Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended June 30, 2018
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
 
GRAFTECIMAGE.JPG
GRAFTECH INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
 
Delaware
27-2496053
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
 
 
982 Keynote Circle
44131
Brooklyn Heights, OH
(Zip code)
(Address of principal executive offices)
 
Registrant’s telephone number, including area code: (216) 676-2000
 
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   ý     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ý     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer o
Accelerated Filer  o
Emerging Growth Company   x
Non-Accelerated Filer  x
Smaller Reporting Company   o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act. x
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes   ¨     No   ý
As of July 16, 2018 , 302,225,923 shares of common stock, par value $.01 per share, were outstanding.


Table of Contents

TABLE OF CONTENTS
 
PART I. FINANCIAL INFORMATION:
 
 
 
Item 1. Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Presentation of Financial, Market and Legal Data
We present our financial information on a consolidated basis. Unless otherwise noted, when we refer to dollars, we mean U.S. dollars.
Unless otherwise specifically noted, market and market share data in this Report are our own estimates or derived from sources described in our Registration Statement on Form S-1 filed on April 13, 2018. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Forward Looking Statements” and “Risk Factors” in this report. We cannot guarantee the accuracy or completeness of this market and market share data and have not independently verified it. None of the sources has consented to the disclosure or use of data in this Report.
Forward Looking Statements
Some of the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report may contain forward‑looking statements that reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward‑looking statements by the use of forward‑looking words such as “will,” “may,” “plan,” “estimate,” “project,” “believe,” “anticipate,” “expect,” “intend,” “should,” “would,” “could,” “target,” “goal,” “continue to,” “positioned to” or the negative version of those words or other comparable words. Any forward‑looking statements contained in this report are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward‑looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. These forward‑looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to:
•
our history of net losses and the possibility that we may not achieve or maintain profitability in the future;
•
the possibility that we are unable to implement our business strategies, including our initiative to secure and maintain three‑ to five‑year take‑or‑pay customer contracts, in an effective manner;

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•
the possibility that new tax legislation could adversely affect us or our stockholders;
•
the fact that pricing for graphite electrodes has historically been cyclical and, in the future, the price of graphite electrodes will likely decline from recent record highs;
•
the sensitivity of our business and operating results to economic conditions;
•
our dependence on the global steel industry generally and the EAF steel industry in particular;
•
the possibility that global graphite electrode overcapacity may adversely affect graphite electrode prices;
•
the competitiveness of the graphite electrode industry;
•
our dependence on the supply of petroleum needle coke;
•
our dependence on supplies of raw materials (in addition to petroleum needle coke) and energy;
•
the legal, economic, social and political risks associated with our substantial operations in multiple countries;
•
the possibility that fluctuation of foreign currency exchange rates could materially harm our financial results;
•
the possibility that our results of operations could deteriorate if our manufacturing operations were substantially disrupted for an extended period, including as a result of equipment failure, climate change, natural disasters, public health crises, political crises or other catastrophic events;
•
the possibility that plant capacity expansions may be delayed or may not achieve the expected benefits;
•
our dependence on third parties for certain construction, maintenance, engineering, transportation, warehousing and logistics services;
•
the possibility that we are unable to recruit or retain key management and plant operating personnel or successfully negotiate with the representatives of our employees, including labor unions;
•
the possibility that we may divest or acquire businesses, which could require significant management attention or disrupt our business;
•
the sensitivity of goodwill on our balance sheet to changes in the market;
•
the possibility that we are subject to information technology systems failures, cybersecurity attacks, network disruptions and breaches of data security;
•
our dependence on protecting our intellectual property;
•
the possibility that third parties may claim that our products or processes infringe their intellectual property rights;
•
the possibility that our manufacturing operations are subject to hazards;
•
changes in, or more stringent enforcement of, health, safety and environmental regulations applicable to our manufacturing operations and facilities;
•
the possibility that significant changes in our jurisdictional earnings mix or in the tax laws of those jurisdictions could adversely affect our business;
•
the possibility that our indebtedness could limit our financial and operating activities or that our cash flows may not be sufficient to service our indebtedness;
•
the possibility that restrictive covenants in our financing agreements could restrict or limit our operations;
•
the possibility that our cash flows could be insufficient to service our indebtedness;

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•
the fact that borrowings under certain of our existing financing agreements subjects us to interest rate risk;
•
the possibility of a lowering or withdrawal of the ratings assigned to our debt;
•
the possibility that disruptions in the capital and credit markets adversely affect our results of operations, cash flows and financial condition, or those of our customers and suppliers;
•
the possibility that highly concentrated ownership of our common stock may prevent minority stockholders from influencing significant corporate decisions;
•
the fact that certain of our stockholders have the right to engage or invest in the same or similar businesses as us;
•
the fact that certain provisions of our Amended and Restated Certificate of Incorporation and our Amended and Restated By‑Laws could hinder, delay or prevent a change of control;
•
the fact that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders;
•
our status as a “controlled company” within the meaning of the NYSE corporate governance standards, which allows us to qualify for exemptions from certain corporate governance requirements; and
•
other risks described in the “Risk Factors” section of this report.
These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. The forward‑looking statements made in this report relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward‑looking statement except as required by law, whether as a result of new information, future developments or otherwise.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward‑looking statements. We caution that you should not place undue reliance on any of our forward‑looking statements. You should specifically consider the factors identified in this report that could cause actual results to differ before making an investment decision to purchase our common stock. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.
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.
For a more complete discussion of these and other factors, see “Risk Factors” in Part II of this report.


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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Unaudited
 
As of
June 30, 2018
 
As of
December 31, 2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
166,140

 
$
13,365

Accounts and notes receivable, net of allowance for doubtful accounts of
$1,406 as of June 30, 2018 and $1,097 as of December 31, 2017
220,631

 
116,841

Inventories
251,328

 
174,151

Prepaid expenses and other current assets
54,304

 
44,872

Current assets of discontinued operations
1,847

 
5,313

Total current assets
694,250

 
354,542

Property, plant and equipment
667,664

 
642,651

Less: accumulated depreciation
152,923

 
129,810

Net property, plant and equipment
514,741

 
512,841

Deferred income taxes
60,355

 
30,768

Goodwill
171,117

 
171,117

Other assets
126,452

 
129,835

Total assets
$
1,566,915

 
$
1,199,103

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
88,112

 
$
69,110

Short-term debt
106,378

 
16,474

Accrued income and other taxes
37,865

 
9,737

Other accrued liabilities
36,271

 
53,226

Current liabilities of discontinued operations
2,761

 
3,412

Total current liabilities
271,387

 
151,959

Long-term debt
2,103,628

 
322,900

Other long-term obligations
71,006

 
68,907

Deferred income taxes
49,736

 
41,746

Related party payable
61,801

 
—

Long-term liabilities of discontinued operations
376

 
376

Contingencies – Note 9
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock, par value $.01, 300,000,000 shares authorized, none issued
—

 
—

Common stock, par value $.01, 3,000,000,000 shares authorized, 302,225,923 shares issued as of June 30, 2018 and December 31, 2017*
3,022

 
3,022

Additional paid-in capital
851,496

 
851,315

Accumulated other comprehensive income
32,250

 
20,289

Accumulated deficit
(1,877,787
)
 
(261,411
)
Total stockholders’ (deficit) equity
(991,019
)
 
613,215

 
 
 
 
Total liabilities and stockholders’ equity
$
1,566,915

 
$
1,199,103

* See Notes 1 and 12
See accompanying Notes to Condensed Consolidated Financial Statements

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GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)
(Unaudited)
 
 
For the Three Months Ended June 30,
 
For the Six Months
Ended June 30,
 
2018
 
2017
 
2018
 
2017
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
 
 
 
 
Net sales
$
456,332

 
$
116,314

 
$
908,231

 
$
221,053

Cost of sales
165,910

 
106,434

 
311,059

 
209,887

Gross profit
290,422

 
9,880

 
597,172

 
11,166

Research and development
581

 
933

 
1,010

 
1,754

Selling and administrative expenses
16,239

 
12,169

 
32,115

 
23,824

Operating profit (loss)
273,602

 
(3,222
)
 
564,047

 
(14,412
)
 
 
 
 
 
 
 
 
Other (income) expense, net
(974
)
 
1,423

 
1,031

 
4,727

Related party Tax Receivable Agreement expense
61,801

 
—

 
61,801

 
—

Interest expense
28,667

 
7,902

 
66,532

 
15,448

Interest income
(391
)
 
(139
)
 
(506
)
 
(262
)
Income (loss) from continuing operations before
provision for income taxes
184,499

 
(12,408
)
 
435,189

 
(34,325
)
 
 
 
 
 
 
 
 
(Benefit) provision for income taxes
(17,264
)
 
925

 
11,379

 
1,286

Net income (loss) from continuing operations
201,763

 
(13,333
)
 
423,810

 
(35,611
)
 
 
 
 
 
 
 
 
    (Loss) income from discontinued operations, net of tax
(315
)
 
(4,050
)
 
1,311

 
(8,116
)
 
 
 
 
 
 
 
 
Net income (loss)
$
201,448

 
$
(17,383
)
 
$
425,121

 
$
(43,727
)
 
 
 
 
 
 
 
 
Basic income (loss) per common share:
 
 
 
 
 
 
 
Net income (loss) per share
$
0.67

 
$
(0.06
)
 
$
1.41

 
$
(0.14
)
Net income (loss) from continuing operations per share
$
0.67

 
$
(0.04
)
 
$
1.40

 
$
(0.12
)
Weighted average common shares outstanding
302,225,923

 
302,225,923

 
302,225,923

 
302,225,923

Diluted income (loss) per common share:
 
 
 
 
 
 
 
Income (loss) per share
$
0.67

 
$
(0.06
)
 
$
1.41

 
$
(0.14
)
Diluted income (loss) from continuing operations per share
$
0.67

 
$
(0.04
)
 
$
1.40

 
$
(0.12
)
Weighted average common shares outstanding
302,231,431

 
302,225,923

 
302,228,712

 
302,225,923

 
 
 
 
 
 
 
 
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
Net income (loss)
$
201,448

 
$
(17,383
)
 
$
425,121

 
$
(43,727
)
Other comprehensive income:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(18,818
)
 
8,755

 
(13,778
)
 
13,595

Commodities derivatives
31,852

 
—

 
25,739

 
—

Other comprehensive income, net of tax:
13,034

 
8,755

 
11,961

 
13,595

Comprehensive income (loss)
$
214,482

 
$
(8,628
)
 
$
437,082

 
$
(30,132
)

See accompanying Notes to Condensed Consolidated Financial Statements

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GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, unaudited)
 
For the Six Months
Ended June 30,
 
2018
 
2017
Cash flow from operating activities:
 
 
 
Net income (loss)
$
425,121

 
$
(43,727
)
Adjustments to reconcile net income (loss) to cash
provided by operations:
 
 
 
Depreciation and amortization
31,696

 
33,294

Impairments
—

 
5,300

Deferred income tax provision
(22,011
)
 
(993
)
Loss on extinguishment of debt
23,827

 
—

Interest expense
2,161

 
3,382

Other charges, net
6,879

 
4,846

Net change in working capital*
(158,588
)
 
157

Change in long-term assets and liabilities
68,590

 
1,214

Net cash provided by operating activities
377,675

 
3,473

Cash flow from investing activities:
 
 
 
Capital expenditures
(28,735
)
 
(13,445
)
Proceeds from the sale of assets
841

 
3,156

Net cash used in investing activities
(27,894
)
 
(10,289
)
Cash flow from financing activities:
 
 
 
Short-term debt, net
(12,571
)
 
(4,927
)
Revolving Facility borrowings
—

 
30,000

Revolving Facility reductions
(45,692
)
 
(18,000
)
Debt issuance costs
(26,283
)
 
—

Proceeds from the issuance of long-term debt, net of
   original issuance discount
2,235,000

 
—

Repayment of Senior Notes
(304,782
)
 
—

Related party Promissory Note repayment
(750,000
)
 
—

Dividends paid
(1,291,494
)
 
—

Net cash (used in) provided by financing activities
(195,822
)
 
7,073

Net change in cash and cash equivalents
153,959

 
257

Effect of exchange rate changes on cash and cash equivalents
(1,184
)
 
63

Cash and cash equivalents at beginning of period
13,365

 
11,610

Cash and cash equivalents at end of period
$
166,140

 
$
11,930

 
 
 
 
* Net change in working capital due to the following components:
 
 
 
Accounts and notes receivable, net
$
(110,700
)
 
$
1,136

Inventories
(82,565
)
 
5,999

Prepaid expenses and other current assets
8,284

 
(1,509
)
Change in accounts payable and accruals
21,075

 
(5,499
)
Increase in interest payable
5,318

 
30

Net change in working capital
$
(158,588
)
 
$
157

During the second quarter of 2018, we declared a $750 million dividend in the form of a Promissory Note that was a non-cash transaction. See Note 6 "Debt and Liquidity" for details.

See accompanying Notes to Condensed Consolidated Financial Statements

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PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



(1)
Organization and Summary of Significant Accounting Policies
A. Organization
GrafTech International Ltd. (the “Company”) is a leading manufacturer of high quality graphite electrode products essential to the production of electric arc furnace steel and other ferrous and non-ferrous metals. References herein to “we,” “our,” or “us” refer collectively to GrafTech International Ltd. and its subsidiaries. On August 15, 2015, we became an indirect wholly owned subsidiary of Brookfield Asset Management Inc. (together with its affiliates, “Brookfield”) through a tender offer to our former stockholders and subsequent merger transaction.
On April 23, 2018, the Company completed its initial public offering ("IPO"). See Note 12 "Stockholders' Equity" for more information regarding these transactions.
The Company’s only reportable segment, Industrial Materials, is comprised of our two major product categories: graphite electrodes and petroleum needle coke products. Needle coke is the key raw material used in the production of graphite electrodes. The Company's vision is to provide the highest quality graphite electrodes and the best customer service all while striving to be the lowest cost producer.
We previously operated an Engineered Solutions business segment. See Note 2 “Discontinued Operations and Assets Held for Sale” for further information. All results from the Engineered Solutions business have been excluded from continuing operations, unless otherwise indicated.
B. Basis of Presentation
The interim Condensed 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 and in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The December 31, 2017 financial position data included herein was derived from the audited condensed consolidated financial statements included in our Registration Statement on Form S-1 filed on April 13, 2018 but does not include all disclosures required by GAAP in audited financial statements. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the accompanying notes, contained in our Registration Statement on Form S-1 filed on April 13, 2018.
The unaudited condensed consolidated financial statements reflect all adjustments (all of which are of a normal, recurring nature) which management considers necessary for a fair statement of financial position, results of operations, comprehensive income and cash flows for the interim periods presented. The results for the interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year.
Earnings per share
The calculation of basic earnings per share is based on the number of common shares outstanding after giving effect to the stock split effected on April 12, 2018 (see Note 12 “Stockholders' Equity”). Diluted earnings per share recognizes the dilution that would occur if stock options or preferred shares were exercised or converted into common shares. See Note 13 "Earnings Per Share".
C. New Accounting Standards
Recently Adopted Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) . The Company adopted ASU 2014-09 and its related amendments (collectively known as ASC 606) effective on January 1, 2018 using the modified retrospective method. Please see Note 3 "Revenue from Contracts with Customers" for the required disclosures related to the impact of adopting this standard and a discussion of the Company's updated policies related to revenue recognition.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Payments, clarifying guidance on the classification of certain cash receipts and payments in the statement of cash flows. The adoption of ASU 2016-15 on January 1, 2018 did not have a material impact on our consolidated financial statements.

