signed in counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. 14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PROVISIONS THEREOF. 24 If the foregoing is in accordance with your understanding, please sign and return four counterparts hereof. Very truly yours, UCAR International Inc. By: /s/ Corrado De Gasperis -------------------------------- Name: Corrado De Gasperis Title: V.P., Chief Financial Officer and Chief Information Officer Accepted: July 25, 2001 J.P. Morgan Securities Inc. Credit Suisse First Boston Corporation Merrill Lynch, Pierce, Fenner & Smith Incorporated Acting severally on behalf of themselves. By: J.P. Morgan Securities Inc. By: /s/ David B. Walker --------------------------------------- Name: David B. Walker Title: Vice President 25 SCHEDULE I Number of Shares Underwriter to be Purchased - ----------- ---------------- J.P. Morgan Securities Inc. $2,400,000 Credit Suisse First Boston Corporation $2,400,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated $2,400,000 Bear, Stearns & Co. Inc. $ 360,000 Banc of America Securities LLC $ 360,000 Gabelli & Company Inc. $ 360,000 Scotia Capital (USA) Inc. $ 360,000 ABN AMRO Incorporated $ 360,000 =========== Total $9,000,000 26 LOCK-UP AGREEMENT ____, 2001 UCAR INTERNATIONAL INC. 3102 West End Avenue Suite 1100 Nashville, TN 31203 J.P. MORGAN SECURITIES INC. CREDIT SUISSE FIRST BOSTON CORPORATION MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED c/o J.P. Morgan Securities Inc. 60 Wall Street New York, NY 10260 Re: UCAR International Inc.--- Public Offering Ladies and Gentlemen: The undersigned understands that each of you proposes to enter into an Underwriting Agreement (the "Underwriting Agreement") by and among UCAR International Inc., a Delaware corporation (the Company"), and each of the underwriters mentioned above (the "Underwriters") providing for the public offering (the "Public Offering") by the Underwriters of common stock, $0.01 per share par value (the "Common Stock"), of the Company (the "Shares"). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Underwriting Agreement. In consideration of the Underwriters' agreement to purchase and make the Public Offering of the Shares, and for other good and valuable consideration receipt of which is hereby acknowledged, the undersigned hereby agrees that, without the prior written consent of J.P. Morgan Securities Inc. on behalf of the Underwriters, the undersigned will not, during the period ending 90 days after the date of the final prospectus relating to the Public Offering (the "Prospectus"), (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (including without limitation, Common Stock which may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and securities which may be issued upon exercise of a stock option or warrant) or (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. In addition, the undersigned agrees that, without the prior written consent of J.P. Morgan Securities Inc. on behalf of the Underwriters, it will not, during the period ending 90 days after the date of the Prospectus, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock. 27 In furtherance of the foregoing, the Company, and any duly appointed transfer agent for the registration or transfer of the securities described herein, are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Agreement. The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Agreement. All authority herein conferred or agreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or personal representatives of the undersigned. The undersigned understands that, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Shares to be sold thereunder, the undersigned shall be released from all obligations under this Lock-Up Agreement. 28 The undersigned understands that the Underwriters are entering into the Underwriting Agreement and proceeding with the Public Offering in reliance upon this Lock-Up Agreement. This Lock-Up Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof. Very truly yours, [NAME OF STOCKHOLDER] By: ------------------------------- Name: Title: Accepted as of the date first set forth above: J.P. MORGAN SECURITIES INC. CREDIT SUISSE FIRST BOSTON CORPORATION MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED Acting severally on behalf of themselves. By: J.P. MORGAN SECURITIES INC. By: ------------------------------------------- Name: Title: 29 EX-10 4 exh10-53_2ndamend.txt EXHIBIT 10.53 EXHIBIT 10.53 CONFORMED COPY SECOND AMENDMENT dated as of April 25, 2001 (this "Amendment") to Credit Agreement dated as of February 22, 2000 (as previously amended, 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. A. Pursuant to the Credit Agreement, the Lenders and the Issuing Bank have extended credit to the Borrower and the LC Subsidiaries, and have agreed to extend credit to the Borrower and the LC Subsidiaries, in each case pursuant to the terms and subject to the conditions set forth therein. B. The Borrower has informed the Administrative Agent that it seeks an amendment of the Credit Agreement as set forth herein. C. The Required Lenders are willing to agree to such amendment pursuant to the terms and subject to the conditions set forth herein. D. Each capitalized term used and not otherwise defined herein shall have the meaning assigned to such term in the Credit Agreement. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT. (a) The following new definition is hereby added to Section 1.01 of the Credit Agreement in its appropriate alphabetical position: "UCC/MC LAWSUIT" shall mean the lawsuit pending in the United States District Court for the Southern District of New York, entitled UCAR International Inc., UCAR Global Enterprises Inc. and UCAR Carbon Company Inc. v. Union Carbide Corporation, Mitsubishi Corporation, Mitsubishi International Corporation, Hiroshi Kawamura and Robert D. Kennedy, Case No. 00 Civ. 1338 (GBD), and all claims asserted by or against any of the parties or their affiliates, related parties or successors in any such lawsuit or in subsequent suits or proceedings arising from or related to the original action or the facts giving rise to that action. (b) The definition of "Amendment Fee" in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "AMENDMENT FEES" shall mean, collectively, the Amendment Fee as such term is defined in each of the First Amendment dated as of October 11, 2000 to this Agreement and the Second Amendment dated as of April 25, 2001 to this Agreement. (c) Section 7.04(j) of the Credit Agreement is hereby amended by inserting the following immediately after the phrase "at any time the amount set forth on Schedule A for the Leverage Ratio that is in effect at such time" appearing in Section 7.04(j)(ii)(B) of the Credit Agreement: , as reduced by the fees, costs and expenses (including fees of counsel and experts) paid by UCAR, Global, the Borrower or any Subsidiary in connection with the UCC/MC Lawsuit, but such amount of the reduction not to exceed $20,000,000, (d) The word "and" appearing at the end of Section 7.06(f) of the Credit Agreement is hereby deleted. The period at the end of Section 7.06(g) is hereby deleted and in lieu thereof a semicolon and the word "and" is inserted in its place. (e) A new Section 7.06(h) is hereby inserted immediately following Section 7.06(g) of the Credit Agreement which shall read in its entirety as follows: (h) Global or any Subsidiary may make Restricted Payments to UCAR in an aggregate amount not to exceed $20,000,000 for the sole and exclusive purpose of paying any fees, costs and expenses (including fees of counsel and experts) paid by UCAR in connection with the UCC/MC Lawsuit. -2- (f)The proviso contained in Section 7.11 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "; PROVIDED HOWEVER, that for purposes of calculating the Interest Coverage Ratio to determine compliance with this Section for any four fiscal quarter period ending before July 1, 2002, (A) to the extent that (i) any amount of the Amendment Fees, (ii) any new charges after the Effective Date in respect of Litigation Liabilities up to the amount of Litigation Payments that could be made and Litigation Reserves that could be created without resulting in a violation of the representation and warranty set forth in Section 4.24 or (iii) any fees, costs and expenses (including fees of counsel and experts) paid or incurred by UCAR, Global, the Borrower or any Subsidiary in connection with the UCC/MC Lawsuit, up to $20,000,000 in the aggregate and $3,000,000 in any one fiscal quarter are deducted from the consolidated net income of UCAR, Global, the Borrower and the Subsidiaries and is not added back by the definition of EBITDA, such amount shall be added back to EBITDA (provided that, with the exception of payments to the European Union in respect of Litigation Liabilities that do not result in a breach of the representation and warranty set forth in Section 4.24 and total no more than $80,000,000 in the aggregate(when taken together with payments to the European Union charges against the Litigation Reserves existing on the Effective Date), payments in respect of charges described in clause (A)(ii) above (or in respect of Litigation Liabilities arising after April 25, 2001, that are charged against the Litigation Reserves existing on the Effective Date in an aggregate amount up to the lesser of (x) the excess of all payments in respect of Litigation Liabilities made after April 25, 2001 over the aggregate amount of the Litigation Reserves in effect on March 31, 2001 and (y) the difference between $40,000,000 and the amount of Litigation Liabilities owed to the European Union that are charged against such Litigation Reserves) shall be deducted from EBITDA as paid) and (B) Cash Interest Expense shall not include any amounts attributable to Indebtedness incurred to finance (i) the Amendment Fees, (ii) payments to the European Union in respect of Litigation Liabilities that do not result in a breach of the representation and warranty set forth in Section 4.24 and total no more than $80,000,000 in the aggregate or (iii) fees, costs and expenses (including fees of counsel and experts) paid by UCAR, Global, the Borrower or any Subsidiary in connection with the UCC/MC Lawsuit, up to $20,000,000 in the aggregate and $3,000,000 in any one fiscal quarter." -3- (g) The proviso contained in Section 7.12 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "; PROVIDED HOWEVER, that for purposes of calculating the Leverage Ratio to determine compliance with this Section on any date prior to July 1, 2002, (A) to the extent that (i) any amount of the Amendment Fees, (ii) any new charges after the Effective Date in respect of Litigation Liabilities up to the amount of Litigation Payments that could be made and Litigation Reserves that could be created without resulting in a violation of the representation and warranty set forth in Section 4.24 or (iii) any fees, costs and expenses (including fees of counsel and experts) paid or incurred by UCAR, Global, the Borrower or any Subsidiary in connection with the UCC/MC Lawsuit, up to $20,000,000 in the aggregate and $3,000,000 in any one fiscal quarter are deducted from the consolidated net income of UCAR, Global, the Borrower and the Subsidiaries and is not added back by the definition of EBITDA, such amount shall be added back to EBITDA (provided that, with the exception of payments to the European Union in respect of Litigation Liabilities that do not result in a breach of the representation and warranty set forth in Section 4.24 and total no more than $80,000,000 in the aggregate(when taken together with payments to the European Union charges against the Litigation Reserves existing on the Effective Date), payments in respect of charges described in clause (A)(ii) above (or in respect of Litigation Liabilities arising after April 25, 2001, that are charged against the Litigation Reserves existing on the Effective Date in an aggregate amount up to the lesser of (x) the excess of all payments in respect of Litigation Liabilities made after April 25, 2001 over the aggregate amount of the Litigation Reserves in effect on March 31, 2001 and (y) the difference between $40,000,000 and the amount of Litigation Liabilities owed to the European Union that are charged against such Litigation Reserves) shall be deducted from EBITDA as paid) and (B)Net Debt shall not include Indebtedness incurred to finance (i) the Amendment Fees, (ii) payments to the European Union in respect of Litigation Liabilities that do not result in a breach of the representation and warranty set forth in Section 4.24 and total no more than $80,000,000 in the aggregate or (iii) the fees, costs and expenses (including fees of counsel and experts) paid by UCAR, Global, the Borrower or any Subsidiary in connection with the UCC/MC Lawsuit up to $20,000,000 in the aggregate and $3,000,000 in any one fiscal quarter." SECTION 2. REPRESENTATIONS AND WARRANTIES. Each of UCAR, Global and the Borrower represents and warrants to each Lender party hereto that, after giving effect to this Amendment: (a) the representations and warranties set forth in Article IV of the Credit Agreement are true and correct in all material respects on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties were true and correct in all material respects as of the earlier date), and (b) no Default or Event of Default has occurred and is continuing. -4- SECTION 3. EFFECTIVENESS. This Amendment shall become effective as of the first date (the "AMENDMENT EFFECTIVE DATE") that the following condition is satisfied: the Administrative Agent or its counsel shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Borrower, UCAR, Global and the Required Lenders. -5- SECTION 4. AMENDMENT FEE. The Borrower agrees to pay to each Lender that executes and delivers a copy of this Amendment to the Administrative Agent (or its counsel) on or prior to April 24, 2001 an amendment fee (the "AMENDMENT FEE") in an amount equal to 0.10% of such Lender's Revolving Commitment (whether used or unused) and outstanding Term Loans, in each case as of the Amendment Effective Date; PROVIDED THAT the Borrower shall have no liability for any such Amendment Fee if this Amendment does not become effective. Such Amendment Fee shall be payable (i) on the Amendment Effective Date, to each Lender entitled to receive such fee as of the Amendment Effective Date and (ii) in the case of any Lender that becomes entitled to the Amendment Fee after the Amendment Effective Date, within two Business Days after such Lender becomes entitled to the Amendment Fee. SECTION 5. EFFECT OF AMENDMENT. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Issuing Bank, the Collateral Agent or the Administrative Agent, under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. SECTION 6. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Delivery of any executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. SECTION 7. APPLICABLE LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 8. HEADINGS. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. [SIGNATURE PAGE FOLLOWS] -6- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date and year first above written. UCAR INTERNATIONAL INC., By: /S/ NANCY FALLS -------------------------------------- Name: Nancy Falls Title: UCAR GLOBAL ENTERPRISES INC., By: /S/ NANCY FALLS -------------------------------------- Name: Nancy Falls Title: UCAR FINANCE INC., By: /S/ NANCY FALLS -------------------------------------- Name: Nancy Falls Title: MORGAN GUARANTY TRUST By: /S/ JAMES H. RAMAGE -------------------------------------- Name: James H. Ramage Title: Managing Director -7- ABN AMRO BANK, by /S/ DAVID MANDRELL ------------------------------------ Name: David Mandrell Title: Senior Vice President by /S/ PAULINE MCHUGH ------------------------------------ Name: Pauline McHugh Title: Group Vice President ADDISON CDO, LIMITED (ACCT 1279), By: Pacific Investment Management Company LLC, as its Investment Advisor, by /S/ RAYMOND G. KENNEDY --------------------------------- Name: Raymond G. Kennedy Title: Executive Vice President AIMCO CDO SERIES 2000-A, by /S/ JERRY D. ZINKULA --------------------------------- Name: Jerry D. Zinkula Title: Authorized Signatory by /S/ PATRICIA W. WILSON --------------------------------- Name: Patricia W. Wilson Title: Authorized Signatory -8- ALLSTATE LIFE INSURANCE COMPANY, by /S/ JERRY D. ZINKULA --------------------------------- Name: Jerry D. Zinkula Title: Authorized Signatory by /S/ PATRICIA W. WILSON --------------------------------- Name: Patricia W. Wilson Title: Authorized Signatory AMMC CDO I, LIMITED, By: American Money Management Corp., as Collateral Manager, by /S/ DAVID P. MEYER --------------------------------- Name: David P. Meyer Title: Vice President AMMC CDO II, LIMITED, By: American Money Management Corp., as Collateral Manager, by /S/ DAVID P. MEYER --------------------------------- Name: David P. Meyer Title: Vice President ARCHIMEDES FUNDING II, LTD., By: ING Capital Advisors LLC, as Collateral Manager, by /S/ JONATHAN DAVID --------------------------------- Name: Jonathan David Title: Vice President -9- ARCHIMEDES FUNDING III, LTD., By: ING Capital Advisors LLC, as Collateral Manager, by /S/ JONATHAN DAVID --------------------------------- Name: Jonathan David Title: Vice President ARES III CLO LTD., By: Ares CLO Management LLC, Investment Manager, by /S/ DAVID A. SACHS --------------------------------- Name: David A. Sachs Title: Vice President ARES IV CLO LTD., By: Ares CLO Management IV, L.P., Investment Manager, By: Ares CLO GP IV, LLC, its Managing Member, by /S/ DAVID A. SACHS --------------------------------- Name: David A. Sachs Title: Vice President ATHENA CDO, LIMITED (ACCT 1277), By: Pacific Investment Management Company LLC, as its Investment Advisor, by /S/ RAYMOND G. KENNEDY --------------------------------- Name: Raymond G. Kennedy Title: Executive Vice President -10- AVALON CAPITAL LTD., By: INVESCO Senior Secured Management, Inc. as Portfolio Advisor, by /S/ GREGORY STOECKLE --------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory AVALON CAPITAL LTD. 2, By: INVESCO Senior Secured Management, Inc., as Portfolio Advisor, by /S/ GREGORY STOECKLE --------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory THE BANK OF NOVA SCOTIA, by /S/ JOHN W. CAMPBELL --------------------------------- Name: John W. Campbell Title: Unit Head BANK POLSKA KASA OPIEKI SA, NEW YORK BRANCH, by /S/ HUSSEIN B. EL-TAWIL --------------------------------- Name: Hussein B. El-Tawil Title: Vice President -11- BLUE SQUARE FUNDING SERIES 3, By: Bankers Trust Company, as Trustee, by /S/ STEPHEN T. HESSLER --------------------------------- Name: Stephen T. Hessler Title: Vice President BHF (USA) CAPITAL CORPORATION, by /S/ CHRISTOPHER J. RIUZZI --------------------------------- Name: Christopher J. Riuzzi Title: Vice President by /S/ AURELIO ALMONTE --------------------------------- Name: Aurelio Almonte Title: Associate CAPTIVA III FINANCE LTD. (ACCT 275), as advised by Pacific Investment Management Company LLC, by /S/ DAVID DYER --------------------------------- Name: David Dyer Title: Director CARLYLE HIGH YIELD PARTNERS II, LTD., by /S/ LINDA M. PACE --------------------------------- Name: Linda M. Pace Title: Vice President -12- CERES II FINANCE LTD, By: INVESCO Senior Secured Management, Inc., as Sub-Managing Agent (Financial), by /S/ GREGORY STOECKLE --------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory CHARTER VIEW PORTFOLIO, By: INVESCO Senior Secured Management, Inc., as Investment Advisor, by /S/ GREGORY STOECKLE --------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory THE CHASE MANHATTAN BANK, by /S/ JAMES H. RAMAGE --------------------------------- Name: James H. Ramage Title: Managing Director CITIBANK N.A. as Additional Investment Manager for and on behalf of FIVE FINANCE CORPORATION, by /S/ MIKE REGAN --------------------------------- Name: Mike Regan Title: Vice President by /S/ MAURA K, CONNOR --------------------------------- Name: Maura K. Connor Title: Vice President -13- COLUMBUS LOAN FUNDING, LTD., By: Travelers Asset Management International Company, LLC, by /S/ JOHN W. PETCHLER --------------------------------- Name: John W. Petchler Title: Second Vice President CREDIT INDUSTRIEL ET COMMERCIAL, by /S/ DJ WILSON --------------------------------- Name: DJ Wilson Title: Manager Acquisition Finance by /S/ CT CARPENTER --------------------------------- Name: CT Carpenter Title: Manager Structured Finance CREDIT LYONNAIS, by /S/ ATTILA KOE --------------------------------- Name: Attila Koe Title: Senior Vice President -14- CREDIT SUISSE FIRST BOSTON, by /S/ MARK E. GLEASON --------------------------------- Name: Mark E. Gleason Title: Director by /S/ JOEL GLODOWSKI --------------------------------- Name: Joel Glodowski Title: Managing Director DELANO COMPANY (ACCT 274), By: Pacific Investment Management Company LLC, as its Investment Advisor, by /S/ RAYMOND G. KENNEDY --------------------------------- Name: Raymond G. Kennedy Title: Executive Vice President EATON VANCE SENIOR INCOME TRUST, By: Eaton Vance Management as Investment Advisor, by /S/ SCOTT H. PAGE --------------------------------- Name: Scott H. Page Title: Vice President EATON VANCE CDO III, LTD., By: Eaton Vance Management as Investment Advisor, by /S/ SCOTT H. PAGE --------------------------------- Name: Scott H. Page Title: Vice President -15- ELF FUNDING TRUST I, By: Highland Capital Management, L.P. as Collateral Manager, by /S/ TODD TRAVERS --------------------------------- Name: Todd Travers Title: Senior Portfolio Manager ELT LTD., by /S/ ANN E. MORRIS --------------------------------- Name: Ann E. Morris Title: Authorized Agent GALAXY CLO 1999-1, LTD., By: SAI Investment Adviser, Inc. its Collateral Manager, by /S/ THOMAS G. BRANDT --------------------------------- Name: Thomas G. Brandt Title: Authorized Agent GENERAL ELECTRIC CAPITAL CORPORATION, by /S/ GREGORY L. HONG --------------------------------- Name: Gregory L. Hong Title: Duly Authorized Signatory -16- GLENEAGLES TRADING LLC, by /S/ ANN E. MORRIS --------------------------------- Name: Ann E. Morris Title: Assistant Vice President JISSEKIKUN FUNDING, LTD. (ACCT 1288), By: Pacific Investment Management Company LLC, as its Investment Advisor, by /S/ RAYMOND G. KENNEDY --------------------------------- Name: Raymond G. Kennedy Title: Executive Vice President KATONAH I, LTD., by /S/ RALPH DELLA ROCCA --------------------------------- Name: Ralph Della Rocca Title: Authorized Officer Katonah Capital, L.L.C. as Manager KATONAH II, LTD., by /S/ RALPH DELLA ROCCA --------------------------------- Name: Ralph Della Rocca Title: Authorized Officer Katonah Capital, L.L.C. as Manager -17- KZH CNC LLC, by /S/ NICHOLAS LUCENTE --------------------------------- Name: Nicholas Lucente Title: Authorized Agent KZH ING-1 LLC, by /S/ NICHOLAS LUCENTE --------------------------------- Name: Nicholas Lucente Title: Authorized Agent KZH ING-2 LLC, by /S/ NICHOLAS LUCENTE --------------------------------- Name: Nicholas Lucente Title: Authorized Agent KZH ING-3 LLC, by /S/ NICHOLAS LUCENTE --------------------------------- Name: Nicholas Lucente Title: Authorized Agent KZH LANGDALE LLC, by /S/ NICHOLAS LUCENTE --------------------------------- Name: Nicholas Lucente Title: Authorized Agent -18- KZH SOLEIL-2 LLC, by /S/ NICHOLAS LUCENTE --------------------------------- Name: Nicholas Lucente Title: Authorized Agent MAPLEWOOD (CAYMAN) LIMITED, by /S/ MARY ANN MCCARTHY --------------------------------- Name: Mary Ann McCarthy Title: Managing Director David L. Babson & Co., Inc. under delegated authority from MassMutual Life Insurance Co., as Investment Manager MASSACHUSETTS MUTUAL LIFE INSURANCE CO., By: David L. Babson & Company, Inc. as Investment Adviser, by /S/ MARY ANN MCCARTHY --------------------------------- Name: Mary Ann McCarthy Title: Managing Director MELLON BANK N.A., by /S/ PETER K. LEE --------------------------------- Name: Peter K. Lee Title: Vice President -19- MONUMENT CAPITAL LTD., By: Alliance Capital Management L.P., as Investment Manager, By: Alliance Capital Management Corporation, as General Partner, by /S/ SVERKER JOHANSSON --------------------------------- Name: Sverker Johansson Title: Vice President MUZINICH CASHFLOW CBO, LIMITED, by /S/ DANIEL NACCARELLA --------------------------------- Name: Daniel Naccarella Title: Attorney-in-Fact NATEXIS BANQUES POPULAIRES, by /S/ GARY KANIA --------------------------------- Name: Gary Kania Title: Vice President by /S/ FRANK H. MADDEN, JR. --------------------------------- Name: Frank H. Madden, Jr. Title: Vice President & Group Manager OLYMPIC FUNDING TRUST, SERIES 1999-1, by /S/ ANN E. MORRIS --------------------------------- Name: Ann E. Morris Title: Authorized Agent -20- PAMCO CAYMAN LTD., By: Highland Capital Management, L.P. as Collateral Manager, by /S/ TODD TRAVERS --------------------------------- Name: Todd Travers Title: Senior Portfolio Manager SAWGRASS TRADING LLC, by /S/ ANN E. MORRIS --------------------------------- Name: Ann E. Morris Title: Assistant Vice President SENIOR DEBT PORTFOLIO, By: Boston Management and Research as Investment Advisor, by /S/ SCOTT H. PAGE --------------------------------- Name: Scott H. Page Title: Vice President SEQUILS-ING I (HBDGM), LTD., By: ING Capital Advisors LLC, as Collateral Manager, by /S/ JONATHAN DAVID --------------------------------- Name: Jonathan David Title: Vice President -21- SIMSBURY CLO, LIMITED, By: David L. Babson & Company, Inc. under delegated authority from MassMutual Life Insurance Co. as collateral manager, by /S/ MARY ANN MCCARTHY --------------------------------- Name: Mary Ann McCarthy Title: Managing Director SWISS LIFE US RAINBOW LIMITED, By: ING Capital Advisors LLC, as Investment Manager, by /S/ JONATHAN DAVID --------------------------------- Name: Jonathan David Title: Vice President THE TRAVELERS INSURANCE COMPANY, by /S/ JOHN W. PETCHLER --------------------------------- Name: John W. Petchler Title: Second Vice President TRAVELERS CORPORATE LOAN FUND, INC., By: Travelers Asset Management International Company, LLC, by /S/ JOHN W. PETCHLER --------------------------------- Name: John W. Petchler Title: Second Vice President -22- TRITON CDO IV, LIMITED, By: INVESCO Senior Secured Management, Inc., as Investment Advisor, by /S/ GREGORY STOECKLE --------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory VAN KAMPEN SENIOR INCOME TRUST, By: Van Kampen Investment Advisory Corp., by /S/ DARVIN D. PIERCE --------------------------------- Name: Darvin D. Pierce Title: Principal VAN KAMPEN SENIOR FLOATING RATE FUND, By: Van Kampen Investment Advisory Corp., by /S/ DARVIN D. PIERCE --------------------------------- Name: Darvin D. Pierce Title: Principal VAN KAMPEN PRIME RATE INCOME TRUST, By: Van Kampen Investment Advisory Corp., by /S/ DARVIN D. PIERCE --------------------------------- Name: Darvin D. Pierce Title: Principal -23- VAN KAMPEN CLO II, LIMITED, By: Van Kampen Management Inc., as Collateral Manager, by /S/ DARVIN D. PIERCE --------------------------------- Name: Darvin D. Pierce Title: Principal WINGED FOOT FUNDING TRUST, by /S/ ANN E. MORRIS --------------------------------- Name: Ann E. Morris Title: Authorized Agent -24- EX-10 5 exh10-54_3rdamend.txt EXHIBIT 10.54 EXHIBIT 10.54 CONFORMED COPY THIRD AMENDMENT dated as of July 10, 2001 (this "Amendment") to Credit Agreement dated as of February 22, 2000 (as previously amended, 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. A. Pursuant to the Credit Agreement, the Lenders and the Issuing Bank have extended credit to the Borrower and the LC Subsidiaries, and have agreed to extend credit to the Borrower and the LC Subsidiaries, in each case pursuant to the terms and subject to the conditions set forth therein. B. The Borrower has informed the Administrative Agent that it seeks an amendment of the Credit Agreement as set forth herein. C. The Required Lenders are willing to agree to such amendment pursuant to the terms and subject to the conditions set forth herein. D. Each capitalized term used and not otherwise defined herein shall have the meaning assigned to such term in the Credit Agreement. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT. (a) The definition of "Amendment Fee" in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "AMENDMENT FEES" shall mean, collectively, the Amendment Fee as such term is defined in each of the First Amendment dated as of October 11, 2000 to this Agreement, the Second Amendment dated as of April 25, 2001 to this Agreement and the Third Amendment dated as of July 10, 2001 to this Agreement plus any other fees, costs and expenses incurred in connection with such Third Amendment, including, but not limited to, attorneys' fees. (b) The definition of "Applicable Rate" in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "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 >3.75 3.00% 2.00% 0.500% - ------------------------------------------------------------------------- CATEGORY 2 < 3.75 and > 3.50 2.875% 1.875% 0.500% - ------------------------------------------------------------------------ CATEGORY 3 < 3.50 > 2.75 2.75% 1.75% 0.500% - ------------------------------------------------------------------------ CATEGORY 4 <2.75 and >2.50 2.50% 1.50% 0.500% - ------------------------------------------------------------------------ CATEGORY 5 <2.50 and >2.25 2.00% 1.00% 0.375% - ------------------------------------------------------------------------ CATEGORY 6 <2.25 and >2.00 1.75% 0.75% 0.375% - ------------------------------------------------------------------------ CATEGORY 7 <2.00 and >1.75 1.50% 0.50% 0.375% - ------------------------------------------------------------------------ CATEGORY 8 <1.75 1.00% 0.00% 0.375% ========================================================================
2
TABLE II ================================================================== EUROCURRENCY BASE RATE LEVERAGE RATIO: SPREAD SPREAD ------------------------------------------------------------------ CATEGORY 1 >3.75 3.25% 2.25% - ------------------------------------------------------------------ CATEGORY 2 <3.75 and >3.50 3.125% 2.125% - ------------------------------------------------------------------ Category 3 <3.50 and >2.75 3.00% 2.00% - ------------------------------------------------------------------ CATEGORY 4 <2.75 and >2.50 3.00% 2.00% - ------------------------------------------------------------------ CATEGORY 5 <2.50 and >2.25 2.50% 1.50% - ------------------------------------------------------------------ CATEGORY 6 <2.25 and >2.00 2.50% 1.50% - ------------------------------------------------------------------ 3 CATEGORY 7 <2.00 and >1.75 2.50% 1.50% - ------------------------------------------------------------------ CATEGORY 8 <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 December 31, 2001, the Applicable Rate will for all purposes be determined by reference to Category 1 in the applicable Table. (c) The following new definition is hereby added to Section 1.01 of the Credit Agreement in its appropriate alphabetical position: "UCAR EQUITY OFFERING" shall mean the underwritten public offering of up to 9.2 million shares of common stock of, and by, UCAR pursuant to a registration statement on Form S-3 filed on June 26, 2001, with the Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended. (d) Section 2.09(d) of the Credit Agreement is hereby amended by inserting the following proviso immediately before the period at the end of the first sentence of such Section: ; PROVIDED that prepayments of the Term Borrowings of any Class with the Net Proceeds received from the UCAR Equity Offering shall be applied to reduce the scheduled repayments of the Term Borrowings of such Class in the order of maturity (e) Section 2.10(c) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (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 prompty 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, (i) in the case of any event described in clause (c) of the definition of the term Prepayment 4 Event other than the UCAR Equity Offering, 50%, or (ii) in the case of the UCAR Equity Offering, 60%) 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. (f) Section 7.04(j) of the Credit Agreement is hereby amended by inserting the following proviso immediately before the period at the end of such Section: ; PROVIDED FURTHER that any investment made after the Amendment Effective Date (as defined in the Third Amendment dated as of July 10, 2001 to this Agreement) by UCAR, Global, the Borrower or any Subsidiary in any Unrestricted Subsidiary must be in the form of an advance evidenced by an intercompany note approved as to form and substance by the Administrative Agent, which shall be secured by substantially all of the assets of such Unrestricted Subsidiary in a manner and pursuant to documentation approved by the Administrative Agent and which shall be pledged under the Pledge Agreement to secure the Loans (and UCAR, Global and the Borrower covenant and agree that no such intercompany note shall be assigned or transferred (other than pursuant to the Pledge Agreement or to a Loan Party that is a party to the Pledge Agreement), or canceled, forgiven, compromised or contributed to the capital of any Unrestricted Subsidiary). Notwithstanding the foregoing, any equity investment made in a person that is not an Unrestricted Subsidiary at the time of such investment shall not be required to be 5 converted into an advance if such person becomes an Unrestricted Subsidiary at a later date. (g) Section 7.10 of the Credit Agreement is hereby amended by deleting the table set forth therein and substituting therefor the following: YEAR AMOUNT 2001 $65,000,000 2002 70,000,000 2003 80,000,000 2004 80,000,000 2005 80,000,000 2006 81,000,000 2007 84,000,000 6 (h) Section 7.11 of the Credit Agreement is hereby amended by deleting the table set forth therein and substituting therefor the following: -------------------------- --------------------------- --------------- FROM AND INCLUDING: TO AND INCLUDING: RATIO: -------------------------- --------------------------- --------------- October 1, 2000 September 30, 2001 2.50:1.00 -------------------------- --------------------------- --------------- October 1, 2001 September 30, 2002 2.50:1.00 -------------------------- --------------------------- --------------- October 1, 2002 September 30, 2003 2.75:1.00 -------------------------- --------------------------- --------------- October 1, 2003 September 30, 2004 3.00:1.00 -------------------------- --------------------------- --------------- October 1, 2004 September 30, 2005 3.25:1.00 -------------------------- --------------------------- --------------- October 1, 2005 September 30, 2006 3.25:1.00 -------------------------- --------------------------- --------------- October 1, 2006 September 30, 2007 3.50:1.00 -------------------------- --------------------------- --------------- October 1, 2007 Tranche B Maturity Date 3.50:1.00 -------------------------- --------------------------- --------------- (i) Section 7.12 of the Credit Agreement is hereby amended by deleting the table set forth therein and substituting therefor the following: ------------------------- --------------------------- ---------------- FROM AND INCLUDING: TO AND INCLUDING: RATIO: ------------------------- --------------------------- ---------------- July 1, 2001 September 30, 2001 4.50:1.00 ------------------------- --------------------------- ---------------- October 1, 2001 September 30, 2002 4.50:1.00 ------------------------- --------------------------- ---------------- October 1, 2002 September 30, 2003 4.25:1.00 ------------------------- --------------------------- ---------------- October 1, 2003 September 30, 2004 4.00:1.00 ------------------------- --------------------------- ---------------- October 1, 2004 September 30, 2005 3.75:1.00 ------------------------- --------------------------- ---------------- October 1, 2005 September 30, 2006 3.75:1.00 ------------------------- --------------------------- ---------------- October 1, 2006 September 30, 2007 3.50:1.00 ------------------------- --------------------------- ---------------- October 1, 2007 Tranche B Maturity Date 3.50:1.00 ------------------------- --------------------------- ---------------- SECTION 2. REPRESENTATIONS AND WARRANTIES. Each of UCAR, Global and the Borrower represents and warrants to each Lender party hereto that, after giving effect to this Amendment: (a) the representations and warranties set forth in Article IV of the Credit Agreement are true and correct in all material respects on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date (in which case such 7 representations and warranties were true and correct in all material respects as of the earlier date), and (b) no Default or Event of Default has occurred and is continuing. SECTION 3. EFFECTIVENESS. This Amendment shall become effective as of the date first written above on the date (the "AMENDMENT EFFECTIVE DATE") on which (a) the Administrative Agent or its counsel shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Borrower, UCAR, Global and the Required Lenders and (b) the gross proceeds received by UCAR in connection with the completed UCAR Equity Offering shall equal or exceed $50,000,000. SECTION 4. AMENDMENT FEE. The Borrower agrees to pay to each Lender that executes and delivers to the Administrative Agent (or its counsel) a copy of this Amendment at or prior to 5:00 p.m., New York City time, on July 10, 2001 an amendment fee (the "AMENDMENT FEE") in an amount equal to 0.25% of such Lender's Revolving Commitment (whether used or unused) and outstanding Term Loans, in each case as of the Amendment Effective Date; PROVIDED that the Borrower shall have no liability for any such Amendment Fee if this Amendment does not become effective. Such Amendment Fee shall be payable on the Amendment Effective Date, to each Lender entitled to receive such fee as determined pursuant to this Section 4. SECTION 5. EFFECT OF AMENDMENT. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Issuing Bank, the Collateral Agent or the Administrative Agent, under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. SECTION 6. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Delivery of any executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. SECTION 7. APPLICABLE LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 8. HEADINGS. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. [SIGNATURE PAGE FOLLOWS] 8 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date and year first above written. UCAR INTERNATIONAL INC., By: /S/ WALTER D. CARTER, JR. --------------------------------------------- Name: Walter D. Carter, Jr. Title: Assistant Treasurer UCAR GLOBAL ENTERPRISES INC., By: /S/ WALTER D. CARTER, JR. --------------------------------------------- Name: Walter D. Carter, Jr. Title: Assistant Treasurer UCAR FINANCE INC., By: /S/ WALTER D. CARTER, JR. --------------------------------------------- Name: Walter D. Carter, Jr. Title: Assistant Treasurer MORGAN GUARANTY TRUST By: /S/ JAMES H. RAMAGE --------------------------------------- Name: James H. Ramage Title: Managing Director ABN AMRO BANK N.V., By: /S/PATRICIA CHRISTY --------------------------------------- Name: Patricia Christy Title: Vice President By: /S/PAMELA DELVECCHIO --------------------------------------- Name: Pamela Delvecchio Title: Assistant Vice President ADDISON CDO, LIMITED (ACCT 1279), By: Pacific Investment Management Company LLC as its Investment Manager, 9 By: /S/MOHAN V. PHANSALKAR --------------------------------------- Name: Mohan V. Phansalkar Title: Executive Vice President AMMC CDO I, LIMITED, By: American Money Management Corp., as Collateral Manager, By: /S/DAVID P. MEYER --------------------------------- Name: David P. Meyer Title: Vice President AMMC CDO II, LIMITED, By: American Money Management Corp., as Collateral Manager, By: /S/DAVID P. MEYER --------------------------------- Name: David P. Meyer Title: Vice President ARCHIMEDES FUNDING II, LTD., By: ING Capital Advisors LLC, as Collateral Manager, By: /S/JONATHAN DAVID --------------------------------- Name: Jonathan David Title: Vice President ARCHIMEDES FUNDING III, LTD., By: ING Capital Advisors LLC, as Collateral Manager, By: /S/JONATHAN DAVID --------------------------------- Name: Jonathan David Title: Vice President ARES III CLO LTD., By: ARES CLO Management LLC, Investment Manager, By: /S/DAVID A. SACHS --------------------------------- Name: David A. Sachs Title: Vice President 10 ARES IV CLO LTD., By: Ares CLO Management IV, L.P., Investment Manager By: Ares CLO GP IV, LLC, Its Managing Member, By: /S/DAVID A. SACHS --------------------------------- Name: David A. Sachs Title: Vice President ATHENA CDO, LIMITED (ACCT 1277), By: Pacific Investment Management Company LLC, as its Investment Advisor, By: /S/MOHAN V. PHANSALKAR --------------------------------------- Name: Mohan V. Phansalkar Title: Executive Vice President AVALON CAPITAL LTD., By: INVESCO Senior Secured Management, Inc., as Portfolio Advisor, By: /S/GREGORY STOECKLE --------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory AVALON CAPITAL LTD. 2, By: INVESCO Senior Secured Management, Inc. as Portfolio Advisor, By: /S/GREGORY STOECKLE --------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory BANK OF AMERICA, N.A., By: /S/WENDY J. GORMAN --------------------------------------- Name: Wendy J. Gorman Title: Principal THE BANK OF NEW YORK, By: /S/STEVEN CAVALUZZO --------------------------------------- Name: Steven Cavaluzzo 11 Title: Vice President THE BANK OF NOVA SCOTIA, By: /S/TODD MELLER --------------------------------------- Name: Todd Meller Title: Managing Director BANK PEKAO S.A., NEW YORK BRANCH, By: /S/HUSSEIN B. EL-TAWIL --------------------------------------- Name: Hussein B. El-Tawil Title: Vice President BHF (USA) CAPITAL CORPORATION, By: /S/RONNI J. LEOPOLD --------------------------------------- Name: Ronni J. Leopold Title: Vice President By: /S/AURELIO ALMONTE --------------------------------------- Name: Aurelio Almonte Title: Associate BLUE SQUARE FUNDING SERIES 3, By: Bankers Trust Company, as Trustee, By: /S/STEPHEN T. HESSLER --------------------------------------- Name: Stephen T. Hessler Title: Vice President CAPTIVA III FINANCE LTD. (ACCT 275), as advised by Pacific Investment Management Company LLC, By: /S/DAVID EGGLISHAW --------------------------------------- Name: David Egglishaw Title: Director 12 CARLYLE HIGH YIELD PARTNERS II, LTD., By: /S/MARK ALTER --------------------------------------- Name: Mark Alter Title: Principal CARLYLE HIGH YIELD PARTNERS III, LTD., By: /S/MARK ALTER --------------------------------------- Name: Mark Alter Title: Principal CERES II FINANCE LTD., By: INVESCO Senior Secured Management, Inc. as Sub-Managing Agent (Financial), By: /S/GREGORY STOECKLE --------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory CHARTER VIEW PORTFOLIO, By: INVESCO Senior Secured Management, Inc. as Investment Advisor, By: /S/GREGORY STOECKLE --------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory CIBC WORLD MARKETS PLC, By: /S/NEIL MCMILLAN --------------------------------------- Name: Neil McMillan Title: Executive Director CITIBANK N.A. as Additional Investment Manager for and on behalf of FIVE FINANCE CORPORATION, By: /S/MARTIN DAVEY --------------------------------------- Name: Martin Davey Title: Vice President 13 By: /S/DANIEL SLOTKIN --------------------------------------- Name: Daniel Slotkin Title: Vice President CREDIT INDUSTRIEL ET COMMERCIAL, By: /S/GARY GEORGE --------------------------------------- Name: Gary George Title: Manager By: /S/CLIVE CARPENTER --------------------------------------- Name: Clive Carpenter Title: Manager CREDIT LYONNAIS NEW YORK BRANCH, By: /S/ATTILA KOC --------------------------------------- Name: Attila Koc Title: Senior Vice President CREDIT SUISSE FIRST BOSTON, By: /S/MARK E. GLEASON --------------------------------------- Name: Mark E. Gleason Title: Director By: /S/WILLIAM S. LUTKIN --------------------------------------- Name: William S. Lutkin Title: Vice President DELANO COMPANY (ACCT 274), By: Pacific Investment Management Company LLC, as its Investment Advisor, By: /S/MOHAN V. PHANSALKAR --------------------------------------- Name: Mohan V. Phansalkar Title: Executive Vice President 14 ELF FUNDING TRUST, By: Highland Capital Management, L.P. as Collateral Manager, By: /S/TODD TRAVERS --------------------------------------- Name: Todd Travers Title: Senior Portfolio Manager ELT LTD., By: /S/ANN E. MORRIS --------------------------------------- Name: Ann E. Morris Title: Authorized Agent FIRST UNION NATIONAL BANK, By: /S/ROBERT BROWN --------------------------------------- Name: Robert Brown Title: Vice President FLEET NATIONAL BANK, By: /S/IRENE BERTOZZI BARTENSTEIN --------------------------------------- Name: Irene Bertozzi Bartenstein Title: Vice President FUJI BANK, LTD., By: /S/JOHN D. DOYLE --------------------------------------- Name: John D. Doyle Title: Vice President and Manager GENERAL ELECTRIC CAPITAL CORPORATION, By: /S/GREGORY HONG --------------------------------------- Name: Gregory Hong Title: Duly Authorized Signatory 15 GLENEAGLES TRADING LLC, By: /S/ANN E. MORRIS --------------------------------------- Name: Ann E. Morris Title: Assistant Vice President HARCH CLO I, LTD., By: /S/MICHAEL E. LEWITT --------------------------------------- Name: Michael E. Lewitt Title: Authorized Signatory INDOSUEZ CAPITAL FUNDING IV, L.P., By: Indosuez Capital as Portfolio Advisor, By: /S/MELISSA MARANO --------------------------------- Name: Melissa Marano Title: Vice President JISSEKIKUN FUNDING, LTD. (ACCT 1288), By: Pacific Investment Management Company LLC, as its Investment Advisor, By: /S/MOHAN V. PHANSALKAR --------------------------------------- Name: Mohan V. Phansalkar Title: Executive Vice President KATONAH I, LTD., By: /S/RALPH DELLA ROCCA --------------------------------------- Name: Ralph Della Rocca Title: Authorized Officer Katonah Capital, L.L.C. as Manager KATONAH II, LTD., By: /S/RALPH DELLA ROCCA --------------------------------------- Name: Ralph Della Rocca Title: Authorized Officer Katonah Capital, L.L.C. as Manager KEMPER FLOATING RATE FUND, 16 By: /S/KELLY D. BABSON --------------------------------------- Name: Kelly D. Babson Title: Managing Director KZH CNC LLC, By: /S/SUSAN LEE --------------------------------------- Name: Susan Lee Title: Authorized Agent KZH CYPRESSTREE-1 LLC, By: /S/SUSAN LEE --------------------------------------- Name: Susan Lee Title: Authorized Agent KZH ING-1 LLC, By: /S/SUSAN LEE --------------------------------------- Name: Susan Lee Title: Authorized Agent KZH ING-2 LLC, By: /S/SUSAN LEE --------------------------------------- Name: Susan Lee Title: Authorized Agent KZH ING-3 LLC, By: /S/SUSAN LEE --------------------------------------- Name: Susan Lee Title: Authorized Agent KZH LANGDALE LLC, By: /S/SUSAN LEE --------------------------------------- Name: Susan Lee Title: Authorized Agent 17 KZH RIVERSIDE LLC, By: /S/SUSAN LEE --------------------------------------- Name: Susan Lee Title: Authorized Agent KZH SOLEIL-2 LLC, By: /S/SUSAN LEE --------------------------------------- Name: Susan Lee Title: Authorized Agent LIBERTY-STEIN ROE ADVISOR FLOATING RATE ADVANTAGE FUND, By: Stein Roe & Farnham Incorporated, as Advisor, By: /S/JAMES R. FELLOWS --------------------------------------- Name: James R. Fellows Title: Senior Vice President & Portfolio Manager MELLON BANK, By: /S/PETER K. LEE --------------------------------------- Name: Peter K. Lee Title: Vice President MONUMENT CAPITAL LTD, By: Alliance Capital Management L.P. as Investment Manager, By: Alliance Capital Management Corporation as General Partner, By: /S/KENNETH G. OSTMANN --------------------------------------- Name: Kenneth G. Ostmann Title: Vice President MOUNTAIN CAPITAL CLO II, LTD., By: /S/DARREN P. RILEY --------------------------------------- Name: Darren P. Riley Title: Director 18 MUZINICH & CO., INC., By: /S/HO C. WANG --------------------------------------- Name: Ho C. Wang Title: Portfolio Manager NATEXIS BANQUES POPULAIRES, By: /S/FRANK H. MADDEN, JR. --------------------------------------- Name: Frank H. Madden, Jr. Title: Vice President & Group Manager By: /S/JOSEPH A. MILLER --------------------------------------- Name: Joseph A. Miller Title: Associate NUVEEN SENIOR INCOME FUND, By: Nuveen Senior Loan Asset Management Inc., By: /S/LISA M. MINCHESKI --------------------------------------- Name: Lisa M. Mincheski Title: Managing Director OCTAGON INVESTMENT PARTNERS II, LLC, By: Octagon Credit Investors, LLC as Sub-Investment Manager, By: /S/MICHAEL B. NECHAMKIN --------------------------------- Name: Michael B. Nechamkin Title: Portfolio Manager OCTAGON INVESTMENT PARTNERS III, LTD., By: Octagon Credit Investors, LLC as Portfolio Manager, By: /S/MICHAEL B. NECHAMKIN --------------------------------- Name: Michael B. Nechamkin Title: Portfolio Manager 19 OCTAGON INVESTMENT PARTNERS IV, LTD., By: Octagon Credit Investors, LLC as collateral manager, By: /S/MICHAEL B. NECHAMKIN --------------------------------- Name: Michael B. Nechamkin Title: Portfolio Manager PAMCO CAYMAN LTD., By: Highland Capital Management LP as Collateral Manager, By: /S/TODD TRAVERS --------------------------------------- Name: Todd Travers Title: Senior Portfolio Manager PNC BANK N.A., By: /S/LOUIS K. MCLINDEN --------------------------------------- Name: Louis K. McLinden Title: Vice President PPM AMERICA, INC., as Attorney-in-fact, on behalf of JACKSON NATIONAL LIFE INSURANCE COMPANY, By: /S/MICHAEL J. HARRINGTON --------------------------------------- Name: Michael J. Harrington Title: Vice President PPM SPYGLASS FUNDING TRUST, By: /S/ANN E. MORRIS --------------------------------------- Name: Ann E. Morris Title: Authorized Agent SANKATY ADVISORS, INC., as Collateral Manager for BRANT POINT CBO 1999-1, LTD., as Term Lender, By: /S/DIANE J. EXTER --------------------------------------- Name: Diane J. Exter 20 Title: Managing Director Portfolio Manager SANKATY ADVISORS, LLC as Collateral Manager for GREAT POINT CLO 1999-1 LTD., as Term Lender, By: /S/DIANE J. EXTER --------------------------------------- Name: Diane J. Exter Title: Managing Director Portfolio Manger SANKATY HIGH YIELD PARTNERS II, L.P., By: /S/DIANE J. EXTER --------------------------------------- Name: Diane J. Exter Title: Managing Director Portfolio Manager SANKATY HIGH YIELD PARTNERS III, L.P., By: /S/DIANE J. EXTER --------------------------------------- Name: Diane J. Exter Title: Managing Director Portfolio Manager SAWGRASS TRADING LLC, By: /S/ANN E. MORRIS --------------------------------------- Name: Ann E. Morris Title: Assistant Vice President SEQUILS-ING I (HBDGM), LTD., By: ING Capital Advisor LLC, as Collateral Manager, By: /S/JONATHAN DAVID --------------------------------- Name: Jonathan David Title: Vice President 22 STANFIELD CLO LTD., By: Stanfield Capital Partners LLC as its Collateral Manager, By: /S/CHRISTOPHER A. BONDY --------------------------------------- Name: Christopher A. Bondy Title: Partner STANFIELD/RMF TRANSATLANTIC CDO LTD., By: Stanfield Capital Partners LLC as its Collateral Manager, By: /S/CHRISTOPHER A. BONDY --------------------------------------- Name: Christopher A. Bondy Title: Partner STEIN ROE & FARNHAM CLO I LTD., By: Stein Roe & Farnham Incorporated, as Portfolio Manager, By: /S/JAMES R. FELLOWS --------------------------------------- Name: James R. Fellows Title: Senior Vice President & Portfolio Manager STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY, By: /S/JAMES R. FELLOWS --------------------------------------- Name: James R. Fellows Title: Senior Vice President Stein Roe & Farnham Incorporated, as Advisor to the Stein Roe Floating Rate Limited Liability Company SWISS LIFE US RAINBOW LIMITED, By: ING Capital Advisors LLC, as Investment Manager, By: /S/JONATHAN DAVID --------------------------------- Name: Jonathan David Title: Vice President 23 TORONTO DOMINION (NEW YORK), INC., By: /S/STACEY L. MALEK --------------------------------------- Name: Stacey L. Malek Title: Vice President TRITON CDO IV, LIMITED, By: INVESCO Senior Secured Management, Inc. as Investment Advisor, By: /S/GREGORY STOECKLE --------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory VAN KAMPEN CLO II, LIMITED, By: Van Kampen Management Inc., as Collateral Manager, By: /S/DARVIN D. PIERCE --------------------------------------- Name: Darvin D. Pierce Title: Principal VAN KAMPEN PRIME RATE INCOME TRUST, By: Van Kampen Investment Advisory Corp., By: /S/DARVIN D. PIERCE --------------------------------------- Name: Darvin D. Pierce Title: Principal VAN KAMPEN SENIOR FLOATING RATE FUND, By: Van Kampen Investment Advisory Corp., By: /S/DARVIN D. PIERCE --------------------------------------- Name: Darvin D. Pierce Title: Principal 23 VAN KAMPEN SENIOR INCOME TRUST, By: Van Kampen Investment Advisory Corp., By: /S/DARVIN D. PIERCE --------------------------------------- Name: Darvin D. Pierce Title: Principal WINGED FOOT FUNDING TRUST, By: /S/ANN E. MORRIS --------------------------------------- Name: Ann E. Morris Title: Authorized Agent 24 EX-10 6 exh10-55_servagtcgiucar.txt EXHIBIT 10.55 EXHIBIT 10.55 CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ================================================================================ OUTSOURCING SERVICES AGREEMENT BETWEEN CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTANTS, INC. ("CGI") AND UCAR INTERNATIONAL INC. ("UCAR") ================================================================================ SECTION 1 - DEFINITIONS...................................................2 SECTION 2 - SERVICES......................................................7 SECTION 3 - SITE OF OPERATION............................................10 SECTION 4 - TRANSITION AND IMPLEMENTATION................................11 SECTION 5 - SERVICE LEVELS...............................................15 SECTION 6 - FEES.........................................................19 SECTION 7 - ANNUAL REVIEWS...............................................21 SECTION 8 - CHANGES TO THE PRODUCTION ENVIRONMENT........................22 SECTION 9 - RESPONSIBILITIES OF UCAR AND CGI.............................23 SECTION 10- TERM.........................................................23 SECTION 11 - TERMINATION..................................................24 SECTION 12 - HUMAN RESOURCES..............................................26 SECTION 13 - CONFIDENTIALITY, PROPRIETARY RIGHTS AND SOFTWARE.............26 SECTION 14 - SECURITY AND AUDIT...........................................28 SECTION 15 - INSURANCE....................................................28 SECTION 16 - WARRANTY.....................................................28 SECTION 17 - LIMITATION OF LIABILITY......................................30 SECTION 18 - FORCE MAJEURE................................................30 SECTION 19 - ASSIGNMENT AND BINDING EFFECT................................30 SECTION 20 - NO WAIVER....................................................31 SECTION 21 - SEVERABILITY.................................................31 SECTION 22 - NO AGENCY/INDEPENDENT CONTRACTOR.............................31 SECTION 23 - ENTIRE AGREEMENT.............................................31 SECTION 24 - COMPLIANCE WITH LAWS.........................................32 SECTION 25 - GOVERNING LAW................................................32 SECTION 26 - PUBLICITY....................................................32 SECTION 27 - NOTICES......................................................32 SECTION 28 - DISPUTE RESOLUTION AND ARBITRATION...........................33 SECTION 29 - CONFLICTS OF INTEREST........................................34 SECTION 30 - AUTHORIZATION AND ENFORCEABILITY.............................34 BASE SERVICES AGREEMENT BETWEEN: CGI Information Systems and Management Consultants, Inc., a duly constituted corporation having its offices at 600 Federal St., Andover, Massachusetts 01810, herein acting by its representatives duly authorized, as they so declare, (hereinafter referred to as "CGI") -AND- UCAR International Inc. a duly constituted corporation having its offices at 3102 West End Avenue, Suite 1100, Nashville, Tennessee 37203, herein acting by its representatives duly authorized, together with its subsidiaries and affiliates, as they so declare, (hereinafter referred to collectively as "UCAR") WHEREAS prior to the date of this Agreement UCAR has operated and managed internally an information systems and technology department; WHEREAS CGI possesses expertise and provides professional services in the support of applications portfolios, project development, systems integration, and the management, implementation, administration and operation of complex information technology infrastructures; WHEREAS UCAR desires to outsource its information technology infrastructure, data network services, the management and administration of its voice and data network services, as well as certain systems integration activities and applications development and maintenance services to CGI in accordance with the terms and conditions of this Agreement, so as to provide UCAR with access to world class IS/IT Services. WHEREAS CGI desires to manage and operate UCAR's information technology environment according to CGI's outsourcing business model; WHEREAS CGI is committed to supporting UCAR by providing at least the same level of service as UCAR currently enjoys and to help in realizing its Power of One business case by further identifying, proposing and evaluating technological solutions that may allow UCAR to benefit from potential areas of opportunity; WHEREAS, the parties desire that this Agreement be construed such that CGI be viewed as UCAR's information technology department and its [TEXT DELETED] of information systems and technology; and WHEREAS the parties desire that the Services shall be provided under the terms and conditions set forth in this Agreement. NOW THEREFORE in consideration of the mutual covenants contained herein, the parties hereto agree as follows: SECTION 1 - DEFINITIONS 1.1 DEFINITIONS - As used in this Agreement: "ADDITIONAL SERVICES" mean any services that are different from, or in addition to, the Base Services; "AGREEMENT" means this Agreement including its Schedules and any amendments thereto; "APPLICATION SOFTWARE" means the group of computer-based programs of any format which perform a specific function or application which have been purchased from a third party or developed by UCAR prior to this Agreement or by CGI during this Agreement and which do not fall within the scope of the System Software, local area networks or desktop computers, together with all additions and enhancements thereto or replacements thereof provided; "APPLICATION SOFTWARE DEVELOPMENT" means the activities leading to the implementation into production of any Application Software, including without limitation activities required to perform: (i) the preliminary analysis, (ii) the architecture, (iii) the functional design, (iv) the application design, (v) the programming, (vi) the testing (functional, integrated and user acceptance testing), (vii) the implementation, (viii) training and (ix) the project management and support activities to develop a new Application Software or an improvement to an existing Application Software which is not an Application Software Support activity; "APPLICATION SOFTWARE SUPPORT" means the following activities: (i) implementation of improvements or changes to existing Application Software where such activity may be authorized by the Change Management Committee or (ii) provision of maintenance and corrective actions resulting from problems or defects in the Application Software; "ASSIGNED CONTRACTS" are the contracts specified as "Assigned Contracts" on Schedule D to which UCAR is a party and which relate to the functions and responsibilities for which CGI is assuming responsibility hereunder. "BASE SERVICES" mean the services, functions and responsibilities described in Schedule "A" hereto, and the J.D. Edwards Project; "BASELINE LEVEL OF RESOURCES" is the amount, with respect to each Measured Resource, to be established during the Transition period as provided in Section 4.2. The amounts set forth in Schedule K will be verified during the Transition Period. "BUDGET PERIOD" means the twelve (12) month period that commences each January or such other month as the parties may mutually agree during the Term; "CGI SITE" means the various facilities owned or leased by CGI to be used by CGI to house any components of the Computer System; "CGI SOFTWARE" is any software, or part of any software, that is designed, developed, owned, modified or provided by or on behalf of CGI; 2 "CHANGE" means any modification as authorized by the Change Management Committee which has the effect of changing, modifying or altering the Computer System when the modification is implemented; "CHANGE MANAGEMENT COMMITTEE" means the committee as defined in Section 8.2 (Change Management Committee); "CIO" means the UCAR Chief Information Officer; "COMMENCEMENT DATE" means 16 April 2001; "COMPUTER SYSTEM" means all components of the computer system to be operated at the Operations Sites including without limitation, the Hardware, the System Software and Data, storage media and other supplies of UCAR, and personal computers and attached peripherals generally located at the user workstation, including LAN/WAN access and desktop software; "CONTRACT MANAGEMENT OFFICE" means the management body used by CGI to manage and deliver Services to UCAR; "Data" means the representation of information or computer instructions in a formalized manner suitable for interpretation or processing including, without limitation, any information set forth in hard copy document or stored on disk, magnetic media, or other storage media together with any combination or organization thereof; "DATA CENTER SERVICES" means the activities required to deliver the Production and includes the operation of the Computer System, help desk, management of the data communications and related technical support services; "ENHANCEMENT" means all new versions, releases, successor products, revisions, improvements, upgrades, modifications, customizations, changes, corrections, or adjustments made to any of the System Software; "HARDWARE" means the computer equipment used to provide the Services hereunder and owned or leased by UCAR before or during the term of this Agreement together with all upgrades or additions or replacements made during the Term; "INFORMATION SYSTEMS MANAGEMENT" means the management activities to be performed by CGI to fulfill its responsibilities listed in Schedule "A" (Base Services); "[TEXT DELETED]" means those persons listed on Schedule "G"; "IS/IT SERVICES" means (i) the development and maintenance of application systems, including the management and the implementation of any defined third-party information services/information technology products and systems integration activities, and (ii) the management of UCAR's information technology processing infrastructure and associated operations including management and administration of internal data and voice communications and desktop; (iii) related administrative functions (ex. report generation); such IS/IT Services are part of the Base Services; 3 "IT STEERING COMMITTEE" means the UCAR management committee composed of UCAR and CGI representatives responsible for the strategic direction of UCAR information technology. This committee shall be chaired by a UCAR Senior Executive. UCAR representatives shall be appointed by the UCAR Chief Executive Officer. The Chief Executive Officer of CGI shall appoint a representative to act on its behalf "J.D. EDWARDS PROJECT" means the services to be provided as described in Schedule C, which, for purposes of Section 11, will be deemed a Tier III Project; "MEASURED RESOURCE" is any resource used by CGI to provide the Base Services for which a baseline has been established as provided in Section 4.2 or for which a baseline may be established by mutual agreement from time to time. Schedule K contains a list of the Measured Resources for which CGI and UCAR currently expect a Baseline Level of Resource will be established. "MISSION CRITICAL ACTIVITIES" means a Computer System or Base Services relating to UCAR's core business activities within a single UCAR division or operation of equivalent importance or on a company-wide basis, and which is critical to UCAR; "OPERATIONAL FRAMEWORK" means CGI's information technology management framework, which is the basis of CGI's ISO 9001 certification, and consists of elements related to the management of a company's information technology function. It specifies the roles and responsibilities of each "IT stakeholder", describes the methodologies, practices and tools required for IT-related activities, and contains the processes inherent to information technology services management; "OPERATIONS SITES" means any location from which CGI provides the Services, including the UCAR Sites and CGI Sites; "[TEXT DELETED]" means the [TEXT DELETED] with whom [TEXT DELETED] for [TEXT DELETED] when all [TEXT DELETED] such as [TEXT DELETED], and [TEXT DELETED] being [TEXT DELETED] when taking into [TEXT DELETED] the [TEXT DELETED] on those [TEXT DELETED] when [TEXT DELETED] to a [TEXT DELETED]. "PRIME INTEREST RATE" means the prime commercial lending rate expressed as an annual rate, which Citibank, N.A. establishes, from time to time, as a reference rate of interest for the purpose of determining the rate of interest that it shall charge to its commercial customers for loans in U.S. funds; "PRODUCTION" means the processing activities including backup and recovery and usual on demand job requests to be executed on the Computer System in order to meet UCAR processing requirements; "PRODUCTION SCHEDULE" means the predefined Production activities, automated or not, that have to be executed during a given period; "PURCHASED ASSETS" means the assets designated as such and set forth on Schedule "D"; 4 "RELOCATION PROJECT" shall mean the activities required to migrate the Data Center Services from the UCAR Sites to CGI Sites; "RELOCATION PROJECT PLAN" shall have the meaning ascribed to it in Section 3.3 hereof "RETAINED CONTRACTS" are the contracts specified as "Retained Contracts" on Schedule E to which UCAR is a party and which relate to the functions and responsibilities for which CGI is assuming responsibility hereunder. "SERVICES" means those services to be performed or provided by CGI under this Agreement, including the Base Services and Additional Services; "SYSTEM INTEGRATION" means to customize, modify, integrate, or configure components (hardware, software, computerized business solutions and supporting equipment), or manage the foregoing activities, when necessary, to satisfy inter-connectibility, compatibility, supportability, reliability or operability requirements and UCAR information processing requirements, including assembly, installation, testing, implementation, integration (including integration of third party software products), rendering operational and supporting off the shelf or third party information technology solutions into the Computer Systems and Application Software; "SYSTEM SOFTWARE" means the group of computer-based programs of any format which are used in conjunction with the Hardware including, without limitation, the computer programs listed in Schedule "F" (System Software) hereto together with any and all computer program Enhancements or replacements and any additional computer-based programs which are generally known as operating software, utilities or system software; "TARGET SERVICE LEVELS" means the levels of service that CGI shall provide to UCAR to be defined during the Transition Period in accordance with Section 5; "TERM" means the period of time that this Agreement shall remain in effect from the Commencement Date as set out in Section 10 (Term) hereof; "TIER III PROJECTS" are projects related to the development and implementation of new applications, the analysis, development and implementation of infrastructure projects, Application Software Development, Applications Software Support Services and Enhancements that require more than [TEXT DELETED] of [TEXT DELETED] during the first 12 months of the Term, [TEXT DELETED] of [TEXT DELETED] during the second 12 months of the Term, and [TEXT DELETED] of [TEXT DELETED] during the remainder of the Term, and other similar projects that the Change Management committee determines would fall outside of the scope of the Base Services. "TIER III PROJECT RATES" means the rates set forth on Schedule H and identified as either long-term rates or short-term rates. Long-term rates will apply to those personnel resources that UCAR commits to obtain from CGI as part of any Annual Technology and Maintenance Plan pursuant to Section 2.7. "TRANSITION PERIOD" means the ten (10) month period commencing on the Commencement Date. 5 "UCAR SITES" means the facilities at which the Services are to be performed and which UCAR may make available to CGI hereunder. The initial UCAR Sites are identified on Schedule N; "UCAR SOFTWARE" is any computer program (including applications, utilities and operating systems software) or database owned or licensed by UCAR or its affiliates that will be accessed or used by CGI in providing Services under this Agreement, including any of the foregoing set forth in Schedule "F"; 1.2 GENDER AND NUMBER - In this Agreement, words importing the singular include the plural and vice-versa, and words importing gender include all genders. 1.3 CURRENCY - All references to amounts of money herein, unless otherwise specified, shall be in U.S. Dollars. 1.4 SECTION HEADINGS - The insertion of headings and the division of this Agreement into Sections are for convenience of reference only and shall not affect the interpretation thereof. 