8
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715). This standard requires an entity to report the service cost component in the same line item as other compensation costs. The other components of net (benefit) cost including our annual mark-to-market re-measurement, will be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The adoption of ASU No. 2017-07 on January 1, 2018 changed the presentation of benefit expenses, but did not have a material impact on our consolidated financial statements. The components of the net (benefit) cost are shown in Note 4, "Retirement Plans and Postretirement Benefits." The following table summarizes the adjustments made to conform prior period classifications to the new guidance:
 
For the Three Months
Ended June 30, 2017
 
For the Six Months
Ended June 30, 2017
 
(dollars in thousands)
 
As
Reported
 
Effect of Accounting Change
 
As
Adjusted
 
As
Reported
 
Effect of Accounting Change
 
As
Adjusted
Cost of Sales
$
106,635

 
$
(201
)
 
$
106,434

 
$
210,289

 
$
(402
)
 
$
209,887

Research and development
943

 
(10
)
 
933

 
1,772

 
(18
)
 
1,754

Selling and administrative expenses
12,195

 
(26
)
 
12,169

 
23,878

 
(54
)
 
23,824

Other (income) expense, net
1,186

 
237

 
1,423

 
4,253

 
474

 
4,727

 
For the Year Ended December 31, 2017
 
For the Year Ended December 31, 2016
 
(dollars in thousands)
 
As
Reported
 
Effect of Accounting Change
 
As
Adjusted
 
As
Reported
 
Effect of Accounting Change
 
As
Adjusted
Cost of Sales
$
462,848

 
$
206

 
$
463,054

 
$
466,990

 
$
1,212

 
$
468,202

Research and development
2,951

 
505

 
3,456

 
2,399

 
135

 
2,534

Selling and administrative expenses
49,479

 
3,027

 
52,506

 
57,784

 
731

 
58,515

Other (income) expense, net
1,634

 
(3,738
)
 
(2,104
)
 
(2,188
)
 
(2,078
)
 
(4,266
)
Accounting Standards Not Yet Adopted     
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under this new guidance, a company will now recognize most leases on its balance sheet as lease liabilities with corresponding right-of-use assets. This ASU is effective for fiscal years beginning after December 15, 2018. The Company has compiled its lease inventory and is currently evaluating the contracts and the impact of the adoption of this standard on its financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350). This guidance was issued to simplify the accounting for goodwill impairment. The guidance removes the second step of the goodwill impairment test, which requires that a hypothetical purchase price allocation be performed to determine the amount of impairment, if any. Under this new guidance, a goodwill impairment charge will be based on the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance will become effective on a prospective basis for the Company on January 1, 2020 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of the adoption of this standard on its results of operations.
(2)
Discontinued Operations and Related Assets Held for Sale
On February 26, 2016, the Company announced that it had initiated a strategic review of its Engineered Solutions business segment to better direct its resources and simplify its operations. As of June 30, 2016, the Engineered Solutions segment qualified for reporting as discontinued operations as its divestiture represents a strategic shift for the Company.
During 2016, we evaluated the fair value of the Engineered Solutions business segment utilizing the market approach (Level 3 measure). As a result, we incurred an impairment charge to our Engineered Solutions business segment of $120 million

9
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


to align the carrying value with estimated fair value. We continued to update this estimate and during 2017, we further reduced the estimated fair value by $5.3 million .
On November 30, 2016, we completed the sale of our Fiber Materials Inc. business, which was a business line within our former Engineered Solutions business. The sale resulted in cash proceeds of $15.9 million and a loss of $0.2 million . We have the ability to realize up to $8.5 million of additional proceeds based on the earnings of the Fiber Materials business over the 24 months following the transaction. We have elected to record this contingent consideration as it is realized and accordingly, it has not been recognized to date.
On July 3, 2017, we completed the sale of our Advanced Energy Technologies ("AET") business. AET was a product line within our Engineered Solutions business which had been classified as held for sale since the second quarter of 2016. The sale resulted in cash proceeds of $28.5 million .
On September 30, 2017, we completed the sale of the majority of the U.S. assets of our GrafTech Advanced Graphite Materials ("GAGM") business, which was a component of our Engineered Solutions business. The sale of the Italian GAGM assets closed on October 5, 2017. In the jurisdictions where the GAGM assets were not acquired, we initiated the wind‑down of the business. The sale was structured as a non‑cash transaction with the buyer assuming certain liabilities associated with the assets acquired. In addition, GrafTech retained certain current assets of GAGM, mostly receivables, which have been substantially realized in the fourth quarter of 2017.
The disposition of the Engineered Solutions business is now substantially complete and, in accordance with our Old Credit Agreement (as defined below), all cash proceeds from these sales were used to pay down our $225 million revolving facility (the "Old Revolving Facility") and the $40 million senior secured delayed draw term loan facility (the "Old Term Loan Facility").
The following tables summarize the results of the Engineered Solutions business segment, reclassified as discontinued operations for the three and six months ended June 30, 2018 and 2017 .
 
For the Three Months
Ended June 30,
 
For the Six Months
Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
 
 
 
 
 
 
 
 
Net sales
$
13

 
$
32,428

 
$
2,468

 
$
64,193

Cost of sales
142

 
28,610

 
1,335

 
57,022

    Gross (loss) profit
(129
)
 
3,818

 
1,133

 
7,171

Research and development
—

 
711

 
—

 
1,281

Selling and administrative expenses
114

 
4,106

 
(244
)
 
7,800

Gain on sale of assets
—

 
—

 
—

 
—

Impairments
—

 
2,800

 
—

 
5,300

    Operating (loss) income
(243
)
 
(3,799
)
 
1,377

 
(7,210
)
Other (income) expense
72

 
(47
)
 
66

 
(18
)
Interest expense
—

 
524

 
—

 
1,133

(Loss) income from discontinued operations
    before income taxes
(315
)
 
(4,276
)
 
1,311

 
(8,325
)
Benefit from income taxes on discontinued operations
—

 
(226
)
 
—

 
(209
)
(Loss) income from discontinued operations
$
(315
)
 
$
(4,050
)
 
$
1,311

 
$
(8,116
)

10
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


The significant components of our Statements of Cash Flows for the Engineered Solutions business segment held for sale are as follows:
 
For the Six Months
Ended June 30,
 
2018
 
2017
 
(dollars in thousands)
Depreciation and amortization
$
—

 
$
2,311

Impairment
—

 
5,300

Deferred income taxes
—

 
(209
)
Capital expenditures
—

 
432

The following table summarizes the carrying value of the assets and liabilities of discontinued operations as of June 30, 2018 and December 31, 2017 .
 
As of
June 30, 2018
 
As of
December 31, 2017
 
(dollars in thousands)
Assets of discontinued operations:
 
 
 
  Accounts receivable
$
1,234

 
$
3,351

  Inventories
191

 
502

  Prepaid expenses and other current assets
326

 
1,137

  Net property plant and equipment
—

 
226

  Other assets
96

 
97

         Total assets of discontinued operations
1,847

 
5,313

 
 
 
 
Liabilities of discontinued operations:
 
 
 
  Accounts payable
$
905

 
$
512

  Accrued income and other taxes
181

 
158

  Other accrued liabilities
1,675

 
2,742

     Total current liabilities of discontinued operations
2,761

 
3,412

 
 
 
 
  Other long-term obligations
376

 
376

 
 
 
 
          Total liabilities of discontinued operations
$
3,137

 
$
3,788

(3)
Revenue from Contracts with Customers
The Company adopted ASC 606 on January 1, 2018. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of the Company's goods and will provide financial statement readers with enhanced disclosures. The reported results for 2018 reflect the application of ASC 606 guidance while the reported results for 2017 were prepared under the guidance of ASC 605, Revenue Recognition (ASC 605), which is also referred to herein as "legacy GAAP" or the "previous guidance".
Financial Statement Impact of Adopting ASC 606
The Company adopted ASC 606 effective January 1, 2018 using the modified retrospective method. Under this method, we could elect to apply the cumulative effect method to either all contracts as of the date of initial application or only to contracts that are not complete as of that date. We elected to apply the modified retrospective method to contracts that are not complete as of the date of initial application. The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018 was to be recorded as an adjustment to accumulated deficit as of the adoption date. As a result

11
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


of using the modified retrospective method, there were no adjustments that were made to accounts on the Company's consolidated balance sheet as of January 1, 2018.
Impact of the adoption of ASC 606 on accounting policies
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods.
To achieve this core principle, the following five steps are performed: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.
The Company sells the majority of its products directly to steel manufacturers located in various jurisdictions. The Company’s contracts consist of longer-term take-or-pay sales contracts of graphite electrodes with terms of up to five years and short-term purchase orders (deliveries within one year). Collectability is assessed based on the customer’s ability and intention to pay, reviewing a variety of factors including the customer’s historical payment experience and published credit and financial information pertaining to the customer. Additionally, for multi-year contracts, we may require the customer to post a bank guarantee, guarantee of a parent, a letter of credit or a significant pre-payment.
The promises of delivery of graphite electrodes represent the distinct performance obligations of our contracts. A small portion of our sales consist of deliveries of by-products of the manufacturing processes, such as graphite powders, naphta and gasoil.
Given their nature, the Company’s performance obligations are satisfied at a point in time when control of the products has been transferred to the customer. In most cases, control transfer is deemed to happen at the delivery point of the products defined under the incoterms, usually at time of loading the truck or the vessel. The Company has elected to treat the transportation activity as a fulfilment activity instead of as a distinct performance obligation, and outbound freight cost is accrued when the product delivery promises are satisfied.
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods to the customer. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer are excluded from the transaction price.
Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. The Company’s contracts and customary practices involve few rebates or discounts. The Company provides a limited warranty on its products and may issue credit notes or replace products free of charge for valid quality claims; historically, quality claims have been insignificant and the Company records appropriate accruals for the estimated credit notes based on the historical statistical experience. Certain contracts provide for limited rebates when deliveries are late versus committed dates. These rebates are accrued for based on historical statistics of late deliveries on the contracts to which those terms apply.
Contracts that contain multiple distinct performance obligations require an allocation of the transaction price to each performance obligation based on a relative stand-alone selling price basis. The Company regularly reviews market conditions and internally approved pricing guidelines to determine stand-alone selling prices for the different types of its customer contracts. The stand-alone prices as known at contract inception are utilized as the basis to allocate the transaction price to the distinct performance obligations. The allocation of the transaction price to the performance obligations remains unchanged if stand-alone selling prices change after contract inception.
The Company expenses sales commissions as earned as their amortization period would not extend beyond the year in which they are incurred. These costs are recorded within selling and administrative expense.

12
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Disaggregation of Revenue
The following table provides information about disaggregated revenue by type of product and contract for the three and six months ended months ended June 30, 2018 :
 
For the Three Months Ended June 30, 2018
 
For the Six
Months Ended June 30, 2018
 
(dollars in thousands)
Graphite Electrodes - Three-to-five-year contracts
$
345,246

 
$
617,447

Graphite Electrodes - Short-term contracts
96,823

 
264,418

By-products
14,263

 
26,366

Total Revenues
$
456,332

 
$
908,231

Impact of New Revenue Guidance on Financial Statement Line Items
There would be no differences to the reported consolidated balance sheet, statement of operations and cash flows, as of and for the six months ended June 30, 2018 , had the previous revenue guidance still been in effect.
Contract Balances
Receivables, net of allowances for doubtful accounts, were $220.6 million as of June 30, 2018 and $116.8 million as of December 31, 2017. Accounts receivables are recorded when the right to consideration becomes unconditional. Payment terms on invoices range from 30 to 120 days depending on the customary business practices of the jurisdictions in which we do business.
Certain short-term and longer-term sales contracts require up-front payments prior to the Company’s fulfilment of any performance obligation. These contract liabilities are recorded as current or long-term deferred revenue, depending on the lag between the pre-payment and the expected delivery of the related products. Current deferred revenue is included in "Other accrued liabilities" and long-term deferred revenue is included in "Other long-term obligations" on the Consolidated Balance Sheets. The following table provides information about deferred revenue from contracts with customers (in thousands):
 
Current deferred revenue
 
Long-Term deferred revenue
 
(dollars in thousands)
Balance as of December 31, 2017
$
20,784

 
$
—

Revenue recognized that was included in the deferred revenue balance
   at the beginning of the period
(20,604
)
 
—

Increases due to cash received, excluding amounts recognized as revenue during the period
467

 
8,242

Foreign currency impact
$
(92
)
 
(510
)
Balance as of June 30, 2018
$
555

 
$
7,732


13
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Transaction Price Allocated to the Remaining Performance Obligations
The following table presents estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in thousands). The estimated revenues do not include contracts with original duration of one year or less.
 
Three-to-five-year take-or-pay contracts
 
(dollars in thousands)

Remainder of 2018
714,709

2019
1,347,005

2020
1,270,684

2021
1,114,294

Thereafter
1,085,725

Total
$
5,532,417

In addition to the expected remaining revenue to be recognized with the longer-term sales contracts, the Company recorded $617.4 million of revenue pursuant to these contracts in the six months ended June 30, 2018 .
(4)
Retirement Plans and Postretirement Benefits
The components of our consolidated net pension costs are set forth in the following table:
 
For the Three Months
Ended June 30,
 
For the Six Months
Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(Dollars in thousands)
Service cost
$
498

 
$
496

 
$
996

 
$
992

Interest cost
1,241

 
1,385

 
2,482

 
2,769

Expected return on plan assets
(1,502
)
 
(1,389
)
 
(3,004
)
 
(2,777
)
Net cost
$
237

 
$
492

 
$
474

 
$
984

The components of our consolidated net postretirement costs are set forth in the following table: 
 
For the Three Months
Ended June 30,
 
For the Six Months
Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(Dollars in thousands)
Service cost
$
—

 
$
1

 
$
—

 
$
1

Interest cost
251

 
241

 
502

 
483

Net cost
$
251

 
$
242

 
$
502

 
$
484

(5)
Goodwill and Other Intangible Assets
We are required to review goodwill and indefinite-lived intangible assets annually for impairment. Goodwill impairment is tested at the graphite electrodes reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.
The following tables represent the changes in the carrying value of goodwill and intangibles for the six months ended June 30, 2018 :

14
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Goodwill
(Dollars in thousands)
Balance as of December 31, 2017
$
171,117

   Adjustments
—

Balance as of June 30, 2018
$
171,117

Intangible Assets
 
As of June 30, 2018
 
As of December 31, 2017
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
(Dollars in Thousands)
Trade name
$
22,500

 
$
(6,629
)
 
$
15,871

 
$
22,500

 
$
(5,512
)
 
$
16,988

Technological know-how
55,300

 
(20,502
)
 
34,798

 
55,300

 
(17,265
)
 
38,035

Customer –related
    intangible
64,500

 
(12,859
)
 
51,641

 
64,500

 
(10,637
)
 
53,863

Total finite-lived
    intangible assets
$
142,300

 
$
(39,990
)
 
$
102,310

 
$
142,300

 
$
(33,414
)
 
$
108,886

Amortization expense of acquired intangible assets was $3.3 million and $3.5 million in the three months ended June 30, 2018 and 2017 , respectively, and $6.6 million and $6.9 million in the six months ended June 30, 2018 and 2017 , respectively. Estimated amortization expense will approximate $6.3 million in the remainder of 2018 , $12.2 million in 2019, $11.4 million in 2020, $10.7 million in 2021 and $10.1 million in 2022.
(6)
Debt and Liquidity
The following table presents our long-term debt: 
 
As of
June 30, 2018
 
As of
December 31, 2017
 
(Dollars in thousands)
Old Credit Facility (Old Revolving Facility and Old Term Loan Facility)
$
—

 
$
58,192

Senior Notes
—

 
280,586

2018 Credit Facility (2018 Term Loan and 2018 Revolving Facility)
2,209,075

 
—

Other Debt
931

 
596

Total Debt
2,210,006

 
339,374

Less: Short-term Debt
(106,378
)
 
(16,474
)
Long-term Debt
$
2,103,628

 
$
322,900

The fair value of debt approximated the book value of $2,210.0 million as of June 30, 2018 .
Senior Notes
On November 20, 2012, the Company issued $ 300 million principal amount of 6.375% Senior Notes due 2020 (the "Senior Notes"). The Senior Notes were the Company's senior unsecured obligations and ranked pari passu with all of the Company's existing and future senior unsecured indebtedness. The Senior Notes were guaranteed on a senior unsecured basis by each of the Company's existing and future subsidiaries that guarantee certain other indebtedness of the Company or another guarantor. The Senior Notes bore interest at a rate of 6.375% per year, payable semi-annually in arrears on May 15 and November 15 of each year. The Senior Notes were scheduled to mature on November 15, 2020.
The Company was entitled to redeem some or all of the Senior Notes at any time on or after November 15, 2016 at the redemption prices set forth in the indenture for the Senior Notes.

15
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


If, prior to maturity, a change in control (as defined in the indenture) of the Company occurred and thereafter certain downgrades of the ratings of the Senior Notes as specified in the indenture occurred, the Company would have been required to offer to repurchase any or all of the Senior Notes at a repurchase price equal to 101% of the aggregate principal amount of the Senior Notes, plus any accrued and unpaid interest.
The indenture for the Senior Notes also contained covenants that, among other things, limited the ability of the Company and certain of its subsidiaries to: (i) create liens or use assets as security in other transactions; (ii) engage in certain sale or leaseback transactions; and (iii) merge, consolidate or sell, transfer, lease or dispose of substantially all of their assets.
The indenture for the Senior Notes also contained customary events of default, including (i) failure to pay principal or interest on the Senior Notes when due and payable, (ii) failure to comply with covenants or agreements in the indenture or the Senior Notes which failures are not cured or waived as provided in the indenture, (iii) failure to pay indebtedness of the Company, any Subsidiary Guarantor or Significant Subsidiary (each, as defined in the indenture) in excess of $50.0 million within any applicable grace period after maturity or acceleration, (iv) certain events of bankruptcy, insolvency, or reorganization, (v) failure to pay any judgment or decree for an amount in excess of $ 50.0 million against the Company, any Subsidiary Guarantor or any Significant Subsidiary that was not discharged, waived or stayed as provided in the indenture, and (vi) cessation of any Subsidiary Guarantee (as defined in the indenture) to be in full force and effect or denial or disaffirmance by any subsidiary guarantor of its obligations under its subsidiary guarantee no longer outstanding. In the case of an event of default, the principal amount of the Senior Notes plus accrued and unpaid interest could have been accelerated.
As described below, the Senior Notes were redeemed on February 12, 2018.
Old Credit Facility
On April 23, 2014, the Company and certain of its subsidiaries entered into an Amended and Restated Credit Agreement ("Old Credit Agreement") with a borrowing capacity of $400 million and a maturity date of April 2019. On February 27, 2015, GrafTech and certain of its subsidiaries entered into a further Amended and Restated Credit Agreement that provided for, among other things, greater financial flexibility and the Old Term Loan Facility. The Old Revolving Facility and Old Term Loan Facility both had maturity dates of April 2019.
On July 28, 2015, the Company and certain of its subsidiaries entered into an amendment to the Amended and Restated Credit Agreement to change the terms regarding the occurrence of a default upon a change in control (which was defined thereunder to include the acquisition by any person of more than 25 percent of the Company’s outstanding shares) to exclude the acquisition of shares by Brookfield.  In addition, effective upon such acquisition, the financial covenants were eased, resulting in increased availability under the Old Revolving Facility. The size of the Old Revolving Facility was also reduced from $400 million to $375 million . The size of the Old Term Loan Facility remained at $40 million .
On April 27, 2016 , the Company and certain of its subsidiaries entered into an amendment to the Old Revolving Facility. The size of the Old Revolving Facility was permanently reduced from $375 million to $225 million . New covenants were also added to the Old Revolving Facility, including a requirement to make mandatory repayments of outstanding amounts under the Old Revolving Facility and the Old Term Loan Facility with the proceeds of any sale of all or any substantial part of the assets included in the Engineered Solutions segment and a requirement to maintain minimum liquidity (consisting of domestic cash, cash equivalents and availability under the Old Revolving Facility) in excess of $25 million . The covenants were also modified to provide for: the elimination of certain exceptions to the Company’s negative covenants limiting the Company’s ability to make certain investments, sell assets, make restricted payments, incur liens, incur debt and prepay or redeem other indebtedness; a restriction on the amount of cash and cash equivalents permitted to be held on the balance sheet at any one time without paying down the Old Revolving Facility and the Old Term Loan Facility; and changes to the Company’s financial covenants so that until the earlier of March 31, 2019 or the Company had $75 million in trailing twelve month EBITDA (as defined in the Old Revolving Facility), the Company was required to maintain trailing twelve month EBITDA above certain minimums ranging from ( $40 million ) to $35 million , after which the Company’s existing financial covenants under the Old Revolving Facility would apply.
With this amendment, the Company had full access to the $225 million Old Revolving Facility, subject to the $25 million minimum liquidity requirement. As of December 31, 2017, the Company had $39.5 million of borrowings on the Old Revolving Facility and $8.7 million of letters of credit drawn against the Old Credit Facility.

16
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


The $40 million Old Term Loan Facility was fully drawn on August 11, 2015. The balance of the Old Term Loan Facility was $18.7 million as of December 31, 2017.
The interest rate applicable to the Old Revolving Facility and Old Term Loan Facility was LIBOR plus a margin ranging from 2.25% to 4.75% (depending on the Company's total senior secured leverage ratio). The borrowers paid a per annum fee ranging from 0.35% to 0.70% (depending on the Company's senior secured leverage ratio) on the undrawn portion of the commitments under the Old Revolving Facility.
As described below, the outstanding indebtedness under the Old Revolving Credit Facility and the Old Term Loan was repaid as of February 12, 2018 and all commitments thereunder have been terminated.
Refinancing
On February 12, 2018, the Company entered into a credit agreement (the “2018 Credit Agreement”) among the Company, GrafTech Finance Inc., a Delaware corporation and a wholly owned subsidiary of GrafTech (“Finance”), GrafTech Switzerland SA, a Swiss corporation and a wholly owned subsidiary of GrafTech (“Swissco”), GrafTech Luxembourg II S.à.r.l., a Luxembourg société à responsabilité limitée and a wholly owned subsidiary of GrafTech (“Luxembourg Holdco” and, together with Finance and Swissco, the “Co‑Borrowers”), the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A. as administrative agent and as collateral agent, which provides for (i) a $1,500 million senior secured term facility (the “2018 Term Loan Facility”) and (ii) a $250 million senior secured revolving credit facility (the “2018 Revolving Credit Facility” and, together with the 2018 Term Loan Facility, the “Senior Secured Credit Facilities”), which may be used from time to time for revolving credit borrowings denominated in dollars or Euro, the issuance of one or more letters of credit denominated in dollars, Euro, Pounds Sterling or Swiss Francs and one or more swing line loans denominated in dollars. Finance is the sole borrower under the 2018 Term Loan Facility while Finance, Swissco and Lux Holdco are Co‑Borrowers under the 2018 Revolving Credit Facility. On February 12, 2018, Finance borrowed $1,500 million under the 2018 Term Loan Facility (the "2018 Term Loans"). The 2018 Term Loans mature on February 12, 2025. The maturity date for the 2018 Revolving Credit Facility is February 12, 2023.
The proceeds of the 2018 Term Loans were used to (i) repay in full all outstanding indebtedness of the Co‑Borrowers under the Old Credit Agreement and terminate all commitments thereunder, (ii) redeem in full the Senior Notes at a redemption price of 101.594% of the principal amount thereof plus accrued and unpaid interest to the date of redemption, (iii) pay fees and expenses incurred in connection with (i) and (ii) above and the Senior Secured Credit Facilities and related expenses, and (iv) declare and pay a dividend to the sole pre-IPO stockholder, with any remainder to be used for general corporate purposes. See Note 8 "Interest Expense" for a breakdown of expenses associated with these repayments. In connection with the repayment of the Old Credit Agreement and redemption of the Senior Notes, all guarantees of obligations under the Old Credit Agreement, the Senior Notes and related indenture were terminated, all mortgages and other security interests securing obligations under the Old Credit Agreement were released and the Old Credit Agreement and the indenture were terminated.
Borrowings under the 2018 Term Loan Facility bear interest, at Finance’s option, at a rate equal to either (i) the Adjusted LIBO Rate (as defined in the 2018 Credit Agreement), plus an applicable margin initially equal to 3.50% per annum or (ii) the ABR Rate (as defined in the 2018 Credit Agreement), plus an applicable margin initially equal to 2.50% per annum, in each case with one step down of 25 basis points based on achievement of certain public ratings of the 2018 Term Loans.
Borrowings under the 2018 Revolving Credit Facility bear interest, at the applicable Co‑Borrower’s option, at a rate equal to either (i) the Adjusted LIBO Rate, plus an applicable margin initially equal to 3.75% per annum or (ii) the ABR Rate, plus an applicable margin initially equal to 2.75% per annum, in each case with two 25 basis point step downs based on achievement of certain senior secured first lien net leverage ratios. In addition, the Co‑Borrowers will be required to pay a quarterly commitment fee on the unused commitments under the 2018 Revolving Credit Facility in an amount equal to 0.25% per annum.
All obligations under the 2018 Credit Agreement are guaranteed by GrafTech, Finance and each domestic subsidiary of GrafTech, subject to certain customary exceptions, and all obligations under the 2018 Credit Agreement of each foreign subsidiary of GrafTech that is a Controlled Foreign Corporation (within within the meaning of Section 956 of the Internal Revenue Code of 1986, as amended from time to time (the "Code")) are guaranteed by GrafTech Luxembourg I S.à.r.l., a Luxembourg société à responsabilité limitée and an indirect wholly owned subsidiary of GrafTech ("Luxembourg Parent"), Luxembourg Holdco and Swissco (collectively, the "Guarantors").
All obligations under the 2018 Credit Agreement are secured, subject to certain exceptions and Excluded Assets (as defined in the 2018 Credit Agreement), by: (i) a pledge of all of the equity securities of Finance and each domestic Guarantor (other than GrafTech) and of each other direct, wholly owned domestic subsidiary of GrafTech and any Guarantor, (ii) a pledge on no more than 65% of the equity interests of each subsidiary that is a Controlled Foreign Corporation (within the meaning of

17
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Section 956 of the Code), and (iii) security interests in, and mortgages on, personal property and material real property of Finance and each domestic Guarantor, subject to permitted liens and certain exceptions specified in the 2018 Credit Agreement. The obligations of each foreign subsidiary of GrafTech that is a Controlled Foreign Corporation under the Revolving Credit Facility are secured by (i) a pledge of all of the equity securities of each Guarantor that is a Controlled Foreign Corporation and of each direct, wholly owned subsidiary of any Guarantor that is a Controlled Foreign Corporation, and (ii) security interests in certain receivables and personal property of each Guarantor that is a Controlled Foreign Corporation, subject to permitted liens and certain exceptions specified in the 2018 Credit Agreement.
The 2018 Term Loans amortize at a rate equal to 5% per annum of the original principal amount of the 2018 Term Loans payable in equal quarterly installments, with the remainder due at maturity. The Co‑Borrowers are permitted to make voluntary prepayments at any time without premium or penalty, except in the case of prepayments made in connection with certain repricing transactions with respect to the 2018 Term Loans effected within twelve months of the closing date of the 2018 Credit Agreement, to which a 1.00% prepayment premium applies. Finance is required to make prepayments under the 2018 Term Loans (without payment of a premium) with (i) net cash proceeds from non‑ordinary course asset sales (subject to customary reinvestment rights and other customary exceptions and exclusions), and (ii) commencing with the Company’s fiscal year ending December 31, 2019, 75% of Excess Cash Flow (as defined in the 2018 Credit Agreement), subject to step‑downs to 50% and 0% of Excess Cash Flow based on achievement of a senior secured first lien net leverage ratio greater than 1.25 to 1.00 but less than or equal to 1.75 to 1.00 and less than or equal to 1.25 to 1.00 , respectively. Scheduled quarterly amortization payments of the 2018 Term Loans during any calendar year reduce, on a dollar‑for‑dollar basis, the amount of the required Excess Cash Flow prepayment for such calendar year, and the aggregate amount of Excess Cash Flow prepayments for any calendar year reduce subsequent quarterly amortization payments of the 2018 Term Loans as directed by Finance.
The 2018 Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to GrafTech and restricted subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes, dispositions, and dividends and other distributions. The 2018 Credit Agreement contains a financial covenant that requires GrafTech to maintain a senior secured first lien net leverage ratio not greater than 4.00 : 1.00 when the aggregate principal amount of borrowings under the 2018 Revolving Credit Facility and outstanding letters of credit issued under the 2018 Revolving Credit Facility (except for undrawn letters of credit in an aggregate amount equal to or less than $35 million ), taken together, exceed 35% of the total amount of commitments under the 2018 Revolving Credit Facility. The 2018 Credit Agreement also contains customary events of default.
Brookfield Promissory Note
On April 19, 2018, we declared a dividend in the form of a $750 million promissory note (the “Brookfield Promissory Note”) to the sole pre-IPO stockholder. The $750 million Brookfield Promissory Note was conditioned upon (i) the Senior Secured First Lien Net Leverage Ratio (as defined in the 2018 Credit Agreement), as calculated based on our final financial results for the first quarter of 2018, being equal to or less than 1.75 to 1.00 , (ii) no Default or Event of Default (each as defined in the 2018 Credit Agreement) having occurred and continuing or that would result from the $750 million Brookfield Promissory Note and (iii) the satisfaction of the conditions occurring within 60 days from the dividend record date. Upon publication of our first quarter report on Form 10-Q, these conditions were met and, as a result, the Brookfield Promissory Note became payable.
The Brookfield Promissory Note had a maturity of eight years from the date of issuance and bore interest at a rate equal to the Adjusted LIBO Rate (as defined in the Brookfield Promissory Note) plus an applicable margin equal to 4.50% per annum, with an additional 2.00% per annum starting from the third anniversary from the date of issuance. We were permitted to make voluntary prepayments at any time without premium or penalty. All obligations under the Brookfield Promissory Note were unsecured and guaranteed by all of our existing and future domestic wholly owned subsidiaries that guarantee, or are borrowers under, the Senior Secured Credit Facilities. No funds were lent or otherwise contributed to us by the pre-IPO stockholder in connection with the Brookfield Promissory Note. As a result, we received no consideration in connection with its issuance. As described below, the Promissory Note was repaid in full on June 15, 2018.
First Amendment to 2018 Credit Agreement
On June 15, 2018, the Company entered into a first amendment (the “First Amendment”) to its 2018 Credit Agreement. The First Amendment amended the 2018 Credit Agreement to provide for an additional $750 million in aggregate principal amount of incremental term loans (the “Incremental Term Loans”) to Finance. The Incremental Term Loans increased the aggregate principal amount of term loans incurred by Finance under the 2018 Credit Agreement from $1,500 million to $2,250 million . The Incremental Term Loans have the same terms as those applicable to the 2018 Term Loans, including interest rate, payment and prepayment terms, representations and warranties and covenants. The Incremental Term Loans mature on February 12, 2025, the