1.5 SCHEDULES - The following Schedules are appended hereto and form part of this Agreement: A. Base Services B. Tier III Project Methodology C. J.D. Edwards Project D. Purchased Assets and Leased Assets E. Third Party Contracts F. Software G. In-Scope Personnel H. Pricing I. Transition Plan J. Target Service Levels K. Baseline Level of Resources L. Termination for Convenience Fee M. Travel and Expense Guidelines N. UCAR Sites O. Current Projects P. [TEXT DELETED] 1.6 STATEMENT OF OBJECTIVES - Each party acknowledges that the other is investing significant time, effort and money in establishing the relationship described in this Agreement, including the purchase by CGI of considerable IS/IT assets and resources (including the transition of UCAR employees to CGI), the assumption by CGI of certain UCAR contractual obligations, and the amortization over the Term of certain start-up costs. The parties agree that this investment of time, effort and money is being made with the objective of establishing a long term, stable and mutually beneficial relationship where CGI will be the exclusive provider of Base Services, including System Integration 6 services, to UCAR; and that CGI will be viewed as the information technology department of UCAR and [TEXT DELETED] OF [TEXT DELETED] services. The objectives of this agreement shall be: 1. Cost efficiencies through infrastructure improvements 2. Maintain or improve current service level and breadth of service 3. Improved IS/IT procurement efficiency, including, where CGI is able, procurement for out of scope locations 4. Data center consolidation 5. Implementation and maintenance of J.D. Edwards SECTION 2 - SERVICES 2.1 GENERAL -- Commencing on the Commencement Date and thereafter during the Term, CGI will provide to UCAR on an exclusive basis, and UCAR will obtain from CGI UCAR's requirements for, the Base Services in accordance with the terms of this Agreement. UCAR may request or require such Additional Services that CGI may provide pursuant to this Agreement. CGI agrees that it will continue to perform, at no additional charge to UCAR, the projects described on Schedule 0 that are being performed by UCAR as such projects are scoped as of the Commencement Date. 2.2 J.D. EDWARDS PROJECT - CGI will implement the J. D. Edwards Project in accordance with Schedule C and the terms of this Agreement. Within the [TEXT DELETED] days after the Commencement Date, CGI, with UCAR's assistance, will develop a [TEXT DELETED] for [TEXT DELETED] the [TEXT DELETED] OF J.D. Edwards. If UCAR and CGI agree on either [TEXT DELETED] the [TEXT DELETED] of the J. D. Edwards Project (solely to [TEXT DELETED] the [TEXT DELETED] of the [TEXT DELETED]) or [TEXT DELETED] the [TEXT DELETED] of the J. D. Edwards Project within that [TEXT DELETED] day period, including [TEXT DELETED] and [TEXT DELETED], then Schedules C, H and L shall be amended as mutually agreed to reflect such [TEXT DELETED] or [TEXT DELETED]. Such [TEXT DELETED] shall be in accordance with the same general economic principles used to establish the pricing in this Agreement. 2.3 TIER III PROJECTS - Commencing on the Commencement Date and thereafter during the Term, UCAR (i) will [TEXT DELETED] from CGI at least [TEXT DELETED] of [TEXT DELETED] in accordance with Schedule P hereto, and (ii) will consider CGI its [TEXT DELETED] of [TEXT DELETED] other [TEXT DELETED] and may obtain from CGI such [TEXT DELETED] in accordance with the terms of this Agreement. CGI's sole remedy for UCAR's failure to [TEXT DELETED] its [TEXT DELETED] under subsection (i) above is the express remedy set forth on Schedule P. For each Tier III Project, CGI will charge UCAR a fixed price or on such other basis as the parties may mutually agree. If UCAR and CGI cannot agree on a fixed price or another charging mechanism for a specific Tier III Project, then the Tier III Project Rates will apply to that Tier III Project. While the parties agree that Tier III Projects include certain Applications Software Support and Enhancement activities that exceed a specified number of person hours of effort, CGI agrees that, on an exception basis, UCAR may request that CGI perform such a Tier III Project with the then current Applications Software Support staff at no additional charge to UCAR. In that event, the Change Management Committee will reprioritize the 7 work then being performed by the Applications Software Support staff and will make appropriate adjustments to the Target Service Levels. The parties agree that, except in extraordinary circumstances, the Applications Software Support staff will not be required to reprioritize its work where the reprioritization will result in noticeable deterioration of Services to UCAR's business units. Prior to redeployment of personnel resources to the JD Edwards Project and during the Transition Period, CGI acknowledges that UCAR may, more as the rule rather than the exception, request that a particular Tier III Project be provided with the then current Applications Support Staff. 2.4 USE OF EXTERNAL SUPPLIERS - When UCAR desires to use an external supplier to perform any Tier III Project subject to and in accordance with Section 2.3 hereof, the following terms and conditions will apply: 2.4.1 UCAR will advise CGI in advance of its intention to obtain a written price quote and proposal from an external supplier to perform that Tier III Project, and CGI will have the first opportunity to provide UCAR a proposal for the Tier III Project. If, following consideration of CGI's proposal, UCAR elects to obtain a proposal from a third party, then UCAR may do so. Before accepting any [TEXT DELETED] for a [TEXT DELETED], UCAR will provide CGI with enough information such that CGI can determine its [TEXT DELETED] to [TEXT DELETED] as the [TEXT DELETED] for the [TEXT DELETED]. If CGI agrees to provide to UCAR the [TEXT DELETED] on [TEXT DELETED] at least as [TEXT DELETED] as the [TEXT DELETED] contained in the [TEXT DELETED] then UCAR will allow CGI to [TEXT DELETED] the [TEXT DELETED] on [TEXT DELETED]. If CGI elects to not [TEXT DELETED] the [TEXT DELETED] on such [TEXT DELETED], then UCAR may elect to have [TEXT DELETED] the [TEXT DELETED] on the [TEXT DELETED] contained in the [TEXT DELETED] and the remaining provisions of this Section 2.4 will apply. 2.4.2 The parties will establish a mutually acceptable process and the parameters upon which the deliverables of IT services or project awarded to an external supplier shall be integrated into the Computer Systems or Application Software managed by CGI. For such an award to an external supplier, CGI will, as a Tier III Project, estimate efforts and pricing for all applicable System Integration activities, of such IT service or project through the preparation of a Tier III Project charter in the format described in Schedule B. The Project charter will also include any and all financial impact on Base Services. CGI will perform the applicable System Integration activities as a Tier III Project and in accordance with the Tier III Project charter. 2.4.3 CGI will not be responsible for the deliverables provided by any external supplier to whom UCAR may award a Tier III Project. UCAR will pay CGI at the Tier III Project Rates for any additional work caused by a defect of such deliverables or the acts or omissions of the external supplier. 2.4.4 If, notwithstanding the establishment of a process as stated in subsection 2.4.2 above, the award of a Tier III Project to an exernal supplier is or, based on reasonable expectations, will be an impediment to CGI's ability to deliver the 8 Services in accordance with this Agreement, the obligations of CGI, including the Target Service Levels will be appropriately adjusted as agreed to by the parties. 2.4.5 If UCAR requests that CGI and one or more external suppliers submit a proposal for a Tier III Project, then that request for proposal will contain the same technology requirements and terms and conditions for all parties invited to submit such a proposal. 2.4.6 The parties agree to review on a periodic basis, at the IT Steering Committee meetings, the reason, nature and value of any Tier III Projects awarded to external suppliers to ensure that they have only been awarded as allowed by this Agreement and to determine how CGI can better meet the full IT needs of UCAR. 2.5 ADDITIONAL SERVICES - During the Term, CGI may from time to time provide UCAR with Additional Services reasonably requested by the Change Management Committee or required by UCAR, including without limitation implementing and operating new systems, developing and implementing enhancements to existing systems, replacing existing systems with new systems, and otherwise providing UCAR with additional capabilities to support its business operations, all in accordance with the following: 2.5.1 Where feasible, CGI will submit to UCAR a proposal to provide the Additional Services on a fixed price or other mutually agreeable basis, and UCAR will duly consider each such proposal and will either accept or reject such proposal within a reasonable time. 2.5.2 Until CGI submits and UCAR accepts a proposal to provide any Additional Services on a fixed price or other mutually agreeable basis, CGI will provide the Additional Service on a time and materials basis, and UCAR will pay CGI, at the Tier III Project Rates for the additional resources utilized in providing the Additional Services, and will reimburse CGI for any out-of-pocket expenses, including payments to third parties, incurred by CGI in connection therewith, or on such other basis as the parties may agree upon at that time. All expenses shall be reimbursed only in accordance with Schedule M. 2.6 CONTRACT MANAGEMENT OFFICE ("CMO") - CGI shall assign a full time dedicated manager who shall be responsible for the management and co-ordination of the delivery of the Services. This manager shall assist and advise UCAR in defining the strategic and operational orientation of the latter's use of information technology, including the integration of information technology with UCAR business requirements. This manager shall furnish periodically to UCAR, throughout the Term, an operations report in a format and with content and periodicity, to be mutually agreed from time to time. 2.7 ANNUAL PLAN -- At least 90 days prior to the start of each Budget Period and with the input of UCAR, CGI shall submit to UCAR an Annual Technology and Maintenance Plan as well as the proposed CGI Planned Annual Revenue (the "Annual Plan"). The Annual Plan will provide input for UCAR's future information technology plans that may impact the Computer Systems, including without limitation any information technologies to be 9 deployed, application maintenance activities and new applications to be implemented during the Term. Each Annual Plan will take into account the business requirements, priorities and business vision of UCAR which are communicated to CGI by UCAR during this technology planning process and will include the following components: (i) an annual update and long range assessment of UCAR's information technology architecture and standard operating environments; (ii) a recommended direction for the evolution of the Services to provide UCAR with the benefits of new technologies and strategies; (iii) an annual update of the required application maintenance activities for UCAR; (iv) determination of the appropriate level of discretionary application maintenance activities for the upcoming year; (v) determination of the appropriate level of discretionary activities for the upcoming year for the Base Services; (vi) an annual capacity plan to reflect UCAR's anticipated Computer Systems growth; and, (vii) the commitment, if any, that UCAR elects to make to CGI for personnel resources to perform Tier III Projects for that year. 2.8 SERVICES INTERRUPTION - In the event of any Computer System malfunctions that will affect UCAR's business as defined in Schedule J, CGI shall notify the list of designated UCAR employees identified in the Operational Framework of the nature and expected duration of the malfunction. Until such time as the Operational Framework has been implemented and designated UCAR employees have been identified, the UCAR processes current at the Commencement Date shall continue. CGI shall continue to co-ordinate the repair services and keep UCAR informed until the malfunction is corrected. Once the malfunction is resolved, CGI shall perform such operational recovery actions as necessary to restore operational service. SECTION 3 - SITE OF OPERATION 3.1 UCAR FACILITIES AND SUPPORT SERVICES -- During the Term, UCAR will provide to CGI, at no charge, the UCAR Sites and the space, office furnishings, janitorial service, telephone service, utilities (including air conditioning) and office-related equipment, supplies, and duplicating services in UCAR's premises that CGI may reasonably need to provide the Services hereunder, including the UCAR Sites. The space allocated to CGI at the UCAR Site shall be similar to the facilities provided by UCAR to its own employees, including furniture, cabling and office support services, but excluding secretarial and administrative support services. In addition, CGI's employees will have access to the UCAR Sites 24 hours a day, seven days a week. UCAR will provide necessary storage space for backup data files and will provide additional storage space that may be required by any change in retention schedules required by any regulatory authority with jurisdiction over UCAR's business. 3.2 CHANGE TO THE CGI SITE -- The parties agree that it is expected that most of the Services will initially be performed from the UCAR Site. CGI shall have the right to relocate and perform all or any portion of the Services from a CGI Site while maintaining the Service 10 Levels required hereunder and the level of security required by UCAR. All costs incurred in such relocation shall be borne by CGI. All relocations that will negatively impact the Services or Service Levels or that may result in increased costs to UCAR shall be subject to the approval of UCAR, whose authorization shall not be unreasonably withheld. 3.3 RELOCATION PROJECT -- In preparation for relocating UCAR's Data and the Services from UCAR Sites to the CGI Site(s), CGI agrees to establish an equipment configuration at the CGI Site that will allow CGI to demonstrate that CGI can successfully migrate UCAR's Data and Services to the CGI site. The Relocation Project will be performed by CGI in multiple phases, as described in the Relocation Project Plan, and CGI and UCAR will perform the other duties set forth in this Section. The parties intend to complete the Relocation Project by November 1, 2001, but in any event it will be completed during the Transition Period. CGI will supply, for approval by UCAR, a fully detailed, written Relocation Project Plan detailing a task list with target dates and responsible personnel, pursuant to which CGI will migrate UCAR's data and Services operations from its facilities to the CGI site. The Relocation Project Plan may be modified from time to time by the mutual agreement of the parties. CGI will be responsible under the Relocation Project Plan for all project management and project planning. UCAR and CGI will, however, share responsibility for certain relocation activities. The Relocation Project Plan will form the basis upon which the Relocation Project hereunder will be accomplished and each of CGI and UCAR will perform its tasks in accordance with the Relocation Project Plan so that the Relocation Project will be accomplished on the schedule established in the Relocation Project Plan. The Relocation Project Plan includes multiple checkpoints or milestones to enable CGI and UCAR to monitor the ongoing progress of the project on a periodic basis and to anticipate any scheduling problems. SECTION 4 - TRANSITION AND IMPLEMENTATION 4.1 TRANSITION PERIOD - During the Transition Period, the parties will work to implement the transition plan as further described in Section 4.2 (Transition Plan) and Schedule I. 4.2 TRANSITION PLAN - The transition plan described in Schedule I will evolve during the Transition Period. The main set of activities defined or to be defined in the transition plan include: a) Complete the transition of the employees and contractors from UCAR to CGI; b) Effective transition of work-in-progress activities on Schedule I to meet planned delivery dates; c) Establish Service Levels in accordance with Section 5 of this Agreement; and d) Establish the pricing method for use after the first 12 months of the Term in accordance with Section 6.2. e) Establish the Baseline Level of Resources for the Measured Resources specified on Schedule K or such other Measured Resources as may be agreed. The Baseline Level of Resources for each Measured Resource will be the 11 applicable quantity of that Measured Resource as existed as of March 1, 2001, or such other date as the parties may agree. UCAR shall cooperate and provide all assistance reasonably necessary to facilitate the migration of its present workload and Computer Systems to CGI. Due diligence will be conducted by CGI and UCAR during the Transition Period. As a result of due diligence, CGI and UCAR will work together in good faith and expeditiously to mutually agree on non-material adjustments to the services, functions and responsibilities in Schedule A. In addition, if at any time it is determined that any service, function or responsibility being performed by an In-Scope Personnel (while an employee of UCAR) has been inadvertently omitted from Schedule A (other than a service, function or responsibility that is unrelated to the Services, such as the management of UCAR's community service program or the purchasing of goods and services for which CGI has no responsibility hereunder, or that the parties expect to be displaced, such as certain responsibilities relating to the Applications Software being replaced in connection with the J.D. Edwards Project), the parties agree that the omitted service, function or responsibility will be deemed added to Schedule A as a Base Service. Or, if it is determined that any service, function or responsibility on Schedule A was not being performed by any In-Scope Personnel, the parties agree that the incorrectly included service, function or responsibility will be deemed deleted from Schedule A and will not be a Base Service, unless it is a service, function, or responsibility that CGI is expected to perform in its capacity as an outside service provider, such as certain of the CMO activities. 4.3 OFFERS OF EMPLOYMENT -- In accordance with CGI's standard hiring policies and subject to Section 4.11, CGI shall offer employment to the UCAR employees identified in Schedule G hereto, and any additional UCAR employees who may be mutually designated by the parties prior to the Commencement Date. CGI's offer of employment to each employee shall include (i) a pay structure and package of benefit programs so that the total compensation package offered by CGI is substantially equivalent to that provided by UCAR, (ii) credit for the employee's length of service with UCAR for purposes of vacation, sick leave, severance, and other CGI employee benefits that are based on length of service, (iii) a waiver of any pre-existing conditions, waiting periods, and confirmations of insurability with respect to any health care and related benefits, (iv) credit for medical and/or dental deductibles used year to date as demonstrated to CGI and (v) a commitment for 12 months of employ, subject to termination for cause. 4.4 Third Party Contracts. 4.4.1 Subject to Section 4.5, as of the Commencement Date, UCAR shall, to the extent possible, assign to CGI the Assigned Contracts, and thereafter during the Term CGI shall be responsible for the management of, and the payment of the charges under, the Assigned Contracts. Once validly assigned by UCAR, CGI shall assume UCAR's rights and obligations under the Assigned Contracts, without further obligation on the part of UCAR. 4.4.2 Subject to Section 4.5, as of the Commencement Date, CGI shall assume management responsibility for the Retained Contracts. UCAR shall retain 12 responsibility for the payment of all amounts due under the Retained Contracts and will notify the third parties to the Retained Contracts that CGI will be managing those contracts on behalf of, and will be acting as UCAR's exclusive agent with respect to, those Retained Contracts. 4.4.3 For Assigned Contracts where advanced payments had been made by UCAR, CGI will remit to UCAR the appropriate adjustments calculated on a prorated basis as at the Commencement Date, within thirty (30) days of the receipt from UCAR of information detailing such advanced payments. In the event that an Assigned Contract cannot be assigned because of unreasonable costs or conditions imposed by the supplier, UCAR and CGI shall determine the best course of action to ensure that CGI can still manage the applicable Assigned Contract on behalf of UCAR with a minimum amount of disruption or interference to UCAR's operations. 4.4.4 If the supplier does not fulfill, or CGI believes that the supplier may not fulfill, its contractual obligations under an Assigned Contract or a Retained Contract, CGI shall in a reasonable and timely fashion notify UCAR and recommend to UCAR, with the appropriate justification, the modifications or improvements to the Computer Systems that it deems necessary in order to meet the Target Services Levels. If UCAR fails to implement such recommendations or other mutually agreed upon solution, CGI shall not be held responsible for unachieved Target Service Levels due to a supplier not fulfilling its contractual obligations, or any other damage or loss to UCAR in result thereof, and UCAR will be responsible for any incremental costs incurred in connection therewith. 4.5 REQUIRED CONSENTS AND LICENSES - UCAR, with CGI's assistance, shall be responsible for obtaining all required consents and licenses necessary to enable CGI to use the Computer Systems and UCAR Sites, including consents or licenses, as the case may be, to the UCAR Software, Assigned Contracts, and Retained Contracts. UCAR shall bear the costs, if any, of obtaining all required consents and licenses to that effect. In the event a consent cannot be obtained for whatever reason, including economic feasibility, UCAR and CGI shall determine the best course of action to ensure that such consent may be obtained, if reasonably possible or the parties shall define an appropriate and mutually acceptable solution to meet the objectives of this Agreement. 4.6 IMPLEMENTATION OF THE OPERATIONAL FRAMEWORK -- CGI, with the participation of UCAR, shall customize its Operational Framework so that it is applicable to the Services. Upon its completion, the customized Operational Framework shall be submitted to UCAR for its review and comment, and following such review and comment, the parties shall implement the Operational Framework. The submission, review and implementation of the Operational Framework shall occur within a reasonable timeframe during the Transition Period. A continuous improvement process with specific measurements for the quality of services rendered will be implemented by CGI. Consistent with CGI's ISO 9001 certification practices, CGI will use all commercially reasonable efforts to have UCAR's IT operations ISO 9001 certified within one year after the Commencement Date but in any event, and with UCAR's cooperation, within 2 years from the Commencement 13 Date. The implementation of the Operational Framework shall be included in Base Services. 4.7 PURCHASED ASSETS -- Subject to the provisions of Section 4.11, effective as of the Commencement Date, UCAR hereby sells to CGI, and CGI hereby purchases from UCAR, the Purchased Assets. UCAR warrants that CGI will receive good and marketable title to the Purchased Assets, free and clear of any liens, restrictions and encumbrances. Further, UCAR shall execute and deliver such bills of sale or other instruments of transfer as may be required in order to vest in CGI good and marketable title to the Purchased Assets, free and clear of any liens, restrictions and encumbrances. CGI agrees that the desktops, laptops and related peripherals included within the Purchased Assets that are used by UCAR personnel (other than the In Scope Personnel) as of the Commencement Date may continue to be used by those personnel during the Term, subject to refresh or replacement by CGI. 4.8 LEASED ASSETS - Effective as of the Commencement Date, UCAR shall, and hereby does, assign to CGI, and CGI shall, and hereby does, assume from UCAR, UCAR's rights and obligations under the leases or other agreements for the fixed assets leased or similarly acquired by UCAR that are set forth in Schedule "C" hereto. UCAR represents that there is no default under any such lease or other agreement and there is no event, which, with the passage of time, would become a default. CGI shall be responsible for the timely payment of and performance of all obligations with respect to those leases and other agreements that are attributable to periods or events occurring on or after the Commencement Date, and UCAR shall remain responsible for the timely payment of and performance of all other obligations under those leases and other agreements for periods prior to the Commencement Date. 4.9 UCAR SOFTWARE -- During the Term and subject to UCAR obtaining any applicable consents or approvals as described in Section 4.5, UCAR shall, pursuant to the terms and conditions of this Agreement, make available to CGI the UCAR Software to enable CGI to perform the Services. Commencing as of the Commencement Date, CGI shall have financial, administrative and management responsibilities for the UCAR Software, and shall comply with the obligations of UCAR under the license and other agreements relating to the UCAR Software to the same extent as if CGI was the contracting party thereto, including paying all amounts due thereunder that are attributable to the period during which CGI has been granted a license or other access to the UCAR Software. UCAR will indemnify CGI from any losses or costs CGI incurs as a result of any default under any license covering the UCAR Software where the default, or the event, which, with the passage of time, would become a default, exists as of the Commencement Date. 4.10 Disaster Recovery Plan. 4.10.1 DISASTER AT CGI'S LOCATION. In connection with the Relocation Project, CGI shall update and deliver to UCAR the disaster recovery plan provided by UCAR to CGI prior to the Commencement Date to reflect the relocation of the Data Center Services from the UCAR Sites to the CGI Sites, including the procedures that CGI will follow in response to a disaster at CGI's location. CGI will maintain that 14 updated disaster recovery plan during the Term that will provide a level of service comparable to that as of the Commencement Date. 4.10.2 DISASTER AT UCAR'S LOCATION. In the event that a disaster or other out of scope disrupting event occurs that adversely affects UCAR's ability to fulfill its obligations with respect to the Services, CGI shall take all reasonable steps, at UCAR's expense, whether or not specified in the applicable Target Service Level, necessary to enable it to assist UCAR. 4.11 [TEXT DELETED] of [TEXT DELETED]- The parties recognize that the transfer of [TEXT DELETED] in [TEXT DELETED] (the "[TEXT DELETED]") is subject to [TEXT DELETED] by the [TEXT DELETED], which [TEXT DELETED] is not expected to be [TEXT DELETED] until after the [TEXT DELETED]. The [TEXT DELETED] of the [TEXT DELETED] is a [TEXT DELETED] to the [TEXT DELETED] of the [TEXT DELETED] (the "[TEXT DELETED] of [TEXT DELETED]"). 4.11.1 Upon satisfaction of the [TEXT DELETED] of [TEXT DELETED], CGI will make [TEXT DELETED] of [TEXT DELETED], in accordance with Section 4.3, to the [TEXT DELETED] identified on Schedule G as [TEXT DELETED] of UCAR's [TEXT DELETED]. Upon satisfaction of the [TEXT DELETED]of [TEXT DELETED], the parties will acknowledge in writing such satisfaction. 4.11.2 If the [TEXT DELETED] of [TEXT DELETED] is not satisfied by [TEXT DELETED], then the [TEXT DELETED] shall not be [TEXT DELETED] to CGI and (i) a [TEXT DELETED] to [TEXT DELETED] of the [TEXT DELETED] shall be [TEXT DELETED] to CGI by UCAR, (ii) the charges to UCAR set forth in Schedule H will be adjusted as mutually agreed, and (iii) the Services will be amended as mutually agreed to remove any obligation of CGI to [TEXT DELETED]. SECTION 5 - SERVICE LEVELS 5.1 TARGET SERVICE LEVELS -- During the Term, CGI will use all commercially reasonable efforts to provide the Services in accordance with the Target Service Levels listed in Schedule J which are to be established as follows: 5.1.1 Commencing on the Commencement Date and until such time as the Target Service Levels are established as provided in Section 5.1.2, which shall occur prior to the end of the Transition Period, CGI will provide the Base Services at least at the same level as such services were being provided by UCAR prior to the Commencement Date. If such levels are not being met, UCAR will notify CGI and the Change Management Committee will work in good faith to equitably adjust the Services. 5.1.2 During the Transition Period and taking into account those services for which UCAR consistently monitored and documented performance levels, CGI, with the cooperation and assistance of UCAR, will measure actual performance and establish Target Service Levels that will be applicable to the Base Services for the remainder of the Term, subject to adjustment as described in this Section 5. Schedule J hereto contains examples of types of services levels that may be 15 established. Commencing on the establishment of the Target Service Levels as described in this Section 5.1.2, CGI will use all commercially reasonable efforts to perform the Base Services in accordance with the Target Service Levels. 5.1.3 UCAR and CGI recognize that UCAR business needs will evolve during the Term and impact the Target Service Levels. CGI and UCAR shall jointly review, on a periodic basis, but not less than once each calendar year, the Target Service Levels in order to reflect their impact on the Base Services of UCAR's business needs, Additional Services and the implementation of changes to application software. 5.1.4 If CGI fails to meet any Target Service Level, CGI will promptly (i) investigate and report on the causes of the problem; (ii) advise UCAR of the status of remedial efforts being undertaken concerning those problems; (iii) use all commercially reasonable efforts to correct the problem and begin meeting the Target Service Levels; and (iv) take all commercially reasonable measures to prevent the problem from recurring. 5.2 CGI STAFFING -- UCAR shall have the opportunity in advance to approve, which approval will not be unreasonably withheld, (i) the CGI CMO and the CMO's direct reports and (ii) the removal of any [TEXT DELETED] during the period of time referenced on Schedule G (other than where CGI is [TEXT DELETED] the [TEXT DELETED] of any such [TEXT DELETED] for [TEXT DELETED]). If CGI notifies UCAR that CGI desires to [TEXT DELETED] a [TEXT DELETED] because CGI does not have [TEXT DELETED] to keep that [TEXT DELETED] on [TEXT DELETED] for UCAR, then either (i) UCAR will approve the request to [TEXT DELETED] the [TEXT DELETED], or (ii) UCAR will pay CGI for that [TEXT DELETED] at the applicable Tier III Project Rates (long-term) until such time as CGI can provide Base Services work to keep that [TEXT DELETED]. In the event that UCAR determines in good faith that any of CGI's employees providing Services to UCAR (excluding the UCAR employees that transition to CGI) are not acceptable to UCAR, then UCAR will give CGI written notice to that effect. After receiving written notice, CGI will have a reasonable period of time in which to investigate the matters stated in the notice, discuss its findings with UCAR, and resolve, if possible, any problems with that person. If, following that period, UCAR requests replacement of that person (excluding, for the first 12 months, the UCAR employees that transition to CGI), CGI will replace that person with another person of suitable ability and qualifications. In all circumstances, CGI shall cause its employees to comply with all the procedures and policies, including among others, security and health/safety and environment, established by UCAR and CGI from time to time. For purposes of this Section 5.2, "[TEXT DELETED]" are those employees identified on Schedule G that are [TEXT DELETED] as [TEXT DELETED]. 5.3 GENERAL SERVICE COVERAGE - CGI and UCAR recognize that Base Services may, in certain instances, require extensive work on the part of CGI to correct problems or defects or to implement important changes within a limited time frame. Both parties shall manage these situations so as to minimize impacts on UCAR's business operations, taking into account the commercial reasonableness of the cost imposed on CGI and the degree of impact upon UCAR's business operations. 16 5.4 SPECIALIZED QUERY LANGUAGES - UCAR may use query tools to extract and format information for their operational needs. CGI and UCAR shall define the parameters and guidelines governing the use of such tools. CGI and UCAR recognize that specialized queries may, in certain instances, have an impact on the performance of the Base Services in accordance with the Target Service Levels. Should such situations occur, UCAR and CGI shall manage these situations to minimize negative impacts. 5.5 Service Levels Measurement 5.5.1 Actual service levels achieved by CGI will be measured against Target Service Levels and reported as described in Schedule J. 5.5.2 The following events, should they occur, shall not be included in the calculation of performance in relation to the Target Service Levels: (a) a failure to the extent resulting from Hardware or System Software no longer being supported by the manufacturer and UCAR not having agreed to an upgrade following a reasonable request submitted by CGI to the Change Management Committee which set out the applicable risk; (b) a failure resulting from additional hardware, software or telecommunication resources required to meet UCAR's growing needs, and UCAR not having agreed to install such additional resources following a reasonable request from CGI, that has taken into account UCAR's reasonable perspective and such other factors submitted by CGI to the Change Management Committee which set out the applicable risk; (c) the period during which a disaster recovery situation, as defined in the Disaster Recovery Plan, exists; (d) a failure of any third-party vendor (other than a CGI subcontractor selected by CGI) to meet its contractual obligations which is not due to any default or failure by CGI; (e) a failure in UCAR's physical environment (electrical, temperature, telecommunications provider, etc.) which is not due to any default or failure by CGI; (f) UCAR's material failure to perform its obligations under this Agreement, which are related to the performance by CGI of the Services and affect Target Service Levels; (g) unreasonable, untimely, incomplete or inaccurate information from UCAR, which are related to the performance by CGI of the services and affect Target Service Levels.; or (h) UCAR's failure to make available information, materials, software, hardware, equipment or personnel in the manner required by this Agreement, which are 17 related to the performance by CGI of the services and affect Target Service Levels. 5.6 MISSION CRITICAL FAILURES - In the event that either party determines that: (i) an outage or failure affects Mission Critical Activities, which lasts at least 6 hours or which either party reasonably expects will not be remedied within a 24 hour period from its commencement; or (ii) the continuation during the period of 3 day(s) of general service instability, as reflected in recurring outages or failures affecting Mission Critical Activities, then either party shall designate the problem as a "Code Red", following which the parties shall proceed as follows: (a) The Change Management Committee shall be immediately notified. CGI shall be responsible for determining what remedial actions are to be taken, but shall consult with UCAR as to such course of action. If the remedy is outside CGI's control, then the Change Management Committee shall agree on the corrective action. (b) CGI shall use commercially reasonable efforts, taking into account the impact on UCAR's business to implement the remedial action and correct the problem as soon as possible, and for such purposes shall provide access to its most experienced staff and cause its personnel to work diligently and continuously, if necessary, until the problem is resolved. (c) CGI shall keep UCAR advised at all times of the estimated time of problem resolution and resumption of system's operation. (d) CGI shall develop a business communications plan and shall provide such assistance and cooperation as may be reasonably necessary to enable UCAR to develop and implement such a plan. No information concerning the Code Red event shall be discussed or made available publicly without the consent of UCAR. (e) The Change Management Committee shall monitor progress on resolution of a Code Red problem and update the business communications plan. If the Code Red problem is not resolved within the estimated time frame, then the joint team will reassess what further or different corrective action may be required. (f) Each of CGI and UCAR must sign-off and agree on the final resolution of the problem. 5.7 PERFORMANCE REVIEW PROCESS - In the event that (a) the actual service levels achieved by CGI during the previous month period fail to meet any of the prescribed Target Service Levels; or a (ii) Code Red problem is declared during the previous month, then a performance review process which incorporates the following steps will be triggered: (a) CGI shall conduct a post mortem analysis and review the results with UCAR. 18 (b) CGI shall develop and implement corrective actions and/or modify existing processes and procedures or create new processes and/or procedures to prevent any recurrence. (c) If a contributing cause of a problem or delay in implementing a remedy to a problem was within the control of a third party, then the parties shall determine a course of action to prevent a recurrence. (d) UCAR and CGI will sign off on the conclusions resulting from review process. 5.8 SERVICE BENCHMARKING - UCAR may, no more than once every three (3) years, conduct a benchmarking survey of the information technology outsourcing industry to determine whether the Target Service Levels are competitive with the service levels being maintained by other vendors providing a similar bundle of services to similarly situated customers on terms, including pricing, similar to the terms the Base Services are being provided hereunder. UCAR and CGI shall mutually agree on the third party that conducts the benchmark survey and shall each bear its own costs and share equally the costs of the third party. Any survey conducted under this provision shall be of at least the quality and scope of the Hackett Study completed for UCAR in 1999. Based upon the results of the benchmarking survey, CGI and UCAR will jointly investigate unfavorable variances, and make adjustments to the Target Service Levels where warranted and mutually agreed upon by the parties. 5.9 PERFORMANCE STANDARDS - CGI and UCAR shall agree to a schedule of performance credits for failure to meet Target Service Levels (as adjusted in accordance with this Agreement, including through the results of benchmarking studies conducted pursuant to Section 5.8). The performance credits shall provide for an adjustment to Fees for each month for which performance credits apply, assessed no more frequently than quarterly, and shall provide for CGI the right to earn back credits for performance (over the next succeeding quarter) that exceeds the Target Service Levels that CGI has previously failed to meet. A continuing and persistent failure to meet Mission Critical Activities or Minimum Service Levels may result, at UCAR's option, in the full or partial termination of the Service or the Agreement. UCAR's termination shall be without penalty and UCAR may obtain such partially terminated Service from a third party until such time as CGI can show to the satisfaction of UCAR that it can meet the Mission Critical Activities or Minimum Service Level on a consistent basis. "Minimum Service Levels" will be established during the Transition Period and are expected to be a level of performance that is below the level of performance reflected by the Target Service Levels. SECTION 6 - FEES 6.1 PURCHASE OF BUSINESS ASSETS -- Upon execution of this Agreement by the parties, CGI will pay UCAR [TEXT DELETED] dollars ($[TEXT DELETED]) for its purchase of UCAR's IS/IT business assets, including the transfer of employees, assignment of material contracts and transfer of the Purchased Assets as described in Section 4.7. The purchase price will be sent by wire transfer to the following account: 19 Chase Manhattan Bank NY ABA: 021000021 Account Name: UCAR Carbon Company Inc. Account Number: 134093046 6.2 BASE SERVICES FEES -- The fees for the Base Services will be as set forth in Section 1 of Schedule H, and all such fees will be payable by UCAR to CGI in accordance with Section 6.5. If any change is required to the Base Services or if CGI's costs to provide the Base Services [TEXT DELETED] or [TEXT DELETED] in any [TEXT DELETED] way, as a result of [TEXT DELETED] or a [TEXT DELETED] in [TEXT DELETED] due to [TEXT DELETED] or [TEXT DELETED], then the parties will agree upon an [TEXT DELETED] to the [TEXT DELETED] to take into account any such [TEXT DELETED] or [TEXT DELETED] or [TEXT DELETED] (taking into account [TEXT DELETED] and the [TEXT DELETED] of [TEXT DELETED]). If following the [TEXT DELETED] of any [TEXT DELETED] part of [TEXT DELETED], UCAR requests CGI to continue to provide the Services in [TEXT DELETED] of that [TEXT DELETED], and the [TEXT DELETED] the [TEXT DELETED] agrees to be bound by the terms of this Agreement, including the [TEXT DELETED] terms hereof, CGI will do so for a reasonable period of time to assist the [TEXT DELETED] in the transition of the Services to [TEXT DELETED]. During the Transition Period, CGI and UCAR will work together in good faith to develop a [TEXT DELETED] that will apply commencing on [TEXT DELETED]. It is expected that the [TEXT DELETED] will include the [TEXT DELETED] set forth in Section 1 of Schedule H, as then adjusted, for the Base Services then being provided, plus a [TEXT DELETED] for taking into account [TEXT DELETED] in the [TEXT DELETED] of [TEXT DELETED] for the [TEXT DELETED] (as set forth in Schedule K). Unless and until CGI and UCAR agree on an [TEXT DELETED], then the [TEXT DELETED] set forth in Section 1 of Schedule H, as then adjusted, will apply, and that amount will be due and payable in accordance with Section 6.5. 6.3 TIER III PROJECT FEES -- Fees for Tier III Projects, other than the J. D. Edwards Project, will be mutually agreed by the parties at the time the projects are developed, or if no such agreement is reached, then CGI will charge UCAR for those Tier III Projects on a time and materials basis in accordance with the Tier III Project Rates. 6.4 REIMBURSEMENT OF EXPENSES - UCAR will reimburse CGI for its reasonable out of pocket travel and travel related expenses it incurs in providing the Additional Services at the request of UCAR pursuant to the Travel and Expense Guidelines set out in Schedule M. 6.5 PAYMENTS - The amounts described in Section 6.2 will be due and payable on or before the Base Fee Payment Date. For all other amounts due hereunder for which a time for payment is not specified, that amount shall be due and payable no later than the thirtieth (30th) day after UCAR's receipt of an invoice therefore. UCAR shall pay the amounts due by wire, funds transfer or other means acceptable to CGI. All amounts due hereunder will be invoiced and paid in U.S. Dollars, and the parties intend that invoices will be submitted by CGI to a UCAR single point of contact in the U.S. as directed by the UCAR CIO. In the event that any payment due hereunder is not received by CGI when due, a late payment fee calculated on an annual basis on the outstanding amount shall also be paid to CGI by UCAR and shall be equal to the lesser of(i) one and one-half percent (1 1/2%) per month, and (ii) the maximum amount allowed by applicable law. For purposes 20 of this Agreement, the "Base Fee Payment Date" is, with respect to the monthly Base Services fee due for each calendar month hereunder, either (i) the last day of the month for which that monthly fee is due, or (ii) thirty days after the end of the month for which that monthly fee is due, if UCAR gives written notice to CGI on or before the date CGI issues to UCAR the invoice for that monthly fee that UCAR desires to delay the payment date for thirty days. If UCAR selects (ii) above, then the invoice for which the payment is being delayed will be increased by an amount equal to the [TEXT DELETED] established by [TEXT DELETED] multiplied by the [TEXT DELETED] to that [TEXT DELETED]. UCAR's right to select the payment option described in clause (ii) above will terminate as of the end of the third year of the Term. 6.6 COST REDUCTION FOR INNOVATIONS -- If during the Term there should become available any significant innovation not included in the Base Services that CGI uses to reduce the costs it incurs in performing the Services materially below the costs reasonably anticipated as of the Commencement Date, then CGI and UCAR shall negotiate in good faith to reduce the charges payable hereunder to reflect the portion of those costs savings that the parties mutually agree should be attributable to UCAR. 6.7 VALUE SHARING INCENTIVE AFFECTING OTHER UCAR BUSINESS FUNCTIONS - Within any Budget Period, CGI may present UCAR with a written proposal for the implementation of a new or different process, system or technology that would reasonably be expected to result in cost savings for UCAR (net of the cost of implementing such proposal) in carrying out certain business functions. If UCAR determines that it wishes to proceed with the proposal, then the parties shall negotiate in good faith the terms and conditions on which the proposal will be implemented as Additional Services recognizing the value of the technology delivered, including the recognized cost benefits, and the manner in which cost savings will be shared. 6.8 TAXES - In addition to the fees due under this Agreement, UCAR agrees to pay any taxes (which shall include taxes, penalties, and interest) applicable under this Agreement, except that each party shall be responsible for any personal property taxes on property it owns or leases, for franchise and privilege taxes on its business, and for taxes based on its net income. 6.9 VERIFICATION OF INFORMATION - UCAR acknowledges that CGI's charges under this Agreement are based on information provided by UCAR to CGI. If at any time during the first 12 months of the term of this Agreement, it is determined that any information provided by UCAR to CGI in connection with entering into this Agreement was materially incorrect or incomplete and, as a result, CGI's charges hereunder were not properly established, then the charges will be appropriately adjusted to take into account the correct and complete information. SECTION 7 - ANNUAL REVIEWS 7.1 IT STEERING COMMITTEE - UCAR and CGI agree to create a IT Steering Committee, including appropriate subcommittees, and each will provide the other a list of its 21 representatives. Either party may substitute its representation on the IT Steering Committee by providing written notice to the other Party. The IT Steering Committee or the appropriate subcommittee will: (a) conduct periodic reviews of the progress of projects; (b) annually review the operating and strategic plans which affect the scope of Services; (c) review, on a periodic basis, performance objectives, measurements, and results. 7.2 CGI ANNUAL PERFORMANCE REVIEW - Annually, CGI shall provide a performance review of its Services to the IT Steering Committee for its appraisal. CGI shall recommend Target Services Levels objectives in support of continuous improvements. Both UCAR and CGI shall mutually agree upon any changes in Target Service Levels objectives. 7.3 ANNUAL SERVICES FEES REVIEW - CGI shall provide input to the UCAR Designated Representative as part of the UCAR annual budget planning process. CGI shall document any proposed changes to its fees hereunder to provide the Services to UCAR. CGI shall also submit the estimated fees of any Additional Services requested by UCAR. Additional Service fees and incremental changes to fees for the Base Services (other than volume charge adjustments for increases to the Baseline Level of Resources), including adjustments in accordance with Section 6, shall be subject to the IT Steering Committee's approval. SECTION 8 - CHANGES TO THE PRODUCTION ENVIRONMENT 8.1 Control Over Change 8.1.1 CHANGES TO COMPUTER SYSTEM - All Changes and upgrades to the Computer System, shall be controlled by CGI and made when deemed necessary by CGI; provided that any such changes that could negatively impact the Services or result in increased costs to UCAR shall be subject to the approval of the Change Management Committee, described in Section 8.2 (Change Management Committee) hereof, which approval cannot be unreasonably withheld. 8.1.2 OTHER CHANGES - All other changes than those described in Section 8.1.1 above, including, without limitation, changes to the operation procedures and schedules shall be subject to the approval of the Change Management Committee. 8.2 CHANGE MANAGEMENT COMMITTEE - The parties shall form a committee comprised of a minimum of two (2) individuals for the purposes of reviewing, assessing the impact of, approving, controlling, scheduling, evaluating, and recording changes as described in Section 8.1 (Control Over Change). UCAR shall appoint one (1) member of such committee which shall be chairperson of the committee and shall be responsible for calling meetings of the committee as may be required. CGI shall appoint one (1) member of the Change Management Committee. Decisions of the Change Management Committee shall be by majority rule, and the parties shall have equal representation on the Change Management Committee. The parties shall follow a mutually agreed change 22 management procedure. In addition, the Change Management Committee shall determine whether a given Change shall be performed as a Base Service or a Tier III Project. 8.3 ENHANCEMENTS - CGI shall inform the Change Management Committee of the availability of enhancements which are released by suppliers of the System Software. CGI acknowledges UCAR's desire to install and integrate enhancements approved by UCAR. 8.4 IMPLEMENTATION OF CHANGE - Subject to Section 6.2, CGI shall install and implement Changes as approved by UCAR and scheduled by the Change Management Committee. SECTION 9 - RESPONSIBILITIES OF UCAR AND CGI 9.1 UCAR -DESIGNATED REPRESENTATIVE - UCAR shall designate an individual who shall have the authority to act for UCAR in connection with all aspects of this Agreement and to whom all CGI communications shall be addressed. The UCAR-designated representative shall be authorized to modify, adjust or eliminate procedures, authorization levels and security policies within the scope of the Agreement. 9.2 CGI MANAGER - CGI shall designate, prior to the Commencement Date, an experienced and qualified employee to act as CGI Manager who shall have overall authority and responsibility to act for CGI and any CGI-approved subcontractor in connection with all aspects of this Agreement and shall coordinate the provision of Services. 9.3 UCAR AND CGI'S PARTICIPATION - CGI and UCAR undertake to cooperate in good faith and in a commercially reasonable manner to fulfill their obligations. 9.4 IT STEERING COMMITTEE - UCAR shall be responsible for scheduling meetings of the IT Steering Committee on a periodic basis and in accordance with Section 7. 9.5 CGI STAFF AND SUBCONTRACTORS - CGI shall at all times during the Term of this Agreement provide experienced and qualified personnel. CGI may use subcontractors to perform its obligations under this Agreement. CGI shall be responsible for the work and performance of its subcontractors. 9.6 PROPERTY OF UCAR DATA - UCAR Data is and shall remain the property of UCAR at all times and UCAR shall provide CGI with the backup, retention, and recovery procedures related to the support of the Data. CGI will use all reasonable efforts to ensure the protection of UCAR data in CGI's control. SECTION 10 - TERM 10.1 TERM - This Agreement shall become effective as of the Commencement Date and, unless terminated earlier pursuant to the provisions hereof, shall remain in full force and effect until the tenth anniversary of the Commencement Date. Three years prior to the expiration of the initial term of the Agreement, the parties shall begin negotiations to either extend the Agreement and/or transition the Services to UCAR or another provider upon termination with negotiations to be concluded one year prior to the expiration of the then current term. 23 SECTION 11 - TERMINATION 11.1 TERMINATION FOR CAUSE BY UCAR: (a) UCAR may terminate this Agreement upon providing CGI with 60 days' prior written notice if CGI shall have breached any of its duties, obligations or responsibilities hereunder in such a manner as to constitute a material breach and fails to remedy such breach within that notice period. CGI may propose and UCAR may accept a specific plan for corrective action over a time period in excess of the 60 day period. For purposes of this Section a material breach of this Agreement shall include, without limitation, the breaches identified in Section 5.9. (b) This Agreement may be terminated by UCAR upon written notice in the event that CGI shall have ceased to carry on business, been adjudged bankrupt under the laws of the United States, made an assignment for the benefit of its creditors, filed a petition for bankruptcy, or if a trustee or receiver shall have been appointed for all or for a substantial portion of the assets of CGI. 11.2 TERMINATION BY CGI - This Agreement may be terminated by CGI upon 30 days prior written notice in the event that UCAR shall have failed to pay CGI the sums which it owes to CGI when such sums become payable (provided that CGI is not in default hereunder or shall not have breached any other material term or condition of this Agreement) and shall have failed to remedy such breach within the notice period, provide such prior written notice has been delivered in accordance with Section 27.1 hereof. Under such termination, UCAR shall pay to CGI the fees then due and unpaid at the time the termination takes effect, plus the fees, if any, due under Section 11.9 11.3 TERMINATION FOR CONVENIENCE - UCAR may terminate this Agreement at any time following the third anniversary of the Commencement Date for its convenience by (i) providing to CGI at least 180 days prior written notice and (ii) paying to CGI a termination for convenience fee calculated in accordance with Schedule L. Tangible assets capitalized for the exclusive delivery of Services to UCAR shall become UCAR property upon payment of such termination for convenience fee. 11.4 RETURN OF PROPERTY - Upon the expiration or upon any termination of this Agreement, CGI shall return to UCAR, in a timely fashion, all copies of the UCAR Data, tapes, documentation, forms and other property of UCAR in the possession of CGI as well as any other information and material relating thereto or relating to UCAR or its business. Similarly, UCAR shall return CGI's property. 11.5 TRANSFER OF CONTRACTS - Upon the expiration or termination of this Agreement, CGI shall transfer or assign to UCAR or its designee, subject to payment by UCAR of any third party transfer fee, the unrecovered portion of any pre-payment, or charge imposed by the applicable vendors, any contract applicable to the Services being provided to UCAR under this Agreement, including but without limitation, leases, service contracts, maintenance contracts, disaster recovery contracts and licenses. UCAR undertakes to 24 hold CGI free and harmless from any obligation under such contracts arising after the transfer date of these contracts. 11.6 ACCESS TO COMPUTER SYSTEM - Access to Computer System -- Upon expiration or termination of this Agreement, UCAR shall have access, as reasonably required by UCAR, to the CGI Site to effect the transfer of its Data to an alternate site at UCAR's cost. If such termination is the result of CGI exercising its right according to Section 11.2 hereof, such access by UCAR shall be granted by CGI upon payment to CGI of any fees due and unpaid at the time of termination, plus the fees, if any, due under Section 11.9. UCAR may elect to repurchase the Computer System (other than those tangible assets addressed in Section 11.9 which are addressed in such Sections) upon any such termination or expiration by delivering written notice to CGI within 60 days after the date of termination or expiration and CGI shall sell the Computer System to UCAR in the event of such election. The purchase price of the Computer System shall be CGI's net book value of the Computer System, which shall be reported to UCAR within 30 days of UCAR's election. UCAR may revoke its election following receipt of the net book value. If UCAR does not revoke its election to purchase the Computer System the purchase price shall be paid within 30 days of the date the net book value is delivered and CGI shall render reasonable assistance to facilitate the transfer or removal of all or any part of the Computer System by UCAR after such purchase. 11.7 TERMINATION ASSISTANCE - Upon the expiration or termination of this Agreement, CGI shall continue to provide to UCAR those minimal services necessary and cooperate with UCAR as reasonably requested by UCAR to effect transition of services and functions being performed by CGI to UCAR or another location determined by UCAR. CGI shall provide the information and assistance necessary, such as but not limited to, the development of a termination and transition plan, the training of UCAR's staff and third party staff as directed by UCAR in the use of the hardware and software and operating procedures being transferred, and providing of technical and telecommunication planning assistance. Daily time and material rates in effect at that time shall apply to CGI personnel assigned to the UCAR transfer project. If such termination is a result of CGI exercising its right in accordance with Section 11.2 hereof, UCAR shall provide CGI with estimated monthly fees in advance. CGI will provide a monthly statement for any fees over the advance amount or provide a credit for any advance amounts over the actual fees. CGI may cease Termination Assistance at any time UCAR fails to timely pay any amounts due hereunder. 11.8 CGI PROPRIETARY SOFTWARE - Upon the expiration or upon any termination of this Agreement, CGI shall grant UCAR a non-exclusive, limited, revocable license to use certain CGI Proprietary Software for UCAR's internal use only, such software being the CGI Proprietary Software that CGI actually used in providing to UCAR the Services hereunder. UCAR's license will be subject to the same terms and conditions and pricing as CGI offers to other commercial clients. Such right to license will be conditioned upon: (i) CGI having the right to grant such a license, (ii) UCAR having paid all fees owing to CGI; and (iii) upfront payment of the appropriate license fees. 25 11.9 RECOVERY OF COMMENCEMENT AND UNAMORTIZED PROJECT COSTS -- Upon the early termination of this Agreement (including any partial termination pursuant to Section 5.9) and in addition to any other rights and remedies either party may have in connection with the termination, UCAR shall pay to CGI a termination fee for the [TEXT DELETED] by [TEXT DELETED] to fulfill its obligations under this Agreement that [TEXT DELETED] has [TEXT DELETED] but [TEXT DELETED] to [TEXT DELETED] over the Term and the [TEXT DELETED] of [TEXT DELETED] to [TEXT DELETED] of [TEXT DELETED] in accordance with each such project mandate. [TEXT DELETED] for the [TEXT DELETED] of Services to UCAR shall become [TEXT DELETED] upon [TEXT DELETED] of such [TEXT DELETED]. The provisions of this Section 11.9 will not apply to a termination pursuant to Section 11.3, except with respect to [TEXT DELETED] the [TEXT DELETED] or [TEXT DELETED] by CGI at [TEXT DELETED] the [TEXT DELETED] for which is [TEXT DELETED] by [TEXT DELETED] over the [TEXT DELETED]. SECTION 12 - HUMAN RESOURCES 12.1 HIRING OF CGI EMPLOYEES - UCAR undertakes that, during the Term of this Agreement and for a period of one year thereafter, it shall not, without CGI's prior consent, recruit or hire any person who is then or was in the previous six months an employee of CGI. Notwithstanding the foregoing, following termination or expiration of this Agreement, UCAR may recruit and hire any In-Scope Personnel. 12.2 HIRING OF UCAR EMPLOYEES -- CGI undertakes that, during the Term of this Agreement and for a period of one year thereafter, IT shall not, without UCAR's prior consent, recruit or hire any person who is then or was in the previous six months an employee of UCAR. SECTION 13 - CONFIDENTIALITY, PROPRIETARY RIGHTS AND SOFTWARE 13.1 CONFIDENTIALITY - CGI shall keep information belonging or relating to UCAR in confidence, and shall neither use it nor disclose it to any other party, with the exception of CGI's third party contractors and fiduciaries, without the explicit written permission of UCAR. CGI shall also cause its employees to enter into a confidentiality agreement. Except as otherwise required by law, UCAR and CGI each agree to take all reasonable precautions to keep the provisions of this Agreement and any confidential information relating to CGI and UCAR respectively, in confidence and shall not disclose such information to any other person without the written permission of CGI or UCAR, as the case may be. In the event either party is required by law to make any disclosure with respect to the provisions of this Agreement or any confidential information relating to the other party, such disclosure may be made only following prompt notice to the other party and sufficient time for that party to obtain a protective order. CGI agrees that UCAR, without prejudice to any rights to judicial relief UCAR may otherwise have, shall be entitled to seek equitable relief, including an injunction, in the event of any breach by CGI of the provisions of this Section. CGI also agrees that it will not seek, and agrees to waive any requirement for the securing or posting of a bond by UCAR in connection with UCAR obtaining such injunctive relief. 26 13.2 UCAR AND DEVELOPED SOFTWARE - UCAR represents that it has all rights in and to the UCAR Software necessary to grant to CGI the rights described in this Agreement. As between UCAR and CGI, UCAR will retain all right, title and interest in and to the UCAR Software and the software applications, including the source codes, developed by CGI and paid for by UCAR. With respect to the UCAR Software, and any developed software owned by UCAR, that CGI needs in order to provide the Services, UCAR hereby grants to CGI the non-exclusive right, at no charge, to operate, copy, modify or otherwise use that software in order to provide the Services. UCAR Software existing as of the Commencement Date will be made available to CGI in the same form and on the same media as exists on the Commencement Date, together with existing documentation and any other related materials. 13.3 CGI SOFTWARE - CGI Software will be and remain the property of CGI and its licensors, and UCAR will have no rights or interests in CGI Software except as otherwise described in this Section; provided, however, as between the parties, UCAR will own the software applications developed by CGI and paid for by UCAR. Subject to the preceding, (i) during the Term, subject to CGI's right to grant such a license with respect to any CGI Software licensed by CGI, CGI hereby grants to UCAR, and UCAR hereby accepts from CGI, a nonexclusive, nontransferable, paid up, royalty free license to access any CGI Software as necessary to use the Services that CGI is obligated to provide to UCAR pursuant to this Agreement, (ii) CGI will retain all right, title and interest in and to all other software developed pursuant to this Agreement, and (iii) upon the expiration or termination of this Agreement (other than a termination for UCAR's failure to make payments hereunder), CGI will grant to UCAR a non-exclusive, limited, paid-up license, to use the Application Software that is owned by CGI and that is then being used by CGI to provide the Base Services, and UCAR may use that CGI Software solely for its internal business operations and may not disclose it to any third party. 13.4 RESIDUAL KNOWLEDGE - Nothing contained in this Agreement will restrict either party from using any ideas, concepts, know-how, methodologies, processes, technologies, algorithms or techniques relating to the Services that either party, individually or jointly, develops or discloses under this Agreement provided that in doing so the party does not breach its obligations under this Agreement or infringe the intellectual property rights of the other party or third parties who have licensed or provided materials to the other party. Without limiting this provision, nothing in Section 13.2 or Section 13.3 will prevent either party from independently developing any software that is the same or similar to any software owned by the other party so long as the developing party does not violate any copyright of the other party. Except for the license rights contained in this Article 13, neither this Agreement, nor any disclosure made hereunder or thereunder grants any license to either party under any patents or copyrights of the other party. 13.5 EXPORT - The parties acknowledge that certain software and technical data to be provided under this Agreement may be subject to export controls under the laws and regulations of the United States or other countries. Neither party will export or re-export any of those items nor any direct product of them nor undertake any transaction in violation of any of those laws or regulations. To the extent within a party's control, that party will be 27 responsible for, and will coordinate and oversee, compliance with those export laws concerning any items it exports or imports under this Agreement. SECTION 14 - SECURITY AND AUDIT 14.1 SECURITY - CGI shall implement and maintain procedures and systems in order to ensure the security of the CGI Site as well as the off-site storage of Data. 14.2 AUDIT RIGHTS.- CGI shall, once a year, or as may be requested by the chairman of IT Steering Committee and approved by CGI, such approval not to be reasonably withheld, allow UCAR's auditors, including internal audit staff, inspectors and other representatives as UCAR may designate in writing, access at reasonable times to the CGI Site, to CGI's personnel providing Services, and to logs relating to the Services for the purpose of performing audits and inspection, to verify the integrity of UCAR's Data and to examine CGI's performance of the Services hereunder. Such audits shall be limited to audits (i) of practices and procedures, (ii) of systems, (iii) of general controls and security practices and procedures, (iv) of disaster recovery and backup procedure, and (v) of due diligence evaluation. The parties hereto agree to make appropriate arrangements to ensure that any audit shall not interfere with CGI's ability to perform the Services, nor with CGI's provision of services to other customers, and shall be subject to CGI's routine security procedures, practices and policies. SECTION 15 - INSURANCE 15.1 INSURANCE - CGI shall at its own expense and for the duration of the Agreement maintain Workers' compensation coverage, crime (including computer fraud coverage), public liability and property damage insurance, all risk insurance, boiler and machinery, extra expense, Data and media, data processors, computer services and software errors and omissions insurance covering the CGI Site. UCAR shall be identified as an additional insured (with the exception of Workers' compensation coverage) as of the Commencement Date. All insurance policies, including but not limited to Workers Compensation coverage shall waive subrogation rights against UCAR. During the term of this Agreement, UCAR's Designated Representative may require CGI to apply changes to the above insurance requirements, subject to the payment by UCAR of any additional premium with respect to the additional coverage that may be requested. CGI shall provide UCAR with thirty (30) days' written notice of cancellation or material change to the above policies and, if requested by UCAR in writing, shall provide UCAR, on an annual basis, with certificates of such insurance. SECTION 16 - WARRANTY 16.1 WORK STANDARDS - CGI represents and warrants that all Services performed by CGI for UCAR shall be performed in a professional manner in accordance with industry standards and practices applicable to the performance of such Services. CGI warrants that Services shall be provided in accordance with applicable laws and regulations. 28 16.2 UCAR LEASED EQUIPMENT AND CONTRACTS - UCAR represents and warrants that it is authorized to include under this Agreement all the leased equipment listed in Schedule "C" (Purchased Assets and Leased Assets) and contracts that were actually assigned and listed in Schedule "D" (Assigned Contracts). 16.3 SYSTEM SOFTWARE LICENSES - UCAR represents and warrants that it is the licensee of the System Software and is authorized to grant the rights it has granted to CGI hereunder. 16.4 RELIABILITY - UCAR represents and warrants that the Hardware and System Software has been maintained in accordance with the manufacturer's approved maintenance standards and is in good working condition. 16.5 NON-INFRINGEMENT - The parties represent and warrant that they shall perform their obligations under this Agreement in a manner that does not infringe or constitute an infringement or misappropriation of any patent, trade secret, copyright or other proprietary right of any third party. 16.6 COMPLIANCE WITH OBLIGATIONS - Each party represents and warrants that its entry into this Agreement does not violate or constitute a breach of any of its contractual obligations with third parties. 16.7 Disclaimer (a) CGI does not guarantee the accuracy of any advice, report, data or other product delivered to UCAR which is produced with or from the data or software provided by UCAR at the beginning of the Agreement. Such products shall be delivered on an "as is basis", and CGI shall not be liable for any inaccuracy therein. (b) Subject to the obligations of CGI contained in this Agreement in particular, CGI does not assure uninterrupted or error-free operation of the Hardware or System Software. (c) Except as provided for in this Agreement, there are no other express warranties or conditions, and there are no implied warranties and conditions, including, but not limited to, the implied warranties of merchandisable quality or fitness for a particular purpose. 16.8 MUTUAL INDEMNIFICATION - CGI and UCAR agree to indemnify and hold harmless the other party against any and all liability, loss, costs, damages, reasonable legal fees and reasonable expenses caused which they sustain or incur by reason or in consequence of an act or omission of the other party in respect of its duties and obligations pursuant to Section 16.5 (Non-Infringement), except that CGI's indemnification obligations to UCAR shall not extend to: (i) claims based on software that UCAR has modified; (ii) claims based on CGI Software used by UCAR in conjunction with other software not authorized or supported by CGI; or (iii) claims based upon CGI Software in use by UCAR that is other than the most recent version. 29 SECTION 17 - LIMITATION OF LIABILITY 17.1 LIMITATION - UCAR and CGI recognize that either party may claim damages for any default by the other party under this Agreement, but that the remedies of the non-defaulting party and the liability of the defaulting party, whether contractual or in tort, shall be limited as set forth hereinafter and that these provisions shall apply notwithstanding the election of the non-defaulting party, if so entitled, to terminate or be discharged from this Agreement. 17.2 REMEDY - Except with respect to UCAR's obligations to make payments to CGI under this Agreement (including any obligation to make payments in the future under this Agreement), with respect to all claims arising out of, under or in connection with this Agreement, each party's liability will not exceed, in the aggregate, an amount equal to the charges actually paid by UCAR to CGI during the first seven (7) months after the Commencement Date (excluding amounts paid as reimbursement of expenses and taxes). The above limitation shall not apply with respect to either party's liabilities concerning damages arising out of the death or personal injury of any person, or with respect to either party's obligations of indemnity for infringement as set forth in Section 16.8, or with respect to a willful and intentional breach of Section 13.1. 17.3 SPECIAL OR CONSEQUENTIAL DAMAGES - In no event shall such damages include, nor shall either party be responsible for, any special, indirect or consequential damages even if they have been advised of the possibility thereof, including but not limited to loss of revenue or profits, other than UCAR's payment amounts hereunder, or failure to realize expected savings, or any damage claimed against either party by any other party. SECTION 18 - FORCE MAJEURE 18.1 FORCE MAJEURE - Notwithstanding any other provision hereof to the contrary, UCAR and CGI shall not be deemed to be in default hereunder or liable for any failure to perform their obligations hereunder for causes beyond their reasonable control including, without limitation, delays in production or delivery of any of the Hardware, System Software, third party application software, or delays resulting from fire, flood, accident, war or civil insurrection. UCAR and CGI shall use all commercially reasonable efforts to resume performance of their respective obligations to whatever extent possible without delay. During any period of Force Majeure, UCAR shall not be obligated to pay for any services which are not being provided. If any Force Majeure event attributable to, and which prevents, CGI from providing the Services for a consecutive period of three months, UCAR may terminate this Agreement. SECTION 19 - ASSIGNMENT AND BINDING EFFECT 19.1 ASSIGNMENT AND BINDING EFFECT - Neither this Agreement nor any of the rights and obligations of either party hereunder shall be assigned or transferred without the prior written consent of the other party, such consent not to be unreasonably withheld; provided that no such written consent shall be required for an assignment to an affiliate of 30 either party. Unless expressly agreed in writing, no assignment by either party will relieve the assigning party of any obligations assigned hereunder. SECTION 20 - NO WAIVER 20.1 NO WAIVER - A waiver by either party of any breach or default of any of the provisions contained herein shall not be construed as a waiver of any succeeding or subsequent breach of this Agreement. SECTION 21 - SEVERABILITY 21.1 SEVERABILITY - The invalidity or unenforceability of any provision of this Agreement herein contained shall not affect the validity or enforceability of any other provision herein contained and any such invalid or unenforceable provision shall be deemed to be severable. SECTION 22 - NO AGENCY/INDEPENDENT CONTRACTOR 22.1 NO AGENCY/INDEPENDENT CONTRACTOR - The parties are and shall at all times remain independent parties and nothing contained herein shall be construed as constituting a partnership, joint venture or an agency between CGI and UCAR. CGI's relationship to UCAR in performing this Agreement is that of an independent contractor, not an employee. The personnel performing services under this Agreement shall at all times be under CGI's exclusive direction and control and shall be employees, including common law employees, of CGI, not UCAR. SECTION 23 - ENTIRE AGREEMENT 23.1 ENTIRE AGREEMENT - This Agreement represents the entire Agreement between the parties with respect to the matters provided for herein, and supersedes all prior discussions, negotiations and agreements between the parties, including but not limited to any proposals or other documents exchanged between the parties. CGI shall assume no responsibilities other than those stated in this Agreement. No amendment to or variation in this Agreement shall be effective unless it is done in writing and signed by authorized representatives of the parties. The parties agree that this Agreement may be amended to add additional UCAR Sites under the same terms and conditions of this Agreement. Such additions shall be evidenced by execution by both parties of an Additional Site Schedule that will specify the additional UCAR Sites to be added, and the Services, Target Service Levels, and pricing, including the UCAR assets to be purchased by CGI, that will be applicable to those additional UCAR Sites. Each Additional Site Schedule will be negotiated using the same general principles as those used to arrive at the purchase price and fees applicable to this Agreement. 31 SECTION 24 - COMPLIANCE WITH LAWS 24.1 Each party agrees that it will comply with all national, U.S. federal, state and local laws, regulations and codes applicable to it in the performance of this Agreement. SECTION 25 - GOVERNING LAW 25.1 GOVERNING LAW - This Agreement shall be governed by the laws of the State of New York. SECTION 26 - PUBLICITY 26.1 PUBLICITY - Each party shall submit to the other all advertising, written sales promotion, press releases and other publicity matters relating to this Agreement in which the other party's name is mentioned and will not publish or use such advertising, sales promotion, press releases, or publicity matters without prior written approval of the other party. However, either party may include the other party's name and a factual description of the work performed under this Agreement in its lists of references and in the experience section of proposals to third parties, in internal business planning documents and in its Annual Report to shareholders, and whenever required for legal, accounting or regulatory purposes. SECTION 27 - NOTICES 27.1 NOTICES - Any notice, directive or other instrument required or permitted to be given hereunder shall be in writing and shall be personally delivered or sent by prepaid registered mail in Canada or by telegram, telex, telecopier or other form of telecommunication, in each case addressed as follows: If to: UCAR UCAR International Inc. 3102 West End Avenue, Suite 1100 Nashville, TN 37203 Attention: Chief Information Officer with copy to: UCAR International Inc. 3102 West End Avenue, Suite 1100 Nashville, TN 37203 Attention: General Counsel 32 If to CGI: CGI Information Systems and Management Consultants, Inc. 1130 Sherbrooke Street West 5th Floor Montreal, Quebec H3A 2M8 Attention: General Counsel and CGI Information Systems and Management Consultants, Inc. 600 Federal St. Andover, Massachusetts 01810 Attention: Managing Director or to such other address as either party may indicate to the other by written notice as its new address for the purposes of this provision. Any notice, consent, directive or other instrument given by either party in accordance with the foregoing shall be deemed to have been received by the other party on the same day it is personally delivered or sent by telecopier or the date of receipt by registered mail or reputable overnight carrier, whichever is sooner. SECTION 28 - INFORMAL DISPUTE RESOLUTION AND ARBITRATION 28.1 INFORMAL DISPUTE RESOLUTION - In the event of a dispute in connection with this Agreement, the UCAR -Designated Representative and the CGI Director shall meet to discuss and resolve the dispute. In the event they are unable to resolve the dispute within thirty (30) days, or fifteen (15) days if either party notifies the other party that the matter requires urgent resolution, the dispute shall be referred to the Chief Executive Officer of each of the parties for resolution of the problem. 28.2 ARBITRATION - If the Chief Executive Officers are unable within thirty (30) days, or fifteen (15) days in case of emergency, to resolve any dispute arising under this Agreement, then such dispute shall be submitted to mandatory and binding arbitration. The disputing party shall notify the other party in writing describing in reasonable detail the nature of the dispute and the parties shall attempt within twenty (20) days of the notification of dispute to agree on an individual arbitrator familiar with New York law. If the parties are unable to agree upon an Arbitrator, then either party shall have the right to apply to a Court in New York for the appointment of a single Arbitrator. The Arbitrator appointed by the Court shall conduct the arbitration in accordance with the rules of the American Arbitration Association. The arbitration hearing shall take place in the city of New York and be commenced as promptly as possible and conducted expeditiously. The Arbitrator's decision shall be final, without appeal and shall bind the parties. It is agreed that any dispute dealing with the infringement of intellectual property rights or the protection of confidential information shall not be subject to arbitration. The parties shall continue to perform their respective obligations notwithstanding a dispute until a dispute 33 is resolved or arbitrated. The Arbitrator shall have the right and power to grant damages as well as award the costs of the arbitration within the limitations set forth in this Agreement. In no event will the Arbitrator have any authority to award damages in amounts or types not provided for or limited by this Agreement. The hearing shall take place no later than ninety (90) days following the appointment of the arbitrator and the decision shall be rendered at the latest one (1) month after the hearing. SECTION 29 - CONFLICTS OF INTEREST 29.1 Consultant agrees that it will not assign the [TEXT DELETED] as "[TEXT DELETED]" on Schedule G hereto to provide services for any of UCAR's competitors (including any subsidiaries or affiliates of such competitors) listed below while such [TEXT DELETED] are in the [TEXT DELETED] of [TEXT DELETED] and during the period of, and for 24 months following, [TEXT DELETED] of [TEXT DELETED] to [TEXT DELETED]. The competitors to which this Section applies are as follows: SGL Carbon AG (Germany) Carbide/Graphite Group, Inc. (US) Showa Denko K.K. (Japan) Carbon Lorraine (France) It is acknowledged by the parties that UCAR's [TEXT DELETED] of [TEXT DELETED] and [TEXT DELETED], such as the [TEXT DELETED] of [TEXT DELETED] ("[TEXT DELETED] Applications") is [TEXT DELETED] in nature. Therefore, CGI agrees that it will not [TEXT DELETED] any [TEXT DELETED] to [TEXT DELETED] for any of UCAR's competitors listed above, if such [TEXT DELETED] has [TEXT DELETED] or [TEXT DELETED] in connection with the development of the [TEXT DELETED] Applications in the prior 24 months for [TEXT DELETED] and 12 months for [TEXT DELETED] without first obtaining consent from UCAR for [TEXT DELETED]. UCAR will not unreasonably withhold its consent to the [TEXT DELETED] of [TEXT DELETED] to [TEXT DELETED] for these listed competitors. SECTION 30 - AUTHORIZATION AND ENFORCEABILITY 30.1 AUTHORIZATION AND ENFORCEABILITY - Each party represents that: (a) it has all requisite corporate power and authority to enter into this Agreement and to carry out the transaction contemplated herein; (b) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all requisite corporate action on the part of each party; and (c) this Agreement has been duly executed and delivered by such party and is a valid and binding obligation of such party, enforceable against it in accordance with its terms. 34 IN WITNESS WHEREOF each party hereto has caused its representative to execute this Agreement to be effective as of the date of execution. CGI INFORMATION SYSTEMS AND MANAGEMENT UCAR INTERNATIONAL INC. CONSULTANTS, INC. By: /s/ Francois Chasse By: /s/ Corrado De Gasperis -------------------------------- ------------------------------ Name: Francois Chasse Name: Corrado De Gasperis Title: Executive Vice President Title: Chief Information Officer 35 SCHEDULE A BASE SERVICES GENERAL DESCRIPTION OF BASE SERVICES. CGI will provide UCAR the services described in this Schedule A. In this role CGI will be the information services/information technology delivery manager and provide UCAR Systems Integration. CGI will provide UCAR IS/IT Services at all UCAR locations in France (following satisfaction of the French Condition of Sale) and the U.S., and Graftech Inc., but excluding all manufacturing process technologies information technology. UCAR's operations in Irvine, California, Mexico, South Africa, Switzerland, Brazil, Russia, Spain and Italy are specifically excluded. It is understood that upon transition of the IS/IT Services at the in-scope locations listed above, UCAR may expand the IS/IT Services to the excluded locations on substantially similar terms. 1.0 GOVERNING RESPONSIBILITY DEFINITIONS The following definitions will be used to describe the respective roles and responsibilities of CGI and UCAR as set forth in this Schedule A. "PERFORM" means assuming primary responsibility for ensuring that a specific task attributed to a party is performed by said party in accordance with this Agreement. "ASSIST" means assuming secondary responsibility for ensuring that a specific task attributed to a party, is performed by said party in accordance with this Agreement. "APPROVE" means providing approval or authorization of a task attributed to the other party, when required and as appropriate. 2.0 ORGANIZATION STRUCTURE [intentionally omitted] 3.0 CONTRACT MANAGEMENT OFFICE (CMO) SERVICES It is the Contract Management Office (CMO) that manages and co-ordinates the delivery of the Services to UCAR in accordance with Section 2.6 (Contract Management Office). More specifically the responsibilities with respect to the CMO activities are as follows:
--------------------------------------------------------------------------------------------- 3.1 CONTRACT MANAGEMENT RESPONSIBILITIES CGI UCAR --------------------------------------------------------------------------------------------- - Authorize and prioritize information technology investments Perform --------------------------------------------------------------------------------------------- - Consult with UCAR on technology investments Perform --------------------------------------------------------------------------------------------- - Develop and approve the strategic information systems direction Assist Perform (including architecture, technology, network and standards) and authorize modifications. --------------------------------------------------------------------------------------------- - Comply with UCAR architecture, technology, network and standards. Perform Perform --------------------------------------------------------------------------------------------- - Provide UCAR with information system management and information Perform technology guidance and support. A-1 --------------------------------------------------------------------------------------------- - Review UCAR Business Unit achievements in information technology Assist Perform utilization and provide direction. --------------------------------------------------------------------------------------------- - Manage the strategic functions of information technology --------------------------------------------------------------------------------------------- - Define and develop high level architecture and technology Assist Perform --------------------------------------------------------------------------------------------- - Approve high level architecture and technology Perform --------------------------------------------------------------------------------------------- - Design security rules and policies Assist Perform Approve --------------------------------------------------------------------------------------------- - Provide CGI with clear direction of UCAR's business needs Perform --------------------------------------------------------------------------------------------- - Work with UCAR managers to coordinate cross-functional Projects Assist Perform or Application Software Support. --------------------------------------------------------------------------------------------- - Develop detailed project architecture, technology and standards Perform Assist considering system availability, reliability and serviceability. Approve --------------------------------------------------------------------------------------------- - Define standard configuration(s) (up to 3 standards) for Perform Assist Desktops, Notebooks and Laptops Approve --------------------------------------------------------------------------------------------- - Manage and control standard system configuration(s) (up to 3 Perform Assist standards) Approve --------------------------------------------------------------------------------------------- - Develop and submit annual technology and maintenance plan Perform Assist --------------------------------------------------------------------------------------------- - Approve annual application technology maintenance plan. Perform --------------------------------------------------------------------------------------------- - Report on conflicts and non-compliance issues Perform Assist --------------------------------------------------------------------------------------------- - Resolve conflicts and non-compliance issues. Assist Perform --------------------------------------------------------------------------------------------- - Review annual performance of CGI. Assist Perform Approve --------------------------------------------------------------------------------------------- - Develop, distribute and collate the CGI Customer Assessment Perform Assist Program --------------------------------------------------------------------------------------------- - Audit processes, procedures, service levels and requirements Assist Perform Approve ---------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------- 3.2 BUSINESS SYSTEM RESPONSIBILITIES CGI UCAR -------------------------------------------------------------------------------------------- - Determine the business needs of UCAR and capture requests Assist Perform -------------------------------------------------------------------------------------------- - Translate UCAR Business Units requirements into business Assist Perform requirements document -------------------------------------------------------------------------------------------- - Work with UCAR to translate requirements into business Perform specifications -------------------------------------------------------------------------------------------- - Define specifications for UCAR application software Perform Assist -------------------------------------------------------------------------------------------- - Document and update operational process. Identify areas for Perform Assist improvement. -------------------------------------------------------------------------------------------- - Where appropriate support each Project with a business case. Assist Perform -------------------------------------------------------------------------------------------- - Produce the Project and annual enhancement plan for the UCAR Assist Perform Business Units -------------------------------------------------------------------------------------------- - Define knowledge management strategy Assist Perform -------------------------------------------------------------------------------------------- - Establish best practices for knowledge gathering Perform Assist -------------------------------------------------------------------------------------------- - Establish standards on knowledge gathering techniques and tools Perform Assist Approve -------------------------------------------------------------------------------------------- - Develop and maintain controlled UCAR procedures for metadata Perform Assist vocabularies, parallel taxonomies and thesaural browsers Approve -------------------------------------------------------------------------------------------- - Develop desktop knowledge sharing processes Perform Assist -------------------------------------------------------------------------------------------- - Oversee maintenance of desktop portals Perform -------------------------------------------------------------------------------------------- A-2 - Develop and integrate software that meets UCAR business Perform Approve requirements according to approved scope and budget --------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------- 3.3 OPERATIONS RESPONSIBILITIES CGI UCAR -------------------------------------------------------------------------------------------- - Develop security rules and policies Assist Perform -------------------------------------------------------------------------------------------- - Perform administration in accordance with security rules and Perform Assist procedures. -------------------------------------------------------------------------------------------- - Authorize the implementation of changes in the production Assist Approve environment according to the change management procedures. -------------------------------------------------------------------------------------------- - Coordinate availability of information technology resources to Perform meet UCAR requirements. -------------------------------------------------------------------------------------------- - Coordinate implementation of changes with UCAR Perform Assist -------------------------------------------------------------------------------------------- - Inform affected Business Units of scheduled implementations Assist Perform -------------------------------------------------------------------------------------------- - Provide required performance report to UCAR Perform -------------------------------------------------------------------------------------------- - Develop UCAR's escalation procedures as required from time to time Assist Perform -------------------------------------------------------------------------------------------- - Comply with UCAR escalation procedures as communicated by UCAR Perform from time to time -------------------------------------------------------------------------------------------- - Comply with CGI escalation procedures as set forth in CGI's Perform Perform operational framework document --------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------- 3.4 MANAGEMENT SERVICES CGI UCAR -------------------------------------------------------------------------------------------- - Co-ordinate and manage the delivery of Tier I, Tier II and Tier Perform III services to UCAR -------------------------------------------------------------------------------------------- - Manage the Assigned Contracts and the Retained Contracts Perform -------------------------------------------------------------------------------------------- - Advise UCAR of Computer Systems capacity issues Perform -------------------------------------------------------------------------------------------- - Advise UCAR of new hardware, software, and system concepts Perform -------------------------------------------------------------------------------------------- - Recommend new, cost effective technologies where and when Perform Assist applicable -------------------------------------------------------------------------------------------- - Provide reasonable assistance to CGI in isolating operational Assist Perform problems -------------------------------------------------------------------------------------------- - Manage the delivery of scheduled reports to UCAR Perform --------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------- 3.5 CONFIGURATION AND CHANGE MANAGEMENT CGI UCAR -------------------------------------------------------------------------------------------- - Prioritize Change Requests Assist Perform -------------------------------------------------------------------------------------------- - Chair the UCAR Change Management Committee meetings Perform -------------------------------------------------------------------------------------------- - Provide input on the value of Change Requests to meeting UCAR Perform Perform business objectives in the Change Management Committee meetings -------------------------------------------------------------------------------------------- - Document, manage, and distribute all UCAR Change Request Perform -------------------------------------------------------------------------------------------- - Provide UCAR with Quality Control signoff on testing performed by Perform Approve CGI for all changes prior to implementation. -------------------------------------------------------------------------------------------- - Provide an implementation plan supporting major Change Requests Perform -------------------------------------------------------------------------------------------- - Initiate, manage, and document problem management Perform Perform --------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------- 3.6 INVENTORY MANAGEMENT & PROCUREMENT CGI UCAR -------------------------------------------------------------------------------------------- - Develop and maintain approved products catalogue Perform Approve -------------------------------------------------------------------------------------------- - Provide product advice to UCAR IT Perform Assist -------------------------------------------------------------------------------------------- A-3 - Negotiate with suppliers for contracts managed by CGI Perform Assist -------------------------------------------------------------------------------------------- - Arrange procurement financing Perform Approve -------------------------------------------------------------------------------------------- - Develop Procurement Plan for items done on UCAR's behalf Perform Approve -------------------------------------------------------------------------------------------- - Approve Procurement done on UCAR's behalf Perform -------------------------------------------------------------------------------------------- - Co-ordinate and administer procurement for acquisitions requested Perform by UCAR -------------------------------------------------------------------------------------------- - Maintain procurement records Perform -------------------------------------------------------------------------------------------- - Maintain records of inventory and associated users Perform Assist -------------------------------------------------------------------------------------------- - Update inventory database ensuring capture of changes caused by Perform Assist IMAC Process -------------------------------------------------------------------------------------------- - Management movement of hardware and software through IMAC process Perform -------------------------------------------------------------------------------------------- - Manage installation and rollout of inventory Perform -------------------------------------------------------------------------------------------- - Manage/Move/Add/Change or technology refresh of in scope inventory Perform --------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------- 3.7 DOCUMENTATION CGI UCAR -------------------------------------------------------------------------------------------- - Maintain existing user, site, network, configuration, license and Perform Approve equipment documentation as agreed by the parties. -------------------------------------------------------------------------------------------- Maintain existing documentation of all IT systems, including at a Perform Approve minimum: - Technical program specifications for each module of code, including source code - Descriptive and diagrammatic definition of the logical physical database design - Procedure manuals suitable for Users - Operations manuals -------------------------------------------------------------------------------------------- Maintain existing documentation that is: Perform Approve - Presented to a standard agreed with UCAR in terms of its presentation, accuracy and scope - The most current and up-to-date versions available - In English and French languages (as required in Europe) -------------------------------------------------------------------------------------------- Produce and distribute changes to user documentation concurrent with Perform software changes -------------------------------------------------------------------------------------------- - Supply revisions at no additional cost to UCAR except as related Perform to Tier III Projects -------------------------------------------------------------------------------------------- - Audit documentation Perform --------------------------------------------------------------------------------------------
----------------------------------------------------------------------------- 3.8 CHANGE MANAGEMENT PROCESS CGI will apply its change management process as will be defined within the Operational Framework. The change management process ensures that: A-4 o A Change Management Committee will be created as identified in Section 8.2 (Change Management Committee) of the Agreement; o Each change must be supported by an impact analysis and a roll-back plan to minimize potential interruptions related to the introduction of a change in Production, unless otherwise agreed to by the Change Management Committee; o Change Requests are reported in the monthly management report given to UCAR, highlighting Change Requests implemented, completed, those still active and those planned over the next period; o On an ongoing basis, identified Change Requests are registered by CGI, tagged with a priority level by UCAR and will remain open until they are completed; o A formal escalation procedure is defined and is strictly adhered to; and, o Outstanding Change Requests are reviewed at the Change Management Committee. 4.0 OPERATION SERVICES (TIER I) 4.1 GENERAL Allocation of UCAR and CGI's responsibilities in the delivery of Operations Services is described hereinafter. 4.2 SERVICES PROVIDED For Operation Services, CGI will: o PARTICIPATE IN CHANGE MANAGEMENT PROCESS o PROVIDE DAY TO DAY OPERATIONAL AND TECHNICAL SUPPORT FOR THE PRODUCTION AND TEST ENVIRONMENTS FOR THE COMPUTER SYSTEM. o PROVIDE PRODUCTION SERVICES o PROVIDE UCAR WITH A SINGLE POINT OF CONTACT HELP DESK o MANAGE PRODUCTION SCHEDULING o PERFORM BACKUP ACTIVITIES OF THE PRODUCTION ENVIRONMENTS o UPON COMPLETION AND MUTUAL ACCEPTANCE OF TARGET SERVICE LEVELS (BY END OF TRANSITION PERIOD) MEET THOSE TARGET SERVICE LEVELS o PERFORM PROBLEM IDENTIFICATION AND RECTIFICATION o PERFORM CHANGE REQUESTS TO OPERATION SERVICES More specifically, for each of the Operation Services listed above, the responsibilities are as follows:
----------------------------------------------------------------------------------------------- 4.2.1 CHANGE AND PROBLEM MANAGEMENT CGI UCAR ----------------------------------------------------------------------------------------------- - Prioritize Change Requests Assist Perform ----------------------------------------------------------------------------------------------- - Assign staff to change management committee Perform Perform ----------------------------------------------------------------------------------------------- - Approve (VETO) change to production environments Perform ----------------------------------------------------------------------------------------------- - Take ownership of Change Request Perform ----------------------------------------------------------------------------------------------- - Maintain accurate change and problem logs Perform ----------------------------------------------------------------------------------------------- A-5 - Develop impact analysis of changes Perform ----------------------------------------------------------------------------------------------- - Develop change implementation plan Perform ----------------------------------------------------------------------------------------------- - Develop fallback plan Perform ----------------------------------------------------------------------------------------------- - Report problems to the help desk Perform Perform ----------------------------------------------------------------------------------------------- - Notify UCAR of malfunctions or errors Perform ----------------------------------------------------------------------------------------------- - Initiate and follow escalation procedures Perform Assist ----------------------------------------------------------------------------------------------- - Approve problem severity definition Assist Perform ----------------------------------------------------------------------------------------------- - Coordinate and manage the vendors under the Assigned Contracts and Perform the Retained Contracts ----------------------------------------------------------------------------------------------- - Approve problem closure Perform -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.2 ESCALATION PROCEDURES CGI UCAR ----------------------------------------------------------------------------------------------- - Develop Escalation Procedures. Perform Assist ----------------------------------------------------------------------------------------------- - Approve Escalation Procedures Approve ----------------------------------------------------------------------------------------------- - Track and manage the resolution of all Escalated Incidents. Perform Approve Assist ----------------------------------------------------------------------------------------------- - Where required, resolve Escalated Incidents. Perform ----------------------------------------------------------------------------------------------- - Document Escalated Incidents. Perform ----------------------------------------------------------------------------------------------- - Advise the User of any changes to original Resolution Period and Perform the Resolution Process. ----------------------------------------------------------------------------------------------- - Report Escalated Incidents as part of the normal Help Desk Perform reporting. -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.3 COMPUTER SYSTEMS OPERATIONS AND SUPPORT CGI UCAR ----------------------------------------------------------------------------------------------- 4.2.3.1 GENERAL ----------------------------------------------------------------------------------------------- - Preliminary approval by CGI Tier I manager of any changes to the Perform Production Environment ----------------------------------------------------------------------------------------------- - Provide final approval to all Change Requests Perform ----------------------------------------------------------------------------------------------- - Provide the maintenance window each month if required and as Perform Assist specified in Schedule J ----------------------------------------------------------------------------------------------- - Manage and co-ordinate all support activities with vendors under Perform the Assigned Contracts and Retained Contracts to limit operational conflicts ----------------------------------------------------------------------------------------------- - Provide continuous and stable power, and adhere to industry Perform environmental standards to and for the physical infrastructures supporting UCAR networks at UCAR Sites ----------------------------------------------------------------------------------------------- - Monitor supported system log files Perform ----------------------------------------------------------------------------------------------- - Monitor and maintain supported Hardware, System Software, and Perform Application Software defined in Schedules D and F ----------------------------------------------------------------------------------------------- - Install new releases, updates and patches for System Software Perform Approve issued by 3rd parties under the Change Request allocations ----------------------------------------------------------------------------------------------- - Provide for and administer third party, warranty, maintenance and Perform support under the Assigned Contracts and the Retained Contracts ----------------------------------------------------------------------------------------------- - Operate system equipment according to schedule and service level Perform requirements ----------------------------------------------------------------------------------------------- - Perform restarts Perform ----------------------------------------------------------------------------------------------- - Execute escalation procedures for malfunctions and failures Perform ----------------------------------------------------------------------------------------------- - Test new software and upgrades previously approved for Perform compatibility with baseline/current configuration ----------------------------------------------------------------------------------------------- A-6 - Prepare Change Request for Hardware and Application Software Perform Approve upgrades ----------------------------------------------------------------------------------------------- - Perform system software recovery, problem analysis, resolution, and Perform reporting ----------------------------------------------------------------------------------------------- - Provide technical support as needed to resolve problems Perform ----------------------------------------------------------------------------------------------- - Manage user passwords and profiles Perform ----------------------------------------------------------------------------------------------- - Support security mechanisms Perform ----------------------------------------------------------------------------------------------- - Support and manage Local Area Network devices Perform ----------------------------------------------------------------------------------------------- - Manage and control system configuration Perform -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.3.2 PERFORMANCE TUNING & MANAGEMENT FOR AS400 ----------------------------------------------------------------------------------------------- - Monitor statistics such as DASD usage, CPU utilization for Perform Production Servers ----------------------------------------------------------------------------------------------- - Review configuration Perform ----------------------------------------------------------------------------------------------- - Review usage Perform Assist ----------------------------------------------------------------------------------------------- - Define indicators to monitor Perform Assist ----------------------------------------------------------------------------------------------- - Establish production environment thresholds to maintain service Perform Approve levels and provide exception reporting where required ----------------------------------------------------------------------------------------------- - Perform tuning based on above information Perform -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.3.3 PERFORMANCE & CAPACITY PLANNING ----------------------------------------------------------------------------------------------- - Manage system performance and capacity Perform ----------------------------------------------------------------------------------------------- - Trend data required to validate the capacity planning exercise Perform ----------------------------------------------------------------------------------------------- - Monitor and document work loads Perform ----------------------------------------------------------------------------------------------- - Evaluate future impacts of Projects Perform Approve ----------------------------------------------------------------------------------------------- - Deliver an annual performance and capacity plan to reflect UCAR's Perform Assist anticipated Computer Systems growth Approve -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.3.4 ADMINISTRATION & MANAGEMENT ----------------------------------------------------------------------------------------------- - Identify and respond to abnormal job termination Perform ----------------------------------------------------------------------------------------------- - Register users, issue mail Ids, issue SecureID tokens Perform Assist Approve ----------------------------------------------------------------------------------------------- - Manage user Ids and accounts Perform ----------------------------------------------------------------------------------------------- - Assign and change user passwords Perform ----------------------------------------------------------------------------------------------- - Create, maintain and delete user profiles Perform Assist Approve ----------------------------------------------------------------------------------------------- - Create and modify user login scripts Perform ----------------------------------------------------------------------------------------------- - Control the amount of user disk space Perform ----------------------------------------------------------------------------------------------- - Maintain existing documentation for the Induction process for Perform Approve computer systems ----------------------------------------------------------------------------------------------- - Execute the induction process for each new UCAR User. Perform ----------------------------------------------------------------------------------------------- - Participate in Health & Safety orientation and meetings, as Perform appropriate ----------------------------------------------------------------------------------------------- - Provide Health & Safety orientation to IT contractors at UCAR Assist Perform locations (to current levels) -----------------------------------------------------------------------------------------------
A-7
----------------------------------------------------------------------------------------------- 4.2.3.5 IMACS (PERSONAL COMPUTING DEVICES, TELCO, DISTRIBUTED PRINTERS / SERVERS) ----------------------------------------------------------------------------------------------- - Scheduling of IMACs Perform Approve ----------------------------------------------------------------------------------------------- - Planning and coordinating the execution of Install, Move, Add and Perform Change ----------------------------------------------------------------------------------------------- - Coordination of site preparation Assist Perform ----------------------------------------------------------------------------------------------- - Installation of system unit Perform ----------------------------------------------------------------------------------------------- - Pre-delivery preparation Perform ----------------------------------------------------------------------------------------------- - Local Pre-delivery preparation Perform ----------------------------------------------------------------------------------------------- - Desk side Pre-delivery preparation Perform ----------------------------------------------------------------------------------------------- - Data Move Perform ----------------------------------------------------------------------------------------------- - Data Conversion as specified and funded in Change Request Process Perform Approve ----------------------------------------------------------------------------------------------- - Ad hoc User orientation at system installation, as specified and Perform Approve funded in Change Request Process ----------------------------------------------------------------------------------------------- - De-installation of system unit Perform ----------------------------------------------------------------------------------------------- - Data erasure upon retirement, removal or change of a Computer Perform Approve Systems -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.4 PRODUCTION SUPPORT AND SCHEDULING FOR AS400 CGI UCAR ----------------------------------------------------------------------------------------------- - Approve production schedules Perform ----------------------------------------------------------------------------------------------- - Execute UCAR-approved production scheduling Perform ----------------------------------------------------------------------------------------------- - Identify and respond to abnormal job termination Perform ----------------------------------------------------------------------------------------------- - Provide feedback concerning problems with output jobs Perform ----------------------------------------------------------------------------------------------- - Monitor and restart regularly scheduled job batches according to Perform UCAR requirements ----------------------------------------------------------------------------------------------- - Provide application scheduling support and maintenance Perform ----------------------------------------------------------------------------------------------- - Provide special production scheduling upon request from UCAR Perform ----------------------------------------------------------------------------------------------- - Resolve scheduling conflicts Assist Perform Approve -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.5 BACKUP AND RECOVERY FOR SERVERS (AT UCAR SITES AND CGI SITES) CGI UCAR ----------------------------------------------------------------------------------------------- - Define backup requirements Assist Perform ----------------------------------------------------------------------------------------------- - Perform backup schedule to meet requirements Perform ----------------------------------------------------------------------------------------------- - Perform tape mounting and dismounting Perform ----------------------------------------------------------------------------------------------- - Perform on-site tape library movements Perform ----------------------------------------------------------------------------------------------- - Perform off-site tape library movements Perform ----------------------------------------------------------------------------------------------- - Provide off-site storage and courier services for tapes Perform ----------------------------------------------------------------------------------------------- - Provide tape and cassette supply requirements Perform Approved ----------------------------------------------------------------------------------------------- - Provide system recovery services as needed Perform ----------------------------------------------------------------------------------------------- - Execute backups of data on the local drive of desktops and laptops Perform -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.6 SECURITY CGI UCAR ----------------------------------------------------------------------------------------------- - Coordinate physical access to UCAR facilities Perform ----------------------------------------------------------------------------------------------- - Manage and administer logical security access into UCAR Systems Perform ----------------------------------------------------------------------------------------------- - Implement industry standards for password rotation, access Perform Approve A-8 privileges, and other security procedures on NT and AS/400 systems in accordance with UCAR security policies ----------------------------------------------------------------------------------------------- - Manage application level password rotation, access privileges, and Perform other security procedures on NT and AS/400 systems ----------------------------------------------------------------------------------------------- - Manage system level access and privileges on NT and AS/400 Perform environments -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.7 TECHNICAL HELP DESK SUPPORT CGI UCAR ----------------------------------------------------------------------------------------------- - Technical (not applications) help desk support for servers, Perform telecommunications and desktops ----------------------------------------------------------------------------------------------- - Log, document and categorize calls and accept ownership of each Perform first level call ----------------------------------------------------------------------------------------------- - Refer Incidents to 2nd and 3rd level Support Perform ----------------------------------------------------------------------------------------------- - Provide a Single Point Of Contact (SPOC) for the Services via Perform current number ----------------------------------------------------------------------------------------------- - Track problems and coordinate until resolution. Perform ----------------------------------------------------------------------------------------------- - Document problem resolution. Perform ----------------------------------------------------------------------------------------------- - Identify recurring problems and escalate. Perform ----------------------------------------------------------------------------------------------- - Escalate problems that are not resolved during initial call. Perform ----------------------------------------------------------------------------------------------- - Provision of emergency support outside normal business hours as Perform Approve defined in Schedule J. ----------------------------------------------------------------------------------------------- - Train Help Desk staff Perform ----------------------------------------------------------------------------------------------- - Notify users of system availability (scheduled and unscheduled) Perform ----------------------------------------------------------------------------------------------- - Measure and Report SPOC performance Perform ----------------------------------------------------------------------------------------------- - Manage 2nd and 3rd Level support Perform ----------------------------------------------------------------------------------------------- - Perform problem analysis, trending, reporting and documenting Perform Approve procedural changes ----------------------------------------------------------------------------------------------- - Manage escalation or critical situation procedures Perform -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.8 PRINTING (AS/400) CGI UCAR ----------------------------------------------------------------------------------------------- - Approve printing schedules Perform ----------------------------------------------------------------------------------------------- - Manage printing according to schedule Perform ----------------------------------------------------------------------------------------------- - Provide toner, paper, special forms, and envelopes not within Perform baseline ----------------------------------------------------------------------------------------------- - Output processing management Perform -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.9 DATA CENTER AND COMPUTER ROOM FACILITIES CGI UCAR ----------------------------------------------------------------------------------------------- - Physical Facility Management - Data Centre (Applies if located at Assist Perform UCAR Site) ----------------------------------------------------------------------------------------------- - Physical Facility Management - Computer Room (Applies if located at Perform Assist CGI Site) ----------------------------------------------------------------------------------------------- - Advise UCAR of any required maintenance Perform ----------------------------------------------------------------------------------------------- - Oversee Data Center or Computer Room maintenance activities Perform Assist ----------------------------------------------------------------------------------------------- - Maintain a log of maintenance performed to the Data Centre or Perform Computer Room -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.10 WIDE AREA NETWORK (WAN) OPERATIONS CGI UCAR ----------------------------------------------------------------------------------------------- - Configure network software and parameters Perform ----------------------------------------------------------------------------------------------- A-9 - Manage branch site planning, organization and operation for Perform Assist telecommunications Approve ----------------------------------------------------------------------------------------------- - Ensure integrity and performance of WAN connection Perform ----------------------------------------------------------------------------------------------- - Manage and administer third party, warranty, maintenance and Perform support under the Assigned Contracts and the Retained Contracts for network services ----------------------------------------------------------------------------------------------- - Perform telecommunications system maintenance schedule in Perform accordance with vendor's requirements ----------------------------------------------------------------------------------------------- - Perform restarts Perform Assist ----------------------------------------------------------------------------------------------- - Execute escalation procedures for malfunctions and failures Perform ----------------------------------------------------------------------------------------------- - Prepare Change Request for Hardware and Software upgrades Perform Approve ----------------------------------------------------------------------------------------------- - Establish and maintain virus protection practices that are at least Perform consistent with current practices ----------------------------------------------------------------------------------------------- - Provide technical support as needed to resolve WAN problems Perform -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.11 VOICE OPERATIONS CGI UCAR ----------------------------------------------------------------------------------------------- - Configure PBX software and parameters Perform ----------------------------------------------------------------------------------------------- - PBX reporting, bill audits, usage reports, and refund tracking. Perform ----------------------------------------------------------------------------------------------- - Responsibility for all long-distance telephone charges, including Perform help desk calls ----------------------------------------------------------------------------------------------- - Manage and administer third party, warranty, maintenance and Perform support under the Assigned Contracts and the Retained Contracts for network services ----------------------------------------------------------------------------------------------- - Provide Change Requests for IMAC support for voice services Perform Assist including PBX and Cell Phones changes Approve ----------------------------------------------------------------------------------------------- - Perform restarts Perform ----------------------------------------------------------------------------------------------- - Execute escalation procedures for malfunctions and failures Perform ----------------------------------------------------------------------------------------------- - Perform PBX recovery Perform ----------------------------------------------------------------------------------------------- - Provide 1st level technical support as needed Perform -----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.12 TECHNOLOGY REFRESH CGI UCAR ----------------------------------------------------------------------------------------------- - Hardware (other than desktop) and System Software (other than Assist Perform desktop) Refresh ----------------------------------------------------------------------------------------------- - Procurement responsibility Perform Assist ----------------------------------------------------------------------------------------------- - Financial Responsibility Perform ----------------------------------------------------------------------------------------------- - Desktop Refresh Perform Assist ----------------------------------------------------------------------------------------------- - Procurement responsibility Perform ----------------------------------------------------------------------------------------------- - Financial Responsibility Perform ----------------------------------------------------------------------------------------------- - Annual Refresh rate of 15% as per PC Refreshment Cycle Chart Perform ----------------------------------------------------------------------------------------------- - PC's to have useable life for 6.66 years Perform ----------------------------------------------------------------------------------------------- - Power users, as defined by UCAR, will be refreshed every Perform 24-months ----------------------------------------------------------------------------------------------- - Regular users will reuse PCs previously used by Power Users Perform ----------------------------------------------------------------------------------------------- - Manage the refreshment schedule Perform Approve Assist -----------------------------------------------------------------------------------------------
------------------------------------------------------------------------------- 4.2.13 DESKTOP REFRESH ASSUMPTIONS ------------------------------------------------------------------------------- A-10 - Does not include any Client-Access Licenses for Servers or Server Applications (e.g. WinNT4, W2Kserver, Exchange 5.5/2000, Netware User License, etc.) ------------------------------------------------------------------------------- - Does not include removable media costs ------------------------------------------------------------------------------- - Desktop Software and Hardware (as identified below) are purchased and remain in CGI's name ------------------------------------------------------------------------------- - Standard Manufacturer warranty for PCs/Laptops for 3-years from date of purchase ------------------------------------------------------------------------------- - Desktops vs. Laptops (US = 60% Desktops, 40% Laptops and in Europe = 70% Desktops, 30% Laptops ------------------------------------------------------------------------------- - No PC growth rate factored into 10-year contract ------------------------------------------------------------------------------- - No provisions for removing desktops and laptops prior to 6.66 year lifespan ------------------------------------------------------------------------------- - Shipping and handling charges are not included ------------------------------------------------------------------------------- - Price does not include any software other than Microsoft desktop operating system and Microsoft Office 2000 Professional ------------------------------------------------------------------------------- - Initial Target Desktop Model* - Initial Target Laptop/Notebook Model* - Pentium III 866Mhz - Pentium III 850Mhz - 256MB Memory - 256MB Memory - 20Gb HD - 20Gb HD - CD-ROM - CD-ROM - 250Mb Zip Drive - PCMCIA Modem - 10/100Mb Ethernet NIC (Token-Ring - Docking Station with Integrated at additional cost) 10/100Mb Ethernet NIC (Token-Ring - Windows 98 SE (US) / Windows NT at additional cost) (Europe) - Windows 98 SE (US) / Windows NT - MS Office 2000 Professional (Europe) - MS Office 2000 Professional ------------------------------------------------------------------------------- * Models for future refreshes will be mutually agreed and are expected to be substantially equivalent in price to the Initial Target Models and "one generation back" in terms of performance and capacity (for instance, if "state-of-the-art" processing speed is one gigahertz then "one generation back" for purposes of the Model will be 866Mhz). ------------------------------------------------------------------------------- - PC REFRESHMENT CYCLE CHART FOR 951 PCS --10 YEARS ------------------------------------------------------------------------------- CONTRACT YEAR ------------------------------------------------------------------------------- 1 2 3 4 5 6 7 8 9 10 ------------------------------------------------------------------------------- U.S. - DESKTOP 76 76 76 76 76 76 76 76 76 76 - LAPTOP 20 20 20 20 20 20 20 20 20 20 ------------------------------------------------------------------------------- FRANCE - DESKTOP 43 43 43 43 43 43 43 43 43 43 - LAPTOP 7 7 7 7 7 7 7 7 7 7 -------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------- 4.2.14 OUT-OF-SCOPE UCAR LOCATIONS CGI UCAR ----------------------------------------------------------------------------------------------- These services will be provided in support of UCAR locations that are Assist Perform not UCAR Sites, as these services were provided in support of those locations by the In-Scope Personnel as of the Commencement Date. CGI will not be financially responsible for any lease, license or maintenance fees for software or hardware located at any UCAR location that is not a UCAR Site. CGI will be entitled to reimbursement for travel and travel related expenses incurred at the request of UCAR to provide any services A-11 while physically at any such UCAR location. (CGI will be responsible for its personnel's travel and travel related expenses to attend the types of UCAR IS/IT meetings that the In-Scope Personnel attended prior to the Commencement Date.) ----------------------------------------------------------------------------------------------- - The help desk services described in Section 4.2.7 of this Schedule Perform ----------------------------------------------------------------------------------------------- - Establish server standards for all UCAR locations Perform Approve ----------------------------------------------------------------------------------------------- - Monitor compliance with the established server standards Perform ----------------------------------------------------------------------------------------------- - The WAN Operations services described in Section 4.2.10 of this Perform Schedule -----------------------------------------------------------------------------------------------
5.0 APPLICATION SOFTWARE SUPPORT (TIER II) 5.1. GENERAL This Section describes the roles and responsibilities related to the activities performed by the parties for Application Software Support. 5.2 SERVICES PROVIDED Application Software Support Services require CGI to: o Provide maintenance and enhancements for applications while in production; o Respond to the trouble tickets; o Meet agreed upon Target Service Levels; o Participate in the change management process; o Correction of a problem or a defect which is defined as a situation in which Application Software does not perform according to Target Service Levels; or as designated in the project design document; o Perform Change Requests to Application Software (note that, as defined in the Agreement, certain Application Software Support activities will be treated as a Tier III Project). More specifically, for the Application Software Support Services, responsibilities are as follows:
----------------------------------------------------------------------------------------------- 5.2.1 APPLICATION MAINTENANCE MANAGEMENT CGI UCAR ----------------------------------------------------------------------------------------------- - Prioritize Change Requests Assist Perform ----------------------------------------------------------------------------------------------- - Maintain an updated log of Change Requests Perform Assist -----------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------ 5.2.2 CHANGE AND PROBLEM MANAGEMENT CGI UCAR ------------------------------------------------------------------------------------------------ - Prioritize Change Requests Perform ------------------------------------------------------------------------------------------------ - Prepare release schedule Perform Approve ------------------------------------------------------------------------------------------------ - Assign staff to change management committee Perform Perform ------------------------------------------------------------------------------------------------ - Approve (VETO) change to production environments Perform ------------------------------------------------------------------------------------------------ - Take ownership of Change Request Perform ------------------------------------------------------------------------------------------------ - Maintain accurate change and problem logs Perform ------------------------------------------------------------------------------------------------ A-12 - Develop impact analysis of changes Perform ------------------------------------------------------------------------------------------------ - Develop change implementation plan Perform ------------------------------------------------------------------------------------------------ - Develop fall - back plan Perform ------------------------------------------------------------------------------------------------ - Report problems and problem status to the help desk Perform Perform ------------------------------------------------------------------------------------------------ - Notify UCAR of malfunctions or errors Perform ------------------------------------------------------------------------------------------------ - Initiate and follow escalation procedures Perform ------------------------------------------------------------------------------------------------ - Assign problem severity Perform ------------------------------------------------------------------------------------------------ - Coordinate 3rd party vendor activities to resolve Perform malfunctions or errors ------------------------------------------------------------------------------------------------ - Approve problem closure Perform ------------------------------------------------------------------------------------------------ - Manage Application Software Inventory Perform ------------------------------------------------------------------------------------------------ - Maintain current Application Software source code Perform Assist ------------------------------------------------------------------------------------------------
-------------------------------------------------------------- --------------------- ----------- 5.2.3 PRODUCTION SUPPORT CGI UCAR -------------------------------------------------------------- --------------------- ----------- - Notify Help Desk of application problems Perform Perform -------------------------------------------------------------- --------------------- ----------- - Isolate and identify application fixes and the estimated Perform time required to repair. -------------------------------------------------------------- --------------------- ----------- - Co-ordinate with end-users to assist CGI in isolating Perform Perform and identifying application problems -------------------------------------------------------------- --------------------- ----------- - Develop and implement work-around's to application Perform problems -------------------------------------------------------------- --------------------- ----------- - Keep CMO informed of actions taken to resolve defects Perform -------------------------------------------------------------- --------------------- ----------- - Detect and arrange correction of latent faults or Perform potential production problems -------------------------------------------------------------- --------------------- ----------- - Detect and recommend improvements to application quality Perform and efficiency -------------------------------------------------------------- --------------------- ----------- - Configure applications to accommodate minor hardware and Perform software changes -------------------------------------------------------------- --------------------- ----------- - Provide assistance to Tier I application activities as Perform required -------------------------------------------------------------- --------------------- ----------- - Implement changes to parameter driven tables as Perform requested by UCAR -------------------------------------------------------------- --------------------- -----------
-------------------------------------------------------------- --------------------- ----------- 5.2.4 MAINTENANCE AND APPLICATION SUPPORT CGI UCAR -------------------------------------------------------------- --------------------- ----------- - When CGI experiences conflict prioritize work on Perform application problems -------------------------------------------------------------- --------------------- ----------- - Use reasonable commercial efforts to promptly rectify Perform all material problems with the applications -------------------------------------------------------------- --------------------- ----------- - Implement all changes into Production Perform Approve -------------------------------------------------------------- --------------------- ----------- - Keep CMO updated as to progress of Enhancements into Perform Production -------------------------------------------------------------- --------------------- ----------- - CGI will modify, test and manage version control changes Perform requested by UCAR -------------------------------------------------------------- --------------------- ----------- - Provide maintenance & support services to enable Perform operation of applications according to their A-13 documentation, specifications and including the then current performance specifications -------------------------------------------------------------- --------------------- ----------- - Corrective maintenance Perform -------------------------------------------------------------- --------------------- ----------- - Preventive maintenance Perform -------------------------------------------------------------- --------------------- ----------- - Adaptive maintenance Perform -------------------------------------------------------------- --------------------- ----------- - Install new releases, updates and patches issued by 3rd Perform Approve parties under the Change Request allocations ------------------------------------------------------------------------------------------------ - Operational performance monitoring Perform Assist ------------------------------------------------------------------------------------------------ - Service management (end to end including Root Cause Perform Analysis) ------------------------------------------------------------------------------------------------ - Software migration and monitoring Perform ------------------------------------------------------------------------------------------------ - Application improvements under the Change Request Perform Approve allocation ------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------ 5.2.5 ENHANCEMENT SUPPORT CGI UCAR ------------------------------------------------------------------------------------------------ - Prioritize Enhancements Assist Perform ------------------------------------------------------------------------------------------------ - Provide requirements for Enhancements Perform ------------------------------------------------------------------------------------------------ - Implement all changes into Production Perform Approve ------------------------------------------------------------------------------------------------ - Update list of Enhancements Perform ------------------------------------------------------------------------------------------------ - Keep CMO updated as to progress of Enhancements into Perform Production ------------------------------------------------------------------------------------------------