18
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


same date as the 2018 Term Loans. GrafTech paid an upfront fee of 1.00% of the aggregate principal amount of the Incremental Term Loans on the effective date of the First Amendment.
The proceeds of the Incremental Term Loans were used to repay, in full, the $750 million of principal outstanding on the Brookfield Promissory Note.
(7)
Inventories
Inventories are comprised of the following: 
 
As of
June 30, 2018
 
As of
December 31, 2017
 
(Dollars in thousands)
Inventories:
 
 
 
Raw materials
$
73,349

 
$
39,434

Work in process
109,091

 
85,852

Finished goods
68,888

 
48,865

         Total
$
251,328

 
$
174,151

(8) Interest Expense
The following tables present the components of interest expense: 
 
For the Three Months
Ended June 30,
 
For the Six Months
Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(Dollars in thousands)
Interest incurred on debt
$
22,554

 
$
6,217

 
$
35,473

 
$
12,086

Related party Promissory Note interest expense
5,090

 
—

 
5,090

 
—

Senior Note redemption premium
—

 
—

 
4,782

 
—

Accretion of fair value adjustment on Senior Notes
—

 
1,609

 
19,414

 
3,208

Accretion of original issue discount on 2018 Term Loans
268

 
—

 
357

 
—

Amortization of debt issuance costs
755

 
76

 
1,416

 
154

Total interest expense
$
28,667

 
$
7,902

 
$
66,532

 
$
15,448

Interest Rates
The 2018 Credit Agreement had an effective interest rate of 5.59% as of June 30, 2018 . The Old Revolving Facility and Old Term Loan Facility had an effective interest rate of 4.57% as of December 31, 2017 and the Senior Notes had a fixed interest rate of 6.375% , both of which were repaid on February 12, 2018 as part of our refinancing (see Note 6 "Debt and Liquidity").
As a result of our February 12, 2018 refinancing, we paid a prepayment premium for the redemption of our Senior Notes totaling $4.8 million . The accretion of the August 15, 2015 fair value adjustment to our Senior Notes totaling $19.4 million included accelerated accretion of $18.7 million for the six months ended June 30, 2018 resulting from the prepayment.
(9)
Contingencies
Legal Proceedings
We are involved in various investigations, lawsuits, claims, demands, environmental compliance programs and other legal proceedings arising out of or incidental to the conduct of our business. While it is not possible to determine the ultimate disposition of each of these matters, we do not believe that their ultimate disposition will have a material adverse effect on our financial position, results of operations or cash flows.

19
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Litigation has been pending in Brazil brought by employees seeking to recover additional amounts and interest thereon under certain wage increase provisions applicable in 1989 and 1990 under collective bargaining agreements to which employers in the Bahia region of Brazil were a party (including our subsidiary in Brazil). Prior to October 1, 2015, we were not party to such litigation. Companies in Brazil have settled claims arising out of these provisions and, in May 2015, the litigation was remanded, in favor of the employees, by the Brazil Supreme Court to the lower courts for further proceedings which included procedural aspects of the case, such as admissibility of instruments filed by the parties. On October 1, 2015, an action was filed by current and former employees against our subsidiary in Brazil to recover amounts under such provisions, plus interest thereon, which amounts together with interest could be material to us. In the first quarter of 2017, the state court ruled in favor of the employees. We have appealed this ruling and intend to vigorously defend it. As of June 30, 2018 , we are unable to assess the potential loss associated with these proceedings as the claims do not currently specify the number of employees seeking damages or the amount of damages being sought.
Product Warranties
We generally sell products with a limited warranty. We accrue for known warranty claims if a loss is probable and can be reasonably estimated. We also accrue for estimated warranty claims incurred based on a historical claims charge analysis. Claims accrued but not yet paid and the related activity within the accrual for the six months ended June 30, 2018 , are presented below: 
 
(Dollars in thousands)
Balance as of December 31, 2017
$
349

Product warranty accruals and adjustments
1,256

Settlements
(88
)
Balance as of June 30, 2018
$
1,517

Tax Receivable Agreement
On April 23, 2018, the Company entered into a tax receivable agreement (the "TRA") that provides Brookfield, as the sole pre-IPO stockholder, the right to receive future payments from us for 85% of the amount of cash savings, if any, in U.S. federal income tax and Swiss tax that we and our subsidiaries realize as a result of the utilization of certain tax assets attributable to periods prior to our IPO, including certain federal net operating losses ("NOLs"), previously taxed income under Section 959 of the Code, foreign tax credits, and certain NOLs in Swissco (collectively, the "Pre‑IPO Tax Assets"). In addition, we will pay interest on the payments we will make to Brookfield with respect to the amount of these cash savings from the due date (without extensions) of our tax return where we realize these savings to the payment date at a rate equal to LIBOR plus 1.00% per annum. The term of the TRA commenced on April 23, 2018 and will continue until there is no potential for any future tax benefit payments.
There was no liability recognized on the date we entered into the TRA as the there was a full valuation allowance recorded against our deferred tax assets. During the second quarter of 2018, it was determined that the conditions were appropriate for the Company to release a valuation allowance of certain tax assets as we exited our three year cumulative loss position. This release resulted the recording of a $61.8 million liability related to the TRA on the Condensed Consolidated Statements of Operations as "Related party Tax Receivable Agreement Expense."
Long-term Incentive Plan
The LTIP was adopted by the Company effective as of August 17, 2015, as amended and restated as of March 15, 2018. The purpose of the plan is to retain senior management personnel of the Company, to incentivize them to make decisions with a long-term view and to influence behavior in a way that is consistent with maximizing value for the shareholder of the Company in a prudent manner. Each participant is allocated a number of profit units, with a a maximum of 30,000 profit units (or Profit Units) available under the Plan. Awards of Profit Units generally vest in equal increments over a five-year period beginning on the first anniversary of the grant date and subject to continued employment with the Company through each vesting date. Any unvested Profit Units that have not been previously forfeited will accelerate and become fully vested upon a ‘‘Change in Control’’ (as defined below).
Profit Units will generally be settled in a lump sum payment within 30 days following a Change in Control based on the ‘‘Sales Proceeds’’ (as defined below) received by Brookfield Capital Partners IV, L.P. (or, together with its affiliates, Brookfield Capital IV) in connection with the Change in Control. The LTIP defines ‘‘Change in Control’’ as any transaction or series of transactions (including, without limitation, the consummation of a combination, share purchases, recapitalization, redemption,

20
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


issuance of capital stock, consolidation, reorganization or otherwise) pursuant to which (a) a Person not affiliated with Brookfield Capital IV acquires securities representing more than seventy percent (70%) of the combined voting power of the outstanding voting securities of the Company or the entity surviving or resulting from such transaction, (b) following a public offering of the Company’s stock, Brookfield Capital IV has ceased to have a beneficial ownership interest in at least 30% of the Company’s outstanding voting securities (effective on the first of such date), or (c) the Company sells all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis. It is intended that the occurrence of a Change in Control in which Sales Proceeds exceed the Threshold Value would constitute a ‘‘substantial risk of forfeiture’’ within the meaning of Section 409A of the Code. The LTIP defines ‘‘Threshold Value’’ as, as of any date of determination, an amount equal to $855,000,000, (which represents the amount of the total invested capital of Brookfield Capital IV as of August 17, 2015), plus the dollar value of any cash or other consideration contributed to or invested in the Company by Brookfield Capital IV after August 17, 2015. The Threshold Value shall be determined by the board in its sole discretion. The LTIP defines ‘‘Sales Proceeds’’ as, as of any date of determination, the sum of all proceeds actually received by the Brookfield Capital IV, net of all Sales Costs (as defined below), (i) as consideration (whether cash or equity) upon the Change in Control and (ii) as distributions, dividends, repurchases, redemptions or otherwise as a holder of such equity interests in the Company. Proceeds that are not paid upon or prior to or in connection with the Change in Control, including earn-outs, escrows and other contingent or deferred consideration shall become ‘‘Sale Proceeds’’ only as and when such proceeds are received by Brookfield Capital IV. ‘‘Sales Costs’’ means any costs or expenses (including legal or other advisor costs), fees (including investment banking fees), commissions or discounts payable directly by Brookfield Capital IV in connection with, arising out of or relating to a Change in Control, as determined by the board in its sole discretion.
Given the successful completion of the IPO in the second quarter, it is reasonably possible that a Change in Control, as defined above, may ultimately happen and that the awarded Profit Units will be subsequently paid out to the participants. Assuming 100% vesting of the awarded Profit Units and depending on Brookfield’s sales proceeds, the potential liability triggered by a Change in Control is estimated to be in the range of $65 million to $90 million . As of June 30, 2018, the awards are 40% vested.
(10)
Income Taxes
We compute and apply to ordinary income an estimated annual effective tax rate on a quarterly basis based on current and forecasted business levels and activities, including the mix of domestic and foreign results and enacted tax laws. The estimated annual effective tax rate is updated quarterly based on actual results and updated operating forecasts. Ordinary income refers to income (loss) before income tax expense excluding significant, unusual, or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs as a discrete item of tax.
The following tables summarize the provision for income taxes for the six months ended June 30, 2018 and June 30, 2017 :
 
For the Three Months
Ended June 30,
 
For the Six Months
Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(Dollars in thousands)
 
 
 
 
 
 
Tax (benefit) expense
$
(17,264
)
 
$
925

 
$
11,379

 
$
1,286

Pretax income (loss)
184,499

 
(12,408
)
 
435,189

 
(34,325
)
Effective tax rates
(9.4
)%
 
(7.5
)%
 
2.6
%
 
(3.7
)%
The effective tax rate for the three months ended June 30, 2017 was (7.5)% This rate differs from the U.S. statutory rate of 35% primarily due to recent losses in the U.S. and Switzerland where we received no tax benefit due to a full valuation allowance and worldwide earnings from various countries taxed at different rates. The recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future.
The effective tax rate for the three months ended June 30, 2018 was (9.4)% . This rate differs from the U.S. statutory rate of 21% primarily due to the favorable impact of the partial release of a valuation allowance recorded against the deferred tax asset related to U.S. tax attributes and the tax impact of worldwide earnings from various countries taxed at different rates.
The tax expense changed from a charge of $0.9 million for the quarter ended June 30, 2017 to a tax benefit of $17.3 million for the quarter ended June 30, 2018. This change is primarily due to the partial release of a valuation allowance in the amount of $80.1 million recorded against the deferred tax asset related to U.S. tax attributes. This change is also the result of a shift in the jurisdictional mix of earnings and losses from year to year. Certain jurisdictions shifted from pre-tax losses in the second quarter of 2017 to pretax earnings in the second quarter of 2018.

21
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


For the six months ended June 30, 2017, the effective tax rate of (3.7)% differs from the U.S. statutory rate of 35% primarily due to recent losses in the U.S. and Switzerland where we receive no tax benefit due to a full valuation allowance and worldwide earnings from various countries tax a different rates. The recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future.
For the six months ended June 30, 2018, the effective tax rate of 2.6% differs from the U.S. statutory rate of 21% primarily due the partial release of a valuation allowance recorded against the deferred tax asset related to U.S. tax attributes and worldwide earnings from various countries taxed at different rates. The recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future.
The tax expense changed from a charge of $1.3 million for the six months ended June 30, 2017 to a tax charge of $11.4 million for the six months ended June 30, 2018. This change is primarily due to the partial release of a valuation allowance recorded against the deferred tax asset related to US tax attributes and shift in the jurisdictional mix of earnings and losses from year to year. Certain jurisdictions shifted from pre-tax losses in the first half of 2017 to pretax earnings in the first half of 2018.
As of June 30, 2018, we had unrecognized tax benefits of $2.5 million , $2.2 million of which, if recognized, would have a favorable impact on our effective tax rate.
We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. All U.S. federal tax years prior to 2014 are generally closed by statute or have been audited and settled with the applicable domestic tax authorities. All other jurisdictions are still open to examination beginning after 2011.
As of June 30, 2018, we determined that sufficient positive evidence existed that allowed us to conclude that a full valuation allowance was no longer required to be recorded against the deferred tax assets related the U.S. tax attributes. This positive evidence was primarily supplied by the Company exiting a cumulative loss period as well as sufficient U.S. forecasted taxable income that would utilize the US tax attributes and thus generate the tax benefit recorded at June 30, 2018. We continue to assess the realization of our deferred tax assets based on determinations of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. Examples of positive evidence would include a strong earnings history, an event or events that would increase our taxable income through a continued reduction of expenses, and tax planning strategies that would indicate an ability to realize deferred tax assets. In circumstances where the significant positive evidence does not outweigh the negative evidence in regards to whether or not a valuation allowance is required, we have established and maintained valuation allowances on those net deferred tax assets.
Tax Cuts and Jobs Act
On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the "Tax Act"), which significantly revised the U.S. corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21% , the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation. The Tax Act also transitioned international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures which have the effect of subjecting certain earnings of our foreign subsidiaries to U.S. taxation as global intangible low taxed income (or "GILTI"). In general, these changes were effective beginning in 2018. The Tax Act also includes a one time mandatory deemed repatriation or transition tax on the accumulated previously untaxed foreign earnings of our foreign subsidiaries.
For the fourth quarter of 2017, we were able to reasonably estimate certain Tax Act effects and, therefore, recorded provisional adjustments associated with the deemed repatriation transition tax and remeasurement of certain deferred tax assets and liabilities. As of the second quarter, the previously disclosed provisional amounts continue to be provisional.
We have not made any additional measurement-period adjustments related to transition tax during 2018, because the Company has not yet completed the calculation of the total post-1986 E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets. We are continuing to gather additional information to complete our accounting for these items and expect to complete our accounting within the prescribed measurement period.
On August 1, 2018, the U.S. Department of Treasury and the Internal Revenue Service issued proposed regulations under code section 965. Due to the complexity of the new GILTI tax rules, the Company is continuing to evaluate this provision