A-14 SCHEDULE B TIER III PROJECT METHODOLOGY SECTION 1 - GENERAL CGI will undertake only those Tier III Projects authorized by the Change Management Committee according to UCAR strategic direction and on the basis of a business case. The determination of efforts and pricing will always take into account two factors: - An evaluation of the complexity of both the project and its components; - An estimate of efforts required. CGI will estimate efforts and pricing for Tier III Projects as follows: - - When the entire Tier III Project efforts and pricing can be determined precisely, CGI will commit itself to deliver the Tier III Project on a fixed bid as per Tier III Project mandate. - - When the entire Tier III Project efforts and pricing cannot be determined precisely: o CGI will rely as much as possible on similar projects as a guideline. o Total effort and pricing estimates will be provided to UCAR for budgetary purposes. o CGI will attempt to break the Tier III Project into phases in order to provide a fix bid. o CGI will confirm effort and pricing in subsequent phases as detailed in the Tier III Project mandate and commit itself to deliver the remainder of the Tier III Project on a fixed bid. o Until a fixed bid is agreed, Tier III Projects will be charged at the Tier III Project Rates. Resources will be assigned on a project basis. At the end of each Tier III Project, the project team will be dismantled. When applicable, Application Software Support activities will be carried out by CGI's Application Software Support Tier II team according to the Tier III Project specifications and fees established in connection with the Tier III Project. Each Tier III Project shall identify the depreciation period of capital cost and shall stipulate capital cost recovery mechanism should early termination of the Agreement occur. SECTION 2 - RESPONSIBILITIES Each party's responsibilities for the Tier III Projects Services are as follows:
- ----------------------------------------------------------------------------------------------- 2.1 PROGRAM MANAGEMENT RESPONSIBILITIES CGI UCAR - ----------------------------------------------------------------------------------------------- - - Review periodically with UCAR needs related to major development Perform Perform activities. - ----------------------------------------------------------------------------------------------- - - Prepare business case for new Tier III Projects according to UCAR Assist Perform guidelines - ----------------------------------------------------------------------------------------------- - - Authorize and Approve all information system investments. Perform - ----------------------------------------------------------------------------------------------- B-1 - - Maintain Tier III Project specific status reports Perform - ----------------------------------------------------------------------------------------------- - - Maintain IT Steering Committee status reports Perform - ----------------------------------------------------------------------------------------------- - - Conduct regular reviews of status of Tier III Projects. Perform Perform - ----------------------------------------------------------------------------------------------- - - Manage priority of Tier III Projects. Assist Perform - -----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------- 2.2 BUSINESS SYSTEM RESPONSIBILITIES CGI UCAR - ----------------------------------------------------------------------------------------------- - - Obtain approval to initiate a Tier III Project. Assist Perform - ----------------------------------------------------------------------------------------------- - - Conduct Tier III Project post-implementation review where Perform Assist appropriate. - ----------------------------------------------------------------------------------------------- - - Redesign business processes to facilitate Tier III Project Assist Perform implementation. - ----------------------------------------------------------------------------------------------- - - Provide UCAR Business Units resources to Tier III Projects as Perform specified in the Tier III Project Management Plan. - ----------------------------------------------------------------------------------------------- - - Manage and maintain professional expertise required to respond to Perform the needs of UCAR service departments users (e.g. recruitment, training, performance appraisal). - ----------------------------------------------------------------------------------------------- - - Define functional and technological requirements to support UCAR Perform Assist needs. - ----------------------------------------------------------------------------------------------- - - Identify training needs and ensure that they are included in the Perform Tier III Project Management Plan - -----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------- 2.3 OPERATIONS RESPONSIBILITIES CGI UCAR - ----------------------------------------------------------------------------------------------- - - Coordinate information systems activities required by the Tier III Perform Project. - ----------------------------------------------------------------------------------------------- - - Define technology architecture of Tier III Projects according to Perform Assist UCAR standards. Approve - ----------------------------------------------------------------------------------------------- - - Provide Tier III Project efforts and pricing including third-party Perform fees, and resulting changes to the Base Services. - ----------------------------------------------------------------------------------------------- - - Define the delivery strategy as well as development tools Perform Approve required for each Tier III Project in accordance with UCAR standards. - ----------------------------------------------------------------------------------------------- - - Assign resources to Tier III Project delivery; Perform - ----------------------------------------------------------------------------------------------- - - Deliver Tier III Projects. Perform - ----------------------------------------------------------------------------------------------- - - Manage Tier III Projects based on CGI's Tier III Project Perform Management Framework - -----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------- 2.4 THIRD PARTY TIER III PROJECTS CGI UCAR - ----------------------------------------------------------------------------------------------- - - Integrate approved 3rd party projects Perform Approve - ----------------------------------------------------------------------------------------------- - - Develop Tier III Project Charter Perform Approve - -----------------------------------------------------------------------------------------------
B-2 SECTION 3 - TIER III PROJECT ORGANIZATION STRUCTURE [CHART INTENTIONALLY OMITTED] The following diagram presents the relationships between CGI and UCAR when a Tier III Project is undertaken. 3.1 Tier III Project steering committee A group of representatives from UCAR and CGI that work with or direct the project authority on a Project-by-Project basis: - sets the Tier III Project guidelines within scope; - ensures that the requirements are consistent with UCAR corporate directions; - approves the Tier III Project strategies. 3.2 Tier III Project authority A UCAR representative (may be the business analyst) who: - is responsible for delivering the Tier III Project; - approves the Tier III Project mandate; - develops the integrated Tier III Project plan (includes activities for user team and delivery team); - obtains Tier III Management Committee approval; - oversees the integrated Tier III Project plan; - maintains liaison with CGI over the course of the Tier III Project; - ensures the cooperation of UCAR resources assigned to the Tier III Project; - ensures that approval for architecture is obtained; - establishes procedures for working and communicating with users; - approves Tier III Project deliverables and changes within scope; - conducts and approves system integration test and authorizes release of holdback payment; - ensures the implementation of the user team plan. 3.3 User team A team of UCAR users that: - reconciles the needs of the various user groups; - participates in user acceptance testing of the Tier III Project; - validates the content of the deliverables produced by the Tier III Project team; - develops and executes the plan for user activities including training. 3.4 Tier III Project director A CGI manager who: - is responsible to UCAR for managing all contractual aspects of the Tier III Project; B-3 - may serve on the project steering committee when necessary; - attends the project steering committee meetings; - participates more actively in monitoring the project by chairing the milestone review meetings. 3.5 Tier III Project manager A CGI consultant who: - reports to the project authority; - develops the Project charter and PMP; - oversees the CGI activities; - maintains the integrated Tier III Project plan; - acts as the CGI Project team's contact with the UCAR internal Project team; - ensures that the necessary management procedures are implemented; - keeps the Tier III Project on time, on budget and within the scope as approved by the Tier III Management Committee and escalates deviation; - manages the service delivery team. - assumes responsibility for the activities described in Section 3.4, if a Project director is not assigned to a particular Tier III Project. 3.6 Quality Assurance A CGI team that may include UCAR user representatives that ensures that Tier III Project deliverables are consistently delivered through the life cycle of the Tier III Project in adherence to UCAR standards and to CGI's IS09001 Tier III Project Management Framework standards, including but not limited to the verification of unit, systems integration and user acceptance testing. 3.7 Delivery team A CGI team that may include UCAR representatives that delivers the Tier III Project according to the integrated Tier III Project plan. B-4 4. TIER III PROJECT CHARTER Both parties shall jointly develop a Tier III Project charter "Tier III Project Charter" in response to UCAR's request for a Tier III Project. The objective is to gain a better insight on the scope and complexity of the request such that a PMP can be completed with a high degree of confidence. A timeframe to deliver the Tier III Project Charter will be established to the agreement of both parties. The following represents the table of contents of a typical Tier III Project Charter: 1. CHARTER DESCRIPTION 2. TIER III PROJECT 2.1. Scope of the project 2.2. Objectives of the project 2.3. Project deliverables 3. TIER III PROJECT CHARACTERISTICS 3.1. Assessment of risk 3.2. Benefits to the organization 3.3. Brief assessment of alternatives 4. TIER III PROJECT MANAGEMENT 4.1. Functional structure of the Tier III Project 4.2. Resource requirements 4.3. Roles and responsibilities of the Tier III Project participants 5. TIER III PROJECT MANAGEMENT PROCEDURES 5.1. Tier III Project tracking 5.2. Communication 5.3. Outstanding item tracking 5.4. Deliverables validation and approval 5.5. Quality assurance 6. TIER III PROJECT SCHEDULE B-5 5. TIER III PROJECT MANAGEMENT PLAN At the beginning of any Tier III Project, CGI shall develop a project mandate for each Tier III Project. The content of this deliverable shall include the following topics. 1. MANDATE DESCRIPTION 2. TIER III PROJECT 2.1 Scope of the Tier III Project 2.2 Tier III Project deliverables 2.3 Pricing, payment and capital cost recovery schedule and authorization signature 3. TIER III PROJECT MANAGEMENT 3.1 Functional structure of the Tier III Project 3.2 Roles and responsibilities of the Tier III Project participants 3.3 Benefits recovery schedule 4. TIER III PROJECT MANAGEMENT PROCEDURES 4.1 Tier III Project tracking 4.2 Communication 4.3 Management of change request 4.4 Outstanding item tracking 4.5 Deliverables validation and approval 4.6 Quality assurance 4.7 Risk management 4.8 Configuration management 4.9 System acceptance before production 4.10 Performance standards 5. TIER III PROJECT SCHEDULE APPENDICES Appendix A: Tier III Project estimates and pricing Appendix B: Request for review and approval of a deliverable form Appendix C: Deliverables out for review and approval log Appendix D: Outstanding items form Appendix E: Outstanding items log Appendix F: Request for change form Appendix G: Request for changes log Appendix H: Compliance checklist B-6 6. OVERVIEW OF CGI'S TIER III PROJECT MANAGEMENT FRAMEWORK (PMF) The objectives of CGI's Tier III Project Management Framework (PMF) are as follows: a) To define a set of generic methods and techniques that can be easily adapted to each Tier III Project; b) To provide CGI and the customer the level of consistency needed to ensure quality applications; c) To provide a standard approach that, once learned, makes Tier III Project management easier to apply. The PMF includes the following management areas and general activities. Each is further described in the framework in terms of responsibilities, process charts, procedures, policies and directives as well as regional administrative procedures. The parties agree that the following table of contents represents the elements identified in the PMF and the parties further agree that the application of the PMF is dependent on the nature of each Tier III Project's distinct requirements and associated deliverables. 1) Preparing the Proposal o Analyze the Request for Proposal o Organize the preparation activity o Arrange for subcontractors o Prepare the bid for subcontractors o Prepare the proposal for the customer o Review and approve the proposal o Sign the proposal and the bid 2) Preparing Contracts o Draft a contract with the UCAR o Check contracts proposed by subcontractors o Obtain CGI approval and signatures o Obtain the UCAR's signature o Open a CGI Tier III Project file 3) Initiating the Tier III Project (produces the PMP) o Understand and define the Tier III Project o Prepare the Tier III Project work plan o Define the organizational structure o Define the management process o Assign the development team o Prepare the Tier III Project Management Plan o Prepare the development budget o Hold the milestone review o Put the Tier III Project organization in place 4) Conducting the Tier III Project o Manage schedules and budgets o Conduct the Tier III Project o Track deliverables B-7 o Manage outstanding items o Manage change requests o Manage billing o Prepare reports o Milestone reviews (held at the end of the following steps: architecture, functional design, construction, system testing) 5) Closing the Tier III Project o Prepare the transition plan o Prepare release plan o Tier III Project assessment (UCAR) o Post-Project evaluation of consultants o Update consultant's resumes o Project assessment (CGI) 6) Management Areas o Scope o Configuration o Quality o Time o Cost o Risk o Human resources o Communications 7) Reference Documents o CGI Operations Management Framework o CGI standard contract o Guide to estimation techniques o Software quality assurance plan o UCAR satisfaction assessment program (CSAP) o Progress report o Risk analysis methodology 8) Forms and Formats o Templates and report forms available in Word format B-8 SCHEDULE C J.D. EDWARDS PROJECT BUSINESS SOLUTIONS THROUGH INFORMATION TECHNOLOGY[TM] GLOBAL JDEDWARDS & [TEXT DELETED] AT UCAR C-1 REVISION LOG ================================================================================ REVISION DESCRIPTION DATE - -------------------------------------------------------------------------------- Version 1.0 Draft Proposal [TEXT DELETED] - -------------------------------------------------------------------------------- Version 1.1 Proposal following review with UCAR [TEXT DELETED] - -------------------------------------------------------------------------------- Version 1.2 Drafting changes following telephone [TEXT DELETED] conference with UCAR - -------------------------------------------------------------------------------- Version 1.3 - -------------------------------------------------------------------------------- Version 1.4 - -------------------------------------------------------------------------------- Version 1.5 ================================================================================ C-2 1 TIER III PROJECT......................................................4 1.1 SCOPE OF PROJECT...............................................4 1.2 PROJECT DELIVERABLES...........................................5 2 TIER III PROJECT CHARACTERISTICS......................................9 2.1. IMPLEMENTATION METHODOLOGY.....................................9 2.2. ASSESSMENT OF RISK.............................................9 2.3. UCAR RESPONSIBILITIES..........................................9 2.4. PRICING........................................................10 3 TIER III PROJECT MANAGEMENT...........................................12 3.1. PROPOSED CONCEPTUAL STRUCTURE OF THE CENTRAL TEAM..............12 3.2. RESOURCE REQUIREMENTS..........................................13 3.3. ROLES AND RESPONSIBILITIES OF THE [TEXT DELETED] PARTICIPANT....................................................14 4 TIER III PROJECT MANAGEMENT PROCEDURES................................16 5.1. PROJECT TRACKING...............................................16 5.2. MANAGING REQUESTS FOR CHANGES..................................16 5.3. TRACKING OUTSTANDING ITEMS.....................................17 5.4. QUALITY ASSURANCE PROCEDURES...................................17 C-3 1 TIER III PROJECT 1.1 Scope of Project The [TEXT DELETED] project refers to a [TEXT DELETED] and [TEXT DELETED] of [TEXT DELETED] and [TEXT DELETED] to UCAR locations [TEXT DELETED]. The [TEXT DELETED] software will require an upgrade to the latest version of either [TEXT DELETED] or [TEXT DELETED], based on future directions. The project scope includes consulting services on the implementation of the following modules of [TEXT DELETED]: PHASE I: [TEXT DELETED] - [TEXT DELETED] and [TEXT DELETED] ([TEXT DELETED] to the extent of [TEXT DELETED] [TEXT DELETED] - [TEXT DELETED] and [TEXT DELETED] [TEXT DELETED] - [TEXT DELETED] and [TEXT DELETED] [TEXT DELETED] - [TEXT DELETED] PHASE II [TEXT DELETED] - [TEXT DELETED] The project scope DOES NOT include: o Neither the software licenses nor any hardware requirements for the implementation. o The following JDW modules; [TEXT DELETED] - [TEXT DELETED] [TEXT DELETED] - [TEXT DELETED] o The order processing for [TEXT DELETED] and [TEXT DELETED] requires the integration of an [TEXT DELETED] software. CGI will not be responsible of the purchase and installation of the software, but will fully participate in the integration between the software and JDEdwards, [TEXT DELETED]. C-4 1.2 Project Deliverables The following lists the critical deliverables of the implementation: PHASE I: [TEXT DELETED] WITH [TEXT DELETED] > [TEXT DELETED] to be completed and tested in [TEXT DELETED] within [TEXT DELETED] from the [TEXT DELETED]. > [TEXT DELETED] of this [TEXT DELETED] will commence in [TEXT DELETED] and will cover [TEXT DELETED] in over [TEXT DELETED] ([TEXT DELETED] and [TEXT DELETED]). > The [TEXT DELETED] for [TEXT DELETED] and [TEXT DELETED] will take us to [TEXT DELETED] in approximately [TEXT DELETED] ([TEXT DELETED] and [TEXT DELETED]) > The [TEXT DELETED], which will be a [TEXT DELETED] in [TEXT DELETED] and [TEXT DELETED] in [TEXT DELETED], will take approximately [TEXT DELETED]. PHASE II: [TEXT DELETED] > [TEXT DELETED] to be completed and tested in [TEXT DELETED] within [TEXT DELETED] from [TEXT DELETED]. > [TEXT DELETED] of [TEXT DELETED] as per the included timeline C-5 [TEXT DELETED] AND [TEXT DELETED] PROJECT SCHEDULE [chart intentionally omitted] [TEXT DELETED] AND [TEXT DELETED] AND [TEXT DELETED] PROJECT SCHEDULE [chart intentionally omitted] C-6 2 [TEXT DELETED] 2.1 Implementation Methodology > The methodology used in this project will be the [TEXT DELETED] methodology. 2.2 Assessment of Risk Several factors can greatly impact the project's success. Any of the following concerns can influence the timeline unfavorably and can result in missed milestones. > Standardized key processes are not yet determined and are imperative at the start of implementation in order to be carried on to the [TEXT DELETED] . > The possibility of [TEXT DELETED] with the knowledge of present data bases due to the [TEXT DELETED] of [TEXT DELETED]. > Retention of the core project team throughout the project. > Cohesiveness within the project team in designing the global model. > Lack of user commitment to the new global model. > Forfeiting of customized automation on present systems with the design of the global model. > Access and availability of UCAR management in the decision making is vital in completing the project milestones on time. > Increased modifications to the software due to legal and critical business requirements may prolong the implementation timeline To succeed in the worldwide implementation, it is very critical that the timeline is respected with prompt decision-making and a well-balanced team. 2.3 UCAR Responsibilities In the event of a fixed price agreement, any risk(s) occurring throughout the [TEXT DELETED] and [TEXT DELETED] implementation will result in missed milestones and may have an impact to the project cost. The following may subsequently reflect a change or an add-on to the fixed price agreement between the two parties. > The implementation of [TEXT DELETED] and [TEXT DELETED] will be based on [TEXT DELETED]. Any required material modifications to the software whether individually or collectively will be the responsibility of UCAR. > The [TEXT DELETED] the [TEXT DELETED] and [TEXT DELETED] of [TEXT DELETED]. Thus, these [TEXT DELETED] must be determined prior to the [TEXT DELETED]. Determining any standard business processes during this stage can prolong this phase, and any added project costs will subsequently be the responsibility of UCAR. > The loss of any key members in the UCAR's project team can affect the project timeline. Any additional costs related to this issue is the responsibility of UCAR. C-7 > The executive steering committee must be available for direction and support. Any decision-making issues brought to the steering committee must be resolved within 2 business days to avoid prolongation of the project. > User acceptance during the roll-out phase is vital to the time allotted to each site. User acceptance of the new standardized global model processes and systems is the responsibility of UCAR's change management manager. Any prolongation to the system implementation at any of UCAR's sites in relation to user acceptance is the responsibility of UCAR. > The travel logistics throughout the project's implementation strategy must be kept to a minimum. Implementation phases (modelling and rollouts) should be conducted in centralized locations, limiting the degree of travelling, and hence, travel costs. 2.4 Pricing Conditional to the completion of the detailed scoping and planning, any changes resulting in costs increases omitted, on our part, from the initial scope that is imperative to the implementation project may reflect additional costs. CGI will [TEXT DELETED] to a [TEXT DELETED] of [TEXT DELETED] of the [TEXT DELETED]. Costs beyond this [TEXT DELETED] will be the responsibility of UCAR over and above the UCAR responsibilities stated herewith. [TEXT DELETED] [chart intentionally omitted] 3 TIER III PROJECT MANAGEMENT 3.1 Proposed conceptual structure of the central team [chart intentionally omitted] C-8 3.2 Resource requirements PHASE I: [TEXT DELETED] SOFTWARE WITH [TEXT DELETED] The [TEXT DELETED] will require [TEXT DELETED] (including [TEXT DELETED]) consisting of [TEXT DELETED], [TEXT DELETED], and [TEXT DELETED]. UCAR will provide a [TEXT DELETED] and [TEXT DELETED] to assist throughout the implementation process. The plan also considers a commitment of approximately [TEXT DELETED] throughout the different phases of the project. During the [TEXT DELETED] of the [TEXT DELETED] implementation [TEXT DELETED] will be required. PHASE II: [TEXT DELETED] The [TEXT DELETED] will require no [TEXT DELETED], but is a prolongation of the project timeline for an additional [TEXT DELETED]. Over and above these resources, a UCAR [TEXT DELETED] and a UCAR [TEXT DELETED] should be provided. 3.3 Roles and responsibilities of the [TEXT DELETED] participant EXECUTIVE STEERING COMMITTEE > Provide overall project direction and management support > Resolve major implementation policy decisions/bottlenecks > Provide resources and management commitment to the project > Communicate high level status of the project > Facilitate execution of the project plan > Resolve resource/issue bottlenecks > Meets monthly UCAR PROJECT MANAGER/SPONSOR > Must have full support of management > Reports regularly to the Executive Steering Committee > Collaborate, with the CGI Project Manager, in the resolution of any disputes that arise during the project > Approve deliverables produced during the project CGI PROJECT MANAGER > Develop and update implementation schedules and plan > Monitor and track budget to actual > Co-ordinate resources (functional, technical) > Monitor the progress on all issues C-9 > Track the deliverables > Keep the lines of communication open among all project participants UCAR PROJECT CONTROL ADMINISTRATOR > Collaborate, with the Project Managers, to the production of the project status reports > Prepare the management documentation (Project Management Plan, Action plan, Management meeting report, Outstanding issues form) and obtain approvals > Collaborate, with the project manager, to follow up on the deliverables > Assist the project manager on the project and executive steering committee meetings > Document the global model business process flows > Co-ordinate in the creation of the test scripts / scenarios > Assist project team to create the user procedures (manuals) > Document the system set-up of the global model > Document the set-up of system security UCAR CHANGE MANAGEMENT MANAGER > Identify at different stages of the project the impact of changes compared to the actual structure of human resources. > Develop the change management approach (plan) during the global model phase. > Document impact of changes for executive steering committee special meetings. > Define integrated approach to communicate information throughout the organisation. > Manage the communication to insure a good transition. > Determine user-training strategies. > Create change management plans throughout the project. TEAM LEADERS > Leads project works > Co-ordinates education and training > Support documentation of procedures > Leads process analysis > Recommends policy changes to the Executive Steering Committee TEAM MEMBERS > Developer of the Model Company > Assist the Team Leaders in implementing and maintaining the Model Company > Complete the tuning of the Model Company to meet the local site needs > Attend application training > Work with CGI Consultants for the system set-up > Conduct Analysis and Process Improvement Workshops > Conduct Conference Room Pilot (CRP) > Develop CRP plan and scripts > Act as focal point for issues affecting their application area > Interface to other Application Leaders C-10 > Develop and maintain procedures > Develop end user training materials > Train end users > Trouble shoot issues in their application area > Develop test plans and scripts C-11 4 TIER III PROJECT MANAGEMENT PROCEDURES 4.1. Project tracking The Project Managers will jointly present a monthly Project Status that will supply information on the following: > Budget tracking > Risks factors > Detail Microsoft Project plan > Short term action list > Documentation plan > Communication plan > Issues tracking and resolution plan > Modification policy > Steering Committee meetings > Status meetings and reports > Deliverables and Milestones 4.2. Managing requests for changes Within the context of the project, the project managers will jointly document any changes that: > require the addition of a deliverable > are made to an unfinished deliverable, or a deliverable that has already been accepted > cause a significant increase in the number or complexity of tasks Depending on the impact of the changes on time and costs the project manager will report or/and seek acceptance, if necessary. Finally, the Project Manager will determine priority based on the original budget. Changes are made only after the Executive Steering Committee has approved change requests. Requests for changes will be recorded on the appropriate form. 4.3 Tracking outstanding items Outstanding items include any items that, if not resolved, could have an adverse effect on the project. Outstanding items will be recorded and noted in the project status reports. 4.4. Quality assurance procedures > Implementation Planning Session > Initial [TEXT DELETED] C-12 > Project Strategy Workshop > Post-[TEXT DELETED] > Readiness Assessment > Upgrade Planning Session for first new release C-13 SCHEDULE D PURCHASED ASSETS AND LEASED ASSETS See attached sub-schedules as follows: Purchased Assets-- Hubs Purchased Assets-- Other Assets Purchased Assets-- Personal Computers Purchased Assets-- Printers Purchased Assets-- Servers Leased Assets [intentionally omitted] D-1 SCHEDULE E THIRD PARTY CONTRACTS 1. Assigned Contracts 2. Retained Contracts [intentionally omitted] E-1 SCHEDULE F SOFTWARE [intentionally omitted] F-2 SCHEDULE G IN-SCOPE PERSONNEL
--------------------------------------------------------------------------------------------------- NAME LOCATION COUNTRY [TEXT DELETED] [TEXT DELETED] PER SECTION 29.1 PER SECTION 5.2 [TEXT DELETED] --------------------------------------------------------------------------------------------------- Asmondy, Brian Clarksville, TN US [TEXT DELETED IN [TEXT DELETED IN COLUMN] COLUMN] --------------------------------------------------------------------------------------------------- Attwell, John Clarksville, TN US --------------------------------------------------------------------------------------------------- Bailey, Susan Nashville, TN US --------------------------------------------------------------------------------------------------- Beavis, William Parma, OH US --------------------------------------------------------------------------------------------------- Cuccaro, Barbara J Parma, OH US --------------------------------------------------------------------------------------------------- Fontana, Elio Cleveland, OH US --------------------------------------------------------------------------------------------------- Griffiths, Karen Cleveland, OH US --------------------------------------------------------------------------------------------------- Keller, Carl Clarksville, TN US --------------------------------------------------------------------------------------------------- Kohl, Susan Parma, OH US --------------------------------------------------------------------------------------------------- Kral, Karen Parma, OH US --------------------------------------------------------------------------------------------------- Lhotsky, Joseph Clarksville, TN US --------------------------------------------------------------------------------------------------- Logan, Theodore Nashville, TN US --------------------------------------------------------------------------------------------------- Lowery, Margie Cleveland, OH US --------------------------------------------------------------------------------------------------- Malone, Laura Parma, OH US --------------------------------------------------------------------------------------------------- McFarland, Charles Nashville, TN US --------------------------------------------------------------------------------------------------- Mikolaj Jr, John Parma, OH US --------------------------------------------------------------------------------------------------- Momany, Kathy Columbia, TN US --------------------------------------------------------------------------------------------------- Mortimer, Daniel Parma, OH US --------------------------------------------------------------------------------------------------- Nuta, Adrian Nashville, TN US --------------------------------------------------------------------------------------------------- Perez, Angel Parma, OH US --------------------------------------------------------------------------------------------------- Robatin, Deborah Clarksville, TN US --------------------------------------------------------------------------------------------------- Rock, David Parma, OH US --------------------------------------------------------------------------------------------------- Sheets, Kenneth Clarksville, TN US --------------------------------------------------------------------------------------------------- Shingleton, Charles Clarksburg, WV US --------------------------------------------------------------------------------------------------- Strohmenger, Mark Parma, OH US --------------------------------------------------------------------------------------------------- Uhrin, David Parma, OH US --------------------------------------------------------------------------------------------------- Wilkinson, Jeannie Clarksville, TN US --------------------------------------------------------------------------------------------------- Asfaux, Louis Rungis France --------------------------------------------------------------------------------------------------- Auffret, Patrice Rungis France --------------------------------------------------------------------------------------------------- Barbelin, Jean-Francois Rungis France --------------------------------------------------------------------------------------------------- Denekre, Herve Calais France --------------------------------------------------------------------------------------------------- Gheerbrant, Jean-Laurent Rungis France --------------------------------------------------------------------------------------------------- Guittet, Franck Rungis France --------------------------------------------------------------------------------------------------- Lebrant, Monique Calais France --------------------------------------------------------------------------------------------------- Lesourd, Max Notre Dame France --------------------------------------------------------------------------------------------------- Loeillet, Sebastien Notre Dame France --------------------------------------------------------------------------------------------------- Zittoun, Gerard Rungis France ---------------------------------------------------------------------------------------------------
G-1 SCHEDULE H PRICING 1. [TEXT DELETED] FEES. Until the [TEXT DELETED] of [TEXT DELETED] (as defined in Section 4.11) occurs, CGI's charges for the [TEXT DELETED] during the first 12 months of the Term will be as indicated on Attachment 1 to this Schedule H. Following the occurrence of the [TEXT DELETED] of [TEXT DELETED], CGI's charges for the [TEXT DELETED] during the remainder of the Term will be as indicated on Attachment 1 to this Schedule H. Unless and until CGI and UCAR agree on the additional volume charges for increases to the [TEXT DELETED] of [TEXT DELETED] in accordance with Section 6.2, if the volume of any [TEXT DELETED] exceeds the monthly [TEXT DELETED] for that [TEXT DELETED] by more than 10% in any month, or if the number of desktops being refreshed on an annual basis exceeds the rate set forth in Schedule A, then UCAR and CGI will agree on an appropriate adjustment to CGI's charges hereunder. 2. ADJUSTMENTS TO [TEXT DELETED] FEES. Effective as of each anniversary of the Commencement Date, an adjustment to the amounts set forth on Attachment 1 to this Schedule H will be made by [TEXT DELETED]% of each such amount by the [TEXT DELETED] that the [TEXT DELETED] increased from the [TEXT DELETED]. (a) "[TEXT DELETED]" is the [TEXT DELETED] for [TEXT DELETED] (not seasonally adjusted), [TEXT DELETED] excluding [TEXT DELETED], as published by the [TEXT DELETED] of [TEXT DELETED] of the [TEXT DELETED] of [TEXT DELETED]. (b) "[TEXT DELETED]" is the most recently published [TEXT DELETED] as of any anniversary of the Commencement Date. (c) "[TEXT DELETED]" is the [TEXT DELETED] from the prior anniversary of the Commencement Date (or, for the first anniversary, the [TEXT DELETED] most recently published as of the Commencement Date) 3. FEES FOR [TEXT DELETED]. The Base Services fees set forth on Attachment 1 to this Schedule H will cover the [TEXT DELETED] for the [TEXT DELETED] for which CGI has responsibility as of the Commencement Date, including the [TEXT DELETED] being implemented as part of the [TEXT DELETED] (less the [TEXT DELETED] being displaced by the [TEXT DELETED]). As new [TEXT DELETED] is implemented, the incremental resources, if any, required to support that new [TEXT DELETED] will be agreed as part of the implementation and integration project and the [TEXT DELETED] Rates will be used to develop the charge to provide the [TEXT DELETED] for that new [TEXT DELETED]. Once that charge is established, then that charge will become part of the Base Service Fees. 4. [TEXT DELETED] RATES. The rates set forth below will be the rates applicable to the personnel resources performing [TEXT DELETED]. The rates designated as "long-term" will apply to those resources for which UCAR has made at least a [TEXT DELETED]. Immediately following satisfaction of the [TEXT DELETED] of [TEXT DELETED], UCAR and CGI will H-1 develop [TEXT DELETED] for personnel resources in [TEXT DELETED] that will be based on the market conditions in [TEXT DELETED]. CLASS LONG-TERM RATE SHORT-TERM RATE RANGE P/A $[TEXT DELETED]/month $[TEXT DELETED]/hour DBA $[TEXT DELETED]/month $[TEXT DELETED]/hour Project Manager $[TEXT DELETED]/month $[TEXT DELETED]/hour Systems Architect $[TEXT DELETED]/month $[TEXT DELETED]/hour Business Analyst $[TEXT DELETED]/month $[TEXT DELETED]/hour 5. ADJUSTMENTS TO [TEXT DELETED]. On each anniversary of the Commencement Date, the [TEXT DELETED], as previously adjusted, will be adjusted by increasing those rates by the percentage that the [TEXT DELETED] increased from the [TEXT DELETED]. 6. CHANGES TO THE APPLICABLE INDEX. If the [TEXT DELETED] no longer published, or there should be substantial changes in the content or calculation methodology, then another comparable measure will be substituted. If actual inflationary impact to CGI is significantly over or under stated as compared to the impact from [TEXT DELETED], then, every 3 years, CGI and UCAR will work in good faith to make appropriate adjustments to the charges hereunder. 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$ [TEXT DELETED] H-6 SCHEDULE I TRANSITION PLAN The Transition Plan is used by the CGI Contract Management Office to execute its activities during the Transition Period. At any given time, Transition Plan contains general activities covering the remainder of the Transition Period which will be further detailed. The transition plan is developed using a project planning tool and contains, but is not limited to, the following major tasks and timeframes: [CHART INTENTIONALLY OMITTED] I-1 SCHEDULE J TARGET SERVICE LEVELS SECTION 1 - OVERVIEW This Schedule describes the governance model for establishing the Target Service Levels that will be established during the Transition Period as described in Article V of the Agreement. The Target Service Levels described in this Schedule are intended to be examples only, and the actual Target Service Levels may be different. 5 DEFINITIONS The following definitions apply to the terms used in this Schedule: AVAILABILITY: is defined as the Percentage of Time that an element of a Service, the Computer Systems or Application Software (herein after referred to as an "Element") is available for use by UCAR during any given month. COVERAGE: is the total number of hours as identified in Section 3.1 "Coverage". CURRENT STATE - The current state of the measurement of the Service Level prior to Commencement Date will be identified under one of the following classifications: 1 Monitored, reported and attained as per Section 5.1 a) (Existing Service Levels prior to Commencement Date); 2 Not consistently monitored, reported or attained as per Section 5.1 b) (Existing Service Levels prior to Commencement Date); 3. Not monitored or reported as per Section 5.1 c) (Existing Service Levels prior to Commencement Date); ELIGIBLE TROUBLE TICKET: An Eligible Trouble Ticket is a Trouble Ticket which is used in the calculation of the Time to Repair for a given reported problem. For a Trouble Ticket to be "Eligible" the associated trouble must affect or be likely to affect an Element. N/A: Not Available PENDING STATE: The state of an Eligible Trouble Ticket when and where additional information available to UCAR or immediate access to the Element is reasonably required by CGI before it can respond and is not made available to CGI by UCAR. PERCENTAGE OF TIME: is defined as the total Coverage minus the Total Time to Repair divided by the Coverage. TICKETING PRIORITIES: There are three priorities for assignment to Eligible Trouble Tickets. A chart of the ticket priorities and their descriptions are as follows. The parties agree that a more detailed description will be included in the implementation of the Operational Framework. J-1
--------------------------------------------------------------------------------------- TICKETING RESPONSE DESCRIPTION PRIORITIES --------------------------------------------------------------------------------------- 1 Within XX minutes of report entry Customer/User declares that an for 2nd level to respond to the Element is down/unusable and has a Enterprise Help Desk serious impact on UCAR operations. There are no bypasses possible. --------------------------------------------------------------------------------------- 2 Within XX hours of report entry Customer/User declares that an for 2nd level to acknowledge with Element is down/unusable and has a initiator serious impact on UCAR operations. Bypasses are not available but the incident does not affect revenue. --------------------------------------------------------------------------------------- 3 Within XX business day of report A functional deficiency exists entry for 2nd level to affecting a small group of users. acknowledge with initiator The function can easily be circumvented. ---------------------------------------------------------------------------------------
REGULAR BUSINESS HOURS: Unless otherwise stated, Regular Business Hours are 8:30am to 5:00pm, Monday to Friday, excluding UCAR holidays observed in the location of operation. TOTAL TIME TO REPAIR: is the sum of the Time to Repair for all Eligible Trouble Tickets generated during a given month for a specific Element. TICKET CLOSURE: A Trouble Ticket will be closed when the specific technical problem being addressed can be shown to be resolved and agreed to by both parties. For example, in the event that a Trouble Ticket is opened due to problems caused by the failure of an Element, the ticket will be closed when the Element has been replaced/repaired and tested. However, if the UCAR Element continues to function improperly due to some other problem (whether or not the other problem has yet been identified), this will not delay the closure of the Trouble Ticket regarding the first problem identified. If subsequently it may be demonstrated that the same Element in question continues to malfunction in the same way and that the Trouble Ticket was shown to have been closed incorrectly, the Trouble Ticket will be re-opened and Time To Repair time will be equal to the aggregate of the Time To Repair prior to the Ticket Closure plus the Time To Repair subsequent to the re-opening(s) of the Trouble Ticket. In all cases UCAR and CGI must agree that a given problem is resolved. TIME TO REPAIR: The time elapsed from the point of the creation of an Eligible Trouble Ticket to the time of Ticket Closure less the time in Pending State. TROUBLE TICKET: A Trouble Ticket is an electronic record of a problem on the CGI call tracking system. The first action in response to any problem reported by UCAR or identified by CGI through the normal course of its operations. In either case a Trouble Ticket will be opened in a timely fashion. This electronic record is then used to track, manage and report on problem rectification. J-2 6 GENERAL TERMS AND CONDITIONS The following sections detail terms and conditions of CGI meeting Service Levels with respect to the UCAR systems. 6.1 Coverage THE FOLLOWING TABLE IDENTIFIES THE TIMES DURING WHICH AN ELEMENT is TO BE AVAILABLE. IT IS THE BASIS FOR THE CALCULATION OF AVAILABILITY AS DEFINED EARLIER. - -------------------------------- ------------------------ ---------------------- ELEMENT COMPONENTS COVERAGE - -------------------------------- ------------------------ ---------------------- Wide Area Network (WAN) - -------------------------------- ------------------------ ---------------------- Local Area Network (LAN) - -------------------------------- ------------------------ ---------------------- Local Servers - -------------------------------- ------------------------ ---------------------- Telco - -------------------------------- ------------------------ ---------------------- Mainframe - -------------------------------- ------------------------ ---------------------- Unix - -------------------------------- ------------------------ ---------------------- ONLINE APPLICATION - -------------------------------- ------------------------ ---------------------- J-3 6.2 Staffing THE FOLLOWING TABLE IDENTIFIES THE TIMES DURING WHICH THE ELEMENT WILL BE STAFFED BY CGI. - --------------------------------- ------------------------------- -------------- ELEMENT COMPONENTS STAFFING - --------------------------------- ------------------------------- -------------- Wide Area Network (WAN) - --------------------------------- ------------------------------- -------------- Local Area Network (LAN) - --------------------------------- ------------------------------- -------------- Local Servers - --------------------------------- ------------------------------- -------------- Telco - --------------------------------- ------------------------------- -------------- Mainframe - --------------------------------- ------------------------------- -------------- Unix - --------------------------------- ------------------------------- -------------- Workstation - --------------------------------- ------------------------------- -------------- - --------------------------------- ------------------------------- -------------- ELEMENT COMPONENTS STAFFING - --------------------------------- ------------------------------- -------------- Helpdesk - --------------------------------- ------------------------------- -------------- Application Support - --------------------------------- ------------------------------- -------------- Printing Shop - --------------------------------- ------------------------------- -------------- 3.3 SCHEDULED MAINTENANCE CGI will periodically require maintenance time to install, configure, and relocate hardware, and upgrade operating and application software to the Computer Systems and Application Software. The necessity of the outage will be at CGI's discretion while the timing of the outage will be subject to UCAR approval through a Change Request issued by CGI. To facilitate these activities, however, still subject to the foregoing, CGI will have access during the following windows:
- ------------------------------------------------------------------------------------------- SYSTEMS START FINISH NOTIFICATION TO END USERS --------------------------------------------------- -------------------------------------------------- DAY(S) TIME DAY(S) TIME - ------------------------------------------------------------------------------------------- Host Related or other System maintenance - ------------------------------------------------------------------------------------------- Semi-annual outages which could include mainframe and network/server upgrades - ------------------------------------------------------------------------------------------- J-4 Annual outage for power - - - system inspection and maintenance - ------------------------------------------------------------------------------------------- Monthly Development Releases once a month - ------------------------------------------------------------------------------------------- NON CRITICAL SYSTEMS - ------------------------------------------------------------------------------------------- Server-related or other non Critical System maintenance - ------------------------------------------------------------------------------------------- Semi-annual outages to perform computer upgrades which includes network (hub and router) and server upgrades - ------------------------------------------------------------------------------------------- Semi-annual outage, if - - - required for power system inspection and maintenance - ------------------------------------------------------------------------------------------- Monthly Development Releases once a month - -------------------------------------------------------------------------------------------
From time to time, exceptions to the above outage window may be requested. UCAR will have the final approval for all Change Requests as approved by the Change Management Committee. Failure to meet the specified down time or the required notification time frame will result in the outage time being added to the Service Level related to the affected Element. Notification will be performed by CGI, two (2) business days prior to the scheduled activity or as defined in the above chart, whichever is greater. Scheduled maintenance outages that are completed within the communicated outage window will not have an impact on the Elements of the Computer System or Application Software Service Level provided that a Change Request had been approved accordingly. Outages or degradations that occur as a result of this Section 3.3 (Scheduled Maintenance), after the outage has been completed and communicated to UCAR will be considered as an outage reported against the Service Level related to the affected Element. 7 SERVICE LEVELS FOR SYSTEMS The following subsections describe how Service Levels that will be measured. 7.1 Computer Systems and Application Software Availability THE FOLLOWING SERVICE LEVEL TABLE DEPICTS THE REQUIRED COMPUTER SYSTEMS AND APPLICATION SOFTWARE AVAILABILITY. THE ELEMENTS IDENTIFIED HEREUNDER ARE CONSIDERED CRITICAL AND ONLY MEASURED IN THE PRODUCTION ENVIRONMENT. J-5 ============================================================================== ELEMENT COMPONENTS SERVICE LEVEL CURRENT STATE ------------------------------------------------------------------------------ WAN/LAN ------------------------------------------------------------------------------ MAINFRAME ------------------------------------------------------------------------------ UNIX ------------------------------------------------------------------------------ ONLINE APPLICATION ------------------------------------------------------------------------------ Email ------------------------------------------------------------------------------ ERP ============================================================================== 7.2 Computer Systems and Application Software Response Time THE FOLLOWING SERVICE LEVEL TABLE DEPICTS THE REQUIRED COMPUTER SYSTEMS AND APPLICATION SOFTWARE RESPONSE TIMES. DURING REGULAR BUSINESS HOURS RESPONSE TIME IS CALCULATED AS THE PERIOD OF TIME FROM THE RECEIPT OF A USER REQUEST BY THE ELEMENT AND THE MOMENT THE ELEMENT SENDS A RESPONSE TO THAT USER REQUEST. THESE - --ELEMENTS IDENTIFIED HEREUNDER ARE CONSIDERED CRITICAL ONLY WHEN USED IN THE PRODUCTION ENVIRONMENT. ============================================================================== ELEMENT COMPONENTS SERVICE LEVEL CURRENT STATE ------------------------------------------------------------------------------ CICS Production ------------------------------------------------------------------------------ Email ------------------------------------------------------------------------------ ERP ============================================================================== 7.3 Problem Resolution THE FOLLOWING TABLE DESCRIBES THE SERVICE LEVELS PERTAINING TO CGI RESOLUTION OF ELIGIBLE TROUBLE TICKETS FOR PROBLEMS REPORTED AGAINST SERVICES IDENTIFIED IN TABLES 4.1. ============================================================================== TICKETING PRIORITIES TIME TO REPAIR SERVICE LEVEL CURRENT STATE ------------------------------------------------------------------------------ P1 ------------------------------------------------------------------------------ P2 ------------------------------------------------------------------------------ P3 ============================================================================== 7.4 User Requests The Service Level of a request that requires a purchase of equipment or software will only take effect once the equipment or software is received. A request that is placed after 3pm during a business day is considered as a request placed at 8:30am the following business day. J-6 ============================================================================== TYPE COMMENTS RESPONSE TIME SERVICE CURRENT STATE ------------------------------------------------------------------------------ New User ID ------------------------------------------------------------------------------ Password Reset ------------------------------------------------------------------------------ Changes to or Removal of user profiles ------------------------------------------------------------------------------ Non Facilities Moves, Adds, Change, Delete ------------------------------------------------------------------------------ New Workstation ------------------------------------------------------------------------------ New TELCO facilities ------------------------------------------------------------------------------ Telco Non Facilities Moves, Adds, Change, Delete ------------------------------------------------------------------------------ New TELCO ------------------------------------------------------------------------------ ONE TIME REQUESTS ============================================================================== 7.5 Help Desk(s) The following table describes the Service Levels pertaining to the Help Desk(s). ============================================================================== ITEM MEASUREMENT LOWER SERVICE UPPER CURRENT SERVICE LEVEL LEVEL SERVICE STATE LEVEL ------------------------------------------------------------------------------ Average Call Waiting Time ------------------------------------------------------------------------------ Call Resolution Rate ============================================================================== J-7 SCHEDULE K BASELINE LEVEL OF RESOURCES - ---------------------------------------------------------------- --------------- RESOURCE TYPE QUANTITY - ---------------------------------------------------------------- --------------- MIDRANGE AND DISTRIBUTED - ---------------------------------------------------------------- --------------- Midrange Systems - ---------------------------------------------------------------- --------------- System Printers - ---------------------------------------------------------------- --------------- Disk (GBs) - ---------------------------------------------------------------- --------------- Tape - ---------------------------------------------------------------- --------------- Intel-based Servers (e-mail, print and LAN) - ---------------------------------------------------------------- --------------- - ---------------------------------------------------------------- --------------- DESKTOP - ---------------------------------------------------------------- --------------- IMAC - U.S. - Desktop, Laptop & Printer (monthly) - ---------------------------------------------------------------- --------------- IMAC-- France - Desktop, Laptop & Printer (monthly) - ---------------------------------------------------------------- --------------- Desktops - U.S. - ---------------------------------------------------------------- --------------- Laptop - U.S. - ---------------------------------------------------------------- --------------- Desktop - France - ---------------------------------------------------------------- --------------- Laptop - France - ---------------------------------------------------------------- --------------- Network Printer - U.S. - ---------------------------------------------------------------- --------------- Network Printer - France - ---------------------------------------------------------------- --------------- Print Supplies by Location - ---------------------------------------------------------------- --------------- HELPDESK - ---------------------------------------------------------------- --------------- Calls- U.S. (monthly) - ---------------------------------------------------------------- --------------- Calls - France (monthly) - ---------------------------------------------------------------- --------------- Calls - Out-of-Scope Locations (monthly) - ---------------------------------------------------------------- --------------- UCAR Staff - U.S. - ---------------------------------------------------------------- --------------- UCAR Staff - France - ---------------------------------------------------------------- --------------- UCAR Staff - Out-of-Scope Locations - ---------------------------------------------------------------- --------------- NETWORK - ---------------------------------------------------------------- --------------- Voice Facilities - U.S. (Number of handsets) - ---------------------------------------------------------------- --------------- IMAC - U.S. handsets (monthly) - ---------------------------------------------------------------- --------------- Data Facilities (Number of data lines) - ---------------------------------------------------------------- --------------- K-1 SCHEDULE L TERMINATION FOR CONVENIENCE FEE The Termination for Convenience Fee schedule is as follows: YEAR FEE($M) ---- ------- 4 $[TEXT DELETED] 5 $[TEXT DELETED] 6 $[TEXT DELETED] 7 $[TEXT DELETED] 8 $[TEXT DELETED] 9 $[TEXT DELETED] 10 $[TEXT DELETED] The Termination for Convenience Fee will be an amount equal to (the termination fee applicable to the year in which the termination is effective minus the termination fee applicable to the next succeeding year) multiplied by (the value for the month in which the termination is effective divided by 12), plus the termination fee applicable to the next succeeding year. The values for each month are as follows: April = 12 October = 6 May = 11 November = 5 June = 10 December = 4 July = 9 January = 3 August = 8 February = 2 September = 7 March = 1 L-1 SCHEDULE M TRAVEL AND EXPENSE GUIDELINES This schedule provides CGI business travelers with a reasonable level of service and comfort at the lowest possible cost. The purpose of this schedule is to ensure there are clearly understood procedures for business travel and expenses incurred when traveling on UCAR's behalf: o UCAR will reimburse CGI for all reasonable and necessary expenses incurred while traveling on authorized UCAR business. o UCAR assumes no obligation to reimburse CGI for expenses that are NOT in compliance with this schedule. AIR TRAVEL o Bookings should be made as early as possible to take advantage of advance purchase discounts. Travelers are expected to use the lowest logical published airfare. o Travelers are expected to fly in coach class at all times. Upgrades to business or first class may be allowed with proper UCAR authorization. o Should travel plans change, UCAR will not be charged for unused tickets without authorization. LODGING Travelers on UCAR business are required, whenever possible, to use: o The least expensive property in a MODERATE or similar hotel category. o Properties where UCAR has a negotiated rate. RENTAL CAR CGI travelers may rent a car at their destination when it is cost effective to do so. CGI travelers are required, whenever possible, to book rental cars using the best rate available. Travelers should book rental cars in the INTERMEDIATE category, except for the following situations: o When the traveler can be upgraded at no extra cost o When three or more employees are traveling together o When cars in the authorized category are not available o When transporting excess baggage M-1 REIMBURSEMENT FOR PERSONAL CAR USAGE Travelers will be reimbursed for business use of personal cars on a fixed scale at the then-current IRS rate. They WILL NOT be reimbursed for any repairs to their personal car resulting from business travel. To be reimbursed for use of their personal car for business, travelers must provide on their expense reports the date, location and purpose of the trip, mileage log, and receipts for gas, tolls and parking. TELEPHONE USAGE UCAR will pay for no more than actual cost for any telephone calls. MEALS AND ENTERTAINMENT Travelers on UCAR business will be reimbursed for reasonable personal and business meal expenses. Moderate restaurants should be used. Travelers will not be reimbursed for entertainment or entertaining customers. EXPENSE REPORTING & INVOICES All travel and expenses shall be paid directly by CGI, and then appropriate travel expenses charged to UCAR by CGI through consolidated invoices. CGI travel and expense invoices will include sufficient detail to see the following: o Name of traveler and purpose of trip o Destination and dates of each trip o Each trip will have air, hotels, car, meals, and other expenses broken out separately. Receipts are not required with invoices but must be available along with the expense report for at least two years for review at UCAR's request. M-2 SCHEDULE N UCAR SITES UNITED STATES CLARKSBURG, WV UCAR Carbon Company, Inc. P.O. Box 2170 Clarksburg, WV 26302--2170 (304) 624-1200 CLARKSVILLE, TN UCAR Carbon Company, Inc. P.O. Box 1044 Clarksville, TN 37041-1044 (931) 552-5100 CLEVELAND, OH Graftech Inc. P.O. Box 94637 Cleveland, OH 44101 (216) 529-3777 COLUMBIA, TN UCAR Carbon Company, Inc. P.O. Box 218 Columbia, TN 38402-0218 (931) 380-1410 LAWRENCEBURG, TN UCAR Carbon Company, Inc. P.O. Box Lawrenceburg, TN 38464 (931) 762-7101 N-1 NASHVILLE, TN UCAR International Inc. 3102 West End Avenue Suite 1100 Nashville, TN 37203 (615) 760-8227 NIAGARA FALLS, NY UCAR Carbon Company, Inc. P.O. Box 887 Niagara Falls, NY 14302-0887 (716) 278-3542 PARMA, OH UCAR Carbon Company, Inc. P.O. Box 6116 Cleveland, OH 44101 (216) 676-2000 FRANCE CALAIS UCAR S.N.C. B.P. 478 F-62226 CALAIS CEDEX FRANCE 33-3-21-19-1420 NOTRE DAME UCAR S.N.C. Usine de Notre-Dame-de-Briancon LA LECHERE F-73264 AIGUEBLANCHE CEDEX FRANCE 33-4-79-22-32-22 N-2 RUNGIS UCAR S.N.C. 4, Place des Etats-Unis SILIC 214 F-94518 RUNGIS, CEDEX FRANCE 33-1-49-78-4600 VENISSIEUX Carbone Savoie 30, rue Louis Jouvet BP 16 VENISSIEUX CEDEX F-69631 FRANCE 33-4-78-77-08-26 N-3 SCHEDULE O CURRENT PROJECTS
PROJECT PURPOSE PHASE SCOPE TARGET COMPLETION EST HOURS RESOURCES - ------------------------------------------------------------------------------------------------------------------------------------ [TEXT DELETED] The [TEXT DELETED] [TEXT DELETED] Replace the use of a [TEXT DELETED] [TEXT DELETED] [TEXT project was [TEXT [TEXT DELETED] containing DELETED] DELETED] to provide [TEXT DELETED]. Develop a [TEXT DELETED] to an [TEXT DELETED] using [TEXT DELETED] from [TEXT DELETED] to allow [TEXT DELETED] into [TEXT DELETED] of [TEXT a [TEXT DELETED]. DELETED]. [TEXT DELETED] A repository for [TEXT [TEXT DELETED] [TEXT DELETED] [TEXT DELETED]. Develop an DELETED] [TEXT DELETED] using [TEXT DELETED] to allow [TEXT DELETED] of [TEXT DELETED]. Provide support uploading data from outside data bases into [TEXT DELETED]. [TEXT DELETED] [TEXT DELETED] data from Phase is [TEXT DELETED] [TEXT DELETED] [TEXT the systems around the with [TEXT DELETED] days, Support DELETED] world. Interface being the final element development from the to complete, no firm [TEXT DELETED] in the date established for [TEXT DELETED]. Build an completion. extract process from the [TEXT DELETED] in [TEXT DELETED] and [TEXT DELETED]. Provide a mechanism to [TEXT DELETED] around the [TEXT DELETED]
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PROJECT PURPOSE PHASE SCOPE TARGET COMPLETION EST HOURS RESOURCES - ------------------------------------------------------------------------------------------------------------------------------------ [TEXT DELETED] Collect all data related [TEXT DELETED] [TEXT DELETED] [TEXT to spending from the completed, no firm work DELETED] various systems around completion date has the world. This [TEXT been established DELETED] phase would follow the same model of the [TEXT DELETED] and [TEXT DELETED] all the [TEXT DELETED]. [TEXT DELETED] and [TEXT DELETED] and [TEXT [TEXT DELETED] and Support for [TEXT [TEXT DELETED] DELETED] data from [TEXT [TEXT DELETED] base Sales [TEXT DELETED] DELETED] into a [TEXT complete. Waiting to DELETED] for DELETED] designed for the develop [TEXT DELETED] forecasting Graphtech business line. Build an [TEXT DELETED] between the [TEXT deleted]. [TEXT DELETED] Extract information from Target [TEXT DELETED] [TEXT DELETED] [TEXT the [TEXT DELETED] for DELETED] the purposes of [TEXT DELETED]. [TEXT DELETED] is currently [TEXT DELETED]. [TEXT DELETED] A [TEXT DELETED] designed [TEXT DELETED] to capture [TEXT DELETED] and [TEXT DELETED] to provide a [TEXT DELETED] view of the information [TEXT Systems running in [TEXT DELETED] [TEXT DELETED] is Target conversion for [TEXT DELETED] [TEXT DELETED], and substantially [TEXT [TEXT DELETED] has not DELETED] Compliance [TEXT DELETED] must DELETED]. With work been established. and be converted to remaining with the order Users are contemplating [TEXT support the [TEXT processing system for a [TEXT DELETED]. DELETED] DELETED]. [TEXT DELETED], and [TEXT DELETED]. [TEXT DELETED] [TEXT DELETED] is [TEXT DELETED]. User [TEXT substantially [TEXT testing will need to be DELETED] DELETED]. The various completed by [TEXT [TEXT DELETED] systems DELETED]. are currently being tested
O-2
PROJECT PURPOSE PHASE SCOPE TARGET COMPLETION EST HOURS RESOURCES - ------------------------------------------------------------------------------------------------------------------------------------ [TEXT DELETED] [TEXT DELETED] that need Targeting [TEXT [TEXT to be made [TEXT DELETED] to [TEXT DELETED] DELETED]. Support of DELETED] in [TEXT and user testing. DELETED] and [TEXT [TEXT DELETED]. Parallel run DELETED] in [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] Using the [TEXT [TEXT DELETED] Provide technical support Support will be [TEXT DELETED] [TEXT DELETED] from [TEXT in the initial required through the DELETED] DELETED], Build a development of the [TEXT balance of the year. model representing DELETED]. Develop data the [TEXT DELETED]. feeds from data extracts from the various [TEXT DELETED]. Using the [TEXT DELETED] from the product suite, [TEXT DELETED] and [TEXT DELETED]. Develop [TEXT DELETED] from the [TEXT DELETED] into [TEXT DELETED] [TEXT DELETED] The [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] has been [TEXT DELETED] [TEXT DELETED] [TEXT selected the [TEXT retained to provide the weeks per DELETED] DELETED] to be bulk of support related interface their [TEXT to the implementation of DELETED] to be the [TEXT DELETED]. IT implemented [TEXT support is required to DELETED] build [TEXT DELETED] the [TEXT DELETED] and the [TEXT DELETED] of the country being implemented. Each interface takes about [TEXT DELETED] [TEXT DELETED] In support of the The [TEXT DELETED] is an [TEXT DELETED] Target No more than [TEXT [TEXT DELETED]. The existing program. [TEXT DELETED] DELETED] [TEXT DELETED] Interfaces need to be screen needs to be built [TEXT DELETED] modified to provide using [TEXT DELETED]. a global view of [TEXT DELETED] and [TEXT DELETED].
O-3
PROJECT PURPOSE PHASE SCOPE TARGET COMPLETION EST HOURS RESOURCES - ------------------------------------------------------------------------------------------------------------------------------------ [TEXT DELETED] Take the [TEXT The vendor has released [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] from the next version of [TEXT DELETED] version [TEXT DELETED]. DELETED] to [TEXT DELETED] [TEXT DELETED] Take the [TEXT The vendor has released [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] software the next version of DELETED] from version [TEXT resolution [TEXT DELETED]. DELETED] to [TEXT DELETED] [TEXT DELETED] The purpose of this [TEXT DELETED] of data [TEXT DELETED], waiting [TEXT DELETED] [TEXT project is to [TEXT from payroll, breaks out to install [TEXT DELETED] DELETED] the [TEXT benefits and employee DELETED] DELETED] of [TEXT data. Sends data from DELETED] into the [TEXT DELETED] to [TEXT General Ledger. DELETED] for the General Ledger. Creation of a report for each site in the US. [TEXT DELETED] [TEXT DELETED] Build [TEXT DELETED] to [TEXT DELETED] Target [TEXT DELETED] [TEXT between the [TEXT the [TEXT DELETED] and completion weeks of [TEXT DELETED] DELETED] and the [TEXT DELETED] - [TEXT DELETED] time [TEXT DELETED] in DELETED]. [TEXT DELETED] use in the company. from the [TEXT DELETED] Design complete, pgming Build interface from the [TEXT DELETED] system. Using [TEXT DELETED] [TEXT DELETED] Provide [TEXT [TEXT DELETED] has been [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] of [TEXT completed to enhance days in [TEXT DELETED] DELETED] performed [TEXT DELETED] of changes DELETED] in the [TEXT made to prices. Waiting DELETED] system to install sometime in [TEXT DELETED] Extend [TEXT [TEXT DELETED] [TEXT DELETED] the [TEXT [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] to production is DELETED] to provide [TEXT days in [TEXT deleted] [TEXT DELETED] reported [TEXT DELETED] of [TEXT DELETED] and DELETED] into the deleted]. [TEXT [TEXT DELETED] [TEXT DELETED] has been DELETED] system. An [TEXT completed. Waiting to DELETED]is [TEXT [TEXT DELETED]. DELETED].
O-4
PROJECT PURPOSE PHASE SCOPE TARGET COMPLETION EST HOURS RESOURCES - ------------------------------------------------------------------------------------------------------------------------------------ [TEXT [TEXT DELETED] has [TEXT DELETED] of [TEXT [TEXT DELETED] [TEXT DELETED] [TEXT deleted]into [TEXT DELETED] of DELETED] into [TEXT days DELETED] [TEXT DELETED] the [TEXT DELETED]. DELETED]. Currently being [TEXT DELETED]. [TEXT [TEXT DELETED] has The new [TEXT DELETED] of No completion min [TEXT [TEXT deleted] at [TEXT DELETED] a [TEXT DELETED] will need established UCAR and DELETED] weeks.DELETED] [TEXT new [TEXT DELETED] to be installed and CGI agree that this is deleted] of the [TEXT tested. Interfaces with a [TEXT DELETED] based DELETED] other applications will on [TEXT DELETED] need to be checked.
O-5 SCHEDULE P [TEXT DELETED] COMMITMENT 1. During the term of this Agreement and in accordance with this Schedule P, UCAR will [TEXT DELETED] from [TEXT DELETED] resulting in [TEXT DELETED] to CGI from UCAR of $[TEXT DELETED] (excluding [TEXT DELETED] for [TEXT DELETED], and [TEXT DELETED] as modified in accordance with Section 2.2). CGI agrees that if UCAR elects to have CGI implement [TEXT DELETED], the [TEXT DELETED] resulting from that implementation will be applied to the preceding [TEXT DELETED]. 2. Definitions. As used in this Schedule: (a) "[TEXT DELETED]" is, with respect to each [TEXT DELETED], the actual dollar amount of [TEXT DELETED] (excluding [TEXT DELETED] for [TEXT DELETED] and [TEXT DELETED]) [TEXT DELETED] by [TEXT DELETED] from [TEXT DELETED] during that [TEXT DELETED]. (b) "[TEXT DELETED]" is, with respect to each [TEXT DELETED], the amount, if any, by which the [TEXT DELETED] for that [TEXT DELETED] exceeds $[TEXT DELETED]. (c) "[TEXT DELETED]" is the [TEXT DELETED] month period commencing with the Commencement Date and each [TEXT DELETED] month period thereafter during the Term. (d) "[TEXT DELETED]" is, with respect to each [TEXT DELETED], the amount, if any, that (i) the sum of (A) the [TEXT DELETED], and (B) the [TEXT DELETED] from all prior [TEXT DELETED] that have not previously been used to offset a prior [TEXT DELETED], is (ii) less than $[TEXT deleted]. 3. Within thirty (30) days after the end of each [TEXT DELETED] and subject to Section 4 below, UCAR will pay CGI as follows: (a) At the end of the first [TEXT DELETED], UCAR will pay to CGI [TEXT DELETED] percent ([TEXT DELETED]%) of the [TEXT DELETED], if any, for that [TEXT DELETED]. (b) At the end of the second [TEXT DELETED], UCAR will pay to CGI [TEXT DELETED] percent ([TEXT DELETED]%) of the [TEXT DELETED], if any, for that [TEXT DELETED] plus [TEXT DELETED] percent ([TEXT DELETED]%) of the sum of the [TEXT DELETED] for that [TEXT DELETED] and the [TEXT DELETED] for the [TEXT DELETED]. (c) At the end of the third [TEXT DELETED], UCAR will pay to CGI [TEXT DELETED] percent ([TEXT DELETED]%) of the [TEXT DELETED], if any, for that [TEXT DELETED]. P-1 (d) At the end of the fourth [TEXT DELETED], UCAR will pay to CGI [TEXT DELETED] percent ([TEXT DELETED]%) of the [TEXT DELETED], if any, for that [TEXT DELETED], plus [TEXT DELETED] percent ([TEXT DELETED]%) of the sum of the [TEXT DELETED] for that [TEXT DELETED] and the[TEXT DELETED] for the prior [TEXT DELETED]. 4. CGI agrees that UCAR will be entitled to recover up to $[TEXT DELETED] of any [TEXT DELETED] for a [TEXT DELETED] by providing additional [TEXT DELETED] to CGI over the next [TEXT DELETED] succeeding months following the first [TEXT DELETED] and over the next [TEXT DELETED] succeeding months following each other [TEXT DELETED]. To the extent UCAR is able to [TEXT DELETED] that amount within that period, the amount owed by UCAR pursuant to Section 3 for that [TEXT DELETED] will be [TEXT DELETED], and any remaining amount will be payable as described in Section 3 within thirty days after the end of the [TEXT DELETED]. IF CGI owes UCAR a [TEXT DELETED] as a result of the [TEXT DELETED] pursuant to this Schedule P, that [TEXT DELETED] will be applied as a credit by CGI against the next invoice submitted to UCAR. P-2 EX-10 7 exh10-56_ballarducar.txt EXHIBIT 10.56 EXHIBIT 10.56 CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION JOINT DEVELOPMENT AND COLLABORATION AGREEMENT AMONG BALLARD POWER SYSTEMS INC. AND GRAFTECH INC. AND UCAR CARBON COMPANY INC. TABLE OF CONTENTS PAGE PART 1 DEFINITIONS AND INTERPRETATIONS........................................2 DEFINITIONS....................................................................2 INTERPRETATION.................................................................9 SCHEDULES.....................................................................10 PART 2 DEVELOPMENT...........................................................10 DEVELOPMENT PERIOD............................................................10 REASONABLE EFFORTS............................................................10 STEERING COMMITTEE............................................................11 DUTIES OF COMMITTEE...........................................................11 PROJECT MANAGER...............................................................12 EXCLUSIVITY AND STANDSTILL....................................................12 NEW TECHNOLOGICAL PLATFORM....................................................14 JOINT AGREEMENT TO DISCONTINUE WORK...........................................15 ONE PARTY DISCONTINUES WORK...................................................15 PROVISION OF EQUIPMENT........................................................16 SUPPLY AGREEMENT..............................................................16 [TEXT DELETED] FUEL CELLS.....................................................17 DEVELOPMENT EXCEPTIONS........................................................17 PART 3 INTELLECTUAL PROPERTY.................................................17 ALLOCATION OF IP..............................................................17 IP REGISTRATIONS..............................................................18 CO-OPERATION BY PARTIES.......................................................18 JOINT ARISING IP..............................................................18 GRAFTECH/BPS LICENSE..........................................................21 BPS/GRAFTECH LICENSE..........................................................25 WARRANTIES AND COVENANTS OF UCAR CARBON AND GRAFTECH..........................30 WARRANTIES AND COVENANTS OF BPS...............................................30 PART 4 CONFIDENTIALITY.......................................................31 NON-DISCLOSURE................................................................31 EXCEPTIONS....................................................................32 LEGAL REQUIREMENT TO DISCLOSE.................................................32 NO SOLICITATION...............................................................33 -i- TABLE OF CONTENTS (CONTINUED) PAGE REASONABLE RESTRICTIONS.......................................................33 PUBLICITY.....................................................................33 PART 5 DISPUTE RESOLUTION....................................................33 INITIATION OF PROCESS.........................................................33 COMMITTEE INVOLVEMENT.........................................................34 SENIOR OFFICER INVOLVEMENT....................................................34 ARBITRATION...................................................................34 IMPLEMENTATION................................................................34 VENUE OF ARBITRATION..........................................................34 NON-APPLICABILITY OF PART 5...................................................35 PART 6 TERMINATION...........................................................35 TERMINATION...................................................................35 EFFECT OF TERMINATION.........................................................36 LIABILITY LIMITED.............................................................41 EXCLUSIONS TO LIMITED LIABILITY...............................................41 PART 7 GENERAL...............................................................42 AMENDMENTS....................................................................42 FURTHER ASSURANCES............................................................42 ENTIRE AGREEMENT..............................................................42 NOTICE........................................................................42 DEEMED RECEIPT................................................................43 CHANGE OF ADDRESS.............................................................43 BINDING EFFECT................................................................43 GOVERNING LAW.................................................................43 ATTORNMENT....................................................................44 FORCE MAJEURE.................................................................44 SEVERABILITY..................................................................44 COUNTERPARTS..................................................................44 NO ASSIGNMENT.................................................................45 SURVIVAL......................................................................45 NO PARTNERSHIP................................................................45 TERMINATION OF UCAR CARBON'S OBLIGATIONS......................................45 -ii- TABLE OF CONTENTS (CONTINUED) PAGE BPS/UCAR CARBON COLLABORATION AGREEMENT.......................................46 REMEDIES......................................................................46 -iii- JOINT DEVELOPMENT AND COLLABORATION AGREEMENT This Agreement is made effective the 5th day of June, 2001. AMONG: GRAFTECH INC., a Delaware corporation having a place of business at 11709 Madison Avenue, Lakewood, Ohio, U.S.A. 44107 ("Graftech") AND: BALLARD POWER SYSTEMS INC., a Canadian corporation having a place of business at 9000 Glenlyon Parkway, Burnaby, British Columbia, Canada V5J 5J9 ("BPS") AND: UCAR CARBON COMPANY INC., a Delaware corporation having an office at 3102 West End Avenue, Suite 1100, Nashville, Tennessee, 37203, U.S.A. ("UCAR Carbon") WHEREAS: (A) BPS has developed, is in possession of and is the beneficial owner of, substantial and valuable expertise, know-how and intellectual property rights relating to the field of PEM Fuel Cells and PEM Fuel Cell Systems (as defined herein) and the design, manufacture and marketing of PEM Fuel Cells and PEM Fuel Cell Systems for the generation of electrical power for a variety of applications; (B) Graftech has developed, is in possession of and is the beneficial owner of, substantial and valuable expertise, know-how and intellectual property rights relating to natural graphite-based materials and products, including flexible graphite and treated natural graphite; (C) Subject to the provisions of this Agreement, each of BPS and Graftech wishes to collaborate with the other, on an exclusive basis, to jointly develop Graphitic Materials (as defined herein) and Graphitic Components (as defined herein) and related process technology and manufacturing processes for their use in PEM Fuel Cells and PEM Fuel Cell Systems for a broad range of power generation applications (the "Development"); and (D) Graftech is currently a wholly-owned subsidiary of UCAR Carbon; NOW THEREFORE, the parties agree as follows: PART 1 DEFINITIONS AND INTERPRETATIONS DEFINITIONS 1.1 In this Agreement, including the recitals, except as otherwise provided or unless the context otherwise requires, AFFILIATE, in relation to a specified Person, means a Person that directly or indirectly controls, is under common control with, or is controlled by the specified Person. For the purposes of this Agreement, control of a corporation, limited liability company, partnership, limited partnership or other entity by a Person is deemed to occur if (a) securities or other ownership interests of the corporation, limited liability company, partnership, limited partnership or other entity to which are attached more than 50% of the votes that may be cast to elect members of the board of directors, general partners, managing members or other governing body of such entity or other rights to elect a majority of the members of the applicable governing body are held, other than by way of security only, by or for the benefit of the Person, and (b) the votes attached to those securities or other ownership interests are sufficient, if exercised, to elect a majority of the members of the board of directors, general partners, managing members or other governing body of such entity, ARISING IP means, collectively, the BPS Arising IP, the Graftech Arising IP and the Joint Arising IP, [TEXT DELETED] means, for the purposes of this Agreement, the formal management decision point that provides [TEXT DELETED] for the [TEXT DELETED] and [TEXT DELETED] and should include [TEXT DELETED] on [TEXT DELETED] and/or [TEXT DELETED]. It is the [TEXT DELETED] described as the [TEXT DELETED] in [TEXT DELETED] dated [TEXT DELETED], [TEXT DELETED] means, for the purposes of this Agreement, the [TEXT DELETED] and [TEXT DELETED] where the [TEXT DELETED] of the [TEXT DELETED] is [TEXT DELETED]. No [TEXT DELETED] should be made [TEXT DELETED] and [TEXT DELETED] is [TEXT DELETED] to [TEXT DELETED] with [TEXT DELETED] for the [TEXT DELETED] of [TEXT DELETED]. It is the [TEXT DELETED] described as the [TEXT DELETED] in [TEXT DELETED], dated [TEXT DELETED], BPS ARISING IP means all Intellectual Property arising pursuant to the Development concerning the items allocated to BPS in Schedule B including, but not limited to, 2 (a) the design, composition, manufacturing techniques and methodology respecting such items, and (b) the use of Graphitic Materials and Graphitic Components in PEM Fuel Cells, PEM Fuel Cell Systems and MEAs, BPS BACKGROUND IP means all Intellectual Property owned or controlled by BPS or its Affiliates before the Effective Date, BPS/GRAFTECH LICENSE has the meaning ascribed to it in ss.3.6, BPS IP means, collectively, the BPS Arising IP and the BPS Background IP, BPS LICENSED TECHNOLOGY means all of the BPS IP concerning component manufacturing technology relevant to the manufacture of Graphitic Components for use in PEM Fuel Cells and PEM Fuel Cell Systems, and all Improvements thereto, owned or controlled by BPS from time to time, to the extent required by Graftech to exercise its rights under the BPS/Graftech License in accordance with the terms thereof, but excludes (a) all IP that is the subject of an existing (as of the Effective Date) bona fide third party restriction or limitation as to its disclosure or licensing, to the extent of such restriction or limitation, (b) for greater certainty, all of the BPS IP concerning the design (including component design), component assembly, component processing (other than as specifically set forth in this Agreement) and stack assembly, related to PEM Fuel Cells, and (c) all IP concerning the items described in ss.2.13 of this Agreement and ss.2.13 of the Supply Agreement, BPS PERMITTED LICENSEES means, collectively, (a) [TEXT DELETED] and its Subsidiaries (other than Subsidiaries that have a line of business that would make them a Graftech Competitor), (b) [TEXT DELETED] and its Subsidiaries (other than Subsidiaries that have a line of business that would make them a Graftech Competitor), (c) wholly-owned subsidiaries of BPS and Ballard Generation Systems Inc., (d) licensees of BPS's Background IP, but excludes any licensee that has a line of business that would make it a Graftech Competitor, (e) subject to ss.3.5(a)(i)(B), subcontractors of BPS, and (f) each other Person that is approved in writing by Graftech as BPS's sublicensee of the Graftech/BPS License, 3 BUSINESS DAY means a day that is not (a) a Saturday or a Sunday, or a British Columbia provincial, Canadian federal, a United States national, or Ohio state, holiday, or (b) a day during the period commencing on December 24 of one year and ending on January 2 of the following year, COMMITTEE has the meaning ascribed to it in ss.2.3, CONFIDENTIAL INFORMATION means, in relation to a Person, information known or used by such Person in connection with its business and technology, including, but not limited to, such Person's Intellectual Property, customer information, financial information, marketing information, and information as to business opportunities and research and development, CONTINUING PARTY has the meaning ascribed to it in ss.2.9(a), DEVELOPMENT has the meaning ascribed to it in Recital (C), DEVELOPMENT PERIOD has the meaning ascribed to it in ss.2.1, DISCLOSING PARTY has the meaning ascribed to it in ss.4.1, DISCONTINUED WORK has the meaning ascribed to it in ss.2.9, DISCONTINUING PARTY has the meaning ascribed to it in ss.2.9, DISPUTE has the meaning ascribed to it in ss.5.1, DISPUTE NOTICE has the meaning ascribed to it in ss.5.1, DONATING PARTY has the meaning ascribed to it in ss.2.10, EFFECTIVE DATE means the date appearing on page 1 of this Agreement, ENCUMBRANCE means any mortgage, charge, pledge, hypothecation, lien, easement, right-of-way, encroachment, security interest, covenant, condition, right of re-entry, right of possession, lease, license, assignment, option, claim or other title defect, encumbrance or charge, whether or not registered or registrable and whether or not consensual or arising by law, statutory or otherwise, EVENT OF DEFAULT in relation to a party to this Agreement means the occurrence of one or more of the following circumstances with respect to such party which has, or is reasonably likely to have, a material adverse effect on the business of any other party or on the performance by such party or any other party of a material term of this Agreement: (a) an order is made or a resolution is passed or a petition is filed by such party for the liquidation, dissolution or winding-up of such party (other than pursuant to a 4 corporate reorganization, recapitalization, realignment or restructuring not connected with an event described in ss.(d), ss.(e) or ss.(f)); (b) such party is in breach of its obligations under Part 4; (c) such party commits a breach in observing or performing any other covenant, agreement or condition of this Agreement (not covered by another provision of this definition of Event of Default) on its part to be observed or performed and does not rectify or cure such breach within 30 days after receipt of written notice from any other party to this Agreement specifying in reasonable detail such breach; provided, however, that if the nature of the breach is such that it cannot be cured within such 30-day period and such party has provided each of the other parties to this Agreement with assurances, reasonably satisfactory to the other party, that the breach can be cured within 60 days, and such party has commenced and continued with all due diligence to cure such breach, such breach will not constitute an Event of Default unless such breach is not cured within 60 days after receipt by such party of written notice specifying the breach; (d) an execution, sequestration or any other process of any court becomes enforceable against such party, or any distress attachment or analogous process is levied upon any material part of the property, assets and undertaking of such party, and any such process or distress attachment is not stayed or otherwise suspended by a court of competent jurisdiction within 60 days; (e) such party voluntarily files for bankruptcy relief, an involuntary bankruptcy proceeding is commenced against such party and is not dismissed within 90 days, or such party makes an assignment for the benefit of creditors, consents to a proposal or similar action under any bankruptcy, insolvency or debtor-creditor legislation applicable to it, or commences (or has commenced against it and is not dismissed within 90 days) any other proceedings relating to it under any reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction whether now or hereafter in effect, or consents to any such proceeding; (f) a custodian, liquidator, receiver, receiver and manager, receiver-manager, trustee or any other person with similar powers is appointed for such party or in respect of any material property or assets or material part of the property or assets of such party and such appointment is not discharged within 90 days or before any action is taken with respect to such property or asset; or (g) a final, non-appealable, decision of any judicial, administrative, governmental authority or other authority or arbitrator is made which enjoins or restrains, or renders illegal or unenforceable, the performance or observance by such party of any material term of this Agreement, FLOW FIELD PLATE means an electrically conductive fuel cell separator plate that can be used in PEM Fuel Cells, 5 GAS DIFFUSION LAYER or GDL means a Substrate which has been [TEXT DELETED] or [TEXT DELETED] to enable it to be [TEXT DELETED] of a [TEXT DELETED] in a [TEXT DELETED], GRAFTECH ARISING IP means all Intellectual Property arising pursuant to the Development concerning the items allocated to Graftech in Schedule B including, but not limited to, the design, composition, manufacturing techniques and methodology respecting such items, GRAFTECH BACKGROUND IP means all Intellectual Property owned or controlled by Graftech or its Affiliates before the Effective Date, GRAFTECH/BPS LICENSE has the meaning ascribed to it in ss.3.5, GRAFTECH COMPETITOR means a manufacturer of Graphitic Materials, GRAFTECH IP means, collectively, the Graftech Arising IP and the Graftech Background IP, GRAFTECH LICENSED TECHNOLOGY means all of the Graftech IP concerning Graphitic Materials and Graphitic Components for PEM Fuel Cells and PEM Fuel Cell Systems, and all Improvements thereto, owned or controlled by Graftech from time to time, to the extent required by BPS to exercise its rights under the Graftech/BPS License in accordance with the terms thereof, but excludes (a) all IP that is the subject of an existing (as of the Effective Date) bona fide third party restriction or limitation as to its disclosure or licensing, to the extent of such restriction or limitation, (b) for greater certainty, all Graftech IP concerning technologies other than for use in PEM Fuel Cells or PEM Fuel Cell Systems, and (c) all Graftech IP concerning the items described in ss.2.13 of this Agreement and ss.2.13 of the Supply Agreement, GRAPHITIC COMPONENTS means components made from or utilizing, in whole or in part, Graphitic Materials, including, but not limited to, Flow Field Plates, GDLs and other components for PEM Fuel Cells and PEM Fuel Cell Systems, GRAPHITIC MATERIALS means materials of intercalated natural graphite flakes and materials derived from such flakes, such as expanded graphite and/or flexible graphite (commonly referred to as graphite sheet or foil), [TEXT DELETED], [TEXT DELETED] or [TEXT DELETED], and [TEXT DELETED], [TEXT DELETED] or [TEXT DELETED], IMPROVEMENTS means, with respect to the Graftech Licensed Technology or the BPS Licensed Technology, as the case may be, all customizations, enhancements, revisions and modifications thereto invented, discovered, developed or made at any time within two years after the end of the Development Period, 6 INTELLECTUAL PROPERTY or IP means a patent, patent application, industrial design, invention, design, trade secret, idea, work, methodology, technology, innovation, creation, concept, moral right, development drawing, research, analysis, know-how, experiment, copyright, data, formula, method, procedure, process, system or technique, JOINT ARISING IP means all Intellectual Property arising pursuant to the Development concerning the items allocated to Graftech and BPS jointly in Schedule B including, but not limited to, manufacturing techniques and methodology respecting such items but, for greater certainty, excludes everything within the definitions of Graftech Arising IP and BPS Arising IP, MEA means a membrane electrode assembly being a solid polymer electrolyte or ion exchange membrane disposed between two GDLs for use in a PEM Fuel Cell and having an electrochemically active region that includes a quantity of electrocatalyst typically disposed in a layer at each membrane/GDL interface, NET SALES PRICE means the gross invoice price (based on fair and honest pricing in accordance with normal established pricing policy of the party paying the royalty), less allowances for returns (in accordance with the normal established return policy of such party) and less cash and other trade discounts off the invoiced price (to the extent separately stated on such invoice) to the extent consistent with normal established discounting policy of such party, shipping charges (to the extent separately stated in such invoice) and sales and other excise taxes included in such invoice price, received or receivable by such party and attributable to the supply of Graphitic Components; provided, however, that with respect to any Graphitic Components disposed of (other than disposal of obsolete, defective and waste products) by such party in any manner other than a bona fide and arm's length sales transaction, the Net Sales Price of such Graphitic Components will be deemed to be an amount equal to the amount which would have been the Net Sales Price of such Graphitic Components had they been sold in the same market for cash in a bona fide and arm's length sales transaction, NOTICE has the meaning ascribed to it in ss.7.4 PEM FUEL CELL means, subject to ss.2.13, a polymer electrolyte membrane fuel cell or fuel cell stack (including, for greater certainty, a direct methanol polymer electrolyte membrane fuel cell or fuel cell stack), including components, devices, materials and subsystems thereof necessary or desirable for the functioning of the fuel cell or fuel cell stack, including for sealing, venting of gases, vibration isolation, electromagnetic shielding, the supply, recirculation and removal of gases and fluids, inlet gas conditioning, humidification and monitoring, and for control logic and interface logic for the safe and optimal performance of the fuel cell or fuel cell stack, definition of control interfaces between the fuel cell and the fuel cell system control system, and further including structural elements, housings and interfaces with an associated fuel cell system or components thereof, PEM FUEL CELL SYSTEM means, subject to ss.2.13, the components assembled or designed for assembly around a PEM Fuel Cell, including the fuel tank, fuel storage and supply 7 subsystem, fuel processor, air supply subsystem, cooling subsystem, control subsystem, electronic interfaces and power conditioning subsystem, PERSON means an individual, corporation, body corporate, firm, limited liability company, partnership, syndicate, joint venture, society, association, trust or unincorporated organization or trustee or other such legal representative, PRIME RATE means the annual prime lending rate of interest established from time to time by the Royal Bank of Canada for loans denominated in the currency of the United States of America, PROJECT MANAGER has the meaning ascribed to it in ss.2.5, PROPOSING PARTY has the meaning ascribed to it in ss.2.7, RECIPIENT has the meaning ascribed to it in ss.4.1, RECIPIENT'S AGENTS has the meaning ascribed to it in ss.4.1(a), REJECTED WORK has the meaning ascribed to it in ss.2.7(e)(i), REJECTING PARTY has the meaning ascribed to it in ss.2.7(e)(ii), RELEASE DATE means, with respect to any particular Graphitic Material or Graphitic Component, the date (a) specified in Schedule C for the supply thereof to third parties, or (b) that is two years after the particular Graphitic Material or Graphitic Component, as the case may be, has passed the [TEXT DELETED], whichever is later, REQUESTING PARTY has the meaning ascribed it in ss.2.10, ROYALTY RATE means a mutually agreed to royalty determined by reference, inter alia, to the factors described in Schedule D, RULES has the meaning ascribed to it in ss.5.4, SENIOR OFFICER means, in the case of BPS, any of BPS's Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Vice-President - Strategic Development or their equivalent; in the case of Graftech, Graftech's President, and in the case of UCAR Carbon, UCAR Carbon's President, SOWS has the meaning ascribed to it in ss.2.2, SPECIFICATIONS means the specifications for the Graphitic Materials and the Graphitic Components agreed to by BPS and Graftech, 8 SUBSIDIARY: a Person will be deemed to be a Subsidiary of another Person if that other Person controls such first Person and for the purpose of this Agreement, [TEXT DELETED] will be deemed to be a Subsidiary of [TEXT DELETED], SUBSTRATE means a Graphitic Material [TEXT DELETED] for liquid or gas permeability but, for greater certainty, excludes a GDL, SUPPLY AGREEMENT means the Master Supply Agreement dated concurrently with this Agreement, as may be modified or amended from time to time, and SUPPLY INDIVIDUAL DEFAULT LICENSE has the meaning ascribed to it in the Supply Agreement. INTERPRETATION 1.2 In this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (a) "this Agreement" means this Joint Development and Collaboration Agreement as from time to time supplemented or amended by one or more agreements entered into pursuant to the applicable provisions hereof, (b) the headings in this Agreement are inserted for convenience only and do not form a part of this Agreement and are not intended to interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof, (c) the terms "including" and "such as", when following any general statement or term, are not to be construed as limiting the general statement or term to the specific items or matters set forth or to similar items or matters, but rather as permitting the general statement or term to refer to all other items or matters that could reasonably fall within their broadest possible scope, (d) all accounting terms not otherwise defined herein have the meanings assigned to them, and all calculations to be made hereunder are to be made, in accordance with, as applicable to BPS or Graftech, respectively, Canadian or United States generally accepted accounting principles applied on a consistent basis, (e) except where otherwise specified, all references to currency mean currency of the United States of America, (f) a reference to a statute includes all regulations made thereunder, all amendments to the statute or regulations in force from time to time, and any statute or regulation that supplements or supersedes such statute or regulations, (g) a reference to an entity includes any successor to that entity, 9 (h) words importing the masculine gender include the feminine or neuter, words in the singular include the plural, words importing a corporate entity include individuals, and vice versa, (i) a reference to "agreed to", "approval", "authorization" or "consent" means written agreement, approval, authorization or consent, as the case may be, and (j) a reference to a Part is to a Part of this Agreement and the symbol ss. followed by a number or some combination of numbers and letters refers to the section, paragraph, subparagraph, clause or subclause of this Agreement so designated. SCHEDULES 1.3 The following schedules are attached hereto and incorporated into this Agreement by reference and form a part hereof: Schedule A: Timetable Schedule B: Ownership of Arising IP Schedule C: Release Dates for Third Party Sales Schedule D: Royalty Determination Schedule E: List of Equipment PART 2 DEVELOPMENT DEVELOPMENT PERIOD 2.1 Subject to extension or earlier termination as provided in this Agreement, the term of this Agreement (the "Development Period") will be ten years commencing on the Effective Date. REASONABLE EFFORTS 2.2 During the Development Period, BPS and Graftech will, on an ongoing basis, prepare detailed statements of work (the "SOWs") to fully identify the key areas of research and development under this Agreement. BPS and Graftech will use commercially reasonable efforts to prepare a detailed SOW in respect of a GDL within 30 days after the Effective Date. Except as otherwise provided in this Agreement, BPS and Graftech will work exclusively with one another with respect to the development of Graphitic Materials and Graphitic Components for PEM Fuel Cells and PEM Fuel Cell Systems, and will each use all commercially reasonable efforts to successfully, diligently and on a timely basis, carry out the portion of the work for which it is responsible as described in the SOWs for the achievement of the objectives of the Development. In particular, (a) Graftech will manufacture the Graphitic Materials and certain Graphitic Components in accordance with the Specifications and will supply the same to BPS pursuant to the Supply Agreement, and 10 (b) BPS will, as applicable, (i) purchase Graphitic Materials and certain Graphitic Components from Graftech in accordance with the provisions of the Supply Agreement and modify and treat the Graphitic Materials and Graphitic Components supplied by Graftech for use in PEM Fuel Cells and PEM Fuel Cell Systems, as applicable, (ii) use those Graphitic Materials to manufacture Graphitic Components for use in PEM Fuel Cells and PEM Fuel Cell Systems, as applicable, and use such certain Graphitic Components for PEM Fuel Cells and PEM Fuel Cell Systems, as applicable, in accordance with the provisions of the Supply Agreement, and (iii) conduct performance testing of Graphitic Materials and Graphitic Components to assess their economic and technical viability for use in PEM Fuel Cells and PEM Fuel Cell Systems, as appropriate. Unless otherwise agreed in writing, each of BPS and Graftech will bear all its own costs and expenditures in connection with its activities pursuant to the Development except that costs jointly incurred by them will be borne by BPS and Graftech equally. STEERING COMMITTEE 2.3 BPS and Graftech will establish a steering committee (the "Committee") comprising a minimum of two, and a maximum of three, representatives of each such party. Each of BPS and Graftech may replace, from time to time, any member appointed by it to the Committee by giving written notice thereof to the other. The Committee will meet as needed and meetings of the Committee may be held by telephone conference. The decisions of the Committee will be made unanimously by all of its members. All proceedings and decisions of the Committee will be recorded in minutes that will be signed by at least one member of the Committee appointed by each of BPS and Graftech. DUTIES OF COMMITTEE 2.4 The Committee will, among other things, (a) conduct a quarterly review of the timetable set forth in Schedule A for the research and development activities under this Agreement and make such adjustments thereto from time to time as is necessary or expedient, (b) monitor the progress and review the performance of each of the parties, (c) oversee all work to be performed by each of the parties pursuant to the Development (including, but not limited to, the work for which each party is responsible as may be described in any SOW), 11 (d) review patent-related and other Intellectual Property issues and define the parties' general strategy concerning the same to the extent relevant to the Development, but not provided for in this Agreement, (e) promptly resolve problems and disputes submitted to the Committee by either party in accordance with Part 5, (f) evaluate the results of each phase of the Development and discuss all technical issues arising with regard to the Development, (g) modify the SOWs as and when deemed necessary, (h) review, on a regular basis, the economics of developing and producing Graphitic Materials and Graphitic Components for PEM Fuel Cells and PEM Fuel Cell Systems and the projected date of commercialization of PEM Fuel Cells and PEM Fuel Cell Systems containing Graphitic Components developed pursuant to the Development, and make recommendations to the parties regarding the same. PROJECT MANAGER 2.5 Each of BPS and Graftech will appoint and maintain, until the expiry of the Development Period, a project manager ("Project Manager"), and may from time to time change its Project Manager, upon prior written notice to the other. Each party's Project Manager will be responsible for that party's performance under this Agreement and will co-ordinate and co-operate with the Committee in the management, co-ordination and administration of the activities of such party under this Agreement. Specifically, the Project Managers will (a) maintain books and written records of the dates on which Confidential Information is disclosed by one party to the other pursuant to the Development, (b) jointly agree to amend the Specifications for Graphitic Materials and Graphitic Components when deemed necessary or expedient, and (c) jointly from time to time when required to do so by Graftech and BPS, identify in writing the particular generation of Graphitic Material or Graphitic Component used or developed during the Development Period which Graftech may use, develop or manufacture for, or supply to, third parties for PEM Fuel Cells and PEM Fuel Cell Systems. EXCLUSIVITY AND STANDSTILL 2.6 Each of Graftech, BPS and UCAR Carbon acknowledges and agrees that except as otherwise expressly provided in, and subject to, ss.2.7, ss.2.9, ss.2.13 and Part 6 of this Agreement and subject to ss.2.13 and ss.6.3(b)(v) of the Supply Agreement, 12 (a) during the Development Period and for a period of two years thereafter, neither Graftech nor BPS will, and each will ensure that none of its Affiliates will, directly or indirectly, (i) collaborate with any third party in the research or development of Graphitic Materials or Graphitic Components for use in PEM Fuel Cells or PEM Fuel Cell Systems, (ii) license to any third party any of its Intellectual Property concerning Graphitic Materials or Graphitic Components for use in PEM Fuel Cells or PEM Fuel Cell Systems, except that (A) BPS will have the right to license its Intellectual Property to the BPS Permitted Licensees, and (B) Graftech will have the right to license its Intellectual Property to any third party for non-PEM Fuel Cell and non-PEM Fuel Cell Systems applications, (b) during the Development Period and for a period of two years thereafter, UCAR Carbon will not, and will ensure that none of its Affiliates will, directly or indirectly, collaborate with any third party in the research or development of Graphitic Materials or Graphitic Components for use in PEM Fuel Cells or PEM Fuel Cell Systems, (c) until two years after the expiry or earlier termination of the Development Period or the expiry or earlier termination of the Supply Agreement, whichever is later, neither Graftech nor UCAR Carbon will, and each will ensure that none of its Affiliates will, directly or indirectly, research, develop, manufacture, make, have made, sell or supply PEM Fuel Cells and PEM Fuel Cell Systems or MEAs; provided, however, that Graftech may research, develop, manufacture, make, have made, sell or supply Graphitic Materials and Graphitic Components for PEM Fuel Cells and PEM Fuel Cell Systems and MEAs in accordance with ss.2.7, ss.2.9, and ss.3.6, and (d) during the Development Period, Graftech and its Affiliates will not, directly or indirectly, (i) knowingly supply any Graphitic Component or Graphitic Material developed for use in PEM Fuel Cells and PEM Fuel Cell Systems to third parties, including Graftech's Affiliates, for use in PEM Fuel Cells or PEM Fuel Cell Systems, or (ii) provide technical assistance to third parties, including Graftech's Affiliates, in respect of the use of such Graphitic Component or Graphitic Material in PEM Fuel Cells or PEM Fuel Cell Systems, until after the Release Date therefor. 13 NEW TECHNOLOGICAL PLATFORM 2.7 If either Graftech or BPS (the "Proposing Party") wishes to propose for inclusion in the Development a Graphitic Component (other than a Flow Field Plate or a GDL) or a different technological approach for the development of Graphitic Materials or Graphitic Components, the following terms and conditions will apply: (a) such proposal may only be made by the Proposing Party by written notice given to the other party at any time after the first anniversary of the Effective Date; (b) such proposal must be in writing accompanied by a reasonably detailed business plan with respect to the proposed activity, including budgets, market research, timelines, feasibility studies, a draft SOW and such other information as may be necessary or useful to enable the other party to make an informed decision as to whether or not to accept the proposal; (c) the other party will have six months after receipt of the proposal within which to accept or reject such proposal; (d) if the proposal is accepted, the proposed activity will be included in the Development; (e) if the proposal is rejected, (i) notwithstanding ss.2.6(a), (b) and (d), the Proposing Party may undertake the rejected work (the "Rejected Work") alone or with third parties, on a non-exclusive basis, (ii) the party rejecting the work (the "Rejecting Party") will not, and will ensure that its Affiliates will not, undertake the Rejected Work for the remainder of the Development Period or two years after its rejection of the Rejected Work, whichever is longer; provided, however, that, if the Rejecting Party is Graftech, the restriction under this ss.(ii) will be equally applicable to UCAR Carbon, (iii) the Rejecting Party will have no rights to Intellectual Property developed by the Proposing Party or its third party collaborators in relation to the Rejected Work after the date that the Rejected Work ceased to be part of the Development, and (iv) the Proposing Party may not use the Rejecting Party's Confidential Information, or the Rejecting Party's Intellectual Property, in connection with any activity related to the Rejected Work; provided, however, that the Proposing Party may use the Joint Arising IP in connection with its activities related to the Rejected Work, 14 (f) if the proposal is acceptable to the other party, but the parties cannot agree upon the terms of inclusion of the proposed activity within the Development, the matter will be resolved by dispute resolution process under Part 5, (g) if the other party does not respond within six months after receipt of the proposal, it will be deemed to have rejected the proposal, in which case ss.(e) will apply MUTATIS MUTANDIS, and (h) nothing in ss.(e) will be construed so as to restrict BPS and Graftech from collaborating with one another in respect of the Rejected Work on an exclusive or non-exclusive basis at any later date; provided, however, that to the extent reasonably feasible, such future collaboration between BPS and Graftech, if commenced during the Development Period, must be on an exclusive basis. JOINT AGREEMENT TO DISCONTINUE WORK 2.8 If both Graftech and BPS wish to cease undertaking work that is part of the Development, upon mutual agreement, they may do so; provided, however, that (a) neither Graftech nor BPS will, and each of them will ensure that its Affiliates will not, and (b) UCAR Carbon will not, and it will ensure that its Affiliates will not, directly or indirectly, undertake such work until two years after the expiry or earlier termination of the Development Period; provided, however, that either party may at any time during the Development Period re-propose the work pursuant to ss.2.7. ONE PARTY DISCONTINUES WORK 2.9 If either Graftech or BPS (the "Discontinuing Party") wishes to stop undertaking any work that is part of the Development (the "Discontinued Work"), the following terms and conditions will apply: (a) the Discontinuing Party will give the other party (the "Continuing Party") 90 days' written notice of its intention to cease undertaking the Discontinued Work, (b) notwithstanding ss.2.6(a), ss.(b) and ss.(d) after the expiration of the 90 day notice period, the Continuing Party may undertake the Discontinued Work alone or with third parties, (c) the Discontinuing Party will not, and it will ensure that its Affiliates will not, undertake the Discontinued Work for the remainder of the Development Period or two years after the date of its notice to the Continuing Party pursuant to ss.(a), whichever is longer; provided, however, that if the Discontinuing Party is Graftech, the restriction under this ss.(c) will be equally applicable to UCAR Carbon, 15 (d) the Discontinuing Party will have no rights to Intellectual Property developed by the Continuing Party or its third party collaborators in connection with the Discontinued Work after the date that the Discontinued Work ceased to be part of the Development, and (e) the Continuing Party may not use the Discontinuing Party's Confidential Information, or the Discontinuing Party's Intellectual Property, in connection with any activity undertaken in relation to the Discontinued Work after the date that the Discontinued Work ceased to be part of the Development; provided, however, that the Continuing Party may use the Joint Arising IP in connection with its activities related to the Discontinued Work. PROVISION OF EQUIPMENT 2.10 Where either Graftech or BPS (the "Requesting Party"), acting reasonably, requests specific equipment from the other (the "Donating Party") in furtherance of the Development and the Donating Party in good faith, determines it necessary to provide such equipment to the Requesting Party for the benefit of the Development, the Donating Party will provide such equipment to the Requesting Party; provided, however, that (a) the Requesting Party must return such equipment to the Donating Party when such equipment is no longer required by the Requesting Party and in any event within 30 days after the end of the Development Period, and (b) the Requesting Party will be responsible for the costs and other incidentals of transportation and set-up of such equipment. Without limiting the rights of Graftech under this ss.2.10, the parties acknowledge that BPS will, as soon as is reasonably practicable after the commencement of the Development Period, provide Graftech with the equipment listed in Schedule E subject to the terms of this ss.2.10. SUPPLY AGREEMENT 2.11 The terms of the Supply Agreement will apply to each Graphitic Material and Graphitic Component that has passed the [TEXT DELETED] and each other Graphitic Material or Graphitic Component specified therein. Each of BPS and Graftech will, promptly upon request by the other, (a) execute such deeds, documents and instruments as may be necessary to implement the intent of this ss.2.11, and (b) except as otherwise set forth in the Supply Agreement, use all commercially reasonable efforts to conclude a supply arrangement in respect of such Graphitic Material and Graphitic Component within 90 days after such material or component has passed the [TEXT DELETED]. 16 [TEXT DELETED] FUEL CELLS 2.12 BPS will [TEXT DELETED] the [TEXT DELETED] of [TEXT DELETED] Fuel Cell technology pursuant to the Development and will [TEXT DELETED] Graftech of its [TEXT DELETED] by [TEXT DELETED]. Graftech will not propose any such technology for development pursuant to ss.2.7 until after [TEXT DELETED] and accordingly, any refusal by BPS to undertake the development of such technology prior to [TEXT DELETED], will be without prejudice to BPS's rights to review the situation should Graftech make a proposal, after [TEXT DELETED], with respect to such technology under ss.2.7. DEVELOPMENT EXCEPTIONS 2.13 Notwithstanding anything to the contrary contained in this Agreement or the Supply Agreement, (a) UCAR Carbon and its Affiliates may manufacture, make, have made, sell or supply non-natural graphite materials, and (b) each of the parties and each of their respective Affiliates may collaborate, research, develop, manufacture, make, have made, sell or supply devices, subsystems, materials or components whose primary function relates to fuel storage devices, power storage devices (such as supercapacitors and lithium-ion batteries), electronic thermal management components (such as heat sinks, heat spreaders and thermal interfaces), electromagnetic interference shielding, radio frequency interference shielding and heat management devices (such as radiators and components relating to reformers) strictly for such primary function, in each case regardless of whether or not such devices, subsystems, materials or components are for use in PEM Fuel Cells or PEM Fuel Cell Systems; but for greater certainty, this provision will not give any rights to any party or any of such party's Affiliates to, and each party will ensure that its Affiliates will not, use or disclose any Intellectual Property or Confidential Information of any other party. PART 3 INTELLECTUAL PROPERTY ALLOCATION OF IP 3.1 The parties acknowledge and agree that all Intellectual Property invented, discovered, improved or otherwise developed pursuant to the Development will vest immediately when the same arises and is hereby assigned in accordance with the definitions of BPS Arising IP, Graftech Arising IP and Joint Arising IP. The parties will execute, or cause to be executed, such deeds, documents, instruments and assignments as may be necessary to effect and implement the intent of this ss.3.1. 17 IP REGISTRATIONS 3.2 Each party will have the sole, exclusive and unrestricted right to apply for, prosecute and obtain all rights, grants, registrations, orders or proprietary interests of any nature, including, without limitation, patents, copyright, industrial design and trademark registrations and any other registrations or grants of rights that are analogous thereto in any and all countries throughout the world in respect of the Arising IP allocated to it under ss.3.1. Each party will not, and it will ensure that none of its employees, agents or Affiliates will, in any manner or to any extent, either directly or indirectly, commit any act or omission through any means that is inconsistent with a party's rights under this ss.3.2. Without limiting the foregoing, no party will, and it will ensure that none of its employees, agents or Affiliates will, diminish, interfere with or impair any other party's right to the Arising IP allocated to it under ss.3.1, whether proprietary, equitable, statutory or otherwise. CO-OPERATION BY PARTIES 3.3 Each party will, and it will ensure that its employees, agents and Affiliates will (a) execute promptly upon request and at the expense of each other party, both during and after the termination of the Development, all applications, transfers, assignments, waivers and other documents as such other party may consider necessary or desirable from time to time for the purpose of (i) obtaining, maintaining or vesting in, or assigning to, such other party absolute title to each patent, copyright, industrial design and trademark registration comprising the Arising IP allocated to it under ss.3.1, and (ii) applying for, prosecuting, obtaining or maintaining any such patent, copyright, industrial design or trademark registration, (b) promptly upon request and at the expense of such other party, co-operate and assist such other party in a commercially reasonable manner in the prosecution and maintenance of each such application and the rights granted in respect thereof, and (c) not contest the validity of any of the Arising IP allocated to Graftech or BPS. JOINT ARISING IP 3.4 The parties will address Joint Arising IP issues as follows: (a) all Joint Arising IP will be owned jointly by Graftech and BPS; (b) regardless of inventorship, the primary responsibility for Joint Arising IP will be determined by the Committee after reviewing the respective contributions of BPS and Graftech to such Intellectual Property; 18 (c) except as otherwise agreed by the parties, the party that the Committee determines is primarily responsible for such Joint Arising IP will file patent applications with respect to such Joint Arising IP in the name of both Graftech and BPS with the relevant patent offices of the United States, Canada, the European Community and such other jurisdictions as the parties may agree to. The party primarily responsible for such Joint Arising IP will provide at least 30 days' advance notice to the other regarding its intent to file patent applications in respect of such Joint Arising IP; (d) each party will execute such documents, execute or obtain such assignments and waivers, and do all such other things as are reasonably requested by the party primarily responsible for such Joint Arising IP in connection with the applications for, and the prosecution and/or maintenance of, patent applications and patents in respect of the same; (e) the party primarily responsible for the Joint Arising IP will be responsible for filing, prosecuting and maintaining such patent applications and patents; provided, however, that the costs thereof will be borne equally by BPS and Graftech; (f) neither BPS nor Graftech will apply for any patent covering Joint Arising IP until determination as to primary responsibility therefor has been made by the Committee; (g) if the party primarily responsible for such Joint Arising IP decides that it (i) does not wish to file any particular patent application, (ii) wishes to cease prosecution of any patent application it has filed, (iii) wishes to cease maintaining any patent covering such Joint Arising IP in full force and effect, or (iv) wishes to cease taking the administrative measures necessary to maintain in full force and effect any particular patent or patent application, it will give at least 60 days' written notice to the other of such decision. The other party will then, at its option, have the right to apply for the particular patent on such Joint Arising IP or take over responsibility for such patent or patent application, as applicable. In such case, all ownership rights will devolve to the party taking over responsibility for such patent or patent application; provided, however, that such party pays all outstanding third party costs incurred during the 60 day notice period related to the filing, prosecution or maintenance of such patent application or patent, as applicable, and the costs of transfer or assignment thereof; (h) if either BPS or Graftech does not wish to pay its share of the costs of filing, prosecution or maintenance of patent applications or patents, as applicable, in or with respect to any particular jurisdiction, such party will retain its right to 19 practice the subject matter of such patent or patent application, but lose all rights to enforcement of such patent applications or patents, as the case may be, in the particular jurisdiction, (i) the party that surrenders or loses its rights under ss.(g) or ss.(h) will execute all such documents, execute or obtain such assignments and waivers, and do all such other things as are reasonably requested by the party assuming responsibility for such patents or patent applications to secure the other party's rights in and to the same; (j) except as otherwise set forth in this Agreement, for non-PEM Fuel Cell and non-PEM Fuel Cell Systems applications, each of BPS and Graftech may practice the Joint Arising IP and license the Joint Arising IP independently in connection with the design, development, manufacture and sale of Graphitic Materials and Graphitic Components, but only with the prior written consent of the other party, such consent not to be unreasonably withheld, conditioned or delayed, and only after such party has entered into an agreement with the other party concerning the payment to the other party of royalties in respect of such practice and/or license of the Joint Arising IP; provided, however, that no royalties will be payable in respect of Joint Arising IP concerning Substrates having [TEXT DELETED]; (k) except as otherwise set forth in this Agreement, for PEM Fuel Cell and PEM Fuel Cell Systems applications, each of BPS and Graftech may practice the Joint Arising IP and license the Joint Arising IP independently on a non-exclusive basis to a third party, but only with the prior written consent of the other party, such consent not to be unreasonably withheld, conditioned or delayed, and only after such party has entered into an agreement with the other party concerning the payment to the other party of royalties in respect of such practice and/or license of the Joint Arising IP; provided, however, that, (i) no royalties will be payable in respect of Joint Arising IP concerning Substrates having [TEXT DELETED], (ii) BPS may license the Joint Arising IP to the BPS Permitted Licensees for use in PEM Fuel Cells and PEM Fuel Cell Systems on a royalty-free basis, without the right to sublicense, and without Graftech's consent, and (iii) subject to ss.2.5(c), Graftech may practice the Joint Arising IP, and, subject to BPS's consent as aforesaid, license the Joint Arising IP in respect of Graphitic Materials and Graphitic Components for PEM Fuel Cells and PEM Fuel Cell Systems on a royalty-bearing basis as aforesaid after their respective Release Dates, as the case may be, and (l) in the case of third party infringement of Joint Arising IP, each of BPS and Graftech will co-operate fully with each other and jointly participate in all actions to terminate or prevent the infringement. The costs and expenses for all such actions will be borne equally by the parties. The party primarily responsible for such infringed Joint Arising IP will be obliged to initiate all actions to terminate 20 or prevent such infringement and will keep the other party current and fully apprised of the status of such actions. If the party primarily responsible for such Joint Arising IP does not initiate such actions to terminate or prevent such infringement within 90 days after the discovery of such infringement, or the parties cannot, for whatever reason, co-operate with one another or jointly participate in such action, the other party may, by notice to the party primarily responsible for such Joint IP, at its own option and at its own expense, take appropriate action to terminate or prevent such infringement. Under no circumstances may either Graftech or BPS grant a license of the Joint Arising IP to an alleged third party infringer except pursuant to a settlement with such third party infringer and any such settlement must be under terms and conditions that are, (i) if both Graftech and BPS have jointly participated in the action, mutually agreeable to Graftech and BPS, or (ii) if only one of Graftech and BPS has participated in the action, as are agreeable to the party so participating. All awards, damages or other monetary amounts recovered pursuant to any action to terminate infringement of Joint Arising IP will be applied proportionately in accordance with the financial contributions of the parties towards the prevention or termination of the infringement. GRAFTECH/BPS LICENSE 3.5 Subject to the terms and conditions of this Agreement, Graftech hereby grants to BPS, and BPS hereby accepts from Graftech, a non-exclusive, world-wide, royalty-free license to practice the Graftech Licensed Technology to the extent constituting, and relating solely to, component manufacturing technology relevant to the manufacture of Graphitic Components for PEM Fuel Cells and PEM Fuel Cell Systems, to the extent strictly necessary to develop, manufacture, make, have made, use and sell Graphitic Components (the "Graftech/BPS License"), on the following terms and conditions: (a) the Graftech/BPS License is not transferable and is not sublicensable without the prior written consent of Graftech and the payment of royalties to Graftech; provided, however, that (i) BPS may sublicense the Graftech/BPS License to have Graphitic Components made for PEM Fuel Cells and PEM Fuel Cell Systems to (A) those Persons listed in ss.(a) to ss.(d), inclusive, of the definition of "BPS Permitted Licensees" on a royalty-free basis, without a further right to sublicense, without first obtaining the consent of Graftech and, with respect to those Persons listed in ss.(c) of the definition of "BPS Permitted Licensees," so long as Graftech is able to meet on a consistent basis, all of such Person's requirements as to pricing, delivery, quality, performance and 21 service in respect of Graphitic Materials, BPS will ensure that such Persons will purchase their requirements of Graphitic Materials to produce such Graphitic Components exclusively from Graftech, and (B) BPS's subcontractors (other than a subcontractor having a line of business which would make it a Graftech Competitor), without a further right to sublicense, but only with the prior written consent of Graftech, such consent not to be unreasonably withheld, conditioned or delayed. In connection with any sublicense to BPS's subcontractors, (I) BPS will obtain from such subcontractor a contractual obligation, for the benefit of both Graftech and BPS, which will subject the subcontractor to obligations of confidentiality at least as restrictive as those set forth in Part 4, (II) BPS will require the subcontractor, for the benefit of both Graftech and BPS, to use such sublicense solely for the production of Graphitic Components for BPS's PEM Fuel Cells and PEM Fuel Cell Systems and for no other purpose and, so long as Graftech is able to meet, on a consistent basis, BPS's requirements as to pricing, delivery, quality, performance and service in respect of Graphitic Materials, to purchase its requirements of Graphitic Materials to produce such Graphitic Components exclusively from Graftech, (III) without prejudice to any of Graftech's rights or remedies, each party will notify the other in writing of any breach by the subcontractor of the requirements described in ss.(I) and ss.(II) promptly after such party becomes aware of the same, (IV) upon BPS becoming aware of such breach, BPS will promptly, at its own expense, take such action as may be necessary to ensure compliance by the subcontractor of the foregoing requirements or, if necessary, terminate the sublicense to such subcontractor. In addition, BPS will, at Graftech's sole cost and expense, assist Graftech in pursuing such other remedies as Graftech may have against such subcontractor; (ii) BPS may at any time require Graftech to, and Graftech will, offer to directly grant a license in respect of any or all of the Graftech Licensed Technology to any Person who is a BPS Permitted Licensee on terms and 22 conditions similar to those set forth in this ss.3.5 except without the right to further sublicense; (b) promptly upon request by BPS, and subject to any bona fide third party restrictions existing as of the Effective Date prohibiting or limiting it from doing so, Graftech will, from time to time, provide to BPS all technical information, documents, plans, blueprints, working and other drawings, specifications, tolerances and other data, material and information (and sources of supply in lieu of any such material and information where disclosure of the same is limited or restricted) in the possession or under the control of, or made available to, Graftech, as is strictly necessary to enable BPS to practice the Graftech Licensed Technology pursuant to the Graftech/BPS License; (c) subject to ss.(b), each of Graftech and BPS will promptly (i) disclose to the other each Improvement to the Graftech Licensed Technology made by such party during the term of the Graftech/BPS License, and (ii) make available to the other all technical information, documents, plans, blueprints and other materials and information relating to such Improvement that are strictly necessary to enable the other to exercise its rights under this Agreement; (d) regardless of inventorship, Graftech will have the sole, exclusive and unrestricted right (but not the obligation) at its own cost, to apply for, prosecute and obtain all rights, grants, registrations, orders or proprietary interests of any nature, including, without limitation, patents, copyright, industrial design and trademark registrations and any other registrations or grants of rights that are analogous thereto in any and all countries throughout the world in respect of Improvements to the Graftech Licensed Technology. BPS will not, and it will ensure that none of its employees, agents or Affiliates will, in any manner or to any extent, either directly or indirectly commit any act or omission through any means that is inconsistent with the other party's rights under this ss.(d); (e) BPS will, and it will ensure that its employees, agents and Affiliates, will (i) execute promptly on request and at the expense of Graftech, both during and after the termination of the Graftech/BPS License, all applications, transfers, assignments, waivers and other documents as Graftech may consider necessary or desirable from time to time for the purpose of (A) obtaining, maintaining or vesting in, or assigning to, Graftech, absolute title to each patent, copyright, industrial design and trademark registration comprising Improvements to the Graftech Licensed Technology, and 23 (B) applying for, prosecuting, obtaining or protecting any such patent, copyright, industrial design or trademark registration, and (ii) promptly upon request and at the expense of Graftech, co-operate and assist Graftech in a commercially reasonable manner in the prosecution and protection of any such applications and the rights granted in respect thereof; (f) Graftech will have the sole right (but not the obligation), including the sole right to all recoveries, to take all actions, including the institution of legal proceedings, which, in the judgement of Graftech, are reasonably calculated to terminate infringements of, or otherwise enforce its rights with respect to, the Graftech Licensed Technology. BPS will, at Graftech's cost and expense, fully co-operate, and not interfere, with all actions taken by Graftech to enforce the Graftech Licensed Technology. To the extent relevant to BPS, Graftech will keep BPS informed of the status and progress of all patent infringement actions instituted by Graftech; (g) Graftech will have the right (but not the obligation) to defend all legal actions asserting the invalidity of any of the Graftech Licensed Technology. Graftech will promptly notify BPS of any suit or action involving Graftech which directly or indirectly relates to the validity of the Graftech Licensed Technology, and will, from time to time, keep BPS informed of the status of such suit or action. Graftech will have conduct of such defense and BPS will, at Graftech's cost and expense, fully co-operate, and not interfere, with Graftech's defense of such actions; (h) subject to ss.(g), BPS will promptly notify Graftech of any suit or action wherein BPS is named as a party and which directly or indirectly relates to the use of the Graftech Licensed Technology or the manufacture, supply or use of any Graphitic Components embodying the Graftech Licensed Technology, and will, from time to time, keep Graftech informed of the status of such suit or action; (i) except to the extent prohibited by applicable law, BPS will not contest the validity of the Graftech Licensed Technology; (j) except as otherwise provided in ss.6.2(a)(iii)(A) and ss.6.2(d)(iii)(A) of this Agreement and ss.2.10(b) and ss.6.3(b)(iii) of the Supply Agreement, BPS will not use the Graftech Licensed Technology to manufacture, or permit the use of such technology for the manufacture of, Graphitic Materials, (k) subject to earlier termination as set forth in ss.(1), ss.6.2(b)(ii) and ss.6.2(c)(ii), the Graftech/BPS License will be a perpetual license; (l) the Graftech/BPS License may be terminated by Graftech, except to the extent that it has become irrevocable either under this Agreement or the Supply Agreement, without prejudice to any other rights it may have against BPS, 24 (i) if BPS is the subject of an Event of Default which has, or is reasonably likely to have, a material adverse effect on the business of Graftech or the performance by Graftech or BPS of a material term of this Agreement, (ii) if BPS contests the validity of the Graftech Licensed Technology, or, (iii) if at any time during the term of the Graftech/BPS License, BPS is in breach of its obligations under ss.2.6, (m) upon termination of the Graftech/BPS License, (i) subject to applicable law, Graftech will offer each Person listed in ss.(a), ss.(b) and ss.(d) of the definition of BPS Permitted Licensees that is not in default under its sublicense with BPS (other than an Affiliate of BPS) and that wishes to continue using the Graftech Licensed Technology, the right to enter into a separate, non-exclusive, royalty-bearing and non-sublicenseable license under terms and conditions otherwise equivalent to those of the Graftech/BPS License, and (ii) BPS will immediately cease all practice and disclosure of, and other activities pertaining to, the Graftech Licensed Technology and will return all of Graftech's Confidential Information in its possession or under its control to Graftech; provided, however, that notwithstanding the foregoing, BPS will be entitled to practice the Graftech Licensed Technology under the Graftech/BPS License solely to fulfill any supply arrangements with third parties existing as of the date of termination, but in no event will BPS practice the Graftech Licensed Technology under this ss.(m) for more than three years after the date that the Graftech/BPS License would, but for this proviso, have been terminated. BPS/GRAFTECH LICENSE 3.6 Effective upon the occurrence of a Release Date in respect of a particular Graphitic Component, BPS hereby grants to Graftech, and Graftech hereby accepts from BPS, a non-exclusive, world-wide, royalty-bearing license under the BPS Licensed Technology to develop, manufacture, make and sell to third parties such particular Graphitic Component embodying the BPS Licensed Technology for use in PEM Fuel Cells and PEM Fuel Cell Systems (the "BPS/Graftech License"), on the following terms and conditions: (a) Graftech will pay to BPS during the term of the BPS/Graftech License within 60 days after the end of each calendar quarter, a royalty equal to the Royalty Rate on the particular Graphitic Component sold by Graftech or its Affiliates to third parties in such calendar quarter; (b) all payments will be made in United States currency by wire transfer or cheque to such bank or account as BPS may from time to time specify in writing. Overdue 25 payments will bear interest at the Prime Rate plus 3% per annum, calculated and payable monthly, not in advance, on the last day of each and every month, with interest on overdue interest at the same rate from the due date to the date of payment; (c) payments of royalties and other amounts will be free and clear of all taxes, duties, levies, fees or charges, except for withholding taxes (to the extent applicable). Any tax which Graftech is required to withhold with respect to royalty or other payments to be made to BPS will be deducted from the amount otherwise due to BPS; (d) Graftech will deliver to BPS within 30 days after the end of each calendar quarter, a written report, certified by the chief financial officer of Graftech as being true and correct, describing for the applicable calendar quarter in which sales of Graphitic Components have occurred, the amount of royalties payable to BPS; (e) under no circumstances will any amount payable to BPS for such royalties be reduced, whether by set-off, counterclaim, adjustment or otherwise; (f) Graftech will maintain at its principal office in the United States, full and accurate books and records for three years in sufficient detail to enable royalties and other amounts payable pursuant to this ss.3.6 to be determined; (g) upon at least 48 hours prior notice to Graftech, Graftech will permit BPS's certified public accountants and other external auditors to have full access to the books and records of Graftech pertaining to its activities pursuant to the BPS/Graftech License to verify the royalties payable and to make copies of the relevant books and records at BPS's expense. BPS's certified public accountants and other external auditors will have such access at all reasonable times and from time to time during normal business hours during the term of the BPS/Graftech License and for a period of three years after its expiration or termination. BPS's certified public accountants and other external auditors will only disclose the results of such audit to BPS, but not the underlying information. Graftech will reimburse BPS for BPS's reasonable costs of each such audit where such audit discloses underpayment by Graftech of more than 10% of the amount of royalties owed to BPS; (h) Graftech will deliver to BPS within 120 days after the end of each fiscal year of Graftech, (i) a written report prepared by Graftech's certified public accountants, which states that, with respect to the fiscal year then just completed, Graftech has paid all royalties and other amounts due to BPS pursuant to this ss.3.6, and (ii) a written report prepared and certified by one of Graftech's senior officers, which states that, with respect to the fiscal year just completed, Graftech is in compliance with the royalty provisions of this ss.3.6; 26 (i) the BPS/Graftech License is not transferable, does not include a "have made" right, and is not sublicensable without the prior written consent of BPS, except that Graftech may sublicense the BPS/Graftech License to subcontractors (other than to subcontractors having a line of business which consists of developing, manufacturing and/or supplying MEAs, PEM Fuel Cells or PEM Fuel Cell Systems), but only with the prior written consent of BPS, such consent not to be unreasonably withheld, conditioned or delayed. In connection with any sublicense to Graftech's subcontractors, (I) Graftech will obtain from such subcontractor a contractual obligation, for the benefit of both Graftech and BPS, which will subject the subcontractor to obligations of confidentiality at least as restrictive as those set forth in Part 4, (II) Graftech will require the subcontractor, for the benefit of both Graftech and BPS, to use such sublicense solely for the production of Graphitic Components for Graftech for PEM Fuel Cells and PEM Fuel Cell Systems and for no other purpose, (III) without prejudice to any of BPS's rights or remedies, each party will notify the other in writing of any breach by the subcontractor of the requirements described in ss.(I) and ss.(II) promptly after such party becomes aware of the same, and (IV) upon Graftech becoming aware of such breach, Graftech will promptly, at its own expense, take such action as may be necessary to ensure compliance by the subcontractor of the foregoing requirements or, if necessary, terminate the sublicense to such subcontractor. In addition, Graftech will, at BPS's sole cost and expense, assist BPS in pursuing such other remedies as BPS may have against such subcontractor; (j) promptly upon request by Graftech, and subject to any bona fide third party restrictions existing as of the Effective Date prohibiting or limiting it from doing so, BPS will, from time to time, provide to Graftech all technical information, documents, plans, blueprints and other material and information (and sources of supply in lieu of any such material and information where disclosure of the same is limited or restricted), in the possession or under the control of, or made available to, BPS as is strictly necessary to enable Graftech to practice the BPS Licensed Technology pursuant to the BPS/Graftech License; (k) subject to ss.