22
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


of the Tax Act and the application of ASC 740. We have included an estimate of the 2018 current GILTI impact in our effective tax rate for the first half of 2018.
(11)
Derivative Instruments
We use derivative instruments as part of our overall foreign currency and commodity risk management strategies to manage the risk of exchange rate movements that would reduce the value of our foreign cash flows and to minimize commodity price volatility. Foreign currency exchange rate movements create a degree of risk by affecting the value of sales made and costs incurred in currencies other than the U.S. dollar.
Certain of our derivative contracts contain provisions that require us to provide collateral. Since the counterparties to these financial instruments are large commercial banks and similar financial institutions, we do not believe that we are exposed to material counterparty credit risk. We do not anticipate nonperformance by any of the counter-parties to our instruments. Our derivative assets and liabilities are included within "Other long-term assets", "Prepaid expenses and other current assets", "Long-term liabilities" and "Other current liabilities" on the Condensed Consolidated Balance Sheets and effects of these derivatives are recorded in other comprehensive income, revenue and cost of goods sold on the Condensed Consolidated Statements of Operations.
Foreign currency derivatives
We enter into foreign currency derivatives from time to time to attempt to manage exposure to changes in currency exchange rates. These foreign currency instruments, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures such as foreign currency denominated debt, sales, receivables, payables, and purchases. Forward exchange contracts are agreements to exchange different currencies at a specified future date and at a specified rate.
During 2017 and 2018 , we entered into foreign currency derivatives denominated in the Mexican peso, South African rand, Brazilian real, euro, Swiss franc and Japanese yen. These derivatives were entered into to protect the risk that the eventual cash flows resulting from commercial and business transactions may be adversely affected by changes in exchange rates between the U.S. dollar and the Mexican peso, euro, South African rand and Japanese yen. We had no foreign currency cashflow hedges outstanding as of June 30, 2018 and December 31, 2017 and therefore, no unrealized gains or losses. As of June 30, 2018 , we had fair value hedge contracts outstanding for the Mexican peso, euro, South African rand, Swiss franc and Japanese yen currency with an aggregate notional amount of $15.2 million . These fair value hedge foreign currency derivatives outstanding as of June 30, 2018 , have maturities through August 31, 2018 .
Commodity derivative contracts
We have entered into commodity derivative contracts for refined oil products. These contracts are entered into to protect against the risk that eventual cash flows related to these products will be adversely affected by future changes in prices. We had outstanding commodity derivative contracts as of June 30, 2018 with notional amount of $168.2 million with maturities from July 2018 to June 2022 . The outstanding commodity derivative contracts represented a net unrealized gain within other comprehensive income of $27.8 million as of June 30, 2018 . We had outstanding commodity derivative contracts as of December 31, 2017 with notional amount of $143.9 million representing a net unrealized gain of $4.7 million .
Net Investment Hedges
We use certain intercompany debt to hedge a portion of our net investment in our foreign operations against currency exposure (net investment hedge). Intercompany debt denominated in foreign currency and designated as a non-derivative net investment hedging instrument was $13.4 million and $14.8 million as of June 30, 2018 and December 31, 2017 , respectively. Within the currency translation adjustment portion of other comprehensive income, we recorded a gain of $2.1 million and $1.4 million in the three and six months ended June 30, 2018 , respectively, and a gain of $0.1 million and a loss $0.7 million in the three and six months ended June 30, 2017 , respectively, resulting from these net investment hedges.

23
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


The fair value of all derivatives is recorded as assets or liabilities on a gross basis in our Consolidated Balance Sheets. As of June 30, 2018 and December 31, 2017 , respectively, the fair value of our derivatives and their respective balance sheet locations are presented in the following table:
 
Asset Derivatives
 
Liability Derivatives
 
Location
 
Fair  Value
 
Location
 
Fair  Value
As of June 30, 2018
(Dollars in thousands)
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
Commodity derivative contracts
Prepaid and other current assets
 
$
15,643

 
Other accrued liabilities
 
$
—

 
Other long-term assets
 
13,095

 
Other long-term obligations
 
58

Total fair value
 
 
$
28,738

 
 
 
$
58

 
 
 
 
 
 
 
 
As of December 31, 2017
 
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
Commodity derivative contracts
Prepaid and other current assets
 
$
2,518

 
Other accrued liabilities
 
$
—

 
Other long-term assets
 
2,808

 
Other long-term obligations
 
581

Total fair value
 
 
$
5,326

 
 
 
$
581

The realized (gains) losses on commodity derivatives remain in Other Comprehensive Income until they are recognized in the Statements of Operations when the hedged item impacts earnings, which is when the finished product is sold. There were no realized gains or losses included in earnings for the six months ended June 30, 2018 . With respect to the inputs used to determine the fair value, we use observable, quoted market rates that are determined by active markets and, therefore, classify the contracts as "Level 2".
 
Asset Derivatives
 
Liability Derivatives
 
Location
 
Fair  Value
 
Location
 
Fair  Value
As of June 30, 2018
(Dollars in Thousands)
Derivatives not designated as hedges:
 
 
 
 
 
 
Foreign currency derivatives
Prepaid and other current assets
 
$
23

 
Other current liabilities
 
$
34

 
 
 
 
 
 
 
 
As of December 31, 2017
 
 
 
 
 
 
 
Derivatives not designated as hedges:
 
 
 
 
 
 
Foreign currency derivatives
Prepaid and other current assets
 
$
9

 
Other current liabilities
 
$
90


 
 
 
 
Amount of (Gain)/Loss
Recognized
 
 
Location of (Gain)/Loss Recognized in the Consolidated Statement of Income
 
For the Six Months Ended June 30,
 
 
 
 
2018
 
2017
Derivatives not designated as hedges:
 
(Dollars in thousands)
Foreign currency derivatives
 
Cost of goods sold, Other expense/(income)
 
$
(296
)
 
$
842

(12)
Stockholders' Equity
Stock Split
On April 12, 2018, the Company effected a 3,022,259.23 to one stock split of the Company's then outstanding common stock. We have retroactively applied this split to all share presentations, as well as "Net income (loss) per share" and "Income (loss) from continuing operations per share" calculations for the periods presented.

24
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Conditional Dividend to Pre-IPO Stockholder
On April 19, 2018, we declared a $160 million cash dividend payable to Brookfield, the sole pre-IPO stockholder. Payment of this dividend was conditional upon (i) the Senior Secured First Lien Net Leverage Ratio (as defined in the 2018 Credit Agreement), as calculated based on our final financial results for the first quarter of 2018, being equal to or less than 1.75 to 1.00, (ii) no Default or Event of Default (as defined in the 2018 Credit Agreement) having occurred and continuing or that would result from the payment of the dividend and (iii) the payment occurring within 60 days from the dividend record date. The conditions of this dividend were met upon filing of our first quarter report on Form 10-Q and the dividend was paid on May 8, 2018.
Brookfield Promissory Note
On April 19, 2018, we declared a dividend in the form of the Brookfield Promissory Note to the sole pre-IPO stockholder. This note was repaid on June 15, 2018. See Note 6 "Debt and Liquidity".
Initial Public Offering
On April 23, 2018, we completed our IPO of 35,000,000 shares of our common stock at a price of $15 per share. This offering represented a sale of 11.6% of our sole pre-IPO stockholder's ownership in the Company.
On April 26, 2018, we closed the sale of an additional 3,097,525 shares of common stock at a price to the public of $15 per share from the pre-IPO stockholder, as a result of the partial exercise by the underwriters in our IPO of their overallotment option.  After giving effect to the partial exercise of the overallotment option, the total number of shares of common stock sold by the pre-IPO stockholder was 38,097,525 .
The Company did not receive any proceeds related to the offering. We have incurred $5.1 million of legal, accounting, printing and other fees associated with this offering through June 30, 2018 , which was recorded in "Selling and administrative" expenses in the Condensed Consolidated Statements of Operations.
Dividend Declaration
The Board declared a dividend of $0.0645 per share, to stockholders of record as of the close of business on May 31, 2018. The dividend, totaling $19.5 million , was paid on June 29, 2018 and represented a prorated quarterly dividend of $0.085 (or $0.34 per annum) per share of our common stock from the date of our IPO, April 23, 2018, to June 30, 2018 . 
The following table reflects the change in stockholders' equity for the period December 31, 2017 to June 30, 2018 :
 
 
(dollars in thousands)
Stockholders' equity as of December 31, 2017
 
$
613,215

   Total comprehensive income
 
437,082

   Dividends paid
 
(1,291,494
)
   Related party dividend of Promissory Note
 
(750,000
)
   Stock based compensation
 
178

Stockholders' equity as of June 30, 2018
 
$
(991,019
)

25
PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(13)
Earnings per Share
The following table shows the information used in the calculation of our basic and diluted earnings per share calculation as of June 30, 2018 and December 31, 2017. See Note 12 "Stockholders' Equity" for details on our April 12, 2018 stock split.
 
For the Three Months
Ended June 30,
 
For the Six Months
Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Weighted average common shares
   outstanding for basic calculation
302,225,923

 
302,225,923

 
302,225,923

 
302,225,923

Add: Effect of stock options and restricted stock
5,508

 
—

 
2,789

 
—

Weighted average common shares
   outstanding for diluted calculation
302,231,431

 
302,225,923

 
302,228,712

 
302,225,923

Basic earnings per common share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings per share are calculated by dividing net income (loss) by the sum of the weighted average number of common shares outstanding plus the additional common shares that would have been outstanding if potentially dilutive securities had been issued.
The weighted average common shares outstanding for the diluted earnings per share calculation excludes consideration of stock options covering 676,185 and 342,462 shares in the three and six months ended June 30, 2018, respectively, as these shares are anti-dilutive.
(14) Stock Based Compensation

Our Board of Directors granted 912,790 stock options, 19,335 deferred stock units and 6,740 restricted stock units during the three months ended June 30, 2018 under our Omnibus Equity Incentive Plan. We recognized stock-based compensation expense of $0.2 million in the three and six months ended June 30, 2018. As of June 30, 2018, unrecognized compensation cost related to non-vested stock options, deferred stock units and restricted stock units represents $5.5 million , which will be recognized over the remaining weighted average life of 3 years .
Stock Options
 
 
Number
of Shares
 
Weighted-
Average
Exercise
Price
Outstanding unvested as of January 1, 2018
 
—

 
—

    Granted
 
912,790

 
15.36

    Forfeited
 
(11,070
)
 
15.00

Outstanding unvested as of June 30, 2018
 
901,720

 
15.36

Deferred Stock Units
 
 
Number
of Shares
 
Weighted-
Average
Grant Date
Fair Value
Outstanding unvested as of January 1, 2018
 
—

 
—

    Granted
 
19,335

 
13.20

Outstanding unvested as of June 30, 2018
 
19,335

 
13.20


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Restricted Stock Units
 
 
Number
of Shares
 
Weighted-
Average
Grant Date
Fair Value
Outstanding unvested as of January 1, 2018
 
—

 
—

    Granted
 
6,740

 
14.02

Outstanding unvested as of June 30, 2018
 
6,740

 
14.02

(15) Subsequent Events
On July 31, the Board declared a dividend of $.085 per share, to stockholders of record as of the close of business on August 31, 2018 to be paid on September 28, 2018.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview
We are a leading manufacturer of high quality graphite electrode products essential to the production of electric arc furnace ("EAF") steel and other ferrous and non‑ferrous metals. We believe that we have the most competitive portfolio of low‑cost graphite electrode manufacturing facilities in the industry, including three of the five highest capacity facilities in the world (excluding China). We are the only large scale graphite electrode producer that is substantially vertically integrated into petroleum needle coke, the primary raw material for graphite electrode manufacturing, which is currently in limited supply. Between 1984 and 2011, EAF steelmaking was the fastest‑growing segment of the steel sector, with production increasing at an average rate of 3.5% per year, based on World Steel Association ("WSA") data. Historically, EAF steel production has grown faster than the overall steel market due to the greater resilience, more variable cost structure, lower capital intensity and more environmentally friendly nature of EAF steelmaking. This trend was partially reversed between 2011 and 2015 due to global steel production overcapacity driven largely by Chinese blast furnace ("BOF") steel production. Beginning in 2016, efforts by the Chinese government to restructure China’s domestic steel industry have led to limits on BOF steel production and lower export levels, and developed economies, which typically have much larger EAF steel industries, have instituted a number of trade policies in support of domestic steel producers. As a result, since 2016, the EAF steel market has rebounded strongly and resumed its long‑term growth trajectory. This revival in EAF steel production has resulted in increased demand for our graphite electrodes.
At the same time, two supply‑side structural changes have contributed to recent record high prices of graphite electrodes. First, ongoing consolidation and rationalization of graphite electrode production capacity have limited the ability of graphite electrode producers to meet demand. We estimate that approximately 20% of graphite electrode industry production capacity (excluding China) has been closed or repurposed since the beginning of 2014, and we believe the majority of these closures represent permanent reductions. Second, demand for petroleum needle coke has outpaced supply due to increasing demand for petroleum needle coke for lithium‑ion batteries used in electric vehicles. As a result, graphite electrode prices have recently reached record high prices. We have implemented a new commercial strategy to sell 60% to 65% of our production capacity through three‑ to five‑year take‑or‑pay contracts. These contracts define volumes and prices, along with price‑escalation mechanisms for inflation, and include significant termination payments (typically, 50% to 70% of remaining contracted revenue) and, in certain cases, parent guarantees and collateral arrangements to manage our customer credit risk. We expect a high degree of stability in our future operating results due to these contracts. We have entered into three‑to‑five‑year take‑or‑pay contracts to sell approximately 132,406, 138,446, 134,831, 117,600 and 112,883 metric tons ("MT") in 2018, 2019, 2020, 2021 and 2022, respectively.
GrafTech's Transformation
Since 2012, we have executed a three‑part transformation plan to improve our competitive position and allow us to better serve our customers. Since 2012, we have achieved annual fixed manufacturing cost improvements of $80 million, annual capital expenditure requirement reductions of $45 million and annual overhead expense reductions of approximately $65 million, all while also improving the productivity of our plant network. We have strategically shifted production from our lowest to our highest production capacity facilities to increase fixed cost absorption. This, coupled with a recovery in customer demand, resulted in a steady increase in our capacity utilization, reaching 100% in the second quarter of 2018 (excluding our temporarily idled St. Marys, Pennsylvania facility). We have also reduced our annual overhead expenses by approximately $65 million since 2012 by simplifying our corporate structure from a conglomerate model to a centralized business focused exclusively on the production of graphite electrodes and petroleum needle coke, and we have streamlined and combined our workforce and various administrative functions for efficiency, and eliminated research and development ("R&D") functions unrelated to graphite electrodes. In 2018, we expect to have maintenance capital expenditures of approximately $35 million. In addition to our fixed cost reductions, we have been able to achieve significant productivity improvements and variable cost reductions across our plants since 2014. Finally, we are currently implementing an operational improvement and debottlenecking initiative, which we expect will increase our currently operating production capacity by approximately 21%, or 35,000 MT, by the end of 2018, allowing us to achieve further improvements in our cost structure. As a result of our prior operational improvement activities, we are able to achieve this large capacity increase with specific, highly targeted capital investments. This debottlenecking initiative is expected to result in approximately $42 million of capital expenditures, slightly higher than previous estimates due mainly to currency impacts. The majority of costs associated with this initiative will be expended in 2018. We expect our debottlenecking initiative along with our maintenance capital expenditures to result in approximately $65 million to $70 million of total capital expenditures in 2018.
In light of improved market conditions, the long lead time required to produce our products, our position as one of the market’s largest producers and our ability, through our substantial vertical integration with Seadrift Coke L.P. ("Seadrift"), to