(j), each of Graftech and BPS will promptly 27 (i) disclose to the other each Improvement to the BPS Licensed Technology made by such party during the term of the BPS/Graftech License, and (ii) make available to the other all technical documents, plans, information, blueprints and other materials and information relating to such Improvement that are strictly necessary to enable the other to exercise its rights under this Agreement; (l) regardless of inventorship, BPS will have the sole, exclusive and unrestricted right (but not the obligation) at its own cost, to apply for, prosecute and obtain all rights, grants, registrations, orders or proprietary interests of any nature, including, without limitation, patents, copyright, industrial design and trademark registrations and any other registrations or grants of rights that are analogous thereto in any and all countries throughout the world in respect of Improvements to the BPS Licensed Technology. Graftech will not, and it will ensure that none of its employees, agents or Affiliates will, in any manner or to any extent, either directly or indirectly commit any act or omission through any means that is inconsistent with the other party's rights under this ss.(l); (m) Graftech will, and it will ensure that its employees, agents and Affiliates, will (i) execute promptly on request and at the expense of BPS, both during and after the termination of the BPS/Graftech License, all applications, transfers, assignments, waivers and other documents as BPS may consider necessary or desirable from time to time for the purpose of (A) obtaining, maintaining or vesting in, or assigning to, BPS, absolute title to each patent, copyright, industrial design and trademark registration comprising Improvements to the BPS Licensed Technology, and (B) applying for, prosecuting, obtaining or protecting any such patent, copyright, industrial design or trademark registration, and (ii) promptly upon request and at the expense of BPS, co-operate and assist BPS in a commercially reasonable manner in the prosecution and protection of any such applications and the rights granted in respect thereof; (n) BPS will have the sole right (but not the obligation), including the sole right to all recoveries, to take all actions, including the institution of legal proceedings, which, in the judgement of BPS, are reasonably calculated to terminate infringements of, or otherwise enforce its rights with respect to, the BPS Licensed Technology. Graftech will, at BPS's cost and expense, fully co-operate, and not interfere, with all actions taken by BPS to enforce the BPS Licensed Technology. To the extent relevant to Graftech, BPS will keep Graftech informed of the status and progress of all patent infringement actions instituted by BPS; 28 (o) BPS will have the right (but not the obligation) to defend all legal actions asserting the invalidity of any of the BPS Licensed Technology. BPS will promptly notify Graftech of any suit or action involving BPS which directly or indirectly relates to the validity of the BPS Licensed Technology, and will, from time to time, keep Graftech informed of the status of such suit or action. BPS will have conduct of such defense and Graftech will fully co-operate, and not interfere, with BPS's defense of such actions; (p) subject to ss.(o), Graftech will promptly notify BPS of any suit or action wherein Graftech is named as a party and which directly or indirectly relates to the use of the BPS Licensed Technology or the manufacture, supply or use of any Graphitic Component embodying the BPS Licensed Technology and will, from time to time, keep BPS informed of such suit or action; (q) except to the extent prohibited by applicable law, Graftech will not contest the validity of the BPS Licensed Technology; (r) subject to earlier termination as set forth in ss.(s), ss.6.2(a)(ii) and ss.6.2(d)(ii), the BPS/Graftech License will be a perpetual license; (s) the BPS/Graftech License may be terminated by BPS, without prejudice to any other rights it may have against Graftech, (i) if Graftech or UCAR Carbon is the subject of an Event of Default which has, or is reasonably likely to have, a material adverse effect on the business of BPS or the performance by Graftech or BPS of a material term of this Agreement, or (ii) if Graftech or UCAR Carbon contests the validity of the BPS Licensed Technology; or (iii) if at any time during the term of the BPS/Graftech License, either Graftech or UCAR Carbon is in breach of its obligation under ss.2.6; (t) upon termination of the BPS/Graftech License, (i) Graftech will immediately cease all practice and disclosure of the BPS Licensed Technology and will return all of BPS's Confidential Information in its possession or under its control to BPS, and (ii) for greater certainty, provided that Graftech complies with ss.(i), Graftech's obligations to pay royalties to BPS (other than those which may have accrued up to the date of termination) in connection with the BPS/Graftech License will end; provided, however, that notwithstanding the foregoing, Graftech will be entitled to practice the BPS Licensed Technology under the BPS/Graftech License (on the royalty basis set forth herein) solely to fulfill any supply arrangements with third parties existing 29 as of the date of termination, but in no event will Graftech practice the BPS Licensed Technology under this ss.(t) for more than three years after the date that the BPS/Graftech License would, but for this proviso, have been terminated. WARRANTIES AND COVENANTS OF UCAR CARBON AND GRAFTECH 3.7 Each of UCAR Carbon and Graftech hereby severally represents and warrants to, and covenants with, BPS (with the intent that such representations, warranties, covenants and agreements will survive the execution and implementation of this Agreement), that (a) as of the Effective Date (i) it has the right and power to enter into, and perform its obligations under, this Agreement, (ii) to the best of its knowledge, the execution and delivery of this Agreement by it, and the performance of the covenants and agreements by it herein contained, are not limited or restricted by or in conflict with, nor will they breach, infringe, contravene or interfere with, any Person's contractual, Intellectual Property, privacy, common law, statutory, equitable, confidentiality or other rights, except to the extent such limitation, restriction, breach, infringement, contravention or interference would not be reasonably likely to have a material adverse effect on it or its ability to perform its obligations pursuant to this Agreement nor on the rights accruing to BPS under this Agreement, (iii) to the best of its knowledge, Graftech is the beneficial owner of, or except as provided in this Agreement, has exclusive right to, the Graftech Licensed Technology, and (iv) Graftech has the unencumbered right to use and license the Graftech IP in accordance with the terms of this Agreement, and (b) each of Graftech and UCAR Carbon will use all commercially reasonable efforts to ensure that at all times during the term of the Graftech/BPS License, Graftech will have the right to license the Graftech IP to BPS in accordance with the terms of this Agreement. WARRANTIES AND COVENANTS OF BPS 3.8 BPS hereby represents and warrants to, and covenants with, Graftech (with the intent that such representations, warranties, covenants and agreements will survive the execution and implementation of this Agreement), that (a) as of the Effective Date (i) it has the right and power to enter into, and perform its obligations under, this Agreement, 30 (ii) to the best of its knowledge, the execution and delivery of this Agreement by it, and the performance of the covenants and agreements by it herein contained, are not limited or restricted by or in conflict with, nor will they breach, infringe, contravene or interfere with, any Person's contractual, Intellectual Property, privacy, common law, statutory, equitable, confidentiality or other rights, except to the extent such limitation, restriction, breach, infringement, contravention or interference would not be reasonably likely to have a material adverse effect on it or its ability to perform its obligations pursuant to this Agreement nor on the rights accruing to Graftech under this Agreement, (iii) to the best of its knowledge BPS is the beneficial owner of, or except as provided in this Agreement, has exclusive rights to, the BPS Licensed Technology, and (iv) BPS has the unencumbered right to use and license the BPS Licensed Technology in accordance with the terms of this Agreement, and (b) BPS will use commercially reasonable efforts to ensure that at all times during the term of the BPS/Graftech License, BPS will have the right to license the BPS Licensed Technology to Graftech in accordance with the terms of this Agreement. PART 4 CONFIDENTIALITY NON-DISCLOSURE 4.1 Each party (the "Recipient") that is the recipient of the Confidential Information disclosed to it by the disclosing party (the "Disclosing Party"), at all times during the Development Period and the Supply Agreement and for a period of ten years next after the expiry or earlier termination of such Development Period or the Supply Agreement, whichever is later, (a) will hold, and will ensure that each of its Affiliates, directors, officers, employees and licensees, including sublicenses (collectively, the "Recipient's Agents") will hold, the Confidential Information of the Disclosing Party in confidence and in trust for the Disclosing Party, (b) will not, and will ensure that the Recipient's Agents will not, directly or indirectly, disclose, use, reproduce or otherwise exploit the Confidential Information of the Disclosing Party or permit the same to be disclosed, used, reproduced or otherwise exploited, except to the extent necessary for (i) the performance of the work under the SOWs, (ii) the legitimate practice of the Graftech/BPS License, the BPS/Graftech License and the Supply Individual Default License, as the case may be, 31 (iii) the furtherance of this Agreement; or (iv) the performance of the work under the Supply Agreement; (c) will only disclose the Confidential Information of the Disclosing Party to the Recipient's Agents (i) with a definable need to know such information in connection with the matters referred to in ss.(b), as the case may be, and (ii) who are informed of the confidential nature of such information, and (d) will, and will ensure that each of the Recipient's Agents will, protect the Confidential Information of the Disclosing Party against wrongful disclosure, misuse, espionage and theft. EXCEPTIONS 4.2 This Agreement imposes no obligation on the Recipient with respect to the Confidential Information of the Disclosing Party, (a) which is or becomes generally available to the public through no fault of the Recipient or the Recipient's Agents, (b) which was legitimately possessed by the Recipient or the Recipient's Agents before its disclosure by the Disclosing Party to the Recipient or the Recipient's Agents, as evidenced by competent proof, (c) which is independently obtained by the Recipient or the Recipient's Agents from a source which was not, at the relevant time, prohibited from disclosing such information to the Recipient or the Recipient's Agents under any legal, contractual or fiduciary obligation, (d) which is the same as information that is developed by the Recipient independently without reference to the Confidential Information of the Disclosing Party, as evidenced by competent proof, (e) which, subject to ss.4.3, is required to be disclosed by applicable law or legal process, or (f) to the extent and in the manner approved by the Disclosing Party in writing. LEGAL REQUIREMENT TO DISCLOSE 4.3 If the Recipient is required by applicable law, regulation or legal process to disclose any of the Confidential Information of the Disclosing Party, the Recipient will notify the Disclosing Party promptly so that the Disclosing Party may seek a protective order or other appropriate remedy or waive compliance with the terms of this Agreement. If no 32 such protective order or other remedy is obtained or the Disclosing Party does not waive compliance with the terms of this Agreement, the Recipient (a) will furnish only that portion of the Confidential Information of the Disclosing Party which the Recipient is advised by counsel is legally required to be disclosed, and (b) will exercise all reasonable efforts to obtain reliable assurances that confidential treatment will be accorded such Confidential Information. NO SOLICITATION 4.4 No party will, during both the Development Period and the term of the Supply Agreement, and for a period of two years next after the expiry or earlier termination of the Development Period or the Supply Agreement, whichever is later, solicit for employment any individual who is, at the time of such solicitation, employed by any other party or its Affiliates nor will such party, directly or indirectly, induce any such individual to leave his or her employment. Nothing in this ss.4.4 will prevent any party from employing any individual that is the other party's employee so long as no solicitation (other than a general advertisement not directed to such individual) has been made to such individual by or on behalf of such party. REASONABLE RESTRICTIONS 4.5 Each party agrees that the restrictions contained in this Part 4 are reasonable for the protection of the respective legitimate business interests of the parties. PUBLICITY 4.6 The parties agree to co-operate with each other in the preparation and distribution of a press release regarding the execution of this Agreement. No public release or announcement concerning the transactions contemplated hereby will be issued by any party without the prior consent of the other parties (which consent will not be unreasonably withheld), except as such release or announcement may be required by law or the rules or regulations of any Canadian, United States or other foreign securities exchange, in which case the party required to make the release or announcement will allow the other party reasonable time to comment on such release or announcement in advance of such issuance. PART 5 DISPUTE RESOLUTION INITIATION OF PROCESS 5.1 If at any time there is a dispute, controversy or claim (a "Dispute") among or between any of the parties hereto with respect to any matter arising out of or relating to this Agreement, then any party that wishes to initiate resolution of the Dispute must give 33 written notice (the "Dispute Notice") to each other party hereto, whether or not involved in the Dispute and to the Committee, requiring that such Dispute be resolved pursuant to this Part 5. COMMITTEE INVOLVEMENT 5.2 If a Dispute Notice is given, any party involved in the Dispute may, in the first instance, ask the Committee forthwith to initiate discussions among the disputing parties with a view to settling the Dispute. A resolution reached by the Committee and communicated by it in writing to the disputing parties will be binding on the parties and will be implemented. SENIOR OFFICER INVOLVEMENT 5.3 If the Dispute is not resolved between the parties thereto within 30 days after the date of the Dispute Notice, any party to the Dispute may ask the Senior Officer of each of the parties involved in the Dispute to forthwith initiate discussions among the disputing parties with a view to settling the Dispute, unless the parties agree in writing to extend such 30-day period for resolution of the Dispute by the Committee. Once the Dispute is referred to the Senior Officers, the Committee will no longer have jurisdiction to resolve the Dispute. A resolution reached by such Senior Officers and communicated by them in writing to the disputing parties will be final and binding upon the parties and will be implemented. ARBITRATION 5.4 If the Dispute is not resolved between the parties within 30 days after its referral to the Senior Officers, any party to the Dispute will be entitled to refer the Dispute to arbitration in accordance with the commercial arbitration rules (the "Rules") of the American Arbitration Association, as modified by the provisions herein, unless the parties agree in writing to extend such 30-day period for resolution of the Dispute by the Senior Officers. IMPLEMENTATION 5.5 Each party to this Agreement will accept as final and binding, and proceed in good faith diligently to implement, the award or decision of the arbitrator or arbitrators, as the case may be, on an arbitration pursuant to ss.5.4. Judgment upon an arbitration award may be rendered in any court of competent jurisdiction or application may be made to any such court by any party for judicial acceptance or an order of enforcement of an arbitration award, as the case may be. Any arbitration award may be supported by a decree of specific performance or other appropriate injunctive relief from a court of competent jurisdiction. VENUE OF ARBITRATION 5.6 All arbitration proceedings will be conducted in New York, New York or in such other place as BPS and Graftech may agree. 34 NON-APPLICABILITY OF PART 5 5.7 This Part 5 will not apply to Part 4 or the grant of provisional remedies, including injunctions, restraining orders and specific performance, and each party reserves its right to commence any action under Part 4 or seek such remedies from a court of competent jurisdiction. PART 6 TERMINATION TERMINATION 6.1 Subject to earlier termination as provided in this Part 6, the Development hereunder will end upon the expiry of the Development Period. Thereafter, unless otherwise terminated as provided herein, the Development will automatically be renewed for additional periods of two years each unless either Graftech or BPS gives written notice to the other parties, at least six months before the expiry of the then current term of the Development, to terminate the Development. Notwithstanding the foregoing, the Development hereunder may be terminated by either BPS or Graftech (a) by written notice to the parties to this Agreement, if any of the other parties to this Agreement becomes the subject of an Event of Default; provided, however, that (i) BPS will only be entitled to terminate the Development if UCAR Carbon is the subject of an Event of Default which has, or is reasonably likely to have, a material adverse effect on the business of BPS or the performance by Graftech or BPS of a material term of this Agreement, (ii) BPS will only be entitled to terminate the Development if Graftech is the subject of an Event of Default which has, or is reasonably likely to have, a material adverse effect on the business of BPS or the performance by Graftech or BPS of a material term of this Agreement, (iii) Graftech will not be entitled to terminate the Development if UCAR Carbon is the subject of an Event of Default, and (iv) Graftech will only be entitled to terminate the Development if BPS is the subject of an Event of Default which has, or is reasonably likely to have, a material adverse effect on the business of Graftech or the performance by Graftech or BPS of a material term of this Agreement, and, (b) without cause, upon 12 months' written notice to the other, or (c) by written notice to the other, if BPS and Graftech have completed the work required of them under the SOWs before the end of the Development Period and cannot agree on additional work to be done, or the milestones or other deliverables to be met, during the balance of the Development Period. 35 EFFECT OF TERMINATION 6.2 In the event that (a) BPS terminates the Development pursuant to ss.6.1(a), (i) the rights of BPS and Graftech to independently practice and license the Joint Arising IP pursuant to ss.3.4 will remain intact, (ii) BPS may terminate the BPS/Graftech License; provided, however, that Graftech will be entitled to practice the BPS Licensed Technology under the BPS/Graftech License (on the royalty basis set forth in ss.3.6) solely to fulfill any supply arrangements with third parties existing as of the date of termination of the Development, but in no event will Graftech practice the BPS Licensed Technology under this ss.(ii) for more than three years after the date that the BPS/Graftech License would, but for this proviso, have been terminated, (iii) the Graftech/BPS License will become irrevocable and sublicensable by BPS without restriction, except that the provisions of ss.3.5(c), (d) and (e) will not apply (other than in relation to IP arising before the termination of the Development pursuant to this ss.(a)), and will remain royalty-free, and, so long as Graftech is able to meet, on a consistent basis, BPS's requirements as to pricing, delivery, quality, performance and service in respect of Graphitic Materials, BPS will continue to acquire from Graftech all of its requirements for Graphitic Materials pursuant to the Supply Agreement; provided, however, that if Graftech is no longer able to meet, on a consistent basis, BPS's requirements as to pricing, delivery, quality, performance and service in respect of Graphitic Materials or the Supply Agreement is terminated by BPS because Graftech is the subject of an Event of Default under the Supply Agreement, then, subject to 6.3(b)(iii) of the Supply Agreement, (A) the Graftech/BPS License will become a perpetual, irrevocable, world-wide, non-exclusive, royalty-bearing right and license, sublicensable by BPS without restriction, to practice the Graftech IP to the extent reasonably necessary to enable BPS to develop, manufacture, make, have made, use and sell, (I) Graphitic Components that are the subject matter of the Development, and (II) Graphitic Materials required to make such Graphitic Components; and (B) if the parties cannot agree on such royalty within 30 days after the subject is first discussed, the matter will be referred to the dispute resolution process pursuant to Part 5. 36 In such event, the Graftech/BPS License will include the right by BPS to disclose Graftech's Confidential Information to BPS's sublicensees in connection with the production and use of the Graphitic Materials and Graphitic Components as permitted by this ss.(iii). Graftech will promptly, upon request, and from time to time, transfer to, and provide BPS with, all relevant technology, information, training and technical assistance as may be necessary to enable BPS to exercise its rights hereunder at a fee that reflects no more than the reasonable cost of effecting such technology transfer, training and technical assistance, (iv) except as otherwise permitted under ss.2.7, ss.2.9 and ss.2.13 of this Agreement and ss.2.13 of the Supply Agreement, Graftech will not, and it will ensure that its Affiliates will not, directly or indirectly, until two years after the expiry or earlier termination of the Development, (A) collaborate with third parties (including Graftech's Affiliates, other than its wholly-owned Subsidiaries), in the research or development of Graphitic Materials or Graphitic Components for PEM Fuel Cells or PEM Fuel Cell Systems, or (B) license to any third party any of the Graftech IP concerning Graphitic Materials or Graphitic Components for use in PEM Fuel Cells or PEM Fuel Cell Systems, (v) subject to ss.2.13 of this Agreement and ss.2.13 of the Supply Agreement, UCAR Carbon and Graftech will not, and each will ensure that its Affiliates will not, directly or indirectly, research, develop, manufacture, make, have made, sell or supply PEM Fuel Cells and PEM Fuel Cell Systems or MEAs until five years after the Development has ended or the Supply Agreement has terminated, whichever is later, (vi) such termination will be without prejudice to any other rights or remedies then available to BPS, (b) Graftech terminates the Development pursuant to ss.6.1(a), (i) the rights of BPS and Graftech to independently practice and license the Joint Arising IP pursuant to ss.3.4 will remain intact, (ii) Graftech may terminate the Graftech/BPS License to the extent it has not become irrevocable under this Agreement or the Supply Agreement; provided, however, that to the extent that the Graftech/BPS License has not become irrevocable, BPS will be entitled to practice the Graftech Licensed Technology under the Graftech/BPS License solely to fulfill any supply arrangements with third parties existing at the date of termination of the Development, but in no event will BPS practice the Graftech Licensed Technology under this ss.(b)(ii) for more than three years after the 37 date that the Graftech/BPS License would, but for this proviso, have been terminated, (iii) the BPS/Graftech License will remain intact and will become irrevocable and sublicensable without restriction, except that the provisions of ss.3.6(k), (l) and (m) will not apply (other than in relation to IP arising before the termination of the Development pursuant to this ss.(b)), (iv) except as otherwise permitted under ss.2.7, ss.2.9 and ss.2.13 of this Agreement, and ss.2.13 of the Supply Agreement, BPS will not, and it will ensure that its Affiliates will not, directly or indirectly, until two years after the expiry or earlier termination of the Development, (A) collaborate with third parties (including BPS's Affiliates, other than its wholly-owned Subsidiaries), in the research or development of Graphitic Materials or Graphitic Components for PEM Fuel Cells or PEM Fuel Cell Systems, or (B) license to any third party (other than those Persons listed in ss.(a), ss.(b) and ss.(d) of the definition of BPS Permitted Licensees) its component manufacturing technology concerning Graphitic Components for use in PEM Fuel Cells or PEM Fuel Cell Systems, and (v) such termination will be without prejudice to any other rights or remedies then available to Graftech, (c) BPS terminates the Development pursuant to ss.6.1(b), (i) the rights of BPS and Graftech to independently practice and license the Joint Arising IP pursuant to ss.3.4 will remain intact, (ii) Graftech may terminate the Graftech/BPS License to the extent it has not become irrevocable under this Agreement or the Supply Agreement; provided, however, that to the extent that the Graftech/BPS License has not become irrevocable, then BPS will be entitled to practice the Graftech Licensed Technology under the Graftech/BPS License solely to fulfill any supply arrangements with third parties existing at the date of termination of the Development, but in no event will BPS practice the Graftech Licensed Technology under this ss.(c)(ii) for more than three years after the date that the Graftech/BPS License would, but for this proviso, have been terminated, (iii) the BPS/Graftech License will remain intact and become irrevocable and sublicensable without restriction, except that the provisions of ss.3.6(k), (l) and (m) will not apply (other than in relation to IP arising before the termination of the Development pursuant to this ss.(c)), 38 (iv) except as otherwise permitted under ss.2.7, ss.2.9 and ss.2.13 of this Agreement and ss.2.13 of the Supply Agreement, BPS will not, and it will ensure that its Affiliates will not, directly or indirectly, until two years after the expiry or earlier termination of the Development, (A) collaborate with third parties (including BPS's Affiliates, other than its wholly-owned Subsidiaries) in the research or development of Graphitic Materials or Graphitic Components for PEM Fuel Cells or PEM Fuel Cell Systems, or (B) license to any third party (other than those Persons listed in ss.(a), ss.(b) and ss.(d) of the definition of BPS Permitted Licensees) its component manufacturing technology concerning Graphitic Components for use in PEM Fuel Cells or PEM Fuel Cell Systems, (d) Graftech terminates the Development pursuant to ss.6.1(b), (i) the rights of BPS and Graftech to independently practice and license the Joint Arising IP pursuant to ss.3.4 will remain intact, (ii) BPS may terminate the BPS/Graftech License; provided, however, that Graftech will be entitled to practice the BPS Licensed Technology under the BPS/Graftech License (on the royalty basis set forth in ss.3.6) solely to fulfill any supply arrangements with third parties as of the date of termination of the Development, but in no event will Graftech practice the BPS Licensed Technology under this ss.(d)(ii) for more than three years after the date that the BPS/Graftech License would, but for this proviso, have been terminated, (iii) the Graftech/BPS License will become irrevocable and sublicensable by BPS without restriction, except that the provisions of ss.3.5(c), (d) and (e) will not apply (other than in relation to IP arising before the termination of the Development pursuant to this ss.(d)), and will remain royalty free, and so long as Graftech is able to meet, on a consistent basis, BPS's requirements as to pricing, delivery, quality, performance and service in respect of Graphitic Materials, BPS will continue to acquire from Graftech all of its requirements for Graphitic Materials pursuant to the Supply Agreement; provided, however, that if Graftech is no longer able to meet, on a consistent basis, BPS's requirements as to pricing, delivery, quality, performance and service in respect of Graphitic Materials or the Supply Agreement is terminated by BPS because Graftech is the subject of an Event of Default under the Supply Agreement, then, subject to ss.6.3(b)(iii) of the Supply Agreement (A) the Graftech/BPS License will become a perpetual, irrevocable, world-wide, non-exclusive, royalty-bearing right and license, sublicensable by BPS without restriction, to practice the Graftech 39 IP to the extent reasonably necessary to enable BPS to develop, manufacture, make, have made, use and sell, (I) Graphitic Components that are the subject matter of the Development, and (II) Graphitic Materials required to make such Graphitic Components; and (B) if the parties cannot agree on such royalty within 30 days after the subject is first discussed, the matter will be referred to arbitration pursuant to Part 5. In such event, the Graftech/BPS License will include the right by BPS to disclose Graftech's Confidential Information to BPS's sublicensees in connection with the production and use of the Graphitic Materials and Graphitic Components as permitted in this ss.(iii). Graftech will promptly, upon request, and from time to time, transfer to, and provide BPS with, all relevant technology, information, training and technical assistance as may be necessary to enable BPS to exercise its rights hereunder at a fee that reflects no more than the reasonable cost of effecting such technology transfer, training and technical assistance, (iv) except as otherwise permitted under ss.2.7, ss.2.9 and ss.2.13 of this Agreement and ss.2.13 of the Supply Agreement, Graftech will not, and it will ensure that its Affiliates will not, directly or indirectly, until two years after the expiry or earlier termination of the Development, (A) collaborate with third parties (including Graftech's Affiliates, other than its wholly-owned Subsidiaries) in the research or development of Graphitic Materials or Graphitic Components for PEM Fuel Cells or PEM Fuel Cell Systems, or (B) license to any third party any of the Graftech IP concerning Graphitic Materials or Graphitic Components for use in PEM Fuel Cells or PEM Fuel Cell Systems and, (v) subject to ss.2.13 of this Agreement and ss.2.13 of the Supply Agreement, UCAR Carbon and Graftech will not, and each will ensure that its Affiliates will not, research, develop, manufacture, make, have made, sell or supply PEM Fuel Cells, PEM Fuel Cell Systems or MEAs until five years after the Development has ended or the Supply Agreement has terminated, whichever is later, (e) either party terminates the Development under ss.6.1(c) or the Development ends by reason of the expiry of the Development Period, 40 (i) the rights of BPS and Graftech to independently practice and license the Joint Arising IP pursuant to ss.3.4 will remain intact, (ii) the BPS/Graftech License will remain intact, (iii) the Graftech/BPS License will remain intact, (iv) except as otherwise permitted under ss.2.7, ss.2.9 and ss.2.13 of this Agreement and ss.2.13 of the Supply Agreement, no party will, and each will ensure that its Affiliates will not, directly or indirectly, until two years after the expiry or earlier termination of the Development, (A) collaborate with third parties (including each party's respective Affiliates, other than its wholly-owned Subsidiaries) in the research or development of Graphitic Materials or Graphitic Components for PEM Fuel Cells or PEM Fuel Cell Systems, or (B) license to any third party any of its Intellectual Property concerning Graphitic Materials or Graphitic Components for use in, PEM Fuel Cells or PEM Fuel Cell Systems; provided, however, that BPS will have the right to license the BPS IP to the BPS Permitted Licensees, and (v) except as otherwise permitted under ss.2.7, ss.2.9 and ss.2.13 of this Agreement and ss.2.13 of the Supply Agreement, Graftech (including its Affiliates) will not, directly or indirectly, supply any Graphitic Component or Graphitic Material to third parties for use in PEM Fuel Cells or PEM Fuel Cell Systems until after the applicable Release Date therefor. LIABILITY LIMITED 6.3 Except as provided in ss.6.4, the liability of any party to any other party for damages for any cause whatsoever, regardless of the form of action, whether in contract or in tort, including negligence, that accrues during the term of this Agreement or the Supply Agreement, will be limited to direct damages suffered by the damaged party. No party will be liable to any other party for any special, indirect, punitive, or consequential damages, including lost profits, lost revenues, damage to reputation or goodwill, failure to realize expected savings, treble damages or other such commercial or economic losses of any kind. EXCLUSIONS TO LIMITED LIABILITY 6.4 ss.6.3 will not apply to (a) any loss, claim, demand, damage or cost arising as a result of the infringement or misuse by one party of any Intellectual Property of the other, or 41 (b) any unauthorized disclosure or use by a party hereto of any of the other party's Confidential Information in violation of this Agreement. PART 7 GENERAL AMENDMENTS 7.1 No amendment, modification, supplement, termination or waiver of any provision of this Agreement will be effective unless in writing signed by the parties and then only in the specific instance and for the specific purpose given. FURTHER ASSURANCES 7.2 The parties will execute such further assurances and other documents and instruments and do such further and other things as may be necessary to implement and carry out the intent of this Agreement. ENTIRE AGREEMENT 7.3 The provisions of this Agreement and the Supply Agreement dated the date hereof constitute the entire agreement among the parties hereto, and, except as provided in ss.7.17, supersede all previous expectations, understandings, communications, representations and agreements whether verbal or written between the parties, concerning the subject matter hereof. NOTICE 7.4 Every notice, request, demand, direction or other communication (each, for the purposes of ss.7.4, ss.7.5 and ss.7.6, a "Notice") required or permitted to be given pursuant to this Agreement will be deemed to be well and sufficiently given if in writing and delivered by hand (including recognized overnight courier service) or transmitted by facsimile, in each case addressed as follows: (a) if to BPS at: 9000 Glenlyon Parkway Burnaby, British Columbia Canada V5J 5J9 Attention: Corporate Secretary Facsimile: (604) 412-3131 42 (b) if to Graftech at: 11709 Madison Avenue Lakewood, Ohio USA 44107 Attention: President Facsimile: (216) 529-3713 with a copy to Graftech's Vice President and General Counsel at the same address and facsimile number; (c) if to UCAR Carbon at: 3102 West End Avenue Suite 1100 Nashville, Tennessee USA 37203 Attention: President Facsimile: (615) 760-7785 with a copy to UCAR Carbon Vice President and General Counsel at the same address and facsimile number; or to such other address or transmission receiving station as is specified by the particular party by Notice to the others. DEEMED RECEIPT 7.5 Any Notice delivered or sent as aforesaid will be deemed conclusively to have been effectively given and received on the day Notice was delivered or sent as aforesaid if it was delivered or sent on a day that was a Business Day or on the next day that is a Business Day if it was delivered or sent on a day that was not a Business Day. CHANGE OF ADDRESS 7.6 A party may at any time, by Notice to the others, change its address to some no less convenient address and will so change its address whenever its address ceases to be suitable for delivery by hand. BINDING EFFECT 7.7 This Agreement will enure to the benefit of and be binding upon the parties and their respective successors and permitted assigns. GOVERNING LAW 7.8 This Agreement will be deemed to have been made in British Columbia, Canada and the construction, validity and performance of this Agreement will be governed in all respects by the laws of British Columbia, and applicable laws of Canada. The application of the 43 provisions of the United Nations Convention on Contracts for the International Sale of Goods are hereby excluded. ATTORNMENT 7.9 Except as provided in Part 5, each party irrevocably attorns to the exclusive jurisdiction of the courts of British Columbia, Canada and all courts having appellate jurisdiction thereover in respect of any proceeding arising out of or relating to this Agreement. FORCE MAJEURE 7.10 No party will be liable to the other for default or delay in the performance of its obligations under this Agreement if such default or delay is caused by fire, strike, riot, war, act of God, delay of carriers, labour disputes, governmental orders or regulation, complete or partial shutdown of plant by reason of inability to obtain sufficient raw material or power, or any other occurrence beyond the reasonable control of such party. The party whose performance is prevented by any such occurrence will notify the other parties of the same in writing as soon as it is reasonably possible after the commencement thereof, will provide the other parties with full written particulars of such occurrence and attempts made to remedy the same, will use commercially reasonable efforts to remedy such occurrence with all reasonable dispatch and, upon cessation of the occurrence, will give prompt written notice to the other parties of the same. No party will be required to make any concession or grant any demand or request to bring to an end any strike or other concerted actions of workers. SEVERABILITY 7.11 If any provision contained in this Agreement is found by any court or arbitrator for any reason, to be invalid, illegal or unenforceable in any respect in any jurisdiction, (a) the validity, legality and enforceability of such provision will not in any way be affected or impaired thereby in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained herein will not in any way be affected or impaired thereby, unless in either case as a result of such determination this Agreement would fail in its essential purpose, and (b) the parties will use their best efforts to substitute for any provision that is invalid, illegal or unenforceable in any jurisdiction a valid and enforceable provision which achieves to the greatest extent possible the economic, legal and commercial objectives of such invalid, illegal or unenforceable provision of this Agreement and, failing the agreement of the parties on such a substitution within 30 days after the finding of the court or arbitrator, either party may refer the matter for dispute resolution under Part 5. COUNTERPARTS 7.12 This Agreement may be executed in counterparts or by facsimile, each of which will together, for all purposes, constitute one and the same instrument, binding on the parties, 44 and each of which will together be deemed to be an original, notwithstanding that all parties are not signatories to the same counterpart or facsimile. NO ASSIGNMENT 7.13 No party may assign any right, benefit or interest in this Agreement without the written consent of each other party, such consent not to be unreasonably withheld, and any purported assignment without such consent will be void. SURVIVAL 7.14 All rights and obligations expressly stated to continue after, or accrue as a result of, the termination of the Development, the Graftech/BPS License and/or the BPS/Graftech License are separate and distinct rights and obligations binding on the parties, will survive the termination of the Development, the Graftech/BPS License, and/or the BPS/Graftech License, as the case may be, and will continue in full force and effect and nothing herein will affect the enforceability of such provisions. For greater certainty, the provisions of ss.2.6, ss.2.7, ss.2.8, ss.2.9, ss.2.11, ss.2.13, Part 3, Part 4, Part 5, Part 6 and Part 7 which are expressly stated to continue, or contemplated as continuing, after the termination of the Development, the Graftech/BPS License, the BPS/Graftech License, will continue to apply after the termination of the Development, the Graftech/BPS License, the BPS/Graftech License, as the case may be. All other provisions will expire except to enforce rights arising prior to termination. NO PARTNERSHIP 7.15 Nothing herein will or will be deemed to create any partnership or joint venture between or among the parties or to give any party any right or authority to act as the agent of or to pledge the credit of any other party. TERMINATION OF UCAR CARBON'S OBLIGATIONS 7.16 Notwithstanding anything to the contrary in this Agreement, the rights and obligations of UCAR Carbon under this Agreement (other than those under Part 4), will terminate five years after UCAR Carbon has, directly or indirectly, through its Affiliates or otherwise, ceased to control Graftech; provided, however, that such obligations will revive if at anytime after it so ceases to control Graftech, UCAR Carbon directly or indirectly, through its Affiliates or otherwise, again controls Graftech. Nothing in this ss.7.16 will release Graftech from any of its obligations under this Agreement, each of which will continue in full force and will be binding on Graftech following the application of this ss.7.16. For the purposes hereof, UCAR Carbon will be deemed to control Graftech if (a) it directly or indirectly holds a sufficient number of the voting rights attached to all outstanding voting securities of Graftech to affect materially the control of Graftech, or (b) it, together with other Persons, acting jointly or in concert by virtue of an agreement, arrangement, commitment or understanding, directly or indirectly, 45 holds in total a sufficient number of the voting rights attached to all outstanding securities of Graftech to affect materially the control of Graftech. For purposes of this Agreement, if UCAR Carbon, alone or acting jointly or in concert with other Persons, directly or indirectly, holds more than 20% of the voting securities of Graftech, UCAR Carbon will be deemed, in the absence of evidence to the contrary, to control Graftech. BPS/UCAR CARBON COLLABORATION AGREEMENT 7.17 Nothing in this Agreement is to be construed so as to adversely affect the rights of the parties under ss.3.4 and ss.3.5 of the Collaboration Agreement made May 3, 1999 between BPS and UCAR Carbon (with Graftech assuming the obligations of UCAR Carbon effective November 15, 1999), as may have been amended, which arose prior to the Effective Date. REMEDIES 7.18 If any party is in default of any term or condition of this Agreement, each other party to this Agreement will be entitled to exercise all rights and remedies available to it at law, in equity or under this Agreement, whether or not such default constitutes an Event of Default. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 46 IN WITNESS WHEREOF the parties have executed this Agreement as of the day and year first above written. BALLARD POWER SYSTEMS INC. By: /s/ LAYLE K. SMITH -------------------------------------- Its: PRESIDENT & CHIEF OPERATING OFFICER By: /S/ NOORDIN NANJI -------------------------------------- Its: VP STRATEGIC DEVELOPMENT & CORPORATE SECRETARY This is the execution page for Ballard Power Systems Inc. for the Joint Development and Collaboration Agreement, made effective June 5, 2001, between Ballard Power Systems Inc., Graftech Inc. and UCAR Carbon Company Inc. 47 IN WITNESS WHEREOF the parties have executed this Agreement as of the day and year first above written. GRAFTECH INC. By:/S/ JOHN J. WETULA -------------------------------------- Its: PRESIDENT UCAR CARBON COMPANY INC. By:/S/ KAREN G. NARWOLD -------------------------------------- Its: VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL This is the execution page for Graftech Inc. and UCAR Carbon Company Inc. for the Joint Development and Collaboration Agreement, made effective June 5, 2001, between Ballard Power Systems Inc., Graftech Inc. and UCAR Carbon Company Inc. 48 SCHEDULE A TIMETABLE TIMETABLE TO COMMENCE RESEARCH AND DEVELOPMENT EFFORTS
- ----------------------- --------------------------- ------------------------- ---------------------------- TRANSPORTATION STATIONARY COMPACT COMPONENTS (GREATER THAN 35 (GREATER THAN 35 (LESS THAN 35 KILOWATTS) KILOWATTS) KILOWATTS) - ----------------------- --------------------------- ------------------------- ---------------------------- Flow Field Plates [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] - ----------------------- --------------------------- ------------------------- ---------------------------- GDL [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] - ----------------------- --------------------------- ------------------------- ----------------------------
SCHEDULE B OWNERSHIP OF ARISING IP PART 1 OWNERSHIP OF ARISING IP RELATING TO FLOW FIELD PLATES
- ------------------------------------------- ----------------- ---------------- -------------- TECHNOLOGY GRAFTECH BALLARD JOINT - ------------------------------------------- ----------------- ---------------- -------------- Basic Raw Material X - ------------------------------------------- ----------------- ---------------- -------------- Treated Raw Material X - ------------------------------------------- ----------------- ---------------- -------------- Raw Material Additives X - ------------------------------------------- ----------------- ---------------- -------------- Intermediate Processing (e.g., [TEXT X DELETED] - ------------------------------------------- ----------------- ---------------- -------------- Processed Material (e.g., [TEXT DELETED]) X - ------------------------------------------- ----------------- ---------------- -------------- Final Material (e.g. GrafCell(TM)material) X - ------------------------------------------- ----------------- ---------------- -------------- Component Processing at Graftech (e.g., X [TEXT DELETED]) - ------------------------------------------- ----------------- ---------------- -------------- Component Processing (e.g., [TEXT X DELETED]) - ------------------------------------------- ----------------- ---------------- -------------- Component X - ------------------------------------------- ----------------- ---------------- -------------- Component Assembly X - ------------------------------------------- ----------------- ---------------- -------------- Component Processing (e.g., [TEXT X DELETED]) - ------------------------------------------- ----------------- ---------------- -------------- Stack Assembly X - ------------------------------------------- ----------------- ---------------- -------------- Use of Component In Fuel Cell X - ------------------------------------------- ----------------- ---------------- -------------- Component Configured for Fuel Cell X - ------------------------------------------- ----------------- ---------------- --------------
SCHEDULE B (CONTINUED) OWNERSHIP OF ARISING IP PART 2 OWNERSHIP OF ARISING IP RELATING TO GDL
- ------------------------------------------- ----------------- ---------------- -------------- TECHNOLOGY GRAFTECH BALLARD JOINT - ------------------------------------------- ----------------- ---------------- -------------- Basic Raw Material X - ------------------------------------------- ----------------- ---------------- -------------- Treated Raw Material X - ------------------------------------------- ----------------- ---------------- -------------- Raw Material Additives X - ------------------------------------------- ----------------- ---------------- -------------- Processed Material (e.g., [TEXT DELETED]) X - ------------------------------------------- ---------------- ---------------- -------------- Intermediate Processing (e.g., [TEXT DELETED]) X - ------------------------------------------- ---------------- ---------------- -------------- Material X - ------------------------------------------- ---------------- ---------------- -------------- [TEXT DELETED] Design (e.g., size, shape, etc.) X - ------------------------------------------- ---------------- --------------- -------------- Configuration of [TEXT DELETED] ([TEXT DELETED]) X - ------------------------------------------- ---------------- --------------- -------------- Substrate Processing (e.g. [TEXT DELETED] processing) X - ------------------------------------------- ---------------- --------------- ------------- Substrate X - ------------------------------------------- ---------------- --------------- ------------- Configuration of [TEXT DELETED] ([TEXT DELETED]) X - ------------------------------------------- ---------------- --------------- ------------- GDL Processing ([TEXT DELETED]) X(1) - ------------------------------------------- ---------------- --------------- ------- ----- GDL X - ------------------------------------------- -------- -------- --------------- -------------
- ---------- (1) Regardless of location or use (I.E., Graftech's facilities or Ballard's facilities). 2
- ------------------------------------------- ----------------- ---------------- -------------- TECHNOLOGY GRAFTECH BALLARD JOINT - ------------------------------------------- ----------------- ---------------- -------------- GDL as used in MEA X - ------------------------------------------- ----------------- --------------- --------------- GDL Configured for Fuel Cell X - ------------------------------------------- ----------------- --------------- --------------- MEA Assembly X - ------------------------------------------- ----------------- ---------------- --------------- Stack Assembly X - ------------------------------------------- ----------------- ---------------- ---------------
3 SCHEDULE B (CONTINUED) OWNERSHIP OF ARISING IP PART 3 OTHER IP
- ------------------------------------------- ----------------- ---------------- -------------- TECHNOLOGY GRAFTECH BALLARD JOINT - ------------------------------------------- ----------------- ---------------- -------------- - ------------------------------------------- ------------------ ---------------- -------------- Graphitic Materials(2) X - ------------------------------------------- ------------------ ---------------- -------------- PEM Fuel Cells(3) X - ------------------------------------------- ------------------ ---------------- -------------- PEM Fuel Cell Systems X - ------------------------------------------- ------------------ ----------------- -------------- Component manufacturing technology X - ------------------------------------------- ------------------ ----------------- --------------
- ---------- (2) Whether pursuant to the Development or not, except for Graphitic Materials developed by Ballard pursuant to ss.ss.2.7 or 2.9. (3) Whether pursuant to the Development or not, except for Graphitic Components developed by Graftech pursuant to ss.ss.2.7 or 2.9. 4 SCHEDULE C RELEASE DATES FOR THIRD PARTY SALES
- ------------------------------------------ ------------------------------ -------------- --------------- -------------- PLATE MATERIAL PLATES SUBSTRATE GDL - ------------------------------------------ ------------------------------ -------------- --------------- -------------- Start Date for External Sales [TEXT DELETED] - [TEXT DELETED][TEXT DELETED] [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] - [TEXT DELETED] - ------------------------------------------ ------------------------------ -------------- --------------- -------------- Ballard's Right to Manufacture No Yes No Yes - ------------------------------------------ ------------------------------ -------------- --------------- -------------- Graftech's Right to Manufacture Yes Yes Yes Yes Components for Ballard - ------------------------------------------ ------------------------------ -------------- --------------- -------------- Estimated [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] Timing for BPS's sales of commercial [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] product - ------------------------------------------ ------------------------------ -------------- --------------- --------------
All platforms to be investigated. [TEXT DELETED] etc.] SCHEDULE D ROYALTY DETERMINATION PRINCIPLES TO CONSIDER FOR THE DETERMINATION OF ROYALTIES 1. The relative contributions of BPS and Graftech to the IP so licensed. In the case of Joint Arising IP, primary consideration shall be given to this principle in determining the royalties to be paid; 2. the impact of the licensed IP on future sales successes of the licensee's product; 3. the total market size or potential revenue or likely revenue realistically achievable for foreseeable products incorporating the IP so licensed; 4. the Net Sales Price of the product incorporating the IP so licensed; 5. the specific markets that are realistically addressable by products embodying the IP so licensed; 6. competing processes available to the licensee and the advantages of using the IP over other processes; 7. the possible duration of any competitive advantage to the licensee by using the IP so licensed; 8. the development cost to the licensee of an alternative to the IP so licensed; 9. opportunity costs to the licensee of assets deployed; 10. the risks to the licensee of investment in manufacturing and commercialization of the licensee's products using the IP so licensed; 11. the incremental financial investment to be made by the licensee for manufacturing, marketing and distribution functions; 12. cost of intangible and intellectual capital to be employed by the licensee; 13. the economic life of the product embodying the licensee's technology; 14. the length of time required to commercialize the licensee's products; and 15. the strength of the IP so licensed. Royalties for licenses granted under this Agreement will be determined as soon as practicable and to the extent possible, before the grant of the applicable license. SCHEDULE E LIST OF EQUIPMENT* GRAFTECH EQUIPMENT REQUIREMENTS 1. Fuel Cell test stand-instrumented as directed by Ballard for evaluation of FFP and GDL o [TEXT DELETED] based on the [TEXT DELETED] o [TEXT DELETED] based on the [TEXT DELETED] 2. Gas Diffusion Layer Evaluation Equipment o Graftech currently has a Gurley and Taber test equipment to test permeability and flexibility. We request "other" devices or test procedures Ballard uses for material evaluations. o Surface roughness? ([TEXT DELETED]) 3. Set of fuel and air [TEXT DELETED] and [TEXT DELETED] 4. Gas permeability test fixture for [TEXT DELETED] 5. Gas permeability test fixture for [TEXT DELETED] 6. Adhesion test equipment * Subject to review pursuant to ss.2.10 EX-10 8 graftech-ballard_suppagmt.txt EXHIBIT 10.57 Exhibit 10.57 CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MASTER SUPPLY AGREEMENT BETWEEN GRAFTECH INC. AND BALLARD POWER SYSTEMS INC. TABLE OF CONTENTS PAGE PART 1 DEFINITIONS AND INTERPRETATION.....................................1 Definitions...........................................................1 Interpretation........................................................8 Schedules.............................................................9 PART 2 PURCHASE AND SALE OF GRAPHITIC MATERIALS AND GRAPHITIC COMPONENTS...............................................9 [TEXT DELETED] Preparation Process....................................9 Purchase and Sale After [TEXT DELETED]................................9 Supply Arrangement Terms..............................................9 Exclusive Supplier of Graphitic Materials............................10 BPS Intent re: Graphitic Components..................................10 Future Forecasts and Pricing - Graphitic Materials and Graphitic Components.................................................10 Future Forecasts for Investment Planning.............................11 Prototype Product Sales..............................................12 Most Favoured Customer...............................................12 BPS's Supplier Manual................................................12 Third Party Sales....................................................13 Liaison Personnel....................................................14 Development Exceptions...............................................14 Existing Supply Arrangement..........................................14 PART 3 CONDITIONS OF PURCHASE............................................14 Conditions of Purchase...............................................14 PART 4 CONFIDENTIALITY...................................................15 Non-Disclosure.......................................................15 Exceptions...........................................................16 Legal Requirement to Disclose........................................16 No Solicitation......................................................16 Reasonable Restrictions..............................................17 Publicity............................................................17 PART 5 DISPUTE RESOLUTION................................................17 Initiation of Process................................................17 -i- TABLE OF CONTENTS (CONTINUED) PAGE Committee Involvement................................................17 Senior Officer Involvement...........................................17 Arbitration..........................................................18 Implementation.......................................................18 Venue of Arbitration.................................................18 Non-Applicability of Part 5..........................................18 PART 6 TERM AND TERMINATION..............................................18 Term ............................................................18 Termination..........................................................19 Liability Limited....................................................22 Exclusions to Limited Liability......................................22 Remedies.............................................................22 PART 7 GENERAL...........................................................22 Amendments...........................................................22 Further Assurances...................................................22 Entire Agreement.....................................................22 Notice...............................................................23 Deemed Receipt.......................................................23 Change of Address....................................................23 Binding Effect.......................................................24 Governing Law........................................................24 Attornment...........................................................24 Force Majeure........................................................24 Severability.........................................................24 Counterparts.........................................................25 No Assignment........................................................25 Survival.............................................................25 No Partnership.......................................................25 -ii- MASTER SUPPLY AGREEMENT THIS AGREEMENT is made effective the 5th day of June, 2001 BETWEEN: GRAFTECH INC., a Delaware corporation having an office at 11709 Madison Avenue, Lakewood, Ohio 44107 ("Graftech") AND: BALLARD POWER SYSTEMS INC., a Canadian corporation having an office at 9000 Glenlyon Parkway, Burnaby, British Columbia, Canada V5J 5J9 ("BPS") WHEREAS: (A) The parties and UCAR Carbon Company Inc. ("UCAR Carbon") have entered into a Joint Development and Collaboration Agreement (the "Collaboration Agreement") as of the date hereof for the development of Graphitic Materials (as defined herein) and Graphitic Components (as defined herein) and related process technology and manufacturing processes for their use in PEM Fuel Cells and PEM Fuel Cell Systems (as defined herein); (B) BPS seeks an assured source of supply of Graphitic Materials and Graphitic Components in connection with the development and manufacture of PEM Fuel Cells and PEM Fuel Cell Systems; (C) Graftech is a manufacturer of Graphitic Materials and Graphitic Components; and (D) BPS intends to purchase from Graftech, and Graftech intends to supply to BPS, Graphitic Materials and Graphitic Components on the terms and conditions set forth in this Agreement and the individual supply arrangements (each a "Supply Arrangement") made pursuant to this Agreement; NOW, THEREFORE, the parties agree as follows: PART 1 DEFINITIONS AND INTERPRETATION DEFINITIONS 1.1 In this Agreement, including the recitals and schedules, except as expressly provided or unless the context otherwise requires. AFFILIATE, in relation to a specified Person, means a Person that directly or indirectly controls, is under common control with, or is controlled by the specified Person. For the purposes of this Agreement, control of a corporation, limited liability company, partnership, limited partnership or other entity by a Person is deemed to occur if (a) securities or other ownership interests of the corporation, limited liability company, partnership, limited partnership or other entity to which are attached more than 50% of the votes that may be cast to elect members of the board of directors, general partners, managing members or other governing body of such entity or other rights to elect a majority of the members of the applicable governing body are held, other than by way of security only, by or for the benefit of the Person, and (b) the votes attached to those securities or other ownership interests are sufficient, if exercised, to elect a majority of the members of the board of directors, general partners, managing members or other governing body of such entity, provided, however, that UCAR Carbon will be deemed to be an Affiliate of Graftech if (c) it directly or indirectly holds a sufficient number of the voting rights attached to all outstanding voting securities of Graftech to affect materially the control of Graftech, or, (d) it, together with other Persons, acting jointly or in concert by virtue of an agreement, arrangement, commitment or understanding, directly or indirectly, holds in total a sufficient number of the voting rights attached to all outstanding securities of Graftech to affect materially the control of Graftech. For purposes of this Agreement, if UCAR Carbon, alone or acting jointly or in concert with other Persons, directly or indirectly, holds more than 20% of the voting securities of Graftech, UCAR Carbon will be deemed, in the absence of evidence to the contrary, to control Graftech, ANNUAL COMMITMENT has the meaning ascribed to it in ss.2.6(c), [TEXT DELETED] means, for the purposes of this Agreement, the formal management decision point that provides [TEXT DELETED] for the [TEXT DELETED] and [TEXT DELETED] and should include [TEXT DELETED] on [TEXT DELETED] and/or [TEXT DELETED]. It is the [TEXT DELETED] described as the [TEXT DELETED] in [TEXT DELETED] dated [TEXT DELETED], [TEXT DELETED] means, for the purposes of this Agreement, the [TEXT DELETED] and [TEXT DELETED] where the [TEXT DELETED] of the [TEXT DELETED] is [TEXT DELETED]. No [TEXT DELETED] should be made [TEXT DELETED] this [TEXT DELETED] and [TEXT DELETED] is [TEXT DELETED] to [TEXT DELETED] with [TEXT DELETED] for the [TEXT DELETED] of [TEXT DELETED]. It is the [TEXT DELETED] described as the [TEXT DELETED] in [TEXT DELETED], dated [TEXT DELETED], BPS/GRAFTECH LICENSE has the meaning ascribed to it in the Collaboration Agreement, 2 BPS PERMITTED LICENSEES means, collectively, (a) [TEXT DELETED] and its Subsidiaries (other than Subsidiaries that have a line of business that would make them a Graftech Competitor), (b) [TEXT DELETED] and its Subsidiaries (other than Subsidiaries that have a line of business that would make them a Graftech Competitor), (c) wholly-owned subsidiaries of BPS and Ballard Generation Systems Inc., (d) licensees of BPS's Background IP, but excludes any licensee that has a line of business that would make it a Graftech Competitor, (e) subject to ss.3.5(a)(i)(B) of the Collaboration Agreement, subcontractors of BPS, and (f) each other Person that is approved in writing by Graftech as BPS's sublicensee of the Graftech/BPS License, BUSINESS DAY means a day that is not (a) a Saturday or a Sunday, or a British Columbia provincial, Canadian federal, a United States national, or Ohio state, holiday, or (b) a day during the period commencing on December 24 of one year and ending on January 2 of the following year, COLLABORATION AGREEMENT has the meaning ascribed to it in Recital (A) to this Agreement, COMMITTEE has the meaning ascribed to it in the Collaboration Agreement, CONDITIONS OF PURCHASE means the conditions of purchase annexed hereto as Schedule D, as may be amended by the parties to this Agreement by mutual agreement from time to time, CONFIDENTIAL INFORMATION means, in relation to a Person, information known or used by such Person in connection with its business and technology, including, but not limited to, such Person's Intellectual Property, customer information, financial information, marketing information, and information as to business opportunities and research and development, DEVELOPMENT has the meaning ascribed to it in the Collaboration Agreement, DISCLOSING PARTY has the meaning ascribed to it in ss.4.1, DISPUTE has the meaning ascribed to it in ss.5.1, DISPUTE NOTICE has the meaning ascribed to it in ss.5.1, 3 EFFECTIVE DATE means the date appearing on page 1 of this Agreement, EVENT OF DEFAULT in relation to a party to this Agreement means the occurrence of one or more of the following circumstances with respect to such party which has, or is reasonably likely to have, a material adverse effect on the business of the other party or on the performance by such party or the other party of a material term of this Agreement: (a) an order is made or a resolution is passed or a petition is filed by such party for the liquidation, dissolution or winding-up of such party (other than pursuant to a corporate reorganization, recapitalization, realignment or restructuring not connected with an event described in ss.(d), ss.(e) or ss.(f)); (b) such party is in breach of its obligations under Part 4; (c) such party commits a breach in observing or performing any other covenant, agreement or condition of this Agreement (not covered by another provision of the definition of Event of Default) on its part to be observed or performed and does not rectify or cure such breach within 30 days after receipt of written notice from the other party to this Agreement specifying in reasonable detail such breach; provided, however, that if the nature of the breach is such that it cannot be cured within such 30-day period and such party has provided the other party to this Agreement with assurances, reasonably satisfactory to the other party, that the breach can be cured within 60 days, and such party has commenced and continued with all due diligence to cure such breach, such breach will not constitute an Event of Default unless such breach is not cured within 60 days after receipt by such party of written notice specifying the breach; (d) an execution, sequestration or any other process of any court becomes enforceable against such party or any distress attachment or analogous process is levied upon any material part of the property, assets and undertaking of such party and any such process or distress attachment is not stayed or otherwise suspended by a court of competent jurisdiction within 60 days; (e) such party voluntarily files for bankruptcy relief, an involuntary bankruptcy proceeding is commenced against such party, and is not dismissed within 90 days, or such party makes an assignment for the benefit of creditors, consents to a proposal or similar action under any bankruptcy, insolvency or debtor-creditor legislation applicable to it, or commences (or has commenced against it and is not dismissed within 90 days) any other proceedings relating to it under any reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction whether now or hereafter in effect, or consents to any such proceeding; (f) a custodian, liquidator, receiver, receiver and manager, receiver-manager, trustee or any other person with similar powers is appointed for such party or in respect of any material property or assets or material part of the property or assets of such 4 party and such appointment is not discharged within 90 days or before any action is taken with respect to such property or asset; or (g) a final, non-appealable, decision of any judicial, administrative, governmental authority or other authority or arbitrator is made which enjoins or restrains, or renders illegal or unenforceable, the performance or observance by such party of any material term of this Agreement, FLOW FIELD PLATE means an electrically conductive fuel cell separator plate that can be used in PEM Fuel Cells, GAS DIFFUSION LAYER or GDL means a Substrate which has been [TEXT DELETED] or [TEXT DELETED] to enable it to be [TEXT DELETED] of a [TEXT DELETED] in a [TEXT DELETED] , GRAFTECH ARISING IP means all Intellectual Property arising pursuant to the Development concerning items allocated to Graftech in Schedule B of the Collaboration Agreement including, but not limited to, the design, composition, manufacturing techniques and methodology respecting such items, GRAFTECH BACKGROUND IP means all Intellectual Property owned or controlled by Graftech or its Affiliates before the Effective Date, GRAFTECH/BPS LICENSE has the meaning ascribed to it in the Collaboration Agreement, GRAFTECH COMPETITOR means a manufacturer of Graphitic Materials, GRAPHITIC COMPONENTS means components made from or utilizing, in whole or in part, Graphitic Materials, including, but not limited to, Flow Field Plates, GDLs and other components for PEM Fuel Cell and PEM Fuel Cell Systems, GRAFTECH IP means, collectively, the Graftech Arising IP and the Graftech Background IP, GRAPHITIC MATERIALS means materials of intercalated natural graphite flakes and materials derived from such flakes, such as expanded graphite and/or flexible graphite (commonly referred to as graphite sheet or foil), [TEXT DELETED], [TEXT DELETED] or [TEXT DELETED], and [TEXT DELETED], [TEXT DELETED] or [TEXT DELETED], INITIAL PURCHASING PERIOD means with respect to a particular Supply Arrangement, the period commencing on the date of execution of such Supply Arrangement and ending on (a) December 31, of the same year, or (b) if the period calculated pursuant to ss.