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(Unaudited)

provide customers with a reliable long‑term supply of graphite electrodes despite the market shortage of petroleum needle coke, we have implemented a new commercial strategy to sell 60% to 65% of our production capacity through three-to-five-year take-or-pay contracts. Additionally, the divestiture of our non-core legacy Engineered Solutions businesses in 2016 and 2017 has allowed our management team to focus on our core competency of graphite electrode production and generated approximately $60 million in cash proceeds and release of working capital. By focusing our management’s attention and R&D spending exclusively on the graphite electrode business, we have been able to meaningfully improve the quality of our graphite electrodes, repositioning ourselves as an industry quality leader and improving our relationships with strategic customers.
Global economic conditions and outlook
The graphite electrode industry has historically followed the growth of the EAF steel industry and, to a lesser extent, the steel industry as a whole, which has been highly cyclical and affected significantly by general economic conditions. Historically, EAF steel production has grown faster than the overall steel market due to the greater resilience, more variable cost structure, lower capital intensity and more environmentally friendly nature of EAF steelmaking.
This growth trend has resumed after a decline in EAF steelmaking between 2011 and 2015, as Chinese steel production, which is predominantly BOF‑based, grew significantly, taking market share from EAF steel producers. Throughout 2015 and 2016, our business faced significant headwinds in the major industries that we served, including slow economic growth and stagnation in steel production year‑over‑year. These factors exerted continued downward pressure on prices for our products, which negatively impacted our recent historical profitability. Additionally, in 2015, steel producers utilized BOFs over EAFs at rates higher than we had historically seen, pressuring the prices of and demand for graphite electrodes, as steel consumers in the United States and Europe, our largest markets, increased imports of low‑cost steel products, primarily from China. Additionally, prices for iron ore, the key raw material for BOFs, declined faster than scrap steel, the key raw material in EAF production. While a decline in the price of oil benefited our cost structure overall, it contributed to lower prices for petroleum needle coke and, indirectly, graphite electrodes.
Graphite electrodes saw further pricing pressure in the first half of 2016, but EAF production started to recover during the second half of 2016, which indicated a potential bottoming out in prices. Costs of the key raw materials used to run BOFs increased, and the price of scrap steel decreased, re‑balancing the economics of EAF mills relative to BOFs. These developments resulted in an increase in our sales volume over the prior year; however, the decline in prices more than offset the volume increase. Because customers historically negotiated annual agreements in the third and fourth quarters of each calendar year for graphite electrodes to be delivered the following year, increases in price often lag behind increases in volume. Nonetheless, a decline in the price of oil and our rationalization initiatives significantly improved our cost structure and positioned us to benefit from a potential recovery.
The outlook for general economic and industry‑specific growth brightened in 2017. In its January 2018 report, the International Monetary Fund ("IMF") increased its estimated global growth rate for 2018 and 2019 by 0.2% to 3.9%. The IMF maintained these estimates recently in its June 2018 World Economic Outlook publication. The WSA's April 2018 Short Range Outlook estimated global steel production outside of China would grow by 3.4% over 2017 levels to 879 million MT in 2018 and by 2.9% to 904 million MT in 2019. The WSA noted that "in the next couple of years, the global economic situation is expected to remain favourable with high confidence and strengthening recovery of investment levels in advanced economies."
Other recent macroeconomic and industry trends have created significant increases in demand for graphite electrodes. Beginning in 2016, efforts by the Chinese government to eliminate excess steelmaking production capacity and improve environmental and health conditions have led to limits on Chinese BOF steel production, including the closure of over 200 million MT of its steel production capacity, based on data from S&P Global Platts and the Ministry of Commerce of the People’s Republic of China. In 2017, Chinese steel exports fell by more than 30% from 2016, including 17 consecutive months of year‑over‑year declines, according to the National Bureau of Statistics of China. Reflecting the reduction in steel production capacity, as a result, the historical growth trend of EAF steelmaking relative to the overall steel market resumed and has led to increased demand for our graphite electrodes. At the same time, ongoing consolidation and rationalization of graphite electrode production capacity has limited the ability of graphite electrode producers to meet this demand. Prior to this improvement in demand, the electrode industry experienced an extended, five‑year downturn, resulting in a reduction of production capacity outside of China of approximately 200,000 MT (or approximately 20%) since the beginning of 2014.
Petroleum needle coke, which is the primary raw material for graphite electrode manufacturing, and coal tar pitch, which is a raw material used in our manufacturing processes, are currently in limited supply. Demand for petroleum needle coke has

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(Unaudited)

outpaced supply due to increasing demand for petroleum needle coke in the production of lithium‑ion batteries used in electric vehicles. Increased demand has led to pricing increases of four to six times for petroleum needle coke in the current market compared to one year ago. While we believe that our substantial vertical integration into petroleum needle coke through our ownership of Seadrift provides a significant cost advantage relative to our competitors in periods of tight petroleum needle coke supply, such as the current market environment, we currently purchase approximately 25% of our petroleum needle coke requirements from external sources. As a result, we expect to incur increased costs purchasing that portion of our petroleum needle coke supply. Additionally, supply of coal tar pitch, a byproduct of coking metallurgical coal used in BOF steelmaking, has fallen as a result of the reduced demand for metallurgical coke for BOF steel furnaces. Consequently, prices for coal tar pitch have increased starting in the second half of 2017. The higher raw material purchase costs for both petroleum needle coke and coal tar pitch are expected to contribute to an increase in our costs of goods sold in future quarters of 2018.
These factors have led to supply constraints for our products. There are indications that this demand and supply imbalance could persist for some time. As a result, graphite electrode prices have recently reached record high prices.
Industry spot prices during the quarter have averaged approximately $15,000-$20,000 per MT. As a result of our recent three- to five-year contracting initiative and other sales commitments most of our 2018 production capacity is now contracted or committed by purchase orders.
We expect the results of our operational improvement and debottlenecking initiative to increase our annual production capacity by approximately 21% during the fourth quarter of 2018. This incremental volume from our capacity expansion will be available for sale to customers on a spot basis going forward.
We expect to experience higher input raw material purchase costs in 2018, which will be reflected in cost of goods sold in future quarters.
Key metrics used by management to measure performance
In addition to measures of financial performance presented in our Consolidated Financial Statements in accordance with GAAP, we use certain other financial measures and operating metrics to analyze the performance of our company. The “non‑GAAP” financial measures consist of EBITDA from continuing operations and adjusted EBITDA from continuing operations, which help us evaluate growth trends, establish budgets, assess operational efficiencies and evaluate our overall financial performance. The key operating metrics consist of sales volume, weighted average realized price, production volume, production capacity and capacity utilization.
Key financial measures
 
For the three months
ended June 30,
 
 
For the six months
ended June 30,
 
(in thousands)
2018

2017

 
2018

2017

Net sales
$
456,332

$
116,314

 
$
908,231

$
221,053

Net income (loss)
201,448

(17,383
)
 
425,121

(43,727
)
EBITDA from continuing operations(1)
228,143

10,796

 
532,911

11,844

Adjusted EBITDA from continuing operations(1)
291,956

12,261

 
602,295

16,452



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Key operating metrics
 
For the three months
ended June 30,
 
 
For the six months
ended June 30,
 
(in thousands, except price data)
2018

2017

 
2018

2017

Sales volume (MT)(2)
45

44

 
88

85

Weighted average realized price(3)
$
9,933

$
2,430

 
$
10,027

$
2,362

Production volume (MT)(4)
45

44

 
88

84

Production capacity (MT)(5)
52

51

 
103

99

Production capacity excluding St. Marys during idle period (MT)(6)
45

44

 
89

85

Capacity utilization(7)
87
%
86
%
 
85
%
85
%
Capacity utilization excluding St. Marys during idle period(6)
100
%
100
%
 
99
%
99
%
(1)
See below for more information and a reconciliation of EBITDA and adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.
(2)
Sales volume reflects the total volume of graphite electrodes sold for which revenue has been recognized during the period. See below for more information on our key operating metrics.
(3)
Weighted average realized price reflects the total revenues from sales of graphite electrodes for the period divided by the graphite electrode sales volume for that period. See below for more information on our key operating metrics.
(4)
Production volume reflects graphite electrodes produced during the period. See below for more information on our key operating metrics.
(5)
Production capacity reflects expected maximum production volume during the period under normal operating conditions, standard product mix and expected maintenance downtime. Actual production may vary. See below for more information on our key operating metrics.
(6)
The St. Marys, Pennsylvania facility was temporarily idled effective the second quarter of 2016, except for the machining of semi‑finished products sourced from other plants.
(7)
Capacity utilization reflects production volume as a percentage of production capacity. See below for more information on our key operating metrics.
Non‑GAAP financial measures
EBITDA from continuing operations and adjusted EBITDA from continuing operations are non‑GAAP financial measures. We define EBITDA from continuing operations, a non‑GAAP financial measure, as net income or loss plus interest expense, minus interest income, plus income taxes, discontinued operations and depreciation and amortization from continuing operations. We define adjusted EBITDA from continuing operations as EBITDA from continuing operations plus any pension and Other post-employment benefit ("OPEB") plan expenses, impairments, rationalization‑related charges, costs related to our initial public offering, non‑cash gains or losses from foreign currency remeasurement of non‑operating liabilities in our foreign subsidiaries where the functional currency is the U.S. dollar and non‑cash fixed asset write‑offs. Adjusted EBITDA from continuing operations is the primary metric used by our management and our board of directors to establish budgets and operational goals for managing our business and evaluating our performance.
We monitor adjusted EBITDA from continuing operations as a supplement to our GAAP measures, and believe it is useful to present to investors, because we believe that it facilitates evaluation of our period‑to‑period operating performance by eliminating items that are not operational in nature, allowing comparison of our recurring core business operating results over multiple periods unaffected by differences in capital structure, capital investment cycles and fixed asset base. In addition, we believe adjusted EBITDA from continuing operations and similar measures are widely used by investors, securities analysts, ratings agencies, and other parties in evaluating companies in our industry as a measure of financial performance and debt‑service capabilities.
Our use of adjusted EBITDA from continuing operations has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
•
adjusted EBITDA from continuing operations does not reflect changes in, or cash requirements for, our working capital needs;

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(Unaudited)

•
adjusted EBITDA from continuing operations does not reflect our cash expenditures for capital equipment or other contractual commitments, including any capital expenditures for future capital expenditure requirements to augment or replace our capital assets;
•
adjusted EBITDA from continuing operations does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;
•
adjusted EBITDA from continuing operations does not reflect tax payments that may represent a reduction in cash available to us;
•
adjusted EBITDA from continuing operations does not reflect expenses relating to our pension and OPEB plans;
•
adjusted EBITDA from continuing operations does not reflect impairment of long‑lived assets and goodwill;
•
adjusted EBITDA from continuing operations does not reflect the non‑cash gains or losses from foreign currency remeasurement of non‑operating liabilities in our foreign subsidiaries where the functional currency is the U.S. dollar;
•
adjusted EBITDA from continuing operations does not reflect rationalization‑related charges, acquisition costs, costs related to the change in control and proxy contests, costs related to our initial public offering, costs or the non‑cash write‑off of fixed assets; and
•
other companies, including companies in our industry, may calculate EBITDA from continuing operations and adjusted EBITDA from continuing operations differently, which reduces its usefulness as a comparative measure.
In evaluating EBITDA from continuing operations and adjusted EBITDA from continuing operations, you should be aware that in the future, we will incur expenses similar to the adjustments in this presentation. Our presentations of EBITDA from continuing operations and adjusted EBITDA from continuing operations should not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non‑recurring items. When evaluating our performance, you should consider EBITDA from continuing operations and adjusted EBITDA from continuing operations alongside other financial performance measures, including our net income (loss) and other GAAP measures.
The following table reconciles our non‑GAAP key financial measures to the most directly comparable GAAP measures:
 
For the three months ended June 30,
 
 
For the six months
ended June 30,
 
 
2018
2017
 
2018
2017
 
(in thousands)
Net income (loss)
201,448

(17,383
)
 
425,121

(43,727
)
Add:
 
 
 
 
 
Discontinued operations
315

4,050

 
(1,311
)
8,116

Depreciation and amortization
15,368

15,441

 
31,696

30,983

Interest expense
28,667

7,902

 
66,532

15,448

Interest income
(391
)
(139
)
 
(506
)
(262
)
Income taxes
(17,264
)
925

 
11,379

1,286

EBITDA from continuing operations
228,143

10,796

 
532,911

11,844

Adjustments:
 
 
 
 
 
Pension and OPEB plan (gain) expenses(1)
484

760

 
995

1,525

Rationalization‑related (gains)/charges(2)
1

(771
)
 
1

(779
)
Initial public offering ("IPO") expenses (3)
1,934

—

 
5,121

—

Non‑cash loss (gain) on foreign currency remeasurement(4)
(1,650
)
1,476

 
223

3,862

Stock based compensation
181

—

 
181

—

Non‑cash fixed asset write-off
1,062

—

 
1,062

—

Related party Tax Receivable Agreement expense (5)
61,801

—

 
61,801

—

Adjusted EBITDA from continuing operations
291,956

12,261

—

602,295

16,452


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(1)
Service and interest cost of our pension and OPEB plans. Also includes a mark‑to‑market loss (gain) for plan assets as of December of each year.
(2)
Costs associated with rationalizations in our graphite electrode manufacturing operations and in the corporate structure. They include severance charges, contract termination charges, write‑off of equipment and (gain)/loss on sale of manufacturing sites.
(3)
Legal, accounting, printing and registration fees associated with the initial public offering
(4)
Non‑cash (gain) loss from foreign currency remeasurement of non‑operating liabilities of our non‑U.S. subsidiaries where the functional currency is the U.S. dollar.
(5)
Tax-related expense for future payment to our sole pre-IPO stockholder for tax assets that are expected to be utilized.
Key Operating Metrics
Key operating metrics consist of sales volume, weighted average realized price, production volume, production capacity and capacity utilization.
Sales volume reflects the total volume of graphite electrodes sold for which revenue has been recognized during the period. For a discussion of our revenue recognition policy, see Note 3 to the Financial Statements "Revenue from Contracts with Customers". Under our policy, volume discounts and rebates are recorded as a reduction of revenue in conjunction with the sale of the graphite electrodes. Weighted average realized price reflects the total revenues from sales of graphite electrodes for the period divided by the graphite electrode sales volume for that period. Sales volume and price help investors understand the factors that drive our net sales.
Production volume reflects graphite electrodes produced during the period. Production capacity reflects expected maximum production volume during the period under normal operating conditions, standard product mix and expected maintenance downtime. Capacity utilization reflects production volume as a percentage of production capacity. Production volume, production capacity and capacity utilization help us understand the efficiency of our production, evaluate cost of sales and consider how to approach our contract initiative.

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Results of Operations and Segment Review
The Three Months Ended June 30, 2018 Compared to the Three Months Ended June 30, 2017
The tables presented in our period-over-period comparisons summarize our Consolidated Statements of Operations and illustrate key financial indicators used to assess the consolidated financial results. Throughout our MD&A, insignificant changes may be deemed not meaningful and are generally excluded from the discussion.

 
Three Months
Ended June 30,
 
Increase/ Decrease
 
% Change
 
 
2018
 
2017
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
456,332

 
$
116,314

 
$
340,018

 
292
 %
Cost of sales
 
165,910

 
106,434

 
59,476

 
56
 %
     Gross (loss) profit
 
290,422

 
9,880

 
280,542

 
2,839
 %
Research and development
 
581

 
933

 
(352
)
 
(38
)%
Selling and administrative expenses
 
16,239

 
12,169

 
4,070

 
33
 %
     Operating (loss) income
 
273,602

 
(3,222
)
 
276,824

 
(8,592
)%
Other expense (income), net
 
(974
)
 
1,423

 
(2,397
)
 
(168
)%
Related party Tax Receivable Agreement expense
 
61,801

 
—

 
61,801

 
N/A

Interest expense
 
28,667

 
7,902

 
20,765

 
263
 %
Interest income
 
(391
)
 
(139
)
 
(252
)
 
181
 %
Loss from continuing operations before
provision for income taxes
 
184,499

 
(12,408
)
 
(12,408
)
 
100
 %
 (Benefit from) provision for income taxes
 
(17,264
)
 
925

 
(18,189
)
 
(1,966
)%
Net loss from continuing operations
 
201,763

 
(13,333
)
 
$
(13,333
)
 
100
 %
Income from discontinued
    operations, net of tax
 
(315
)
 
(4,050
)
 
3,735

 
(92
)%
Net loss
 
$
201,448

 
$
(17,383
)
 
$
(9,598
)
 
$
—

Net sales. Net sales increased from $116.3 million in the three months ended June 30, 2017 to $456.3 million in the three months ended June 30, 2018 . The increase was primarily driven by a 306% increase in the weighted average sales price of graphite electrodes. The weighted average realized price increased to $9,933 per MT in the three months ended June 30, 2018 compared to $2,430 per MT in the same period of the prior year. This increase in weighted average realized price was driven by increased demand for graphite electrodes due to growth in EAF steel manufacturing, combined with a constrained graphite electrode supply due to reductions in graphite elect r ode manufacturing capacity over the past several years and a limited supply of our key raw material, petroleum needle coke.
We have successfully implemented our strategy entering into take-or-pay sales agreements with our customers that range from three to five years in duration. For the three months ended June 30, 2018 , approximately 75% of our revenues were generated from these contracts, with the remainder generated from other graphite electrode sales and by-product sales.
Cost of sales. We experienced increases in cost of sales from $106.4 million in the three months ended June 30, 2017 to $165.9 million in the three months ended June 30, 2018 . This increase was primarily the result of sales of inventory that was manufactured using higher priced needle coke and pitch.
Selling and administrative expenses. Selling and administrative expenses increased from $12.2 million in the three months ended June 30, 2017 to $16.2 million in the three months ended June 30, 2018 . This increase was driven primarily by $1.9 million of additional costs related to our IPO.
Other (income) expense. Other expense decreased from $1.4 million of expense in the three months ended June 30, 2017 to income of $1.0 million in the three months ended June 30, 2018 primarily due to advantageous non‑cash foreign currency impacts on non‑operating assets and liabilities.

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Related party Tax Receivable Agreement expense. This $61.8 million of expense is the result of our tax receivable agreement liability recorded after it was estimated we would realize certain deferred tax assets.
Interest Expense . Interest expense increased from $7.9 million in the three months ended June 30, 2017 , to $28.7 million in the three months ended June 30, 2018 primarily due to additional borrowings.
Provision for income taxes. The following table summarizes the expense/(benefit) for income taxes:  
 
Three Months Ended June 30,
 
2018
 
2017
 
(Dollars in thousands)
 
 
 
 
Tax (benefit) expense
$
(17,264
)
 
$
925

Pretax income (loss)
184,499

 
(12,408
)
Effective tax rates
(9.4
)%
 
(7.5
)%
The effective tax rate for the three months ended June 30, 2017 was (7.5)% This rate differs from the previous U.S. statutory rate of 35% primarily due to recent losses in the U.S. and Switzerland where we received no tax benefit due to a full valuation allowance and worldwide earnings from various countries taxed at different rates. The recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future.
The effective tax rate for the three months ended June 30, 2018 was (9.4)%. This rate differs from the current U.S. statutory rate of 21% primarily due to the partial release of a valuation allowance recorded against the deferred tax asset related to US tax attributes and the tax impact of worldwide earnings from various countries taxed at different rates. The recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future.
The tax expense changed from a charge of $0.9 million for the quarter ended June 30, 2018 to a tax benefit of $17.3 million for the quarter ended June 31, 2018. This change is primarily due to the partial release of a valuation allowance recorded against the deferred tax asset related to US tax attributes and shift in the jurisdictional mix of earnings and losses from year to year. Certain jurisdictions shifted from pre-tax losses in the second quarter of 2017 to pretax earnings in the second quarter of 2018.
Income from Discontinued Operations . Our income from discontinued operations increased from a loss of $4.1 million for the three months ended June 30, 2017 to a loss of $0.3 million in the three months ended June 30, 2018 as we have divested substantially all of our former Engineered Solutions business.

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GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Unaudited)

The Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017
The tables presented in our period-over-period comparisons summarize our Consolidated Statements of Operations and illustrate key financial indicators used to assess the consolidated financial results. Throughout our MD&A, insignificant changes may be deemed not meaningful and are generally excluded from the discussion.
 
For the Six Months
Ended June 30,
 
Increase/ Decrease
 
% Change
 
2018
 
2017
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
908,231

 
$
221,053

 
$
687,178

 
311
 %
Cost of sales
311,059

 
209,887

 
101,172

 
48
 %
     Gross profit
597,172

 
11,166

 
586,006

 
5,248
 %
Research and development
1,010

 
1,754

 
(744
)
 
(42
)%
Selling and administrative expenses
32,115

 
23,824

 
8,291

 
35
 %
     Operating income (loss)
564,047

 
(14,412
)
 
578,459

 
(4,014
)%
Other expense (income), net
1,031

 
4,727

 
(3,696
)
 
(78
)%
Related party Tax Receivable Agreement expense
61,801

 
—

 
61,801

 
N/A

Interest expense
66,532

 
15,448

 
51,084

 
331
 %
Interest income
(506
)
 
(262
)
 
(244
)
 
93
 %
Income (loss) from continuing operations before
provision for income taxes
435,189

 
(34,325
)
 
469,514

 
(1,368
)%
Provision for income taxes
11,379

 
1,286

 
10,093

 
785
 %
Net income (loss) from continuing operations
423,810

 
(35,611
)
 
459,421

 
(1,290
)%
Income (loss) from discontinued operations, net of tax
1,311

 
(8,116
)
 
9,427

 
(116
)%
Net income (loss)
$
425,121

 
$
(43,727
)
 
$
468,848

 
(1,072
)%
Net sales. Net sales increased by $687.2 million , or 311% , from $221.1 million in the six months ended June 30, 2017 to $908.2 million in the six months ended June 30, 2018 . This increase was driven by a 318% increase in the weighted average realized price for graphite electrodes and a 2.9% increase in sales volume in the six months ended June 30, 2018 compared to the same period in 2017. The weighted average realized price increased to $10,027 per MT in the six months ended June 30, 2018 compared to $2,362 per MT in the same period of the prior year. These increases in weighted average realized price and sales volume were driven by increased demand for graphite electrodes due to growth in EAF steel manufacturing, combined with a constrained graphite electrode supply due to reductions in graphite elect r ode manufacturing capacity over the past several years and a limited supply of our key raw material, petroleum needle coke.
We have successfully implemented our strategy entering into take-or-pay sales agreements with our customers that range from three to five years in duration. For the six months ended June 30, 2018 , approximately 68% of our revenues were generated from these contracts, with the remainder generated from other graphite electrode sales and by-product sales .
Cost of sales. Cost of sales increased by $101.2 million , or 48% , from $209.9 million in the six months ended June 30, 2017 to $311.1 million in the six months ended June 30, 2018 . This increase was primarily the result of the higher input costs of needle coke and pitch. Cost of sales was also negatively impacted by $10.4 million of foreign currency impact.
Selling and administrative expenses. Selling and administrative expenses increased by $8.3 million , or 35% , from $23.8 million in the six months ended June 30, 2017 to $32.1 million in the six months ended June 30, 2018 . This increase was driven primarily by $5.1 million of additional costs related to our IPO and financing costs.
Other (income) expense. Other expense decreased by $3.7 million , or 78% , from $4.7 million in six months ended June 30, 2017 to $1.0 million in the six months ended June 30, 2018 . This decrease was primarily due to non‑cash foreign currency impacts on non‑operating assets and liabilities.

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PART I (CONT’D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Unaudited)

Related party Tax Receivable Agreement expense. This $61.8 million of expense is the result of our tax receivable agreement liability recorded after it was estimated we would realize certain deferred tax assets.
Interest expense. Interest expense increased by $51.1 million , or 331% , from $15.4 million in the six months ended June 30, 2017 to $66.5 million in the six months ended June 30, 2018 , due to increased interest expense primarily due additional borrowings and the early extinguishment of our Senior Notes. These early extinguishment charges included accelerated accretion of the fair value adjustment on the Senior Notes of $18.7 million and a premium redemption of $4.8 million.
  Provision for income taxes. The following table summarizes the expense/(benefit) for income taxes:  
 
For the Six Months Ended June 30,
 
2018
 
2017
 
(Dollars in thousands)
 
 
Tax expense
$
11,379

 
$
1,286

Pretax income (loss)
435,189

 
(34,325
)
Effective tax rates
2.6
%
 
(3.7
)%
For the six months ended June 30, 2017, the effective tax rate of (3.7)% differs from the previous U.S. statutory rate of 35% primarily due to recent losses in the U.S. and Switzerland where we receive no tax benefit due to a full valuation allowance and worldwide earnings from various countries tax a different rates. The recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future.
For the six months ended June 30, 2018, the effective tax rate of 2.6% differs from the current U.S. statutory rate of 21% primarily due the partial release of a valuation allowance recorded against the deferred tax asset related to US tax attributes worldwide earnings from various countries taxed at different rates. The recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future.
The tax expense changed from a charge of $1.3 million for the quarter ended June 30, 2017 to a tax charge of $11.4 million for the quarter ended June 30, 2018. This change is primarily due to the partial release of a valuation allowance recorded against the deferred tax asset related to US tax attributes and shift in the jurisdictional mix of earnings and losses from year to year. Certain jurisdictions shifted from pre-tax losses in the first half of 2017 to pretax earnings in the half of 2018.
Income (loss) from discontinued operations. Income (loss) from our discontinued operations increased by $9.4 million , or 116% , from a loss of $8.1 million in the six months ended June 30, 2017 to income of $1.3 million in the six months ended June 30, 2018 . The loss in the three months ended March 31, 2017 included an impairment of $5.3 million . The remaining increase was due to the elimination of operations in 2017 and the wind-down of remaining assets into 2018.
  Effects of Changes in Currency Exchange Rates
When the currencies of non-U.S. countries in which we have a manufacturing facility decline (or increase) in value relative to the U.S. dollar, this has the effect of reducing (or increasing) the U.S. dollar equivalent cost of sales and other expenses with respect to those facilities. In certain countries in which we have manufacturing facilities, and in certain export markets, we sell in currencies other than the U.S. dollar. Accordingly, when these currencies increase (or decline) in value relative to the U.S. dollar, this has the effect of increasing (or reducing) net sales. The result of these effects is to increase (or decrease) operating profit and net income.
Many of the non-U.S. countries in which we have a manufacturing facility have been subject to significant economic and political changes, which have significantly impacted currency exchange rates. We cannot predict changes in currency exchange rates in the future or whether those changes will have net positive or negative impacts on our net sales, cost of sales or net income.
The impact of these changes in the average exchange rates of other currencies against the U.S. dollar on our net sales was an increase of $2.7 million and $12.8 million for the three and six months ended June 30, 2018 , respectively, compared to the same periods of 2017 . The impact of these changes on our cost of sales was in increase of $3.3 million and $10.4 million for the three and six months ended June 30, 2018 , respectively, compared to the same periods of 2017 .
We have in the past and may in the future use various financial instruments to manage certain exposures to risks caused by currency exchange rate changes, as described under “Part I, Item 3–Quantitative and Qualitative Disclosures about Market Risk”.