(a) is less than six months, December 31 of the following year, INITIAL TERM has the meaning ascribed to it in ss.6.1, 5 INTELLECTUAL PROPERTY or IP means a patent, patent application, industrial design, invention, design, trade secret, idea, work, methodology, technology, innovation, creation, concept, moral right, development drawing, research, analysis, know-how, experiment, copyright, data, formula, method, procedure, process, system or technique, JOINT ARISING IP has the meaning ascribed to it in the Collaboration Agreement, MEA means a membrane electrode assembly being a solid polymer electrolyte or ion exchange membrane disposed between two GDLs for use in a PEM Fuel Cell and having an electrochemically active region that includes a quantity of electrocatalyst typically disposed in a layer at each membrane/GDL interface, NET SALES PRICE means the gross invoice price (based on fair and honest pricing in accordance with normal established pricing policy of the party paying the royalty), less allowances for returns (in accordance with the normal established return policy of such party), and less cash and other trade discounts off the invoiced price (to the extent separately stated on such invoice) to the extent consistent with normal established discounting policy of such party, shipping charges (to the extent separately stated in such invoice) and sales and other excise taxes included in such invoice price, received or receivable by the party and attributable to the supply of Graphitic Components; provided, however, that with respect to any Graphitic Components disposed of (other than disposal of obsolete, defective and waste products) by such party in any manner other than a bona fide and arm's length sales transaction, the Net Sales Price of such Graphitic Components will be deemed to be an amount equal to the amount which would have been the Net Sales Price of such Graphitic Components had they been sold in the same market for cash in a bona fide and arm's length transaction, NOTICE has the meaning ascribed to it in ss.7.4, PEM FUEL CELL means, subject to ss.2.13, a polymer electrolyte membrane fuel cell or fuel cell stack (including, for greater certainty, a direct methanol polymer electrolyte membrane fuel cell or fuel cell stack), including components, devices, materials and subsystems thereof necessary or desirable for the functioning of the fuel cell or fuel cell stack, including for sealing, venting of gases, vibration isolation, electromagnetic shielding, the supply, recirculation and removal of gases and fluids, inlet gas conditioning, humidification and monitoring, and for control logic and interface logic for the safe and optimal performance of the fuel cell or fuel cell stack, definition of control interfaces between the fuel cell and the fuel cell system control system, and further including structural elements, housings and interfaces with an associated fuel cell system or components thereof, PEM FUEL CELL SYSTEM means, subject to ss.2.13, the components assembled or designed for assembly around A PEM Fuel Cell, including the fuel tank, fuel storage and supply subsystem, fuel processor, air supply subsystem, cooling subsystem, control subsystem, electronic interfaces and power conditioning subsystem, 6 PERSON means an individual, corporation, body corporate, firm, limited liability company, partnership, syndicate, joint venture, society, association, trust or unincorporated organization or trustee or other such legal representative, PRICING AND DELIVERY SCHEDULE has the meaning ascribed to it in ss.2.6(b), PRODUCTS means Graphitic Materials and Graphitic Components that have passed the [TEXT DELETED], PROTOTYPE PRODUCTS means Graphitic Materials and Graphitic Components that have not passed the [TEXT DELETED], PURCHASE ORDER has the meaning ascribed to it in ss.2.8, RECIPIENT has the meaning ascribed to it in ss.4.1, RECIPIENT'S AGENTS has the meaning ascribed to it in ss.4.1(a), RENEWAL TERM has the meaning ascribed to it in ss.6.1, REVISED ANNUAL COMMITMENT has the meaning ascribed to it in ss.2.6(g), REVISED PRICING AND DELIVERY SCHEDULE has the meaning ascribed to it in ss.2.6(d), RFQ has the meaning ascribed to it in ss.2.1, ROYALTY RATE means a mutually agreed to royalty determined by reference, inter alia, to the factors described in Schedule C attached hereto, RULES has the meaning ascribed to it in ss.5.4, SENIOR OFFICER means, in the case of BPS, BPS's President and, in the case of Graftech, Graftech's President, SPECIFICATIONS means the specifications for the Graphitic Materials and Graphitic Components agreed to by BPS and Graftech, SUBSTRATE means a Graphitic Material [TEXT DELETED] for liquid or gas permeability but, for greater certainty, excludes a GDL, SUPPLIER MANUAL means the BPS document which describes BPS's method of evaluating, approving, rating and ranking its suppliers' performance and product quality, the current version of which is attached hereto in Schedule A, as may be amended from time to time, SUPPLY ARRANGEMENT has the meaning ascribed to it in Recital (D) to this Agreement, SUPPLY INDIVIDUAL DEFAULT LICENSE has the meaning ascribed to it in ss.2.10, 7 UCAR CARBON has the meaning ascribed to it in Recital A, YEAR means a calendar year, and YEARLY FORECAST has the meaning ascribed to it in ss.2.6(a), INTERPRETATION 1.2 In this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (a) "this Agreement" means this Master Supply Agreement as from time to time supplemented or amended by one or more agreements entered into pursuant to the applicable provisions hereof, (b) the headings in this Agreement are inserted for convenience only and do not form a part of this Agreement and are not intended to interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof, (c) the terms "including" and "such as", when following any general statement or term, are not to be construed as limiting the general statement or term to the specific items or matters set forth or to similar items or matters, but rather as permitting the general statement or term to refer to all other items or matters that could reasonably fall within their broadest possible scope, (d) all accounting terms not otherwise defined herein have the meanings assigned to them, and all calculations to be made hereunder are to be made, in accordance with, as applicable to BPS or Graftech, respectively, Canadian or United States generally accepted accounting principles applied on a consistent basis, (e) except where otherwise specified, all references to currency mean currency of the United States of America, (f) a reference to a statute includes all regulations made thereunder, all amendments to the statute or regulations in force from time to time, and any statute or regulation that supplements or supersedes such statute or regulations, (g) a reference to an entity includes any successor to that entity, (h) words importing the masculine gender include the feminine or neuter, words in the singular include the plural, words importing a corporate entity include individuals, and VICE VERSA, (i) a reference to "agreed to", "approval", "authorization" or "consent" means written agreement, approval, authorization or consent, as the case may be, and 8 (j) a reference to a Part is to a Part of this Agreement and the symbol ss. followed by a number or some combination of numbers and letters refers to the section, paragraph, subparagraph, clause or subclause of this Agreement so designated. SCHEDULES 1.3 The following schedules are attached hereto and are incorporated into this Agreement by reference and form a part hereof: Schedule A Supplier Manual Schedule B Supply Arrangement - Graphitic Materials for Flow Field Plates Schedule C Royalty Determination Schedule D Conditions of Purchase PART 2 PURCHASE AND SALE OF GRAPHITIC MATERIALS AND GRAPHITIC COMPONENTS [TEXT DELETED] 2.1 As part of the [TEXT DELETED], BPS will provide to Graftech a request for quote ("RFQ") for its requirements of Graphitic Materials and, as appropriate, Graphitic Components. Such RFQ will include BPS's estimated weight, volume or quantity requirements for such Graphitic Materials or Graphitic Components for the term of the envisioned Supply Arrangement, as well as the specifications and quality requirements for such Graphitic Materials or Graphitic Components. Graftech will use such RFQ to provide to BPS a firm fixed pricing and delivery schedule for the supply of such Graphitic Materials or Graphitic Components. PURCHASE AND SALE AFTER [TEXT DELETED] 2.2 Promptly after a particular Product has passed the [TEXT DELETED], BPS will provide Graftech written notice of such event. Subject to the terms of this Agreement, within 90 days after any particular Product has passed the [TEXT DELETED], the parties (a) will, if such Product is a Graphitic Material, and (b) may, at the option of BPS, if the Product is a Graphitic Component enter into a Supply Arrangement in respect of the particular Product. SUPPLY ARRANGEMENT TERMS 2.3 Such Supply Arrangement will be governed by the terms and conditions of this Agreement and specify, 9 (a) the weight, quantity or volume of the Product agreed to be purchased by BPS during (i) the Initial Purchasing Period, or (ii) the entire period of the Supply Arrangement; (b) the agreed purchase price of the Product purchased; (c) the Product Specifications and quality requirements; (d) the term of the Supply Arrangement; and (e) that the purchase and sale of the Product under such Supply Arrangement is governed by the terms and conditions of this Agreement. EXCLUSIVE SUPPLIER OF GRAPHITIC MATERIALS 2.4 Subject to the right of BPS to acquire Graphitic Materials and Graphitic Components from elsewhere for benchmarking purposes, so long as Graftech is able to meet, on a consistent basis, BPS's requirements as to pricing, delivery, quality, performance and service in respect of Graphitic Materials or Graphitic Components for incorporation in PEM Fuel Cells and PEM Fuel Cell Systems, BPS will acquire from Graftech (a) all of its requirements for such Graphitic Materials, and (b) 80% of its requirements for such Graphitic Components in connection with BPS's development and manufacture of the [TEXT DELETED] PEM Fuel Cell stack. BPS INTENT RE: GRAPHITIC COMPONENTS 2.5 Except as otherwise provided in this Agreement and the Collaboration Agreement and BPS's right to make, have made or manufacture Graphitic Components for its own PEM Fuel Cell and PEM Fuel Cell Systems business, it is the intent (but not the obligation) of BPS to acquire from Graftech all of its requirements for Graphitic Components used in connection with its development or manufacture of PEM Fuel Cells and PEM Fuel Cell Systems. FUTURE FORECASTS AND PRICING - GRAPHITIC MATERIALS AND GRAPHITIC COMPONENTS 2.6 Subject to the terms of this Agreement, except for those Products covered by individual Supply Arrangements, future forecasts, pricing and purchase of each Graphitic Material and Graphitic Component will be dealt with as follows: (a) commencing no later than 60 days before the expiry of the Initial Purchasing Period under a Supply Arrangement, or such longer period as set out in ss.2.3(a)(ii), and thereafter no later than November 1 of each subsequent Year, BPS will furnish to Graftech a rolling three-Year forecast of its Yearly requirements of 10 the Graphitic Material or the Graphitic Component, as the case may be (the "Yearly Forecast"), which forecast will not be binding upon BPS; (b) within 30 days after receipt of such forecast, Graftech will provide BPS in writing its firm fixed pricing and delivery schedule (the "Pricing and Delivery Schedule") of the quantity or volume of the Graphitic Material or the Graphitic Component, as the case may be, forecast as required by BPS during the first Year of such three-Year forecast; (c) no later than 30 days after receipt of the Pricing and Delivery Schedule for the Graphitic Material or the Graphitic Component, as the case may be, BPS will provide Graftech with a written binding commitment (the "Annual Commitment") to purchase a specified quantity or volume of the Graphitic Material or the Graphitic Component, as the case may be, during the first Year of the three-Year Forecast, which commitment may vary from the forecast given by BPS for such year; (d) if BPS's quantity or volume or requirements of the Graphitic Material or the Graphitic Component, as the case may be, described in the Annual Commitment is different from BPS's forecast for the first Year of its three-Year rolling forecast by more than 10%, Graftech will no longer be bound by the Pricing and Delivery Schedule but must, within 30 days after receipt of such Annual Commitment, provide BPS with a new firm fixed pricing and delivery schedule (the "Revised Pricing and Delivery Schedule") that takes into account the difference; (e) BPS will have 30 days after receipt of Graftech's Revised Pricing and Delivery Schedule within which to accept or reject the same; it being understood and agreed that BPS's failure to respond within such 30 day period will be deemed to be a rejection of the Revised Pricing and Delivery Schedule; (f) if BPS rejects or is deemed to have rejected the Revised Pricing and Delivery Schedule, the matter will be referred for dispute resolution under Part 5; and (g) BPS may, upon 30 days' written notice to Graftech, make changes to the Annual Commitment ("Revised Annual Commitment") in which event ss.(d), ss.(e) and ss.(f) will apply, MUTATIS MUTANDIS; provided, however, that if Graftech, acting reasonably, does not provide a Revised Pricing and Delivery Schedule for such Revised Annual Commitment, this will not constitute an Event of Default or a failure to meet BPS's Supplier Manual under ss.2.10(a). FUTURE FORECASTS FOR INVESTMENT PLANNING 2.7 BPS will provide long-term forecasts of its requirements for Graphitic Materials and Graphitic Components as requested by Graftech from time to time to assist Graftech in its long-term investment planning. BPS will provide forecasts for the time frame requested by Graftech to the extent practicable. 11 PROTOTYPE PRODUCT SALES 2.8 Notwithstanding ss.2.6 and ss.2.7 hereof, BPS will not be required to submit any forecasts for Prototype Products and any sales of Prototype Products by Graftech to BPS will be effected using BPS's standard purchase order form ("Purchase Order"); provided, however, that sales of Prototype Products will be governed by the terms of this Agreement. MOST FAVOURED CUSTOMER 2.9 Notwithstanding anything in this Agreement to the contrary, if at any time during the term of this Agreement Graftech sells or supplies, or offers to sell or supply, to any other Person a like quantity of Graphitic Materials and Graphitic Components with substantially similar function and capability as those supplied to BPS at a price and terms that are more favourable to such other Person than the price and terms offered to BPS, Graftech will so inform BPS promptly. In the case where in any [TEXT DELETED] period the price at which such Graphitic Materials and Graphitic Components are sold to any other Person is [TEXT DELETED] than the [TEXT DELETED] to BPS for a [TEXT DELETED] quantity of [TEXT DELETED] Graphitic Materials and Graphitic Components with [TEXT DELETED] and [TEXT DELETED] during such period, the [TEXT DELETED] by BPS to Graftech for the Graphitic Materials and the Graphitic Components sold to BPS during such period will be deemed to have been automatically [TEXT DELETED] to that [TEXT DELETED] price from the date on which the price for the Graphitic Materials and Graphitic Components was [TEXT DELETED] to the other Person. In the case where the terms in a sale to such other Person are more [TEXT DELETED] than the [TEXT DELETED] in a [TEXT DELETED] to BPS, such [TEXT DELETED] of the [TEXT DELETED] to BPS will be amended so that the more [TEXT DELETED] terms will apply to all [TEXT DELETED] and [TEXT DELETED] between BPS and Graftech. The parties will make such adjustments to payments or otherwise as may be necessary to fulfil the intent of this ss.2.9. BPS'S SUPPLIER MANUAL. 2.10 In evaluating whether or not Graftech is meeting BPS's requirements as to delivery, quality and service, BPS will, subject to ss.3.1, utilize its Supplier Manual in respect of which Graftech has not consented to in writing. BPS will provide Graftech with and, upon written request from Graftech, explain its then current criteria in respect of its Supplier Manual; provided, however, that Graftech's inability to comply with any material change to such Supplier Manual will not constitute an Event of Default for purposes of this Agreement or any Supply Arrangement; provided, however, that (a) if Graftech has been meeting, for a minimum of [TEXT DELETED] months, BPS's Supplier Manual requirements as materially changed (even though not consented to in writing), it will be deemed to have accepted such material change. If Graftech then fails to meet such BPS's Supplier Manual requirements as materially changed, excluding for purposes of this ss.2.10 any price-related requirement of the Supplier Manual, including that set forth in Section 5.5 thereof, or 12 (b) if Graftech fails to meet BPS's Supplier Manual requirements as presently existing or changed by agreement (where such change is material), excluding for purposes of this ss.2.10 any price-related requirement of the Suppliers Manual, including that set forth in Section 5.5 thereof or (c) if Graftech is in default of the Conditions of Purchase under any Supply Arrangement or Purchase Order, in respect of a particular Graphitic Material or Graphitic Component and such failure continues for a period of [TEXT DELETED] months after the date Graftech receives written notice from BPS of such failure, and provided such failure has a material adverse effect on BPS's business or on the ability of Graftech to materially perform its obligations under the Supply Arrangement for that particular Graphitic Material or Graphitic Component, then Graftech will be deemed to have granted to BPS, a perpetual, irrevocable, world-wide, non-exclusive, royalty-bearing right and license (the "Supply Individual Default License") sublicensable by BPS without restriction, to use all of the Graftech IP to the extent reasonably necessary to develop, manufacture, make, have made, use and sell the particular Graphitic Material or Graphitic Component that is the subject of Graftech's failure to meet BPS's Supplier Manual requirements. In such event, ss.2.4 will be inapplicable insofar as it relates to the particular Graphitic Material or Graphitic Component. The grant of the Supply Individual Default License will be without prejudice to any other remedies then available to BPS against Graftech and such Supply Individual Default License includes the right by BPS to disclose Graftech's Confidential Information to BPS's sublicensees and subcontractors in connection with the production, use or sale of such Graphitic Materials and Graphitic Component. Graftech will promptly, upon request and from time to time, transfer to, and provide BPS with, all relevant technology, information, training and technical assistance as may be necessary to enable BPS to exercise its rights under the Supply Individual Default License at a fee that reflects no more than the reasonable cost of effecting such technology transfer, training and technical assistance, (d) any dispute between BPS and Graftech with regard to any price-related requirement of the Supplier Manual, including that set forth in Section 5.5 thereof, will be resolved pursuant to the dispute resolution process set forth in Part 5 hereof, (e) to the extent any provision of the Supplier Manual is inconsistent with any provision of this Agreement or the Collaboration Agreement, the provisions of this Agreement or the Collaboration Agreement, as the case may be, will govern, and (f) Graftech will, from time to time, comply with all non-material changes to BPS's Supplier Manual promptly after such changes have been effected by BPS and communicated in writing to Graftech. THIRD PARTY SALES 2.11 Except as otherwise set forth in this Agreement or the Collaboration Agreement, the parties acknowledge and agree that BPS will not be entitled to resell any Graphitic 13 Material or Graphitic Component supplied to BPS pursuant to any Supply Arrangement to any third party except where such Graphitic Material or Graphitic Component is integrated into, or is part of, a MEA, PEM Fuel Cell or PEM Fuel Cell System manufactured by, or on behalf of, BPS. LIAISON PERSONNEL 2.12 Each of Graftech and BPS hereby covenant and agree to designate a responsible employee of managerial level to act as a liaison between BPS and Graftech for the supply of Graphitic Materials and Graphitic Components to BPS. DEVELOPMENT EXCEPTIONS 2.13 Notwithstanding anything to the contrary contained in this Agreement or the Collaboration Agreement, (a) Graftech and its Affiliates may manufacture, make, have made, sell or supply non-natural graphite materials, and (b) each of the parties and each of its Affiliates may collaborate, research, develop, manufacture, make, have made, sell or supply devices, subsystems, materials or components whose primary function relates to fuel storage devices, power storage devices (such as supercapacitors and lithium-ion batteries), electronic thermal management components (such as heat sinks, heat spreaders and thermal interfaces), electromagnetic interference shielding, radio frequency interference shielding and heat management devices (such as radiators and components relating to reformers) strictly for such primary function, in each case regardless of whether or not such devices, subsystems, materials or components are for use in PEM Fuel Cells or PEM Fuel Cell Systems; provided, however, that for greater certainty, this provision will not give any rights to either party or either party's Affiliates to, and each party will ensure that its Affiliates will not, use or disclose the Intellectual Property or Confidential Information of the other party. EXISTING SUPPLY ARRANGEMENT 2.14 Attached hereto as Schedule B is the Supply Arrangement for GRAFCELL(TM) advanced flexible Graphitic Materials for Flow Field Plates for PEM Fuel Cells. PART 3 CONDITIONS OF PURCHASE CONDITIONS OF PURCHASE 3.1 BPS and Graftech agree that all sales of Graphitic Materials and Graphitic Components pursuant to this Agreement will be subject to the terms of this Agreement including the Conditions of Purchase, but the terms and conditions set out in Appendix V of the 14 Supplier Manual will not govern such sales. For greater certainty, if and to the extent that any of the terms of the Conditions of Purchase is inconsistent with any provision of this Agreement, such provision of this Agreement will prevail. PART 4 CONFIDENTIALITY NON-DISCLOSURE 4.1 Each party (the "Recipient") that is the recipient of the Confidential Information disclosed to it by the disclosing party (the "Disclosing Party"), at all times during the Development Period (as defined in the Collaboration Agreement) and the Supply Agreement and for a period of ten years next after the expiry or earlier termination of such Development Period or the Supply Agreement, whichever is later, (a) will hold, and will ensure that each of its Affiliates, directors, officers, employees and licensees, including sublicenses (collectively, the "Recipient's Agents") will hold, the Confidential Information of the Disclosing Party in confidence and in trust for the Disclosing Party, (b) will not, and will ensure that the Recipient's Agents will not, directly or indirectly, disclose, use, reproduce or otherwise exploit the Confidential Information of the Disclosing Party or permit the same to be disclosed, used, reproduced or otherwise exploited, except to the extent necessary for (i) the performance of the work under the SOWs (as defined in the Collaboration Agreement), (ii) the legitimate practice of the Graftech/BPS License, the BPS/Graftech License and the Supply Individual Default License, as the case may be, (iii) the furtherance of the Collaboration Agreement; or (iv) the performance of the work under this Agreement; (c) will only disclose the Confidential Information of the Disclosing Party to the Recipient's Agents (i) with a definable need to know such information in connection with the matters referred to in ss.(b), as the case may be, and (ii) who are informed of the confidential nature of such information, and (d) will, and will ensure that each of the Recipient's Agents will, protect the Confidential Information of the Disclosing Party against wrongful disclosure, misuse, espionage and theft. 15 EXCEPTIONS 4.2 This Agreement imposes no obligation on the Recipient with respect to the Confidential Information of the Disclosing Party, (a) which is or becomes generally available to the public through no fault of the Recipient or the Recipient's Agents, (b) which was legitimately possessed by the Recipient or the Recipient's Agents before its disclosure by the Disclosing Party to the Recipient or the Recipient's Agents, as evidenced by competent proof, (c) which is independently obtained by the Recipient or the Recipient's Agents from a source which was not, at the relevant time, prohibited from disclosing such information to the Recipient or the Recipient's Agents under any legal, contractual or fiduciary obligation, (d) which is the same as information that is developed by the Recipient independently without reference to the Confidential Information of the Disclosing Party, as evidenced by competent proof, (e) which, subject to ss.4.3, is required to be disclosed by applicable law or legal process, or (f) to the extent and in the manner approved by the Disclosing Party in writing. LEGAL REQUIREMENT TO DISCLOSE 4.3 If the Recipient is required by applicable law, regulation or legal process to disclose any of the Confidential Information of the Disclosing Party, the Recipient will notify the Disclosing Party promptly so that the Disclosing Party may seek a protective order or other appropriate remedy or waive compliance with the terms of this Agreement. If no such protective order or other remedy is obtained or the Disclosing Party does not waive compliance with the terms of this Agreement, the Recipient (a) will furnish only that portion of the Confidential Information of the Disclosing Party which the Recipient is advised by counsel is legally required to be disclosed, and (b) will exercise all reasonable efforts to obtain reliable assurances that confidential treatment will be accorded such Confidential Information. NO SOLICITATION 4.4 Neither party will, both during the term of this Agreement and the Collaboration Agreement, and for a period of two years next after the expiry or earlier termination of this Agreement or the Collaboration Agreement, whichever is later, solicit for employment any individual who is, at the time of such solicitation, employed by the other 16 party or its Affiliates nor will such party, directly or indirectly, induce any such individual to leave his or her employment. Nothing in this ss.4.4 will restrict either party from employing any individual that is the other party's employee so long as no solicitation (other than a general advertisement not directed to such individual) has been made to such individual by or on behalf of such party. REASONABLE RESTRICTIONS 4.5 Each party agrees that the restrictions contained in this Part 4 are reasonable for the protection of the respective legitimate business interests of the parties. PUBLICITY 4.6 The parties agree to co-operate with each other in the preparation and distribution of a press release regarding the execution of this Agreement. No public release or announcement concerning the transactions contemplated hereby will be issued by any party without the prior consent of the other parties (which consent will not be unreasonably withheld), except as such release or announcement may be required by law or the rules or regulations of any Canadian, United States or other foreign securities exchange, in which case the party required to make the release or announcement will allow the other party reasonable time to comment on such release or announcement in advance of such issuance. PART 5 DISPUTE RESOLUTION INITIATION OF PROCESS 5.1 If at any time there is a dispute, controversy or claim (a "Dispute") between the parties hereto with respect to any matter arising out of or relating to this Agreement, then the party that wishes to initiate resolution of the Dispute must give written notice (the "Dispute Notice") to the other party and to the Committee, requiring that such Dispute be resolved pursuant to this Part 5. COMMITTEE INVOLVEMENT 5.2 If a Dispute Notice is given, either party may, in the first instance, ask the Committee forthwith to initiate discussions with a view to settling the Dispute. A resolution reached by the Committee and communicated by it in writing to the parties will be binding on the parties and will be implemented. SENIOR OFFICER INVOLVEMENT 5.3 If the Dispute is not resolved between the parties within 30 days after the date of the Dispute Notice, either party may ask the Senior Officer of each of the parties to forthwith initiate discussions with a view to settling the Dispute, unless the parties agree in writing to extend such 30-day period for resolution of the Dispute by the Committee. Once the 17 Dispute is referred to the Senior Officers, the Committee will no longer have jurisdiction to resolve the Dispute. A resolution reached by such Senior Officers and communicated by them in writing to the parties will be final and binding upon the parties and will be implemented. ARBITRATION 5.4 If the Dispute is not resolved between the parties within 30 days after its referral to the Senior Officers, either party will be entitled to refer the Dispute to arbitration in accordance with the commercial arbitration rules (the "Rules") of the American Arbitration Association, as modified by the provisions herein, unless the parties agree in writing to extend such 30-day period for resolution of the Dispute by the Senior Officers. IMPLEMENTATION 5.5 Each party will accept as final and binding, and proceed in good faith diligently to implement, the award or decision of the arbitrator or arbitrators, as the case may be, on an arbitration pursuant to ss.5.4. Judgment upon an arbitration award may be rendered in any court of competent jurisdiction or application may be made to any such court by either party for judicial acceptance or an order of enforcement of an arbitration award, as the case may be. Any arbitration award may be supported by a decree of specific performance or other appropriate injunctive relief from a court of competent jurisdiction. VENUE OF ARBITRATION 5.6 All arbitration proceedings will be conducted in New York, New York or in such other place as BPS and Graftech may agree. NON-APPLICABILITY OF PART 5 5.7 This Part 5 will not apply to Part 4 or the grant of provisional remedies, including injunctions, restraining orders and specific performance, and each of BPS and Graftech reserves its right to commence any action under Part 4 or seek such remedies from a court of competent jurisdiction. PART 6 TERM AND TERMINATION TERM 6.1 Subject to earlier termination as provided in this Part 6, the initial term of this Agreement will be 15 years commencing on the Effective Date ("Initial Term"). Thereafter, unless otherwise terminated as provided herein, this Agreement will be automatically renewed for additional periods of three years each (each a "Renewal Term") unless either party gives written notice to the other, at least six months before the expiry of the then current term of this Agreement, to terminate this Agreement. 18 TERMINATION 6.2 This Agreement and, subject to ss.(a), any Supply Arrangement, may be terminated (a) by BPS, upon six months' notice to Graftech, if BPS determines that, through technological advances or otherwise, Graphitic Materials or Graphitic Components or technology in respect thereof are no longer viable for use in connection with the development or manufacture by BPS of PEM Fuel Cells; provided, however, that BPS may not terminate any then existing Supply Arrangement by reason only of this ss.(a), (b) in the case of this Agreement as a whole, by either party upon written notice to the other party if the other party becomes the subject of an Event of Default, and (c) in the case of any particular Supply Arrangement, by either party upon written notice to the other party if the other party becomes the subject of an Event of Default under that particular Supply Arrangement. 6.3 In the event that (a) BPS terminates this Agreement pursuant to ss.6.2(a), BPS will have no liability to Graftech as a result of such termination, (b) BPS terminates this Agreement pursuant to ss.6.2(b), (i) the rights of BPS and Graftech to independently practice and license the Joint Arising IP pursuant to ss.3.4 of the Collaboration Agreement will remain intact, (ii) BPS may terminate the BPS/Graftech License; provided, however, that notwithstanding the foregoing, Graftech will be entitled to practice the BPS Licensed Technology under the BPS/Graftech License (on the royalty basis set forth in ss.3.6 of the Collaboration Agreement) solely to fulfill any supply arrangements with third parties existing as of the date of termination of this Agreement, but in no event will Graftech practice the BPS Licensed Technology under this ss.(ii) for more than three years after the date that the BPS/Graftech License would, but for this proviso, have been terminated, (iii) the Graftech/BPS License will become a perpetual, irrevocable, world-wide, non-exclusive, royalty-bearing right and license, sublicensable by BPS without restriction, except that the provisions of ss.3.5(c),ss.(d) and ss.(e) of the Collaboration Agreement will not apply (other than in respect of IP arising before the termination of this Agreement pursuant to this ss.(b)), to practice the Graftech IP to the extent reasonably necessary to enable BPS to develop, manufacture, make, have made, use and sell Graphitic Components and manufacture, make, have made and use Graphitic Materials required to make such Graphitic Components. If the 19 parties cannot agree on such royalty within 30 days after the subject is first discussed, the matter will be referred to the dispute resolution process set forth in Part 5. The Graftech/BPS License will also include the right by BPS to disclose Graftech's Confidential Information to BPS's sublicensees and subcontractors in connection with the production and use of Graphitic Materials and Graphitic Components. Graftech will promptly, upon request, and from time to time, transfer to, and provide BPS with, all relevant technology, information, training and technical assistance as may be necessary to enable BPS to exercise its rights hereunder at a fee that reflects no more than the reasonable cost of effecting such technology transfer, training and technical assistance, (iv) except as otherwise permitted under ss.2.7, ss.2.9 and ss.2.13 of the Collaboration Agreement and ss.2.13 of this Agreement, Graftech will not, and will ensure that its Affiliates will not, directly or indirectly, until two years after the expiry or earlier termination of the Development, (A) collaborate with third parties (including Graftech's Affiliates, other than its wholly-owned Subsidiaries) in the research or development of Graphitic Materials or Graphitic Components for PEM Fuel Cells or PEM Fuel Cell Systems, or (B) license to any third party any of the Graftech IP concerning Graphitic Materials or Graphitic Components for use in PEM Fuel Cells or PEM Fuel Cell Systems, (v) subject to ss.2.13 of this Agreement and ss.2.13 of the Collaboration Agreement, Graftech will not, and will ensure that its Affiliates will not, directly or indirectly, research, develop, manufacture, make, have made, sell or supply PEM Fuel Cells, PEM Fuel Cell Systems or MEAs until five years after the Development has ended or this Agreement has terminated, whichever is later, and (vi) such termination will be without prejudice to any other rights or remedies then available to BPS, (c) BPS terminates a Supply Arrangement pursuant to ss.6.2(c), the Supply Individual Default License will automatically come into effect with respect to the particular Graphitic Material or Graphitic Component that was subject of the terminated Supply Arrangement, (d) Graftech terminates this Agreement pursuant to ss.6.2(b), (i) the rights of BPS and Graftech to independently practice and license the Joint Arising IP pursuant to ss.3.4 of the Collaboration Agreement will remain intact, 20 (ii) Graftech may terminate the Graftech/BPS License to the extent it has not become irrevocable under this Agreement or the Collaboration Agreement; provided, however, that to the extent that the Graftech/BPS License has not become irrevocable, BPS will be entitled to practice the Graftech Licensed Technology under the Graftech/BPS License solely to fulfill any supply arrangements with third parties existing at the date of termination of this Agreement, but in no event will BPS practice the Graftech Licensed Technology under this ss.(d)(ii) for more than three years after the date that the Graftech/BPS License would, but for this proviso, have been terminated, (iii) the BPS/Graftech License will remain intact and become irrevocable and fully sublicensable without restriction, except that ss.3.6(k), ss.(l) and ss.(m) of the Collaboration Agreement will not apply (other than in respect of IP arising before the termination of this Agreement pursuant to this ss.(d)), (iv) except as otherwise permitted under ss.2.7, ss.2.9 and ss.2.13 of the Collaboration Agreement and ss. 2.13 of this Agreement, BPS will not, and will ensure that its Affiliates will not, directly or indirectly, until two years after the expiry or earlier termination of the Development, (A) collaborate with third parties (including BPS's Affiliates other, than its wholly-owned Subsidiaries) in the research or development of Graphitic Materials or Graphitic Components for PEM Fuel Cells or PEM Fuel Cell Systems, or (B) license to any third party (other than those Persons listed in ss.(a), ss.(b) and ss.(d) of the definition of BPS Permitted Licensees) its component manufacturing technology concerning Graphitic Components for use in PEM Fuel Cells or PEM Fuel Cell Systems, and (v) such termination will be without prejudice to any other rights or remedies then available to Graftech, (e) Graftech terminates a Supply Arrangement pursuant to ss.6.2(c), Graftech may terminate the Graftech/BPS License to the extent that it has not become irrevocable under this Agreement or the Collaboration Agreement; provided, however, that to the extent that the Graftech/BPS License has not become irrevocable BPS will be entitled to practice the Graftech Licensed Technology under the Graftech/BPS License solely to fulfill any supply arrangements with third parties existing at the date of termination of such Supply Arrangement, but in no event will BPS practice the Graftech Licensed Technology under this ss.(e) for more than three years after the date that the Graftech/BPS License would, but for this proviso, have been terminated. 21 LIABILITY LIMITED 6.4 Except as provided in ss.6.5 of this Agreement and ss.11 of the Conditions of Purchase, the liability of each party to the other for damages for any cause whatsoever, regardless of the form of action, whether in contract or in tort, including negligence, that accrues during the term of this Agreement or a Supply Arrangement, will be limited to direct damages suffered by the damaged party. Neither party will be liable to the other for any special, indirect, punitive, or consequential damages, including lost profits, lost revenues, damage to reputation or goodwill, failure to realize expected savings, treble damages or other such commercial or economic losses of any kind. EXCLUSIONS TO LIMITED LIABILITY 6.5 ss.6.4 will not apply to (a) any loss, claim, demand, damage or cost arising as a result of the infringement or misuse by one party of any Intellectual Property of the other, or (b) any unauthorized disclosure or use by a party hereto of any of the other party's Confidential Information in violation of this Agreement. REMEDIES 6.6 If a party is in default of any term or condition of this Agreement, the other party to this Agreement will be entitled to exercise all rights and remedies available to it at law, in equity or under this Agreement, whether or not such default constitutes an Event of Default. PART 7 GENERAL AMENDMENTS 7.1 No amendment, modification, supplement, termination or waiver of any provision of this Agreement will be effective unless in writing signed by the parties and then only in the specific instance and for the specific purpose given. FURTHER ASSURANCES 7.2 The parties will execute such further assurances and other documents and instruments and do such further and other things as may be necessary to implement and carry out the intent of this Agreement. ENTIRE AGREEMENT 7.3 The provisions of this Agreement and the Collaboration Agreement constitute the entire agreement among the parties hereto, and supersede all previous expectations, 22 understandings, communications, representations and agreements whether verbal or written between the parties, concerning the subject matter hereof. NOTICE 7.4 Every notice, request, demand, direction or other communication (each, for the purposes of ss.7.4, ss.7.5 and ss.7.6, a "Notice") required or permitted to be given pursuant to this Agreement will be deemed to be well and sufficiently given if in writing and delivered by hand (including recognized overnight courier service) or transmitted by facsimile, in each case addressed as follows: (a) if to BPS at: 9000 Glenlyon Parkway Burnaby, British Columbia Canada V5J 5J9 Attention: Corporate Secretary Facsimile: (604) 412-3131 and, (b) if to Graftech at: 11709 Madison Avenue Lakewood, Ohio USA 44107 Attention: President Facsimile: (216) 529-3713 with a copy to Graftech's Vice President and General Counsel at the same address and facsimile number; or to such other address or transmission receiving station as is specified by the particular party by Notice to the others. DEEMED RECEIPT 7.5 Any Notice delivered or sent as aforesaid will be deemed conclusively to have been effectively given and received on the day Notice was delivered or sent as aforesaid if it was delivered or sent on a day that was a Business Day or on the next day that is a Business Day if it was delivered or sent on a day that was not a Business Day. CHANGE OF ADDRESS 7.6 A party may at any time, by Notice to the others, change its address to some no less convenient address and will so change its address whenever its address ceases to be suitable for delivery by hand. 23 BINDING EFFECT 7.7 This Agreement will enure to the benefit of and be binding upon the parties and their respective successors and permitted assigns. GOVERNING LAW 7.8 This Agreement will be deemed to have been made in British Columbia, Canada and the construction, validity and performance of this Agreement will be governed in all respects by the laws of British Columbia, and applicable laws of Canada. The application of the provisions of the United Nations Convention on Contracts for the International Sale of Goods are hereby excluded. ATTORNMENT 7.9 Except as provided in Part 5, each party irrevocably attorns to the exclusive jurisdiction of the courts of British Columbia, Canada and all courts having appellate jurisdiction thereover in respect of any proceeding arising out of or relating to this Agreement. FORCE MAJEURE 7.10 No party will be liable to the other for default or delay in the performance of its obligations under this Agreement if such default or delay is caused by fire, strike, riot, war, act of God, delay of carriers, labour disputes, governmental orders or regulation, complete or partial shutdown of plant by reason of inability to obtain sufficient raw material or power, or any other occurrence beyond the reasonable control of such party. The party whose performance is prevented by any such occurrence will notify the other party of the same in writing as soon as it is reasonably possible after the commencement thereof, will provide the other party with full written particulars of such occurrence and attempts made to remedy the same, will use commercially reasonable efforts to remedy such occurrence with all reasonable dispatch and, upon cessation of the occurrence, will give prompt written notice to the other parties of the same. Neither BPS nor Graftech will be required to make any concession or grant any demand or request to bring to an end to any strike or other concerted action of workers. In any such circumstance which only partially reduces Graftech's ability to produce or deliver Graphitic Materials or Graphitic Components, BPS will have production priority for its requirements. SEVERABILITY 7.11 If any provision contained in this Agreement is found by any court or arbitrator for any reason, to be invalid, illegal or unenforceable in any respect in any jurisdiction, (a) the validity, legality and enforceability of such provision will not in any way be affected or impaired thereby in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained herein will not in any way be affected or impaired thereby, unless in either case as a result of such determination this Agreement would fail in its essential purpose, and 24 (b) the parties will use their best efforts to substitute for any provision that is invalid, illegal or unenforceable in any jurisdiction a valid and enforceable provision which achieves to the greatest extent possible the economic, legal and commercial objectives of such invalid, illegal or unenforceable provision of this Agreement and, failing the agreement of the parties on such a substitution within 30 days after the finding of the court or arbitrator, either party may refer the matter for dispute resolution under Part 5. COUNTERPARTS 7.12 This Agreement may be executed in counterparts or by facsimile, each of which will together, for all purposes, constitute one and the same instrument, binding on the parties, and each of which will together be deemed to be an original, notwithstanding that all parties are not signatories to the same counterpart or facsimile. NO ASSIGNMENT 7.13 No party may assign any right, benefit or interest in this Agreement without the written consent of each other party, such consent not to be unreasonably withheld, and any purported assignment without such consent will be void. SURVIVAL 7.14 All rights and obligations of the parties occurring before the effective date of termination of this Agreement and all rights and obligations expressly stated to continue after, or accrue as a result of, the termination of this Agreement are separate and distinct rights and obligations binding on the parties, will survive its termination and will continue in full force and effect and nothing herein will affect the enforceability of such provisions. For greater certainty, the premature termination of this Agreement will not affect the rights and obligations of any party under ss.2.10, ss.2.13, Part 3, Part 4, Part 5, Part 6 and Part 7. All other provisions will expire except to enforce rights arising prior to termination. NO PARTNERSHIP 7.15 Nothing herein will or will be deemed to create any partnership or joint venture between the parties or to give either party any right or authority to act as the agent of or to pledge the credit of the other party. 25 IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement as of the date first above written. GRAFTECH INC. By:/S/ JOHN J. WETULA ---------------------------------- Its: PRESIDENT This is the execution page for Graftech Inc. for the Master Supply Agreement, made effective June 5, 2001, between Ballard Power Systems Inc. and Graftech Inc. 26 IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement as of the date first above written. BALLARD POWER SYSTEMS INC. By: /s/ LAYLE K. SMITH ---------------------------------- Its: PRESIDENT & CHIEF OPERATING OFFICER By: /S/ NOORDIN NANJI ---------------------------------- Its: VP STRATEGIC DEVELOPMENT & CORPORATE SECRETARY --------------------------------- This is the execution page for Ballard Power Systems Inc. for the Master Supply Agreement, made effective June 5, 2001, between Ballard Power Systems Inc. and Graftech Inc. 27 SCHEDULE A SUPPLIER MANUAL [intentionally omitted] A-1 SCHEDULE B SUPPLY ARRANGEMENT GRAPHITIC MATERIALS FOR FLOW FIELD PLATES
- -------------------------------------------------------------------------------------------------------------- MATERIAL SPECIFICATION |TITLE | |Flexible Graphite [TEXT DELETED] Material [TEXT |DELETED] - ------------------------------------------------------------|------------------------------------------------- AUTHOR |DATE |APPROVED |DATE | | | Author: M. SEXSMITH |Date: JULY 20, 1999 |M. Sexsmith |12, July, 1999 - --------------------------------------------------------------------------------------------------------------
1. Scope 1.1 This specification covers flexible graphite material supplied by UCAR as blend [TEXT DELETED]. The Specification covers several possible thicknesses and area weights 2. Applicable Documents 2.1 American Society for Testing and Materials (ASTM) 2.1.1. -[TEXT DELETED] [TEXT DELETED] Measurement Technique 2.1.2. -[TEXT DELETED] [TEXT DELETED] Measurement 2.1.3. -[TEXT DELETED] [TEXT DELETED] and [TEXT DELETED] of Gasket Materials 3. Requirements 3.1 PRECEDENCE - In the event of any conflict between the requirements of this specification referenced documents, this specification shall govern. 3.2 VISUAL REQUIREMENTS - The material shall have no gross physical defects including [TEXT DELETED], [TEXT DELETED], [TEXT DELETED] or [TEXT DELETED] on the surface. There may not be more than [TEXT DELETED] between [TEXT DELETED] and [TEXT DELETED] in diameter in any [TEXT DELETED] by [TEXT DELETED] area. There shall be no [TEXT DELETED] more than [TEXT DELETED] diameter in the material. 3.3 CHEMICAL REQUIREMENTS - All flexible graphite material shall conform to the following requirements. -------------- ------------- ----------- ------------------ Property Specification Tolerance Test Method -------------- ------------- ----------- ------------------ [TEXT DELETED] [TEXT [TEXT [TEXT DELETED] DELETED] DELETED] -------------- ------------- ---------- ------------------ [TEXT DELETED] [TEXT [TEXT [TEXT DELETED] DELETED] DELETED] -------------- ------------- ---------- ------------------ [TEXT DELETED] [TEXT [TEXT [TEXT DELETED] DELETED] DELETED] -------------- ------------- ---------- ------------------ 3.4 PHYSICAL PROPERTIES - Shall conform to the following requirements. B-1 - ---------------- ----------- ----------- ---------- --------------------- [TEXT DELETED] [TEXT [TEXT [TEXT See Section 4.5.2.1 gm/cm2 DELETED] DELETED] DELETED] - ---------------- ----------- ----------- ---------- --------------------- [TEXT DELETED] [TEXT [TEXT [TEXT DELETED] DELETED] DELETED] - ---------------- ----------- ----------- ---------- --------------------- [TEXT DELETED] [TEXT [TEXT [TEXT See Section 4.5.2.3 DELETED] DELETED] DELETED] - ---------------- ----------- ----------- ---------- --------------------- [TEXT DELETED] [TEXT [TEXT [TEXT See Section 4.5.2.3 DELETED] DELETED] DELETED] - ---------------- ----------- ----------- ---------- --------------------- [TEXT DELETED] [TEXT [TEXT [TEXT See Section 4.5.2.2 DELETED] DELETED] DELETED] - ---------------- ----------- ----------- ---------- --------------------- [TEXT DELETED] [TEXT [TEXT [TEXT See Section 4.5.2.4 DELETED] DELETED] DELETED] - ---------------- ----------- ----------- ---------- --------------------- [TEXT DELETED] [TEXT [TEXT [TEXT See Section 4.5.2.4 DELETED] DELETED] DELETED] - ---------------- ----------- ----------- ---------- --------------------- 3.5 DIMENSIONAL REQUIREMENTS - Plates produced from this material shall conform to the dimensions specified on the relevant part drawing. On occasion Ballard may request material to be sent for testing purposes only that does not have the dimensions listed in this document. The results of tests requiring specific dimensions will not be considered to be requirements but should be performed and included in the Certificate of Compliance. Such data should be labeled as such. 4. Quality Assurance Provisions 4.1 RESPONSIBILITY FOR INSPECTION - Unless otherwise specified, the supplier is responsible for the performance of all inspections specified in Section 3. The supplier may use their own, or any other facility suitable, for the performance of the inspections specified therein. 4.2 QUALITY VERIFICATION - Ballard Power Systems Inc. will have the right to subject any requested lot of material to any of the inspection requirements specified to verify that the lot will comply with the requirements specified herein. 4.3 PROCESS CHANGE NOTIFICATION - The supplier shall provide advance information in writing concerning any changes in process or preservations from the product previously approved. Approval to ship product incorporating changes shall be dependent upon Ballard's evaluation that these changes do not violate this specification or the intended use of the product. Ballard Power Systems Inc. reserves the right to perform a qualification inspection if necessary. 4.4 CERTIFICATE OF COMPLIANCE - The supplier is required to provide a certificate of compliance with data for each lot number of material. Failure to supply a certificate may be cause for rejection except as noted in section 3.4. the supplier is required to provide the following data: 4.4.1 Material Lot Number, Purchase Order Number and BPS Part Number. 4.4.2. Chemical Analysis (see Section 3.2). 4.4.3. Physical Property Inspection Data (see Section 3.3). B-2 4.5. Methods of Inspection 4.5.1. CHEMICAL REQUIREMENTS INSPECTION - A chemical analysis shall be performed on each lot of material. The analysis shall conform to the requirements of Section 3.2. 4.5.2. PHYSICAL PROPERTY INSPECTION - The physical tests shall be performed according to the following methods 4.5.2.1 [TEXT DELETED]- A sample of the [TEXT DELETED] material shall be [TEXT DELETED] to a known [TEXT DELETED] and [TEXT DELETED] and [TEXT DELETED]. 4.5.2.2 [TEXT DELETED] - [TEXT DELETED] samples [TEXT DELETED] by [TEXT DELETED] are [TEXT DELETED] from [TEXT DELETED] on the [TEXT DELETED]. Each of the samples is placed in the [TEXT DELETED] and [TEXT DELETED] for [TEXT DELETED]. The test parameters are: -------------------- ----------------- --------------- ----------- Test Condition Specification Tolerance Accuracy -------------------- ----------------- --------------- ----------- [TEXT DELETED] Load [TEXT DELETED] [TEXT [TEXT DELETED] DELETED] -------------------- ----------------- --------------- ----------- Test Current [TEXT DELETED] [TEXT [TEXT DELETED] DELETED] -------------------- ----------------- --------------- ----------- [TEXT DELETED] [TEXT DELETED] [TEXT [TEXT DELETED] DELETED] -------------------- ----------------- --------------- ----------- 4.5.2.3 [TEXT DELETED] STRENGTH - A sheet of the material is [TEXT DELETED] to the [TEXT DELETED]. [TEXT DELETED] samples of specified size are [TEXT DELETED] from a sample component in [TEXT DELETED] from each other. The samples are tested according to the requirements of [TEXT DELETED] according to the following test parameters. The ultimate flexural load shall exceed the specified limit and the [TEXT DELETED] at the [TEXT DELETED] shall exceed the specified limit. --------------------- --------------- -------------- ---------------- Test Condition Specification Tolerance Accuracy --------------------- --------------- -------------- ---------------- [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] --------------------- --------------- -------------- ---------------- Beam Length [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] --------------------- --------------- -------------- ---------------- Beam Width [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] --------------------- --------------- -------------- ---------------- Beam Thickness [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] --------------------- --------------- -------------- ---------------- Support and Load Pins [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] --------------------- --------------- -------------- ---------------- 4.5.2.4 [TEXT DELETED] - A piece of material is tested according to [TEXT DELETED]. The test conditions are given in the following table --------------- ----------------- --------------- Penetrator Preload Total Load --------------- ----------------- --------------- [TEXT DELETED] [TEXT DELETED] [TEXT DELETED] --------------- ----------------- --------------- 5. Packaging 5.1 DOCUMENTATION - A packing list and certificate of compliance will accompany each B-3 shipment. The packing list will contain information as shown in Section 5.2. The certificate of compliance will contain information as shown in Section 4.4. 6. Revision History 6.1 PA ECR 99-00172-00 6.2 ECN 99-00179-00 July 7, 1999 Initial Release 6.3 Change all references to Grafoil to flexible graphite (including document title), updated section 3.3 to include [TEXT DELETED], and updated [TEXT DELETED] numbers. 02/09/99 [TEXT DELETED]. B-4
SUPPLY CHAIN FORECAST RELEASE MARCH 19/01 (UNOFFICIAL) - ------------- ------- ------ -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Month Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Total - ------------- ------- ------ -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- - ---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- [TEXT DELETED] pieces [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] - ---------------------------- -------- -------- -------- -------- -------- -------- ----------------------------------- -------- [TEXT DELETED] pieces [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT [TEXT DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] DELETED] - ---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
B-5 UCAR UCAR CARBON COMPANY INC. P.O. Box 94637 Cleveland, Ohio 44101 U.S.A. Ballard Power Systems Inc. Date 08/03/99 9000 Glenlyon Parkway Burnby, BC Quotation Number: 99G1203 Canada V5J 5J9 Inquiry Number: Attn: V. Totten In response to your inquiry, we are pleased to quote as follows.
============= =============== ====================================================================== ============================ ITEM QUANTITY DESCRIPTION PRICE - ------------- --------------- ---------------------------------------------------------------------- ---------------------------- "GRAFOIL" Products Per Ballard Power Systems Supply Agreement Schedule B provided 7/29/1999. 1 Volumes [TEXT DELETED] mg/cm2, [TEXT DELETED] thick x [TEXT DELETED] x [TEXT $[TEXT DELETED]/ea Per [TEXT DELETED] [TEXT DELETED] DELETED] 2 " [TEXT DELETED] mg/cm2, [TEXT DELETED] thick x [TEXT DELETED] x [TEXT $[TEXT DELETED]/ea DELETED] 3 " [TEXT DELETED] thk x [TEXT DELETED] x [TEXT DELETED] [TEXT DELETED] $[TEXT DELETED]/ea 4 " [TEXT DELETED] mg/cm2, [TEXT DELETED] thick x [TEXT DELETED] x [TEXT $[TEXT DELETED]/ea DELETED] 5 " [TEXT DELETED] mg/cm2, [TEXT DELETED] thk x [TEXT DELETED] x [TEXT $[TEXT DELETED]/rl DELETED] on [TEXT DELETED]. *SEE PARAGRAPH 1 ON REVERSE SIDE ============= =============== ====================================================================== ============================
Delivery Point: FCA Factory - Cleveland, Ohio Terms of Payment: Date Draft 30 Days Estimated Time of Shipment From Plant: As Required This date will be confirmed upon receipt of order. If it is unsatisfactory please let us know. The sale of the products described herein shall be governed by the terms and conditions contained in any written contract currently in effect between Buyer and Seller covering such sale. If there is no such contract, then Seller hereby offers to sell such product to Buyer only upon the terms set forth herein, including those on the reverse side of this document. This quotation is subject to acceptance within (30) days from the date hereof. Thank you for this inquiry. Be assured your order will receive our prompt attention. cc: P. Calarco UCAR J.J. Gough UCAR Very truly yours, MH. Burns UCAR /s/ John R. Smelko B-6 UCAR UCAR CARBON COMPANY INC. P.O. Box 94637 Cleveland, Ohio 44101 U.S.A. Ballard Power Systems Inc. Date 08/03/99 9000 Glenlyon Parkway Burnaby, BC Quotation Number: 99G1203 Canada V5J 5J9 Inquiry Number: Attn: V. Totten In response to your inquiry, we are pleased to quote as follows.
============= =============== ====================================================================== ============================ ITEM QUANTITY DESCRIPTION PRICE - ------------- --------------- ---------------------------------------------------------------------- ---------------------------- "GRAFOIL" Products Per Ballard Power Systems Supply Agreement Schedule B provided 7/29/1999. 1 Volumes [TEXT DELETED] g/cm2, [TEXT DELETED] thick x [TEXT DELETED] x [TEXT $[TEXT DELETED]/ea Per [TEXT DELETED] DELETED] [TEXT DELETED] 2 " [TEXT DELETED] mg/cm2, [TEXT DELETED] thick x [TEXT DELETED] x [TEXT $[TEXT DELETED]/ea DELETED] 3 " [TEXT DELETED] thk x [TEXT DELETED] x [TEXT DELETED] $[TEXT DELETED]/ea [TEXT DELETED] 4 " [TEXT DELETED] mg/cm2, [TEXT DELETED] thick x [TEXT DELETED] x [TEXT $[TEXT DELETED]/ea DELETED] 5 " [TEXT DELETED] mg/cm2, [TEXT DELETED] thk x [TEXT DELETED] x [TEXT $[TEXT DELETED]/rl DELETED] on [TEXT DELETED]. *SEE PARAGRAPH 1 ON REVERSE SIDE ============= =============== ====================================================================== ============================
Delivery Point: FCA Factory - Cleveland, Ohio Terms of Payment: Date Draft 30 Days Estimated Time of Shipment From Plant: As Required This date will be confirmed upon receipt of order. If it is unsatisfactory please let us know. The sale of the products described herein shall be governed by the terms and conditions contained in any written contract currently in effect between Buyer and Seller covering such sale. If there is no such contract, then Seller hereby offers to sell such product to Buyer only upon the terms set forth herein, including those on the reverse side of this document. This quotation is subject to acceptance within (30) days from the date hereof. Thank you for this inquiry. Be assured your order will receive our prompt attention. cc: P. Calarco UCAR J.J. Gough UCAR Very truly yours, M.H. Burns UCAR /s/ John R. Smelko B-7 UCAR UCAR CARBON COMPANY INC. PHONE: 216/529-3777 P.O. Box 94637 Cleveland, Ohio 44101 U.S.A. 800/253-8003 Ballard Power Systems Inc. Date September 27, 1999 9000 Glenlyon Parkway Quotation No. 99G1274 Burnaby, BC Canada V5J 5J9 Attn: Al Fortin Fax: 604-412-8649 This quotation is submitted in reply to your inquiry and is our offer to sell you the products described below, only upon the terms and conditions of sale contained in this quotation, including those contained on the reverse side hereof.
=================== ========================================================================== ============================= QUANTITY DESCRIPTION PRICE - ------------------- -------------------------------------------------------------------------- ----------------------------- [TEXT DELETED] GRAFOIL [TEXT DELETED] mg/cm2 $[TEXT DELETED] Rolls [TEXT DELETED]x [TEXT DELETED] x [TEXT DELETED] EA ROLL [TEXT DELETED]: [TEXT DELETED] x [TEXT DELETED] Width [TEXT DELETED] [TEXT DELETED] meters - [TEXT DELETED] diameter Note: The last time we supplied this, the width tolerance was +/- [TEXT DELETED] Please confirm when ordering. *SEE PARAGRAPH 1 ON REVERSE - ------------------------------- ------------------------------------------------------ ------------------------------------- ESTIMATED SHIPPING DATE ABOVE PRICES F.O.S. SHIPPING POINT TERMS As Scheduled Cleveland, OH Net 30 Days-No Cash Discount - ------------------------------- ------------------------------------------------------ -------------------------------------
This offer to sell the products described above is subject to acceptance within fifteen (15) days from the date hereof. The estimated shipping date will be confirmed upon receipt of order. If this date does not meet your needs and an earlier delivery is required, please let us know. Thank you for this inquiry. We assure you that your order will be serviced promptly. cc: M. Burns Very truly yours, P. Calarco UCAR J. Gough UCAR CARBON COMPANY INC. By: /s/ John R. Smelko John R. Smelko B-8 UCAR UCAR CARBON COMPANY INC. PHONE: 216/529-3777 P.O. Box 94637 Cleveland, Ohio 44101 U.S.A. 800/253-8003 Ballard Power Systems Inc. Date October 22, 1999 9000 Glenlyon Parkway Quotation No. 99G1297 Burnaby, BC V5J 5J9 Your Fax Inquiry Dated Oct. 20, 1999 Attn: Michelle Hicks This quotation is submitted in reply to your inquiry and is our offer to sell you the products described below, only upon the terms and conditions of sale contained in this quotation, including those contained on the reverse side hereof.
=================== ========================================================================== ============================= QUANTITY DESCRIPTION PRICE - ------------------- -------------------------------------------------------------------------- ----------------------------- [TEXT DELETED] GRAFOIL [TEXT DELETED] $[TEXT DELETED] Pcs. [TEXT DELETED]x [TEXT DELETED] x [TEXT DELETED] Net Each [TEXT DELETED] GRAFOIL [TEXT DELETED] $[TEXT DELETED] Pcs. [TEXT DELETED] x [TEXT DELETED] x [TEXT DELETED] Net Each [TEXT DELETED] GRAFOIL [TEXT DELETED] $[TEXT DELETED] Pcs. [TEXT DELETED]x [TEXT DELETED] x [TEXT DELETED] Net Each Please specify density when ordering. U.S. Dollars *SEE PARAGRAPH 1 ON REVERSE - ------------------------------- ------------------------------------------------------ ------------------------------------- ESTIMATED SHIPPING DATE ABOVE PRICES F.O.S. SHIPPING POINT TERMS As Scheduled Cleveland, OH Net 30 Days-No Cash Discount - ------------------------------- ------------------------------------------------------ -------------------------------------
This offer to sell the products described above is subject to acceptance within fifteen (15) days from the date hereof. The estimated shipping date will be confirmed upon receipt of order. If this date does not meet your needs and an earlier delivery is required, please let us know. Thank you for this inquiry. We assure you that your order will be serviced promptly. cc: Milt Burns Very truly yours, Paul Calarco UCAR Jeff Gough UCAR CARBON COMPANY INC. By: /s/ John R. Smelko John R. Smelko B-9 UCAR UCAR CARBON COMPANY INC. PHONE: 216/529-3777 P.O. Box 94637 Cleveland, Ohio 44101 U.S.A. 800/253-8003 Ballard Power Systems Inc. Date January 12, 2000 9000 Glenlyon Parkway Quotation No. 00G1009 Burnaby, BC V5J 5J9 Attn: Al Fortin Phone: 604/412-4717 Fax: 604/412-8649 This quotation is submitted in reply to your inquiry and is our offer to sell you the products described below, only upon the terms and conditions of sale contained in this quotation, including those contained on the reverse side hereof.
=================== ========================================================================== ============================= QUANTITY DESCRIPTION PRICE - ------------------- -------------------------------------------------------------------------- ----------------------------- [TEXT DELETED] [TEXT DELETED] mg/cm2 $[TEXT DELETED] Rolls [TEXT DELETED] x [TEXT DELETED]+/-[TEXT DELETED] x [TEXT Net EA Roll DELETED] USD [TEXT DELETED]: [TEXT DELETED] x [TEXT DELETED] x [TEXT DELETED] *SEE PARAGRAPH 1 ON REVERSE - ------------------------------- ------------------------------------------------------ ------------------------------------- ESTIMATED SHIPPING DATE ABOVE PRICES F.O.S. SHIPPING POINT TERMS 2 Weeks ARO Cleveland, OH Net 30 Days-No Cash Discount - ------------------------------- ------------------------------------------------------ -------------------------------------
This offer to sell the products described above is subject to acceptance within fifteen (15) days from the date hereof. The estimated shipping date will be confirmed upon receipt of order. If this date does not meet your needs and an earlier delivery is required, please let us know. Thank you for this inquiry. We assure you that your order will be serviced promptly. cc: Jeff Gough Very truly yours, Paul Calarco UCAR Milt Burns UCAR CARBON COMPANY INC. File By: /s/ John R. Smelko John R. Smelko B-10 UCAR UCAR CARBON COMPANY INC. PHONE: 216/529-3777 P.O. Box 94637 Cleveland, Ohio 44101 U.S.A. 800/253-8003 Ballard Power Systems Inc. Date March 10, 2000 9000 Glenlyon Parkway Quotation No. 00G1057 Burnaby, BC V5J 5J9 Your Fax Inquiry of of March 2, 2000 Attn: Michelle Hicks This quotation is submitted in reply to your inquiry and is our offer to sell you the products described below, only upon the terms and conditions of sale contained in this quotation, including those contained on the reverse side hereof.
=================== ========================================================================== ============================= QUANTITY DESCRIPTION PRICE - ------------------- -------------------------------------------------------------------------- ----------------------------- [TEXT DELETED]* GRAFOIL [TEXT DELETED] g/cm2 $[TEXT DELETED] [TEXT DELETED] x [TEXT DELETED] x [TEXT DELETED] EA USD *To Be Ordered in 2 Distinct Lots of [TEXT DELETED] Pieces Each. *SEE PARAGRAPH 1 ON REVERSE - ------------------------------- ------------------------------------------------------ ------------------------------------- ESTIMATED SHIPPING DATE ABOVE PRICES F.O.S. SHIPPING POINT TERMS 2 Weeks ARO Cleveland, OH Net 30 Days-No Cash Discount - ------------------------------- ------------------------------------------------------ -------------------------------------
This offer to sell the products described above is subject to acceptance within fifteen (15) days from the date hereof. The estimated shipping date will be confirmed upon receipt of order. If this date does not meet your needs and an earlier delivery is required, please let us know. Thank you for this inquiry. We assure you that your order will be serviced promptly. cc: Paul Calarco Very truly yours, Jeff Gough UCAR File UCAR CARBON COMPANY INC. By: /s/ John R. Smelko John R. Smelko B-11 UCAR UCAR CARBON COMPANY INC. PHONE: 216/529-3777 P.O. Box 94637 Cleveland, Ohio 44101 U.S.A. 800/253-8003 Ballard Power Systems Inc. Date March 10, 2000 9000 Glenlyon Parkway Quotation No. 00G1051 Burnaby, BC V5J 5J9 Your Fax Inquiry of March 6, 2000 Attn: Michelle Hicks This quotation is submitted in reply to your inquiry and is our offer to sell you the products described below, only upon the terms and conditions of sale contained in this quotation, including those contained on the reverse side hereof.
=================== ========================================================================== ============================= QUANTITY DESCRIPTION PRICE - ------------------- -------------------------------------------------------------------------- ----------------------------- [TEXT DELETED]* GRAFOIL [TEXT DELETED] g/cm2 $[TEXT DELETED] [TEXT DELETED] x [TEXT DELETED] x [TEXT DELETED] EA NET Per [TEXT DELETED] USD except tolerances: +/- [TEXT DELETED] width +/- [TEXT DELETED] length *[TEXT DELETED] Pieces for delivery [TEXT DELETED] [TEXT DELETED] Pieces for delivery [TEXT DELETED] *SEE PARAGRAPH 1 ON REVERSE - ------------------------------- ------------------------------------------------------ ------------------------------------- ESTIMATED SHIPPING DATE ABOVE PRICES F.O.S. SHIPPING POINT TERMS As Scheduled Cleveland, OH Net 30 Days-No Cash Discount - ------------------------------- ------------------------------------------------------ -------------------------------------
This offer to sell the products described above is subject to acceptance within fifteen (15) days from the date hereof. The estimated shipping date will be confirmed upon receipt of order. If this date does not meet your needs and an earlier delivery is required, please let us know. Thank you for this inquiry. We assure you that your order will be serviced promptly. cc: Paul Calarco Very truly yours, Jeff Gough UCAR File UCAR CARBON COMPANY INC. By: /s/ John R. Smelko John R. Smelko B-12 UCAR GRAPH - TECH UCAR GRAPH - TECH INC. Ballard Power Systems Inc. June 7, 2000 Quotation No. 00G1098
YEAR QUANTITY DESCRIPTION PRICE ---- -------- ----------- ----- [TEXT DELETED] [TEXT DELETED] GRAFCELL [TEXT DELETED] $[TEXT K Kg DELETED] Per Kg [TEXT DELETED] [TEXT DELETED] GRAFCELL [TEXT DELETED] $[TEXT K Kg DELETED] Per Kg [TEXT DELETED] [TEXT DELETED] GRAFCELL [TEXT DELETED] $[TEXT K Kg DELETED] Per Kg [TEXT DELETED] [TEXT DELETED] GPAFCELL [TEXT DELETED] $[TEXT K Kg DELETED] Per Kg [TEXT DELETED] [TEXT DELETED] GRAFCELL [TEXT DELETED] $[TEXT K Kg DELETED]
Notes: Prices quoted in year 2000 dollars Assume all materials to be shipped in coils after 2003 [TEXT DELETED] weight is [TEXT DELETED] mg/cm2 Material is not [TEXT DELETED] Volumes as stated in Ballard's forecast release No. 4 dated April 28, 2000. P.O. Box 94637, Cleveland, OH 44101-4637 U.S.A. Tel: (216) 529-3777, (800) 253-8003 Fax: (216) 529-3888 Email: grafoil@ucar.com B-13 UCAR UCAR CARBON COMPANY INC. P.O. Box 94637 Cleveland, Ohio 44101 U.S.A. Ballard Power Systems Inc. Date June 22, 2000 9000 Glenlyon Parkway Burnaby, BC Quotation Number: 00G1101 Canada V5J 5J9 Inquiry Number: Your Fax of June 20, 2000 Attn: Michelle Hicks In response to your inquiry, we are pleased to quote as follows.
============= =============== ====================================================================== ============================ ITEM QUANTITY DESCRIPTION PRICE - ------------- --------------- ---------------------------------------------------------------------- ---------------------------- A [TEXT DELETED] GRAFCELL [TEXT DELETED] g/cm(2) $[TEXT DELETED] (per release) [TEXT DELETED] x [TEXT DELETED] x [TEXT DELETED] EA NET Your [TEXT DELETED] USD *SEE PARAGRAPH 1 ON REVERSE SIDE ============= =============== ====================================================================== ============================
Delivery Point: FOB Factory - Cleveland, Ohio Terms of Payment: Net 30 Days Estimated Time of Shipment From Plant: --- This date will be confirmed upon receipt of order. If it is unsatisfactory please let us know. The sale of the products described herein shall be governed by the terms and conditions contained in any written contract currently in effect between Buyer and Seller covering such sale. If there is not such contract, then Seller hereby offers to sell such product to Buyer only upon the terms set forth herein, including those on the reverse side of this document. This quotation is subject to acceptance within (30) days from the date hereof. Thank you for this inquiry. Be assured your order will receive our prompt attention. cc: Paul Calarco Very truly yours, Jeff Gough Milt Burns File By: /s/ John R. Smelko John R. Smelko B-14 UCAR UCAR CARBON COMPANY INC. P.O. Box 94637 Cleveland, Ohio 44101 U.S.A. Ballard Power Systems Inc. Date September 15, 2000 9000 Glenlyon Parkway Burnaby, BC Quotation Number: 00G1135 Revision A Canada V5J 5J9 Inquiry Number: Verbal (Gough) Attn: Horst Thumm In response to your inquiry, we are pleased to quote as follows.
============= =============== ====================================================================== ============================ ITEM QUANTITY DESCRIPTION PRICE - ------------- --------------- ---------------------------------------------------------------------- ---------------------------- A [TEXT DELETED] GRAFCELL [TEXT DELETED] MG/CM(2) $[TEXT DELETED] ea. roll [TEXT DELETED] x [TEXT DELETED] x [TEXT DELETED] USD [TEXT DELETED]: [TEXT DELETED] x [TEXT DELETED] x [TEXT DELETED] (Material may be [TEXT DELETED] & [TEXT DELETED] *SEE PARAGRAPH 1 ON REVERSE SIDE ============= =============== ====================================================================== ============================
Delivery Point: FOB Factory - Cleveland, Ohio Terms of Payment: Net 30 Days Estimated Time of Shipment From Plant: 1 TO 2 WEEKS ARO This date will be confirmed upon receipt of order. If it is unsatisfactory please let us know. The sale of the products described herein shall be governed by the terms and conditions contained in any written contract currently in effect between Buyer and Seller covering such sale. If there is not such contract, then Seller hereby offers to sell such product to Buyer only upon the terms set forth herein, including those on the reverse side of this document. This quotation is subject to acceptance within (30) days from the date hereof. Thank you for this inquiry. Be assured your order will receive our prompt attention. cc: Jeff Gough Very truly yours, File By: /s/ John R. Smelko John R. Smelko B-15 GRAFTECH GRAFTECH INC. GRA P.O. Box 94637 Cleveland, Ohio 44101 U.S.A. Ballard Power Systems Inc. Date January 8, 2001 Burnaby, BC Quotation Number: 00G1007 Inquiry Number: Fax of Jan. 8, 2001 Attn: Michelle Hicks In response to your inquiry, we are pleased to quote as follows.
============= ================ ===================================================================== ============================ ITEM QUANTITY DESCRIPTION PRICE - ------------- ---------------- --------------------------------------------------------------------- ---------------------------- A [TEXT DELETED] GRAFCELL [TEXT DELETED] g/cm(2) $[TEXT DELETED] PCS [TEXT DELETED] x [TEXT DELETED] x [TEXT DELETED] EA NET Per DWG [TEXT DELETED] *SEE PARAGRAPH 1 ON REVERSE SIDE ============= ================ ===================================================================== ============================
Delivery Point: Cleveland, Ohio Terms of Payment: Net 30 Days Estimated Time of Shipment From Plant: 2 Weeks This date will be confirmed upon receipt of order. If it is unsatisfactory please let us know. The sale of the products described herein shall be governed by the terms and conditions contained in any written contract currently in effect between Buyer and Seller covering such sale. If there is not such contract, then Seller hereby offers to sell such product to Buyer only upon the terms set forth herein, including those on the reverse side of this document. This quotation is subject to acceptance within (30) days from the date hereof. Thank you for this inquiry. Be assured your order will receive our prompt attention. cc: Jeff Gough Very truly yours, Paul Calarco Milt Burns File By: /s/ John R. Smelko John R. Smelko B-16 GRAFTECH P.O. Box 94637 Cleveland, Ohio 44101 U.S.A. Phone 216/529-3777 Ballard Power Systems Inc. Date 01/24/01 9000 Glenlyon Parkway Burnaby, BC Quotation Number: 01G1029 Canada V5J 5J9 Attn: Michelle Hicks Inquiry Number: e-mail dated 01-19-01 In response to your inquiry, we are pleased to quote as follows.
============= =============== ====================================================================== ============================ ITEM QUANTITY DESCRIPTION PRICE - ------------- --------------- ---------------------------------------------------------------------- ---------------------------- A --- GRAFCELL [TEXT DELETED] MG/CM(2) $[TEXT DELETED]/pc [TEXT DELETED] X [TEXT DELETED] x [TEXT DELETED] [TEXT DELETED]: [TEXT DELETED] x [TEXT DELETED] x [TEXT DELETED] B --- GRAFCELL [TEXT DELETED] MG/CM(2) $[TEXT DELETED]/roll [TEXT DELETED] X [TEXT DELETED] x [TEXT DELETED] [TEXT DELETED]: [TEXT DELETED] X [TEXT DELETED] X [TEXT DELETED] *SEE PARAGRAPH 1 ON REVERSE SIDE ============= =============== ====================================================================== ============================
Delivery Point: FOB Cleveland, Ohio Terms of Payment: Net 30 Days Estimated Time of Shipment From Plant: 4 Weeks This date will be confirmed upon receipt of order. If it is unsatisfactory please let us know. The sale of the products described herein shall be governed by the terms and conditions contained in any written contract currently in effect between Buyer and Seller covering such sale. If there is not such contract, then Seller hereby offers to sell such product to Buyer only upon the terms set forth herein, including those on the reverse side of this document. This quotation is subject to acceptance within (30) days from the date hereof. Thank you for this inquiry. Be assured your order will receive our prompt attention. cc: Horst Thumm Very truly yours, Jeff Gough By: /s/ John R. Smelko John R. Smelko B-17 SCHEDULE C ROYALTY DETERMINATION PRINCIPLES TO CONSIDER FOR THE DETERMINATION OF ROYALTIES 1. The relative contributions of BPS and Graftech to the IP so licensed. In the case of Joint Arising IP, primary consideration shall be given to this principle in determining the royalties to be paid; 2. the impact of the licensed IP on future sales successes of the licensee's product; 3. the total market size or potential revenue or likely revenue realistically achievable for foreseeable products incorporating the IP so licensed; 4. the Net Sales Price of the product incorporating the IP so licensed; 5. the specific markets that are realistically addressable by products embodying the IP so licensed; 6. competing processes available to the licensee and the advantages of using the IP over other processes; 7. the possible duration of any competitive advantage to the licensee by using the IP so licensed; 8. the development cost to the licensee of an alternative to the IP so licensed; 9. opportunity costs to the licensee of assets deployed; 10. the risks to the licensee of investment in manufacturing and commercialization of the licensee's products using the IP so licensed; 11. the incremental financial investment to be made by the licensee for manufacturing, marketing and distribution functions; 12. cost of intangible and intellectual capital to be employed by the licensee; 13. the economic life of the product embodying the licensee's technology; 14. the length of time required to commercialize the licensee's products; and 15. the strength of the IP so licensed. Royalties for licenses under this Agreement will be determined as soon as practicable and to the extent possible, before the grant of the applicable license. C-1 SCHEDULE D CONDITIONS OF PURCHASE ACCEPTANCE 1. Each Purchase Order issued by BPS will be deemed accepted by Graftech upon receipt by BPS of Graftech's acknowledgement, by electronic mail, telefax or other agreed form or Graftech delivers the ordered items to BPS. Subject to ss.2.8 of this Agreement, acceptance of a Purchase Order is expressly limited to the terms thereof. Graftech will not unreasonably reject a Purchase Order from BPS. OVERSHIPMENTS, INSTALLMENTS 2. BPS will pay only for maximum quantities of Graphitic Materials and Graphitic Components ordered. Overshipments will be held at Graftech's risk and expense for a reasonable time while awaiting shipping instructions from Graftech. Return shipping charges for excess quantities will be at Graftech's expense. Any provision in a Supply Arrangement or Purchase Order for delivery of items by installment will not be construed as rendering the obligations of Graftech severable and BPS will only be obliged to pay the price of the Graphitic Materials and Graphitic Components, as the case may be, included in such installment after such is actually received by BPS. PACKING AND SHIPMENT 3. Unless otherwise specified in a Supply Arrangement or Purchase Order, if the price of the ordered Graphitic Material or Graphitic Component is based on the weight or volume thereof, such price must reflect the net weight or volume of the materials or items ordered only, and no charges will be allowed for boxing, crating, handling damage, carting, drayage, storage or other packing requirements. Unless otherwise specified in a Supply Arrangement or Purchase Order, all ordered Graphitic Materials or Graphitic Components must be securely packed in cartons, boxes or other containers, and marked and otherwise prepared for shipment in a manner which is (a) in accordance with good commercial practice, (b) acceptable to common carriers for shipment at the lowest rate for the Graphitic Materials or Graphitic Components, and (c) adequate to ensure safe arrival of the ordered the Graphitic Materials or Graphitic Components at the named destination. Graftech must mark all containers with necessary lifting, handling and shipping information, purchase order numbers, date of shipment and the names of the consignee and consignor, if applicable. An itemized packaging sheet must accompany each shipment. No partial or complete delivery will be permitted hereunder before the date or dates specified for delivery without BPS's prior written consent thereto. If the ordered Graphitic Materials or Graphitic Components are improperly delivered for shipment, any D-1 additional cost thereby incurred will be for the account of, and will be paid by, Graftech, and may be deducted by BPS from the payment of the price for such Graphitic Materials or Graphitic Components. DELIVERY 4. Unless otherwise specifically provided on the face of the Purchase Order or in the Supply Arrangement, the Products called for hereunder shall be delivered on a FCA origin basis. The term "FCA" has the meaning ascribed thereto in, and is to be interpreted in accordance with the Incoterms 2000 published by the International Chamber of Commerce. Notwithstanding the shipping terms contained in any Purchase Order or Supply Arrangement, title to and risk of loss of Graphitic Materials and Graphitic Components, as the case may be, will remain with Graftech and not pass to BPS until delivery to BPS's named destination for importation. WARRANTIES 5. Graftech hereby represents and warrants to BPS (with the intention that such representations and warranties will survive the execution and implementation of each Purchase Order or Supply Arrangement) and covenants and agrees with BPS that the Graphitic Materials and Graphitic Components, as the case may be, supplied pursuant to a Purchase Order or Supply Arrangement will (a) be in full compliance with the Specifications, (b) be in conformity with samples, if any, approved by BPS, if applicable, (c) be produced in compliance with the requirements of the Fair Labor Standards Act of 1938 (United States of America), as amended, (d) not infringe upon any intellectual property right of any Person covering the Graphitic Materials or Graphitic Components themselves; provided, however, Graftech will not warrant against infringement by reason of any use of such Graphitic Materials or Graphitic Components in combination with other articles or materials or in the practice of any process other than in combination with other articles or materials or in the practice of any processes for which such Graphitic Materials or Graphitic Components have been expressly manufactured by Graftech, (e) be of good quality, without defect in materials or workmanship, and (f) be so supplied, and BPS will have title thereto, free and clear of all liens, encumbrances and security interests. NO OTHER WARRANTIES 6. THERE ARE NO EXPRESS WARRANTIES BY GRAFTECH IN RESPECT OF THE GRAPHITIC MATERIALS OR GRAPHITIC COMPONENTS OTHER THAN THOSE D-2 SPECIFIED IN ss.5 HEREOF. NO OTHER WARRANTIES BY GRAFTECH IN RESPECT OF THE GRAPHITIC MATERIALS OR GRAPHITIC COMPONENTS (OTHER THAN WARRANTY OF TITLE AS PROVIDED BY THE UNIFORM COMMERCIAL CODE) WILL BE IMPLIED OR OTHERWISE CREATED AT LAW OR IN EQUITY, INCLUDING, BUT NOT LIMITED TO, WARRANTY OF MERCHANTABILITY AND WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. Without limiting the generality of the forgoing, BPS assumes all risk and liability for the results obtained by the use of any of the Graphitic Materials or Graphitic Components delivered hereunder in combination with other articles, or materials or in the practice of any processes other than in combination with articles or materials or in the practice of any processes for which such Graphitic Materials or Graphitic Components have been expressly manufactured by Graftech. FAILURE TO MEET WARRANTIES 7. If any of the Graphitic Materials or Graphitic Components delivered by Graftech to BPS do not meet the warranties applicable thereto, BPS may, at its option, (a) require Graftech to correct, at no cost to BPS, any defective or non-conforming Graphitic Materials or Graphitic Components by repair or replacement, or (b) return such defective or non-conforming Graphitic Materials or Graphitic Components at Graftech's expense to Graftech and recover from Graftech the purchase price paid therefor. The foregoing remedies are not exclusive and are in addition to all other remedies at law or in equity available to BPS including but not limited to, the remedy available to BPS under ss.2.10 of this Agreement; provided, however, that other than as provided in ss. 6.5 of this Agreement, in no event will Graftech be liable for special, incidental, indirect, or consequential damages, whether or not caused by or resulting from the negligence of Graftech. No waiver by BPS of any Specifications for one or more of the Graphitic Materials or Graphitic Components ordered will constitute a waiver or such Specification for the remaining Graphitic Materials or Graphitic Components to be delivered hereunder, unless specified by BPS in writing. INVOICES 8. Each invoice issued as a result of a Supply Arrangement or Purchase Order must: (a) be rendered separately for each delivery, (b) not cover more than one Supply Arrangement or Purchase Order, (c) contain the Supply Arrangement or Purchase Order number under which it is issued, and D-3 (d) be rendered to the proper Accounts Payable Department of BPS as set forth in the Purchase Order. Invoice payment terms will be 30 days from the date the invoice is received by the proper Accounts Payable Department of BPS. INSPECTION 9. The Graphitic Materials or Graphitic Components purchased are subject to BPS's inspection and approval at any place BPS may reasonably designate. BPS may, without liability hereunder or otherwise and without prejudice to any other rights or remedies available to it, reject and refuse acceptance of any Graphitic Materials or Graphitic Components which do not conform in all respects to: (a) any instructions contained in the relevant Purchase Order or Supply Arrangement; (b) the Specifications; or (c) Graftech's warranties contained in ss.5 hereof. With respect to any Graphitic Materials or Graphitic Components which do not so conform, BPS may, in BPS's sole discretion, hold such Graphitic Materials or Graphitic Components for Graftech's inspection at Graftech's risk upon notification to Graftech, or return such Graphitic Materials or Graphitic Components to Graftech at Graftech's expense. BPS's rejection of any Graphitic Materials or Graphitic Components under a Purchase Order or Supply Arrangement will be without prejudice to its rights to require Graftech to perform its obligations in respect to the balance of the same Purchase Order or Supply Arrangement. Payments for any Graphitic Materials or Graphitic Components will not be deemed to be an acceptance thereof. CHANGES 10. BPS reserves the right at any time to request reasonable changes to: (a) method of packaging, packing or shipment; and (b) place and /or time of delivery of Products. If any such change causes an increase or decrease in the cost of, or the time required for the performance hereunder, an equitable adjustment shall be made in the price or delivery schedule, or both. Any claim for adjustment by Graftech shall be deemed waived unless asserted in writing within 30 days from the receipt by Graftech of the requested change. Nothing contained in this clause shall relieve Graftech from proceeding without delay in the performance of the order as changed. INDEMNIFICATION 11. Each party shall indemnify and hold the other harmless from any third party claim, demand, cause of action, damage, or cost and expense for which the other might become D-4 liable arising from or in connection with that party's performance or non-performance hereunder. The provisions of ss.6.4 of this Agreement will not apply to this ss.11. COMPLIANCE WITH LAW 12. Each of BPS and Graftech warrants and represents that it has and will continue during the performance of its obligations hereunder, to comply with all relevant provisions of federal, provincial, state, and local laws and regulations. Graftech also warrants and represents that any chemical substance delivered hereunder shall not be on the list of prohibited substances detailed in the Canadian Environmental Protection Act and shall be dealt with only in conformity with such Act. Graftech will obtain all federal, provincial, state, municipal and other government or regulatory licenses, permits or other documents or permissions that are required by Graftech or are incidental to the sale or shipment of the products by Graftech to BPS. EQUIPMENT 13. All tooling, equipment or material of every description owned by a party (the "Owner") and furnished to the other party or specifically paid for by the Owner, and any replacement thereof, will remain the property of the Owner. Such property, and whenever practical, each individual item thereof, will be plainly marked or otherwise properly identified as the "Property of BPS" or "Property of Graftech," as appropriate, and will be safely stored. A party will not substitute any property for the Owner's property and will not use such property except in fulfilling the Purchase Order or a Supply Arrangement. Such property, while in the party's custody or control, will be held at that party's expense, and will be insured by that party in an amount equal to its replacement cost with loss payable to Owner. Such property will be prepared for shipment and delivered in good condition, normal wear and tear excepted, to the Owner on a FCA origin basis immediately upon request by the Owner. D-5 EX-10 9 exh10-58_conocohumber.txt EXHIBIT 10.58 EXHIBIT 10.58 CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AGREEMENT THIS AGREEMENT is effective as of January 1 2001 ("the Effective Date") BETWEEN 1. CONOCO (UK) LIMITED ("Seller") of Park House 116 Park Street London W1K 6NN and 2. UCAR S.A. ("Buyer") of 17 Route de Pallatex CH-1163 Etoy Switzerland (each a "Party" and together "the Parties") and confirms and sets forth the terms and conditions agreed for (i) the supply of needle coke ("Coke") (ii) a [TEXT DELETED] of [TEXT DELETED] on the sale of Coke by Seller and its parent corporation, Conoco Inc. (together "Conoco") to Buyer and its parent corporation, UCAR Carbon Company Inc. ("UCARINC"), and their respective affiliates (collectively "UCAR") and [TEXT DELETED] by UCAR and (iii) the collaboration for the joint development of certain new technologies. 1. PRINCIPLES GOVERNING THE AGREEMENT. THIS AGREEMENT SHALL BE GOVERNED BY THE FOLLOWING PRINCIPLES, WHICH EACH OF SELLER AND BUYER AGREES TO OBSERVE AND IMPLEMENT TOGETHER WITH THEIR RESPECTIVE PARENT CORPORATIONS AND AFFILIATES WHERE APPLICABLE: (a) The Parties shall extract benefits from the marketplace and not each other. (b) The Parties shall establish a mindset and openness that enables the Coke to [TEXT DELETED] between Conoco and UCAR to be optimized and maximized. (c) The Parties shall align the organizations for breakthrough performance in achieving both efficiency and growth objectives to drive supply chain cost reductions and value creation. (d) The Parties shall provide flexibility in implementation of the Agreement to accommodate an ever-changing world. (e) The Parties shall simplify their work processes where possible to avoid business paralysis, achieve efficiency and create value. (f) The Parties are committed to resolving conflicts and issues constructively using an internal dispute resolution mechanism building on the theme that the Agreement will be a long-term relationship with potentially high barriers to exit. 2. SUPPLY AND QUANTITY 2.1 Subject to all the terms and provisions of the Agreement, Seller shall supply and Buyer shall purchase, receive and pay for an agreed-upon quantity and quality of Coke during each year of the Agreement with the intent being for Seller and its affiliates to supply as much Coke as [TEXT DELETED] and [TEXT DELETED] and [TEXT DELETED], subject always to Buyer's obligations for purchases of Coke from other producers existing as of the Effective Date. The intent is that the quantity of Coke supplied under this Agreement will be in the range of [TEXT DELETED] per year. Periodically, but no less frequently than quarterly from the Effective Date, Buyer shall provide a 12 month forecast in writing for quantities and Grades of Coke to be supplied hereunder and broken down by month (each a "Forecast"). If Seller objects to a Forecast, it shall notify Buyer within 10 business days of its receipt of such Forecast and Seller and Buyer shall proceed to agree on a mutually agreeable Forecast. The Forecasts so applied shall become part of this Agreement, and 2 each Forecast shall serve as an amendment of the prior Forecast for purposes of this Agreement. 2.2 Buyer recognizes that Seller and its affiliates will continue to sell Coke to other customers and will from time to time have initiatives to improve Coke quality and quantity to these customers. 2.3 Buyer further recognizes that, upon the occurrence of a force majeure event, Seller and its affiliates each has an obligation to supply its respective customers on a fair and equitable basis under the circumstances. Seller recognizes, solely for purposes of this Section 2.3, that Coke is essential to graphite electrodes which are essential to electric arc furnace steel production, that UCAR is the [TEXT DELETED] manufacturer of graphite electrodes and supplies [TEXT DELETED]% of the world's consumption thereof, that a material disruption in the supply of graphite electrodes could materially affect the steel industry and important aspects of the economy, and that, under the Agreement, UCAR will become [TEXT DELETED] on [TEXT DELETED] for its [TEXT DELETED] for Coke and [TEXT DELETED] of the [TEXT DELETED] of Coke from Conoco. Therefore, upon the occurrence of a force majeure event, Seller shall consider the foregoing factors in allocating its supply of Coke equitably amongst all its customers and any [TEXT DELETED] in such supply to [TEXT DELETED] shall be [TEXT DELETED] is to [TEXT DELETED]. 3. QUALITY 3.1 The Coke to be supplied and purchased pursuant to the Agreement shall be the under- mentioned grades of coke derived from petroleum oil processing at Seller's supplier's Humber Refinery and conforming to the quality requirements set out in Section 3.2 below (each a "Grade"): i) Humber [TEXT DELETED] ("[TEXT DELETED] Grade") 3 ii) Humber [TEXT DELETED] ("[TEXT DELETED] Grade") iii) Humber [TEXT DELETED] ("[TEXT DELETED] Grade") Unless the context otherwise requires, any reference to "Coke" alone shall be understood to refer to and include any or all such Grades. 3.2 Each such Grade shall, in relation to the properties shown to be applicable to that particular Grade as set forth in Column 1 of Appendix C, conform in all respects with the lower specification values (LSL) set opposite thereto in Column 2 of Appendix C and/or the upper specification values (USL) set opposite thereto in Column 6 of Appendix C according to whichever of them shall be applicable when determined according to the Test Method set opposite thereto in Column 7 of Appendix C and, if so conforming, shall be accepted by Buyer. 3.3 Failure to meet the moisture content indicated in Column 6 of Appendix C shall be deemed not to constitute any breach of Seller's obligation provided the moisture content of any delivery is not in excess of 0.3 weight percent and Buyer shall take and accept delivery of all such Coke as if it were in conformity with said specification. 3.4 Any claims by Buyer with regard to alleged quality defects shall be made in accordance with General Condition 7 of Seller's General Conditions of Sale (each a "General Condition") referred to in Section 16.1 below and annexed hereto as Appendix D. 3.5 Seller shall advise Buyer in advance of any planned change in the aim values shown in Column 4 of Appendix C. 3.6 If requested by Buyer or otherwise required, Seller will treat Coke for dust suppression by the application of dust suppressant. The selection of the specific suppressant(s) and the rate of application shall be mutually agreed between Seller and Buyer. 4 3.7 From time to time Seller and Buyer may agree upon revised specifications to existing Grades of Coke or the introduction of new Grades of Coke. In such an event an addition or modification shall also be agreed to Appendix C setting forth the properties and specification values applicable to each such specification revision or new Grade. 4. DELIVERY 4.1 All prices applicable under the provision of Section 5 below shall apply (unless otherwise expressly agreed) on the basis that Coke is delivered [TEXT DELETED] into [TEXT DELETED] by [TEXT DELETED] and/or [TEXT DELETED] or [TEXT DELETED] and/or delivered into road vehicles or containers contracted by Buyer, in each case at the applicable loading point as provided by General Condition 2.2. 4.2 Prior to the first day of each delivery month, Seller and Buyer shall agree upon a mutually acceptable delivery schedule for the next delivery month and may mutually agree upon adjustments to the delivery schedule with the intent being to improve upon the supply chain process. 5. [TEXT DELETED] AGREEMENT. As of the Effective Date, each of Seller and Buyer shall [TEXT DELETED] in [TEXT DELETED] in the [TEXT DELETED] for [TEXT DELETED] by [TEXT DELETED], as determined pursuant to the following provisions of this Section 5. To accomplish the foregoing, the following terms shall apply: 5.1 DEFINITIONS. [TEXT DELETED] ("[TEXT DELETED]") for any period means (i) net [TEXT DELETED] of [TEXT DELETED], less (ii) [TEXT DELETED] of [TEXT DELETED] , plus (iii) [TEXT DELETED], less (iv) [TEXT DELETED], and less (v) an allocation of [TEXT DELETED] and [TEXT DELETED] as applicable to [TEXT DELETED] (each of (i), (ii), (iii), (iv) and (v) being calculated consistently with [TEXT DELETED] accounting policies and methodologies as they applied on [TEXT DELETED] and otherwise in accordance with U.S. GAAP), in each case for the 5 relevant period. [TEXT DELETED] ("[TEXT DELETED]%") for any period means [TEXT DELETED] for the relevant period divided by [TEXT DELETED] of [TEXT DELETED]. For purposes of calculating [TEXT DELETED] and [TEXT DELETED]%, [TEXT DELETED] of [TEXT DELETED] includes [TEXT DELETED] from other [TEXT DELETED] as accounted for in the [TEXT DELETED] for the relevant period consistently with said accounting policies and methodologies applicable at [TEXT DELETED]. 5.2 [TEXT DELETED] OF COKE PRICE. 5.2.1 The price to be paid by Buyer and received by Seller for all Coke supplied [TEXT DELETED] or [TEXT DELETED] or [TEXT DELETED] or into road vehicles or containers at said [TEXT DELETED] or [TEXT DELETED] shall be calculated in accordance with the following [TEXT DELETED] (the "[TEXT DELETED]") and expressed in US$ per MT: (a) the price for [TEXT DELETED] Coke shall be (i) [TEXT DELETED]% multiplied by $[TEXT DELETED], plus (ii) $[TEXT DELETED] (b) the price for [TEXT DELETED] Coke shall be the [TEXT DELETED] price as ascertained as above plus $[TEXT DELETED] (c) the price for [TEXT DELETED] Coke shall be the [TEXT DELETED] price as ascertained as above minus $[TEXT DELETED] 5.2.2 For purposes of calculating the [TEXT DELETED] price, the [TEXT DELETED]% shall be expressed as a portion of 100 (i.e., a [TEXT DELETED]% of [TEXT DELETED]% shall be expressed as [TEXT DELETED] and not [TEXT DELETED]). 5.2.3 If new Grades of Coke are developed in the future, prices therefore will be negotiated based on their relationship (in terms of quality and cost to produce) to the existing Grades. If the mix of grades of Coke purchased by UCAR from Conoco is changed by UCAR so that the aggregate volume of [TEXT DELETED] Grade (as defined in the Lake Charles Agreement as referred to and defined in 5.4 below) and [TEXT DELETED] Grade (which, together with the [TEXT DELETED] as taken by UCAR from suppliers other than Conoco, are hereinafter referred to collectively as "Premium Grades") exceeds [TEXT DELETED]% of the total volume of Coke purchased by UCAR from Conoco, Seller and Buyer will renegotiate the 6 [TEXT DELETED] between the price for those Grades and the price for [TEXT DELETED] so as to preserve the intent of the Parties and their respective parent corporations with respect to [TEXT DELETED]. An increase in the volume of Premium Grades purchased from Conoco because UCAR sources higher percentages of their combined requirements for Premium Grades from Conoco instead of other suppliers shall not constitute a change in product mix (using 2000 as the base year). 5.3 APPLICATION OF [TEXT DELETED]. The [TEXT DELETED] shall be applied as follows: 5.3.1 Prices for invoicing and payment purposes A. For the year [TEXT DELETED] the prices to be used for invoicing and payment for Coke supplied under this Agreement will be [TEXT DELETED] at the following: GRADE [TEXT DELETED] - $[TEXT DELETED] per metric ton GRADE [TEXT DELETED] - $[TEXT DELETED] per metric ton GRADE [TEXT DELETED] - $[TEXT DELETED] per metric ton B. From and after the quarter beginning on [TEXT DELETED], the prices to be used for invoicing for Coke supplied during each quarter will be adjusted on a quarterly basis as described in Sections 5.3.3 and 5.3.4 hereof. 5.3.2 [TEXT DELETED] typically closes its books approximately [TEXT DELETED] days after each quarter-end and approximately [TEXT DELETED] days after each year-end. Buyer will provide (or cause [TEXT DELETED] to provide) Seller with [TEXT DELETED]'s calculation of the "[TEXT DELETED]% (before making the calculation described in Section 5.3.3 hereof) for each quarter, beginning with the quarter 7 ending [TEXT DELETED], within [TEXT DELETED] business days after [TEXT DELETED] closes its books for that quarter; provided, however, that for the [TEXT DELETED] of this Agreement (ending [TEXT DELETED]), the [TEXT DELETED]% shall be provided by [TEXT DELETED] within [TEXT DELETED] business days after [TEXT DELETED] closes its books for the quarter. 5.3.3 Within 5 business days after UCARINC provides the [TEXT DELETED]% for each quarter (the "Prior Quarter") beginning with the quarter ending March 31, 2001, the Parties will calculate what the [TEXT DELETED]% would have been for the Prior Quarter if the prices for all Coke supplied by Seller and purchased by Buyer during the Prior Quarter had been those provided for under the [TEXT DELETED] (the "[TEXT DELETED]") and such calculations shall continue in an iterative process until the [TEXT DELETED] for [TEXT DELETED] Grade for any quarter changes by no more than $1 per metric ton. 5.3.4 Subject to Section 5.3.1A and 5.3.5 hereof, the [TEXT DELETED] shall be used as the invoicing prices for all Coke supplied and purchased in the subsequent quarter. The difference between the total Coke prices that were actually invoiced and paid during the Prior Quarter and the total prices that would have been charged and paid in respect of that same quarter if the [TEXT DELETED] had been used is called the "[TEXT DELETED]." For example, if [TEXT DELETED] closes its books for the quarter ending [TEXT DELETED] on [TEXT DELETED], Buyer shall provide the [TEXT DELETED]% to Seller by [TEXT DELETED]. The Parties will calculate the [TEXT DELETED] by [TEXT DELETED]. The [TEXT DELETED] thus ascertained will then be applied: 8 A. for the purposes of ascertaining the [TEXT DELETED] in relation to the Prior Quarter (in this example the quarter ending [TEXT DELETED]) and B. as the invoicing prices for the quarter beginning on [TEXT DELETED]. 5.3.5 If the [TEXT DELETED] for [TEXT DELETED] Grade when determined by the [TEXT DELETED] is either [TEXT DELETED] a [TEXT DELETED] price of $[TEXT DELETED]/MT or [TEXT DELETED] a [TEXT DELETED] price of $[TEXT DELETED]/MT then any amounts above or below this minimum/maximum range will be disregarded for the purposes of A. determining the [TEXT DELETED] to be used pursuant to 5.3.4 above; and B. the [TEXT DELETED]. 5.3.6 In the event that the [TEXT DELETED] yields a price for [TEXT DELETED] Grade which is outside this minimum/maximum range for [TEXT DELETED] then the [TEXT DELETED] shall be [TEXT DELETED] as provided in Section 5.5. 5.3.7 Appendix B illustrates the manner in which [TEXT DELETED]% is to be calculated and the resultant calculation of the [TEXT DELETED]. 5.4 ADDITIONAL PROCEDURES. The [TEXT DELETED] shall accumulate on a net basis from quarter to quarter and, for ease of administration, the [TEXT DELETED] applicable under this Agreement shall be aggregated with the [TEXT DELETED] applicable under the concurrent Agreement of even date herewith made between Conoco Inc. as seller and UCARINC as buyer for the sale and purchase of Coke produced at Conoco Inc.'s Lake Charles Refinery ("the Lake Charles Agreement") and shall be administered for the purposes of this present Agreement as if the aggregated [TEXT DELETED] accumulated under the Lake Charles Agreement. Whenever the net accumulated amount of the aggregated [TEXT DELETED] exceeds $[TEXT DELETED] 9 then, within [TEXT DELETED] business days after such excess is determined, an amount equal to the excess over $[TEXT DELETED] shall be paid by the advantaged entity (meaning here Conoco Inc. or UCARINC as the case may require) to the other and receipt of such payment by the entity receiving the same shall be a good and sufficient discharge of the liability of Seller or Buyer (as the case may be) for payment of so much of the amount so paid as may have become due and payable pursuant to this present Agreement alone. 5.5 REEVALUATION OF [TEXT DELETED]. Seller and Buyer agree that, together with their respective parent corporations, they will [TEXT DELETED] the [TEXT DELETED] when [TEXT DELETED] in the [TEXT DELETED] of their respective businesses and shall continue to [TEXT DELETED] and [TEXT DELETED] a [TEXT DELETED] for the Coke business that [TEXT DELETED] enable each party to [TEXT DELETED] the [TEXT DELETED] and [TEXT DELETED] of Coke sales by Conoco to UCAR and [TEXT DELETED] by [TEXT DELETED]. 5.6 AUDIT RIGHTS. Each of Seller and Buyer will permit the other Party and its representatives limited audit rights to ensure compliance with the Agreement in areas relating to [TEXT DELETED], but excluding any access to third party Coke pricing. Each Party will be provided by the other with reasonable access to the related facilities, books, records and documents. 5.7 VAT AND CLIMATE CHANGE LEVY. 5.7.1 All prices as herein before referred to are exclusive of (i) any Value Added Tax and/or (ii) a Climate Change Levy ("CCL") or any such similar energy or carbon tax which may from time to time be applicable to the sale and delivery of Coke and the gross amount (if any) payable in connection with either or both of them 10 shall become due and shall be paid in like manner as is provided in relation to said prices. 5.7.2 Buyer warrants and confirms that: (i) none of the Coke supplied and purchased under the Agreement will be used for burning within the United Kingdom; (ii) Buyer intends to use all such Coke for the purposes only of supplying it to another person or causing it to be exported from the United Kingdom; (iii) once any such Coke has been so exported Buyer does not intend that any of it shall be brought back into the United Kingdom. 6. CAPITAL INVESTMENT 6.1 MAINTENANCE CAPITAL EXPENDITURES All maintenance and sustaining capital expenditures shall be the responsibility of the owners of each of the respective businesses. 6.2 SPECIAL PROJECTS In the event of an opportunity for a special project relating to the [TEXT DELETED] between Conoco and UCAR (including, but not limited to, [TEXT DELETED] and [TEXT DELETED]), the Management Committee (referenced in Section 9 hereof) will explore the project and, together with their respective parent corporations, Seller and Buyer will determine on a case-by-case basis whether and how to fund the project as well as how to measure and [TEXT DELETED] its [TEXT DELETED] and [TEXT DELETED]. If only one of Conoco or UCAR proceeds with a special project, including [TEXT DELETED] thereof, then such party will be entitled to [TEXT DELETED] of the [TEXT DELETED] derived therefrom. 7. JOINT TECHNOLOGY DEVELOPMENT 11 Seller and Buyer agree that, together with their respective parent corporations, they will establish a [TEXT DELETED] and [TEXT DELETED] program under which, from time to time, they will identify and agree on [TEXT DELETED] with the intent of [TEXT DELETED] and [TEXT DELETED] in the Coke to [TEXT DELETED]. Ownership rights to such intellectual property developed under the program will be determined and set forth in the program agreement(s). In the absence of such an agreement Conoco would own any Coke related intellectual property and UCAR would own any graphite electrode related intellectual property. Any intellectual property developed jointly thereunder will be used exclusively, to the extent legally and practicably possible, for the benefit of UCAR and Conoco and shall not be transferred to third parties. To the extent that any intellectual property is developed under the program, the Parties agree to keep all such information confidential in conformity with the Confidentiality Agreement referred to in Section 14 below as it is to apply to this Agreement. 8. TERM This Agreement shall be deemed to have commenced on and to have been continuously in force since the Effective Date and shall continue in force unless and until terminated in accordance with Section 12 below. 9. MANAGEMENT COMMITTEE A Management Committee shall be established consisting of one senior manager from each of Seller and Buyer and one senior manager from each of Conoco Inc. and UCARINC respectively. Each of Seller and Buyer shall notify the other of the member it appoints to the Management Committee as well as any changes thereto. Subcommittees shall be established as deemed appropriate by the Management Committee. The 12 Management Committee shall meet at least quarterly, and its responsibilities shall include those outlined in Appendix A hereto. 10. OWNERSHIP OF ASSETS/EMPLOYMENT ISSUES Each of Seller and Buyer shall continue to own all of the assets owned by it prior to the commencement of the Agreement, including, but not limited to, all patents, trademarks, licenses, know-how and proprietary technology. The ownership of assets acquired or developed through a special project (see Section 6.2 hereof) or by joint development (see Section 7 hereof) shall be determined on a case-by-case basis as mutually decided and documented by the Management Committee. The employees of each Party shall remain with their respective employers. 11. DISPUTE RESOLUTION 11.1 Dispute resolution procedures shall be established whereby, together with their respective parent corporations, each of Seller and Buyer shall follow certain steps toward resolving disputes during the term of this Agreement. At a minimum, such procedures shall require that issues under dispute be presented to the Management Committee for consideration and resolution. In the event that the Management Committee is unable to resolve an issue within 30 days, the issue will be presented to designated executives of each Party for resolution. 11.2 If the designated executives cannot resolve the issue within 30 days after being presented with it either Seller or Buyer may exercise its right to terminate this Agreement under Section 12.1B hereof, and any controversy or claim arising out of or relating to this Agreement or any breach thereof, shall be settled by arbitration in New York, New York, United States of America in accordance with the rules of the American Arbitration 13 Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. 11.3 In the event that a dispute arises under this Agreement simultaneously with a dispute under the Lake Charles Agreement and in relation to an issue which is common to both of them then for the purposes of determining that issue: A. they shall be treated as constituting one dispute only and shall be referred to and settled by one arbitration accordingly; B. any conflict or inconsistency between the applicable English law and the applicable substantive law under the Lake Charles Agreement shall be resolved by according precedence to the latter law to the intent that it shall prevail over the applicable English law to the extent necessary for resolving such conflict or inconsistency. 11.4 The provisions in this Section 11 shall supersede General Condition 8.1(a). 12. EXIT PROVISIONS 12.1 This Agreement may be terminated by written notice given by Seller or Buyer to the other of them: A. on or at any time after January 1, 2007; B. at [TEXT DELETED] in the event that a [TEXT DELETED] cannot be [TEXT DELETED] in compliance with the dispute resolution procedures described in Section 11.1 hereof ; or C. in the event that the Party to which notice is given goes into liquidation (other than voluntary liquidation in a solvent condition for the purposes of amalgamation or reconstruction), enters into an arrangement or composition with its creditors or has a receiver appointed of any of its assets. 14 12.2 Termination pursuant to Section 12.1 above shall take effect as follows: 12.2.1 In the case of notice given pursuant to Section 12.1A: A. if it is given by no later than September 30, at the end of the calendar year in which it is given; or B. if it is given later than September 30, at the end of the calendar year next following the year in which it is given. 12.2.2 In the case of a notice given pursuant to Section 12.1B, at the end of the calendar year in which it is given. 12.2.3 In the case of notice given pursuant to section 12.1C, forthwith upon such notice being given or on such later date as may be specified in that notice by the Party giving it. Each such date is hereinafter referred to as "the Effective Termination Date". 12.3 In the event of termination pursuant to Section 12.1A or 12.1B above (but not Section 12.1C), Seller and Buyer shall enter into a replacement agreement providing for the supply and purchase of Coke on terms corresponding with the terms and provisions of this present Agreement mutatis mutandis save that A. it shall be for a term of three years beginning immediately after the Effective Termination Date; B. for the first, second and third years of such term, Seller shall supply and Buyer shall purchase and receive approximately [TEXT DELETED]%, [TEXT DELETED]% and [TEXT DELETED]%, respectively, of the volume of each Grade supplied during the year ending with the Effective Termination Date; 15 C. the prices to be charged by Seller and paid by Buyer shall be on a "[TEXT DELETED]" basis, meaning that such prices shall be no [TEXT DELETED] than the [TEXT DELETED] (excluding [TEXT DELETED]) [TEXT DELETED] by [TEXT DELETED] for the relevant Grade of Coke among all of its Coke [TEXT DELETED] other than Buyer and ascertained by reference to the prices applicable at the commencement of the year in which delivery is effected of the quantity of Coke for which the price is to be ascertained; and D. Sections 5.1, 5.3, 5.4, 5.5, 8, 12.1A, 12.3 and 12.4 and the [TEXT DELETED] provisions in Section 5.2 of this present Agreement shall not apply. 12.4 The net accumulated amount of the [TEXT DELETED] as of the Effective Date of Termination shall be paid to the appropriate Party promptly after such date. 12.5 The provisions of Section 12.1C above shall supersede General Condition 8.1(b). 13. MODIFICATION OF TERMS Seller and Buyer agree that certain terms of the Agreement may be renegotiated in the event of certain material events provided, however, that no amendment to or variation in this Agreement or any Appendix or Annex hereto shall be effective unless it is made or evidenced in writing and signed by authorized representatives of the Parties. 14. CONFIDENTIALITY The Confidentiality Agreement made on [TEXT DELETED] by and between Conoco Inc. and UCAR International Inc. and amended by two several letter agreements dated [TEXT DELETED] and [TEXT DELETED] respectively shall apply to and form part of this Agreement as fully and effectually as if it were reproduced herein and set forth in full but suitably modified to such extent as may be appropriate so as to render it capable of applying to 16 and affecting anything contained or provided for in or arising from or contemplated by the terms and provisions of this present Agreement. 15. ENTIRE AGREEMENT; HEADINGS; COUNTERPARTS 15.1 Except as otherwise provided in the Confidentiality Agreement referred to in section 14 above and in a certain letter agreement dated February 21, 2001, relating to payment terms, this Agreement contains the entire agreement between Seller and Buyer with respect to the subject matter of this Agreement and supersedes all prior agreements (including the 2000-2002 Graphite Coke Sales Agreement dated June 14, 2000), whether written or oral, between them with respect to the subject matter of this Agreement. 15.2 Seller and Buyer explicitly acknowledge that, together with their respective parent corporations, they are involved in a number of [TEXT DELETED] regarding [TEXT DELETED], none of which shall serve to modify this Agreement unless recorded in writing as described in Section 13. 15.3 The headings in this Agreement are inserted for convenience of reference only and will not be used to interpret or construe any provision of this Agreement. 15.4 This Agreement may be executed in counterparts, each of which will be deemed an original and all of which will constitute one and the same instrument. 16. MISCELLANEOUS 16.1 Seller's General Conditions of Sale set forth in Appendix D annexed hereto (including its Annexes, which include in particular, as Annex II, a Material Safety Data Sheet containing information regarding health risks and recommendations for the safe use and handling of calcined petroleum coke) are incorporated into and form part of this Agreement (a) subject as provided under 16.2 below and 17 (b) so far as they are not otherwise in conflict or inconsistent with the express terms of this present Agreement and for the purposes of those Conditions this Agreement shall constitute "the Principal Agreement" as therein referred to. 16.2 The said General Conditions of Sale shall apply and take effect subject to modification as follows: A. Any references therein to "Product", "[TEXT DELETED]" (or "[TEXT DELETED]"), "Seller's Warehouse" (or "Warehouse") and "this Agreement" shall be read and construed as if they were references to Coke, [TEXT DELETED], Seller's supplier's Warehouse and this present Agreement respectively B. General Condition 9 shall be read and construed and shall take effect in the like manner and to the like extent as if the events and circumstances described and referred to in 9.2: (i) Included any interference with or disruption to or any failure, limitation or cessation of Seller's existing or contemplated sources of supply of Coke (ii) were expressed to be applicable to Seller's supplier as well as to Seller to the intent that any effect which any of those events and circumstances may have on or in relation to Seller's supplier and the production of Coke shall be treated conclusively as having the like and corresponding effect in relation to Seller and its sources of supply of Coke C. Condition 2.2.1 and Parts A and C of Annex 1 shall apply to deliveries of Coke FCA as they apply to deliveries into road vehicles MUTATIS MUTANDIS 18 D. In condition 14.5 the words, "each of the terms FOB and FCA and the rights and obligations of the Parties in relation to each such term" shall be substituted for the words, "the term FOB and the rights and obligations of the party in relation to said term" 16.3 ADDRESSES, ETC. FOR NOTICES For the purposes of General Condition 12, the address for each of Seller and Buyer shall be as set forth at the beginning of the Agreement and other information for such Party, as applicable at the date hereof, is: For Seller: Attention Petroleum Coke Business Manager - Europe Conoco (UK) Limited Petroleum Coke Marketing Crude and Products International Park House 116 Park Street London W1K 6NN Facsimile: +44(0) 20 7408 6968 For Buyer: Attention Director of Purchasing UCAR S.A. route de Pallatex CH-1163 Etoy Switzerland Facsimile: +41 21 821 3361 With a copy to: Attention: General Counsel UCAR International Inc. 3102 West End Avenue, Suite 1100 Nashville, Tennessee 37203 United States 16.4 This Agreement shall be binding upon Seller and Buyer and their respective successors and assigns and shall inure to the benefit of Seller and Buyer and their respective successors and permitted assigns. 19 17. PUBLIC ANNOUNCEMENTS Neither Seller nor Buyer Party nor any affiliates, subsidiaries, employees, officers, directors or agents of Seller or Buyer will make any public statement with regard to this Agreement, including the fact of its existence, the subject matter hereof or the transactions contemplated hereby, without the prior written consent and agreement of the other Party; provided, however, that each Party shall fully cooperate and shall not delay in providing its reasonable consent in the event that the other Party must make a public announcement in order to comply with the disclosure requirements of U.S. and other applicable securities laws. 20 EFFECTIVE the day and year first before written by the duly authorised representative of Seller and Buyer respectively: CONOCO (UK) LIMITED UCAR S.A. By: /S/ W. RICK HAMM By: /S/ JOHN A. TONER --------------------------------- ---------------------------------- Name: W. Rick Hamm Name: John A. Toner Title: President, Refining and Title: Director, Strategic Raw Marketing-Europe Materials Worldwide Purchasing 21 EX-10 10 exh10-59_conocoucar.txt EXHIBIT 10.59 EXHIBIT 10.59 CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AGREEMENT THIS AGREEMENT is made effective as of January 1 2001 ("the Effective Date") BETWEEN 1. CONOCO INC. ("Seller") of 600 North Dairy Ashford Road, Houston, Texas 77079 and 2. UCAR CARBON COMPANY INC. ("UCARINC") and UCAR S.A. (together, "Buyer") of 3102 West End Avenue, Suite 1100, Nashville, Tennessee, (each a "Party" and together "the Parties") and confirms and sets forth the terms and conditions agreed for (i) the supply of needle coke ("Coke"), (ii) a [TEXT DELETED] of [TEXT DELETED] on the sale of Coke by Seller and its subsidiary, Conoco (UK) Limited (together "Conoco") to Buyer and [TEXT DELETED] by Buyer and its affiliates (collectively, "UCAR") and (iii) the collaboration for the joint development of certain new technologies. 1. Principles Governing the Agreement. This Agreement shall be governed by the following principles, which each of Seller and Buyer agrees to observe and implement together with their respective parent corporations and affiliates where applicable: (a) The Parties shall extract benefits from the marketplace and not each other. (b) The Parties shall establish a mindset and openness that enables the Coke to [TEXT DELETED] between Conoco and UCAR to be optimized and maximized. (c) The Parties shall align the organizations for breakthrough performance in achieving both efficiency and growth objectives to drive supply chain cost reductions and value creation. (d) The Parties shall provide flexibility in implementation of the Agreement to accommodate an ever-changing world. (e) The Parties shall simplify their work processes where possible to avoid business paralysis, achieve efficiency and create value. (f) The Parties are committed to resolving conflicts and issues constructively using an internal dispute resolution mechanism building on the theme that the Agreement will be a long-term relationship with potentially high barriers to exit. 2. Supply and Quantity. 2.1 Subject to all the terms and provisions of the Agreement, Seller shall supply and Buyer shall purchase, receive and pay for an agreed-upon quantity and quality of Coke during each year of the Agreement with the intent being for Seller and its affiliates to supply as much Coke as [TEXT DELETED] and [TEXT DELETED], [TEXT DELETED] subject always to Buyer's obligations for purchases of Coke from other producers existing as of the Effective Date. The intent is that the quantity of Coke supplied under this agreement will be in the range of [TEXT DELETED] per year. Periodically, but no less frequently than quarterly from the Effective Date, Buyer shall provide a 12 month forecast in writing for quantities and Grades of Coke to be supplied hereunder and broken down by month (each a "Forecast"). If Seller objects to a Forecast, it shall notify Buyer within 10 business days of its receipt of such Forecast and Seller and Buyer shall proceed to agree on a mutually agreeable Forecast. The Forecasts so applied shall become part of this Agreement, and each Forecast shall serve as an amendment of the prior Forecast for purposes of this Agreement. 2.2 Buyer recognizes that Seller and its affiliates will continue to sell Coke to other customers and will from time to time have initiatives to improve Coke quality and quantity to these customers. 2.3 Buyer further recognizes that, upon the occurrence of a force majeure event, Seller and its affiliates each has an obligation to supply its respective customers on a fair and equitable basis under the circumstances. Seller recognizes, solely for purposes of this Section 2.3, that Coke is essential to graphite electrodes which are essential to electric arc furnace steel production, that UCAR is the [TEXT DELETED] manufacturer of graphite electrodes and supplies [TEXT DELETED]% of the world's consumption thereof, that a material disruption in the supply of graphite electrodes could materially affect the steel industry and important aspects of the economy, and that, under the Agreement, UCAR will become [TEXT DELETED] on [TEXT DELETED] for its [TEXT DELETED] for Coke and [TEXT DELETED] of the [text deleted] of Coke from Conoco. Therefore, upon the occurrence of a force majeure event, Seller shall consider the foregoing factors in allocating its supply of Coke equitably amongst all its customers and any [TEXT DELETED] in such supply to [TEXT DELETED] shall be [TEXT DELETED] is to [TEXT DELETED]. 2 3. QUALITY. 3.1 The Coke to be supplied and purchased pursuant to the Agreement shall be the under- mentioned grades of coke derived from petroleum oil processing at Seller's Westlake, Louisiana refinery and conforming to the quality requirements set out in Section 3.2 below (each a "Grade"): i) Lake Charles [TEXT DELETED] Grade ("[TEXT DELETED] Grade") ii) Lake Charles [TEXT DELETED] Grade ("[TEXT DELETED] Grade") iii) Lake Charles [TEXT DELETED] Grade ("[TEXT DELETED] Grade") Unless the context otherwise requires, any reference to "Coke" alone shall be understood to refer to and include any or all such Grades. 3.2 Each such Grade shall have physical properties that conform to those listed in the applicable specifications of Appendix C. 3.3 The quality of each Grade of Coke delivered hereunder will be determined by testing samples which will be taken by Conoco as the Coke is loaded into Buyers designated transportation equipment (vessels, barges, trucks or railcars) at [TEXT DELETED] or [TEXT DELETED] or at such other loading facility as may be mutually agreed upon by Buyer and Seller. For coke delivered into railcars, each sample will include coke which is being loaded in up to eight railcars. 3.4 Conoco will divide each Coke sample into two equal portions. Conoco will (i) test one portion at its own laboratory to determine the Coke's physical properties, and (ii) retain the second portion for 90 days after the sample is obtained. 3.5 Upon receipt of the Coke sample test results from its laboratory, Conoco will prepare a Quality Certificate, which it will immediately fax or transmit electronically to Buyer. If Buyer objects to Conoco's test results/quality determination, then the retained sample will be analyzed at a mutually acceptable independent testing laboratory. The cost of the independent testing laboratory's analysis will be shared equally by Seller and Buyer. 3.6 From time to time Seller and Buyer may agree upon revised specifications to existing Grades of Coke or the introduction of new Grades of Coke. In such an event an addition or modification shall also be 3 agreed to Appendix C setting forth the properties and specification values applicable to each such specification revision or new Grade. 4. DELIVERY. 4.1 All prices applicable under the provision of Section 5 below shall apply (unless otherwise expressly agreed) on the basis that Coke is delivered [TEXT DELETED] and/or [TEXT DELETED] and/or delivered into road vehicles or containers at said [TEXT DELETED] (and/or at such other loading facility upon which Buyer and Seller mutually agree), in each case in the manner specified in General Condition 1. 4.2 Prior to the first day of each delivery month, Seller and Buyer shall agree upon a mutually acceptable delivery schedule for the next delivery month and may mutually agree upon adjustments to the delivery schedule with the intent being to improve upon the supply chain process. 5. [TEXT DELETED] AGREEMENT. As of the Effective Date, each of Seller and Buyer shall [TEXT DELETED] in [TEXT DELETED] in the [TEXT DELETED] for [TEXT DELETED] by [TEXT DELETED], as determined pursuant to the following provisions of this Section 5. To accomplish the foregoing, the following terms shall apply: 5.1 Definitions. [TEXT DELETED] ("[TEXT DELETED]") for any period means (i) net [TEXT DELETED] of [TEXT DELETED], less (ii) [TEXT DELETED] of [TEXT DELETED], plus (iii) [TEXT DELETED], less (iv) [TEXT DELETED], and less (v) an allocation of [TEXT DELETED] and [TEXT DELETED] as applicable to [TEXT DELETED] (each of (i), (ii), (iii), (iv) and (v) being calculated consistently with [TEXT DELETED] accounting policies and methodologies as they applied on [TEXT DELETED] and otherwise in accordance with U.S. GAAP), in each case for the relevant period. [TEXT DELETED] ("[TEXT DELETED]%") for any period means [TEXT DELETED] for the relevant period divided by [TEXT DELETED] of [TEXT DELETED]. For purposes of calculating [TEXT DELETED] and [text deleted]%, [TEXT DELETED] of [TEXT DELETED] includes [TEXT DELETED] from other [TEXT DELETED] as accounted for in the [TEXT DELETED] for the relevant period consistently with said accounting policies and methodologies applicable at [TEXT DELETED]. 5.2 [TEXT DELETED] OF COKE PRICE. 5.2.1 The price to be paid by Buyer and received by Seller for all Coke supplied [TEXT DELETED] or [TEXT DELETED] or into road vehicles or containers at said [TEXT DELETED] (or at such other loading 4 facility upon which Buyer and Seller may mutually agree) shall be calculated in accordance with the following [TEXT DELETED] (the "[TEXT DELETED]") and expressed in US$ per MT: (a) the price for [TEXT DELETED] Coke shall be (i) [TEXT DELETED]% multiplied by $[TEXT DELETED], plus (ii) $[TEXT DELETED] (b) the price for [TEXT DELETED] Coke shall be the [TEXT DELETED] price as ascertained as above plus $[TEXT DELETED] (c) the price for [TEXT DELETED] Coke shall be the [TEXT DELETED] price as ascertained as above minus $[TEXT DELETED] 5.2.2 For purposes of calculating the [TEXT DELETED] price, the [TEXT DELETED]% shall be expressed as a portion of 100 (i.e., a [TEXT DELETED]% of [TEXT DELETED]% shall be expressed as [TEXT DELETED] and not [TEXT DELETED]). 5.2.3 If new Grades of Coke are developed in the future, prices therefore will be negotiated based on their relationship (in terms of quality and cost to produce) to the existing Grades. If the mix of grades of Coke purchased by UCAR from Conoco is changed by UCAR so that the [TEXT DELETED] of [TEXT DELETED] Grade (as defined in the Humber Agreement as referred to and defined in 5.4 below) and [TEXT DELETED] Grade (which, together with the [TEXT DELETED] as taken by UCAR from suppliers other than Conoco, are hereinafter referred to collectively as "Premium Grades") exceeds [TEXT DELETED]% of the total volume of Coke purchased by UCAR from Conoco, Seller and Buyer will renegotiate the [TEXT DELETED] between the price for those Grades and the price for [TEXT DELETED] so as to preserve the intent of the Parties and their respective parent corporations with respect to [TEXT DELETED]. An increase in the volume of Premium Grades purchased from Conoco because UCAR sources higher percentages of their combined requirements for Premium Grades from Conoco instead of other suppliers shall not constitute a change in product mix (using 2000 as the base year). 5.3 APPLICATION OF [TEXT DELETED]. The [TEXT DELETED] shall be applied as follows: 5.3.1 Prices for invoicing and payment purposes 5 (a) For the year [TEXT DELETED] the prices to be used for invoicing and payment for Coke supplied under this Agreement will be [TEXT DELETED] at the following: Grade [TEXT DELETED] - $[TEXT DELETED] per metric ton Grade [TEXT DELETED] - $[TEXT DELETED] per metric ton Grade [TEXT DELETED] - $[TEXT DELETED] per metric ton (b) From and after the quarter beginning on [TEXT DELETED], the prices to be used for invoicing for Coke supplied during each quarter will be adjusted on a quarterly basis as described in Sections 5.3.3 and 5.3.4 hereof. 5.3.2 [TEXT DELETED] typically closes its books approximately [TEXT DELETED] days after each quarter-end and approximately [TEXT DELETED] days after each year-end. Buyer will provide (or cause [TEXT DELETED] to provide) Seller with [TEXT DELETED]'s calculation of the "[TEXT DELETED]" [TEXT DELETED]% (before making the calculation described in Section 5.3.3 hereof) for each quarter, beginning with the quarter ending [TEXT DELETED], within [TEXT DELETED] business days after [TEXT DELETED] closes its books for that quarter; provided, however, that for the [TEXT DELETED] of this Agreement (ending [TEXT DELETED]), the [TEXT DELETED]% shall be provided by [TEXT DELETED] within [TEXT DELETED] business days after [TEXT DELETED] closes its books for the quarter. 5.3.3 Within [TEXT DELETED] business days after [TEXT DELETED] provides the [TEXT DELETED]% for each quarter (the "Prior Quarter") beginning with the quarter ending [TEXT DELETED], the Parties will calculate what the [TEXT DELETED]% would have been for the Prior Quarter if the prices for all Coke supplied and purchased during the Prior Quarter had been those provided for under the [TEXT DELETED] (the "[TEXT DELETED]") and such calculations shall continue in an iterative process until the [TEXT DELETED] for [TEXT DELETED] Grade for any quarter changes by no more than $1 per metric ton. 5.3.4 Subject to Section 5.3.1A and 5.3.5 hereof, the [TEXT DELETED] shall be used as the invoicing prices for all Coke supplied and purchased in the subsequent quarter. The difference between the total Coke prices that were actually invoiced and paid during the Prior Quarter and the total 6 prices that would have been charged and paid in respect of that same quarter if the [TEXT DELETED] had been used is called the "[TEXT DELETED]." For example, if [TEXT DELETED] closes its books for the quarter ending [TEXT DELETED] on [TEXT DELETED], it shall provide the [TEXT DELETED]% to Seller by [TEXT DELETED]. The Parties will calculate the [TEXT DELETED] by [TEXT DELETED]. The [TEXT DELETED] thus ascertained will then be applied: (a) for the purposes of ascertaining the [TEXT DELETED] in relation to the Prior Quarter (in this example the quarter ending [TEXT DELETED]) and (b) as the invoicing prices for the quarter beginning on [TEXT DELETED]. 5.3.5 If the [TEXT DELETED] for [TEXT DELETED] Grade when determined by the determined by the [TEXT DELETED] is either [TEXT DELETED] a [TEXT DELETED] price of $[TEXT DELETED]/MT or [TEXT DELETED] a [TEXT DELETED] price of $[TEXT DELETED]/MT then any amounts above or below this minimum/maximum range will be disregarded for the purposes of (a) determining the [TEXT DELETED] to be used pursuant to 5.3.4 above; and (b) the [TEXT DELETED]. 5.3.6 In the event that the [TEXT DELETED] yields a price for [TEXT DELETED] Grade which is outside this minimum/maximum range for [TEXT DELETED] then the [TEXT DELETED] shall be [TEXT DELETED] as provided in Section 5.5. 5.3.7 Appendix B illustrates the manner in which [TEXT DELETED]% is to be calculated and the resultant calculation of the [TEXT DELETED]. 5.4 ADDITIONAL PROCEDURES. The [TEXT DELETED] shall accumulate on a net basis from quarter to quarter and, for ease of administration, the [TEXT DELETED] applicable under this Agreement shall be aggregated with the [TEXT DELETED] applicable under the concurrent Agreement of even date herewith made between Conoco (UK) Limited as seller and UCAR S.A. as buyer for the sale and purchase of Coke produced at Conoco (UK) Limited's Humber refinery ("the Humber Agreement") and shall be administered for the purposes of this present Agreement as if the aggregated [TEXT DELETED] accumulated under the Humber 7 Agreement. Whenever the net accumulated amount of the aggregated [TEXT DELETED] exceeds $[TEXT DELETED] then, within [TEXT DELETED] business days after such excess is determined, an amount equal to the excess over $[TEXT DELETED] shall be paid by the advantaged entity (meaning here Conoco or UCARINC as the case may require) to the other and receipt of such payment by the entity receiving the same shall be a good and sufficient discharge of the liability of Seller or Buyer (as the case may be) for payment of so much of the amount so paid as may have become due and payable pursuant to this present Agreement alone. 5.5 REEVALUATION OF [TEXT DELETED]. Seller and Buyer agree that, together with their respective parent corporations, they will [TEXT DELETED] the [TEXT DELETED] when [TEXT DELETED] changes occur in the [TEXT DELETED] of their respective businesses and shall continue to [TEXT DELETED] and [TEXT DELETED] a [TEXT DELETED] for the Coke business that [TEXT DELETED] enable each party to [TEXT DELETED] the [TEXT DELETED] and [TEXT DELETED] of Coke sales by Conoco to UCAR and [TEXT DELETED] by [TEXT DELETED]. 5.6 AUDIT RIGHTS. Each of Seller and Buyer will permit the other Party and its representatives limited audit rights to ensure compliance with the Agreement in areas relating to [TEXT DELETED], but excluding any access to third party Coke pricing. Each Party will be provided by the other with reasonable access to the related facilities, books, records and documents. 5.7 VAT AND CLIMATE CHANGE LEVY. 5.7.1 All prices as herein before referred to are exclusive of (i) any Value Added Tax and/or (ii) a Climate Change Levy ("CCL") or any such similar energy or carbon tax which may from time to time be applicable to the sale and delivery of Coke and the gross amount (if any) payable in connection with either or both of them shall become due and shall be paid in like manner as is provided in relation to said prices. 6. CAPITAL INVESTMENT. 6.1 MAINTENANCE CAPITAL EXPENDITURES. All maintenance and sustaining capital expenditures shall be the responsibility of the owners of each of the respective businesses. 6.2 SPECIAL PROJECTS. 8 In the event of an opportunity for a special project relating to the [TEXT DELETED] between Conoco and UCAR (including, but not limited to, [TEXT DELETED] and [TEXT DELETED]), the Management Committee (referenced in Section 9 hereof) will explore the project and, together with their respective parent corporations, Seller and Buyer will determine on a case-by-case basis whether and how to fund the project as well as how to measure and [TEXT DELETED] its [TEXT DELETED] and [TEXT DELETED]. If only one of Conoco or UCAR proceeds with a special project, including [TEXT DELETED] thereof, then such party will be entitled to [TEXT DELETED] of the [TEXT DELETED] derived therefrom. 7. JOINT TECHNOLOGY DEVELOPMENT. Seller and Buyer agree that, they will establish a [TEXT DELETED] and [TEXT DELETED] program under which, from time to time, they will identify and agree on [TEXT DELETED] with the intent of [TEXT DELETED] and [TEXT DELETED] in the Coke to [TEXT DELETED]. Ownership rights to such intellectual property developed under the program will be determined and set forth in the program agreement(s). In the absence of such an agreement Conoco would own any Coke related intellectual property and UCAR would own any graphite electrode related intellectual property. Any intellectual property developed jointly thereunder will be used exclusively, to the extent legally and practicably possible, for the benefit of UCAR and Conoco and shall not be transferred to third parties. To the extent that any intellectual property is developed under the program, the Parties agree to keep all such information confidential in conformity with the Confidentiality Agreement referred to in Section 14 below as it is to apply to this Agreement. 8. TERM. This Agreement shall be deemed to have commenced on and to have been continuously in force since the Effective Date and shall continue in force unless and until terminated in accordance with Section 12 below. 9. MANAGEMENT COMMITTEE. A Management Committee shall be established consisting of two senior managers from Buyer and one senior manager from each of Seller and Conoco (UK) Limited. Each of Seller and Buyer shall notify the other of the member it appoints to the Management Committee as well as any changes thereto. Subcommittees shall be established as deemed appropriate by the Management Committee. The 9 Management Committee shall meet at least quarterly, and its responsibilities shall include those outlined in Appendix A hereto. 10. OWNERSHIP OF ASSETS/EMPLOYMENT ISSUES. Each of Seller and Buyer shall continue to own all of the assets owned by it prior to the commencement of the Agreement, including, but not limited to, all patents, trademarks, licenses, know-how and proprietary technology. The ownership of assets acquired or developed through a special project (see Section 6.2 hereof) or by joint development (see Section 7 hereof) shall be determined on a case-by-case basis as mutually decided and documented by the Management Committee. The employees of each Party shall remain with their respective employers. 11. DISPUTE RESOLUTION. 11.1 Dispute resolution procedures shall be established whereby, together with their respective parent corporations, each of Seller and Buyer shall follow certain steps toward resolving disputes during the term of this Agreement. At a minimum, such procedures shall require that issues under dispute be presented to the Management Committee for consideration and resolution. In the event that the Management Committee is unable to resolve an issue within 30 days, the issue will be presented to designated executives of each Party for resolution. 11.2 If the designated executives cannot resolve the issue within 30 days after being presented with it either Seller or Buyer may exercise its right to terminate this Agreement under Section 12.1B hereof, and any controversy or claim arising out of or relating to this Agreement or any breach thereof, shall be settled by arbitration in New York, New York, United States of America in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. 11.3 In the event that a dispute arises under this Agreement simultaneously with a dispute under the Humber Agreement and in relation to an issue which is common to both of them then for the purposes of determining that issue: (a) they shall be treated as constituting one dispute only and shall be referred to and settled by one arbitration accordingly 10 (b) any conflict or inconsistency between the applicable New York law and the applicable substantive law under the Humber Agreement shall be resolved by according precedence to New York law to the intent that it shall prevail over the applicable law under the Humber Agreement to the extent necessary for resolving such conflict or inconsistency. 12. EXIT PROVISIONS. 12.1 This Agreement may be terminated by written notice given by Seller or Buyer to the other of them: (a) on or at any time after January 1, 2007; (b) at [TEXT DELETED] in the event that a [TEXT DELETED] cannot be [TEXT DELETED] in compliance with the dispute resolution procedures described in Section 11.1 hereof; or (c) in the event that the Party to which notice is given goes into liquidation (other than voluntary liquidation in a solvent condition for the purposes of amalgamation or reconstruction), enters into an arrangement or composition with its creditors or has a receiver appointed of any of its assets. 12.2 Termination pursuant to Section 12.1 above shall take effect as follows: 12.2.1 In the case of notice given pursuant to Section 12.1A: (a) if it is given by no later than September 30, at the end of the calendar year in which it is given; or (b) if it is given later than September 30, at the end of the calendar year next following the year in which it is given; 12.2.2 In the case of a notice given pursuant to Section 12.1B, at the end of the calendar year in which it is given; or 12.2.3 In the case of notice given pursuant to section 12.1C, forthwith upon such notice being given or on such later date as may be specified in that notice by the Party giving it. Each such date is hereinafter referred to as "the Effective Termination Date". 11 12.3 In the event of termination pursuant to Section 12.1A or 12.1B above (but not Section 12.1C), Seller and Buyer shall enter into a replacement agreement providing for the supply and purchase of Coke on terms corresponding with the terms and provisions of this present Agreement mutatis mutandis save that (a) it shall be for a term of three years beginning immediately after the Effective Termination Date; (b) for the first, second and third years of such term, Seller shall supply and Buyer shall purchase and receive approximately [TEXT DELETED]%, [TEXT DELETED]% and [TEXT DELETED]%, respectively, of the volume of each Grade supplied during the year ending with the Effective Termination Date; (c) the prices to be charged by Seller and paid by Buyer shall be on a "[TEXT DELETED]" basis, meaning that such prices shall be no [TEXT DELETED] than the [TEXT DELETED](excluding [TEXT DELETED]) [TEXT DELETED] by [TEXT DELETED] for the relevant Grade of Coke among all of its Coke [TEXT DELETED] other than Buyer and ascertained by reference to the prices applicable at the commencement of the year in which delivery is effected of the quantity of Coke for which the price is to be ascertained; and (d) Sections 5.1, 5.3, 5.4, 5.5, 8, 12.1A, 12.3 and 12.4 and the [TEXT DELETED] provisions in Section 5.2 of this present Agreement shall not apply. 12.4 The net accumulated amount of the [TEXT DELETED] as of the Effective Date of Termination shall be paid to the appropriate Party promptly after such date. 13. MODIFICATION OF TERMS. Seller and Buyer agree that certain terms of the Agreement may be renegotiated in the event of certain material events provided, however, that no amendment to or variation in this Agreement or any Appendix or Annex hereto (other than changes to a Forecast as defined in 2.1) shall be effective unless it is made or evidenced in writing and signed by authorized representatives of the Parties. 14. CONFIDENTIALITY. The Confidentiality Agreement made on [TEXT DELETED], by and between Conoco Inc. and UCAR International Inc. and amended by two separate letter agreements dated [TEXT DELETED], and [TEXT 12 DELETED], respectively shall apply to and form part of this Agreement as fully and effectually as if it were reproduced herein and set forth in full but suitably modified to such extent as may be appropriate so as to render it capable of applying to and affecting anything contained or provided for in or arising from or contemplated by the terms and provisions of this present Agreement. [LENGTH OF NEGOTIATIONS ARE SENSITIVE AND NOT MATERIAL TO INVESTORS; UCAR DOESN'T WANT OTHER STRATEGIC PARTIES TO SPECULATE AS TO THE LENGTH OF TIME DURING WHICH THE PARTIES HAVE BEEN DISCUSSING TRANSACTIONS; THESE CONFID. AGTS HAVE INVOLVED A VARIETY OF POSSIBLE TRANSACTIONS AND UCAR DOESN'T WANT COMPETITORS TO KNOW THE DATES] 15. ENTIRE AGREEMENT; HEADINGS; COUNTERPARTS. 15.1 Except as otherwise provided in the Confidentiality Agreement referred to in Section 14 above and in a certain letter agreement dated February 21, 2001, relating to payment terms, this Agreement contains the entire agreement between Seller and Buyer with respect to the subject matter of this Agreement and supersedes all prior agreements (including the 2000-2002 Graphite Coke Sales Agreement dated June 14, 2000), whether written or oral, between them with respect to the subject matter of this Agreement. 15.2 Seller and Buyer explicitly acknowledge that, they are involved in a number of [TEXT DELETED] regarding [TEXT DELETED], none of which shall serve to modify this Agreement unless recorded in writing as described in Section 13. 15.3 The headings in this Agreement are inserted for convenience of reference only and will not be used to interpret or construe any provision of this Agreement. 15.4 This Agreement may be executed in counterparts, each of which will be deemed an original and all of which will constitute one and the same instrument. 16. MISCELLANEOUS. 16.1 Seller's General Conditions of Sale set forth in Appendix D annexed hereto are incorporated into and form part of this Agreement (a) subject as provided under 16.2 below; and 13 (b) so far as they are not otherwise in conflict or inconsistent with the express terms of this present Agreement; and for the purposes of those Conditions this Agreement shall constitute "the Special Provisions" as therein referred to. 16.2 The said General Conditions of Sale shall apply and take effect subject to modification as follows: (a) Any references therein to "Product", and "this Agreement" shall be read and construed as if they were references to Coke, and this present Agreement respectively (b) General Condition 7 shall be read and construed and shall take effect in the like manner and to the like extent as if the events and circumstances described and referred to in 7.1: (i) included any interference with or disruption to or any failure, limitation or cessation of Seller's existing or contemplated sources of supply of Coke (ii) were expressed to be applicable to Seller's supplier as well as to Seller to the intent that any effect which any of those events and circumstances may have on or in relation to Seller's supplier and the production of Coke shall be treated conclusively as having the like and corresponding effect in relation to Seller and its sources of supply of Coke 17. ADDRESSES ETC FOR NOTICES. The address for each of Seller and Buyer shall be as set forth at the beginning of the Agreement and other information for such Party, as applicable at the date hereof, is: For Seller: Attention: General Manager, Global Carbon Business Conoco Inc. 600 North Dairy Ashford Road Houston, Texas 77079 Facsimile: (281) 293-1641 14 With a copy to: Attention: General Counsel Conoco Inc. 600 North Dairy Ashford Road Houston, Texas 77079 Facsimile: (281) 293-3700 For Buyer: Attention Director of Purchasing UCAR Carbon Company Inc. 3102 West End Avenue, Suite 1100 Nashville, Tennessee 37203 United States Facsimile: (615) 760-7650 With a copy to: Attention: General Counsel UCAR International Inc. 3102 West End Avenue, Suite 1100 Nashville, Tennessee 37203 United States Facsimile: (615) 760-7785 16.4 This Agreement shall be binding upon Seller and Buyer and their respective successors and assigns and shall inure to the benefit of Seller and Buyer and their respective successors and permitted assigns. 18. PUBLIC ANNOUNCEMENTS. Neither Seller nor Buyer Party nor any affiliates, subsidiaries, employees, officers, directors or agents of Seller or Buyer will make any public statement with regard to this Agreement, including the fact of its existence, the subject matter hereof or the transactions contemplated hereby, without the prior written consent and agreement of the other Party; provided, however, that each Party shall fully cooperate and shall not delay in providing its reasonable consent in the event that the other Party must make a public announcement in order to comply with the disclosure requirements of U.S. and other applicable securities laws. 15 EFFECTIVE the day and year first before written by the duly authorized representative of Seller and Buyer respectively: CONOCO INC. UCAR CARBON COMPANY INC. By: /s/ Jim W. Nokes By: /s/ John A. Toner ------------------------- ----------------------- Name: Jim W. Nokes Name: John A. Toner Title: Executive Vice President Title: Director, Strategic Refining, Marketing, Supply & Transportation Raw Materials and Worldwide Puchasing UCAR S.A. By: /s/ John A. Toner --------------------------- Name: John A. Toner Title: Director, Strategic Raw Materials and Worldwide Purchasing 16 -----END PRIVACY-ENHANCED MESSAGE-----