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PART I (CONT’D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Unaudited)

  Liquidity and Capital Resources
Our sources of funds have consisted principally of cash flow from operations and debt, including our credit facilities (subject to continued compliance with the financial covenants and representations). Our uses of those funds (other than for operations) have consisted principally of dividends, capital expenditures, cash paid for acquisitions and associated expenses, debt reduction payments and other obligations. Disruptions in the U.S. and international financial markets could adversely affect our liquidity and the cost and availability of financing to us in the future.
We believe that we have adequate liquidity to meet our needs. As of June 30, 2018 , we had liquidity of $409.6 million consisting of $243.5 million of availability on our 2018 Revolving Facility (subject to continued compliance with the financial covenants and representations) and cash and cash equivalents of $166.1 million . We had long‑term debt of $2,103.6 million , short‑term debt of $106.4 million and stockholder’s deficit of $(991.0) million as of June 30, 2018 . As of December 31, 2017 , we had liquidity of $165.2 million consisting of $151.8 million available on our Old Revolving Facility (subject to continued compliance with the financial covenants and representations and adjusting for the $25 million minimum liquidity requirement) and cash and cash equivalents of $13.4 million . We had long‑term debt of $322.9 million , short‑term debt of $16.5 million and stockholders’ equity of $613.2 million as of December 31, 2017 .
As of June 30, 2018 and December 31, 2017 , $62.6 million and $12.6 million, respectively, of our cash and cash equivalents were located outside of the United States. We repatriate funds from our foreign subsidiaries through dividends. All of our subsidiaries face the customary statutory limitation that distributed dividends do not exceed the amount of retained and current earnings. In addition, for our subsidiary in South Africa, the South Africa Central Bank imposes that certain solvency and liquidity ratios remain above defined levels after the dividend distribution, which historically has not materially affected our ability to repatriate cash from this jurisdiction. The cash and cash equivalents balances in South Africa were $6.5 million and $1.8 million as of June 30, 2018 and December 31, 2017 , respectively. Upon repatriation to the United States, the foreign source portion of dividends we receive from our foreign subsidiaries is no longer subject to U.S. federal income tax as a result of the Tax Act.
Cash flow and plans to manage liquidity . Our cash flow typically fluctuates significantly between quarters due to various factors. These factors include customer order patterns, fluctuations in working capital requirements, timing of capital expenditures, acquisitions, divestitures and other factors. We had positive cash flow from operating activities during 2017, 2016 and 2015. Although the global economic environment experienced significant swings in these periods, our working capital management and cost‑control initiatives allowed us to remain operating cash‑flow positive in both times of declining and improving operating results. Cash from operations is expected to return to positive sustained levels due to the predictable earnings generated by our three-to-five-year sales contracts with our customers.
As of June 30, 2018 , we had access to the $250 million 2018 Revolving Facility, which was undrawn. We had $6.5 million of letters of credit, for a total availability on the 2018 Revolving Facility of $243.5 million . As of December 31, 2017 , we had $39.5 million of borrowings and $8.7 million of letters of credit, for a total of $48.2 million drawn against the Old Revolving Credit Facility. We also had $0.5 million of surety bonds outstanding as of both June 30, 2018 and December 31, 2017 .
On February 12, 2018, we entered into the 2018 Credit Agreement, which provides for the 2018 Revolving Facility and the 2018 Term Loan Facility. On February 12, 2018, our wholly owned subsidiary, Finance, borrowed $1,500 million under the 2018 Term Loan Facility. The funds received were used to pay off our outstanding debt, including borrowings under our Old Credit Agreement and the Senior Notes and accrued interest relating to those borrowings and the Senior Notes, declare and pay a dividend of $1,112.0 million to our sole pre-IPO stockholder, pay fees and expenses incurred in connection therewith and for other general corporate purposes.
On April 19, 2018, we declared a dividend in the form of the Brookfield Promissory Note to the sole pre-IPO stockholder. The $750 million Brookfield Promissory Note was conditioned upon (i) the Senior Secured First Lien Net Leverage Ratio (as defined in the 2018 Credit Agreement), as calculated based on our final financial results for the first quarter of 2018, being equal to or less than 1.75 to 1.00, (ii) no Default or Event of Default (each as defined in the 2018 Credit Agreement) having occurred and continuing or that would result from the $750 million Brookfield Promissory Note and (iii) the satisfaction of the conditions described in (i) and (ii) above occurring within 60 days from the dividend record date. Upon publication of our first quarter report on Form 10-Q, these conditions were met and, as a result, the Brookfield Promissory Note became payable.
The Brookfield Promissory Note had a maturity of eight years from the date of issuance and bore interest at a rate equal to the Adjusted LIBO Rate (as defined in the Brookfield Promissory Note) plus an applicable margin equal to 4.50% per annum, with an additional 2.00% per annum starting from the third anniversary from the date of issuance. We were permitted to make voluntary prepayments at any time without premium or penalty. All obligations under the Brookfield Promissory Note were

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PART I (CONT’D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Unaudited)

unsecured and guaranteed by all of our existing and future domestic wholly owned subsidiaries that guarantee, or are borrowers under, the Senior Secured Credit Facilities. No funds were lent or otherwise contributed to us by the selling stockholder in connection with the Brookfield Promissory Note. As a result, we received no consideration in connection with its issuance. As described below, the Brookfield Promissory Note was repaid, in full, on June 15, 2018.
On April 19, 2018, we declared a $160 million cash dividend payable to Brookfield, the sole pre-IPO stockholder. Payment of this dividend was conditional upon (i) the Senior Secured First Lien Net Leverage Ratio (as defined in the 2018 Credit Agreement), as calculated based on our final financial results for the first quarter of 2018, being equal to or less than 1.75 to 1.00, (ii) no Default or Event of Default (as defined in the 2018 Credit Agreement) having occurred and continuing or that would result from the payment of the dividend and (iii) the payment occurring within 60 days from the dividend record date. The conditions of this dividend were met upon filing of our first quarter report on Form 10-Q and the dividend was paid on May 8, 2018.
On June 15, 2018, GrafTech entered into the First Amendment to its 2018 Credit Agreement. The First Amendment amends the 2018 Credit Agreement to provide for the additional $750 million in aggregate principal amount of the Incremental Term Loans to Finance. The Incremental Term Loans increase the aggregate principal amount of term loans incurred by Finance under the 2018 Credit Agreement from $1,500 million to $2,250 million. The Incremental Term Loans have the same terms as those applicable to the existing term loans under the 2018 Credit Agreement, including interest rate, payment and prepayment terms, representations and warranties and covenants. The Incremental Term Loans mature on February 12, 2025, the same date as the existing term loans. GrafTech paid an upfront fee of 1.00% of the aggregate principal amount of the Incremental Term Loans on the effective date of the First Amendment. The proceeds of the Incremental Term Loans were used to repay, in full, the $750 million in principal amount of the outstanding on the Brookfield Promissory Note.
We currently pay a quarterly cash dividend of $0.085 per share, or an aggregate of $0.34 per share on an annualized basis. For the quarterly period ending June 30, 2018, we paid a prorated cash dividend for the period beginning on the closing date of the IPO and ending on the last day of that period. On July 31, 2018 the Board of Directors declared a dividend for the third quarter of 2018 of $.085 per share, payable to stockholders of record as of August 31, 2018 to be paid on September 28, 2018.
We cannot assure you, however, that we will pay dividends in the future in these amounts or at all. Our board of directors may change the timing and amount of any future dividend payments or eliminate the payment of future dividends in its sole discretion, without any prior notice to our stockholders. Our ability to pay dividends will depend upon many factors, including our financial position and liquidity, results of operations, legal requirements, restrictions that may be imposed by the terms of our current and future credit facilities and other debt obligations and other factors deemed relevant by our board of directors.
Potential uses of our liquidity include dividends, share repurchases, capital expenditures, acquisitions, debt repayments and other general purposes. Continued volatility in the global economy may require additional borrowings under the 2018 Revolving Facility. An improving economy, while resulting in improved results of operations, could increase our cash requirements to purchase inventories, make capital expenditures and fund payables and other obligations until increased accounts receivable are converted into cash. A downturn could significantly and negatively impact our results of operations and cash flows, which, coupled with increased borrowings, could negatively impact our credit ratings, our ability to comply with debt covenants, our ability to secure additional financing and the cost of such financing, if available.
In the event that operating cash flows fail to provide sufficient liquidity to meet our business needs, including capital expenditures, any such shortfall would need to be made up by increased borrowings under our 2018 Revolving Facility, to the extent available.
In order to seek to minimize our credit risks, we may reduce our sales of, or refuse to sell (except for cash on delivery or under letters of credit or parent guarantees), our products to some customers and potential customers. In the current economic environment, our customers may experience liquidity shortages or difficulties in obtaining credit, including letters of credit. Our unrecovered trade receivables worldwide have not been material during the last two years individually or in the aggregate.
We manage our capital expenditures by taking into account quality, plant reliability, safety, environmental and regulatory requirements, prudent or essential maintenance requirements, global economic conditions, available capital resources, liquidity, long‑term business strategy and return on invested capital for the relevant expenditures, cost of capital and return on invested capital of the Company as a whole and other factors. We expect to have maintenance capital expenditures of approximately $35 million in 2018. Our debottlenecking initiative is expected to result in approximately $42 million of capital expenditures, slightly higher than previous estimates due mainly to currency impacts. The majority of costs associated with this initiative will be expended in 2018. We expect our debottlenecking initiative along with our maintenance capital expenditures to result in approximately $65 million to $70 million of total capital expenditures in 2018.

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(Unaudited)

In addition to the items discussed above, future financing activities and uses of our liquidity could include outflows related to the payment of the quarterly cash dividend to stockholders and debt repayment.
Related Party Transactions . We have engaged in the following transactions with affiliates or related parties during the six months ended June 30, 2018 : payment of dividends to Brookfield and entrance into and repayment of the Brookfield Promissory Note, Tax Receivable Agreement, Stockholders Rights Agreement and Registration Rights Agreement with Brookfield. Additionally, during 2016, Brookfield purchased on the open market in aggregate approximately $53 million of the Senior Notes. We redeemed our Senior Notes on February 12, 2018.
We have also reimbursed certain costs incurred by Brookfield as required under the Investment Agreement dated May 4, 2015 between Brookfield and GrafTech, including in connection with, transactions with our current or former subsidiaries, compensatory transactions with directors and officers including employee benefits (including reimbursement to Brookfield for compensation costs incurred by it for certain personnel who devote substantially all of their working time to us), stock option and restricted stock grants, compensation deferral, stock purchases, and customary indemnification and expense advancement arrangements.
One of our independent directors purchased an aggregate of 5,000 shares of common stock in April 2018 in our IPO.
Cash Flows.
The following table summarizes our cash flow activities:
 
For the Six
Months Ended
June 30, 2018
 
For the Six
Months Ended
June 30, 2017
 
in millions
Cash flow provided by (used in):
 
 
 
Operating activities
$
377.7

 
$
3.5

Investing activities
$
(27.9
)
 
$
(10.3
)
Financing activities
$
(195.8
)
 
$
7.1

Operating Activities
Cash flow from operating activities represents cash receipts and cash disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting net income (loss) for:
•
Non-cash items such as depreciation and amortization, impairment, post retirement obligations, and severance and pension plan changes;
•
Gains and losses attributed to investing and financing activities such as gains and losses on the sale of assets and unrealized currency transaction gains and losses; and
•
Changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations.
The net impact of the changes in working capital (operating assets and liabilities), which are discussed in more detail below, include the impact of changes in: receivables, inventories, prepaid expenses, accounts payable, accrued liabilities, accrued taxes, interest payable, and payments of other current liabilities.
During the six months ended June 30, 2018 , changes in working capital resulted in a net use of funds of $158.6 million which was impacted by:
•
net cash outflows in accounts receivable of $110.7 million from the increase in accounts receivable due to increased sales driven by higher weighted average realized prices;
•
net cash outflows from increases in inventory of $82.6 million , due primarily to higher priced raw materials;
•
net cash inflows from increases in accounts payable of $21.1 million , due primarily to higher priced raw materials; and

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(Unaudited)

•
net cash inflows from decreased prepaid expense of $8.3 million due to the reduction of advanced payments.
•
net cash inflows from increased interest payable of $5.3 million due to increased borrowings.
Other uses of cash in the six months ended June 30, 2018 included contributions to pension and other benefit plans of $3.7 million, cash paid for interest of $35.2 million and taxes paid of $11.7 million.
During the six months ended June 30, 2017, changes in working capital resulted in a net source of funds of $0.2 million which was impacted by:
•
net cash inflows in accounts receivable of $1.1 million from the decrease in accounts receivable due to the collection of customer sales;
•
net cash inflows from decreases in inventory of $6.0 million, due primarily to inventory management initiatives;
•
net cash outflows from increased prepaid expense of $1.5 million due to advanced payments;
•
net cash outflows due to decrease in accounts payable and accruals of $5.5 million primarily resulting from timing of payments.
Other uses of cash in the six months ended June 30, 2017 included contributions to pension and other benefit plans of $4.8 million.
Investing Activities
Net cash used investing activities was $27.9 million during the six months ended June 30, 2018 resulting from capital expenditures of $28.7 million partially offset by proceeds from the sale of fixed assets of $0.8 million .
Net cash used in investing activities was $10.3 million during the six months ended June 30, 2017 and included capital expenditures of $13.4 million and proceeds from the sale of fixed assets of $3.2 million.
  Financing Activities
Net cash outflow from financing activities was $195.8 million during the six months ended June 30, 2018 , which was the net impact of our February 12, 2018 refinancing and subsequent amendment, proceeds of which were used to repay outstanding debt, pay a dividend of $1,291.5 million , and repay the $750 million Brookfield Promissory Note to Brookfield.
Net cash inflow from financing activities was $7.1 million during the six months ended June 30, 2017, resulting from net borrowings under our Revolving Facility.

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PART I (CONT’D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Unaudited)

Long-Term Contractual, Commercial and Other Obligations and Commitments. The following table updates our long-term contractual obligations and other commercial commitments as of December 31, 2017 to reflect, on a pro forma basis: (A)(i) our entrance into the 2018 Credit Agreement and the borrowing of $1,500 million of 2018 Term Loans thereunder in February 2018; and (ii) the use of proceeds therefrom to, among other things, repay in full all outstanding indebtedness under the Old Credit Agreement and redeem in full the Senior Notes at a redemption price of 101.594% of the principal amount thereof plus accrued and unpaid interest to the date of redemption; (B) the issuance of the Brookfield Promissory Note in May 2018; (C)(i) our entrance into the First Amendment to the 2018 Credit Agreement and the borrowing of the $750 million of Incremental Term Loans thereunder in June 2018; and (ii) the repayment in full of the $750 million in principal amount outstanding on the Brookfield Promissory Note; and (D) additional purchase obligations for 2018, primarily for raw materials, that were entered into since the filing of our year-end financial statements.
 
Pro Forma Contractual Obligations
 
Total  
 
2018
 
2019-2020
 
2021-2022
 
2023+
 
(in thousands)
Contractual and Other Obligations
 
 
 
 
 
 
 
 
 
2018 Term Loan Facility (a)
$
2,250,000

 
$
56,250

 
$
225,000

 
$
225,000

 
$
1,743,750

Pro Forma Interest on Long-term Debt (a)
$
819,130

 
$
105,140

 
$
258,226

 
$
235,281

 
$
220,483

Leases
6,188

 
2,180

 
2,646

 
713

 
649

Total contractual obligations
3,075,318

 
163,570

 
485,872

 
460,994

 
1,964,882

Postretirement, pension and related benefits (b)
115,557

 
11,717

 
22,986

 
22,853

 
58,001

Committed purchase obligations (c)
140,785

 
140,785

 
—

 
—

 
—

Other long-term obligations
8,463

 
6,721

 
723

 
392

 
627

Uncertain income tax provisions
2,492

 
379

 
1,990

 
123

 
—

Total contractual and other obligations (d)
$
3,342,615

 
$
323,172

 
$
511,571

 
$
484,362

 
$
2,023,510

Other Commercial Commitments
 
 
 
 
 
 
 
 
 
Guarantees (e)
525

 
525

 
—

 
—

 
—

Total other commercial commitments
$
525

 
$
525

 
$
—

 
$
—

 
$
—

(a)
On February 12, 2018, the Company entered into the 2018 Credit Agreement, which provided for the 2018 Term Loan Facility and 2018 Revolving Credit Facility. On February 12, 2018, Finance borrowed $1,500 million of 2018 Term Loans under the 2018 Term Loan Facility. The proceeds of the 2018 Term Loans were used, among other things, to pay off our outstanding debt, including borrowings under the Old Credit Agreement and the Senior Notes and related interest. On April 19, 2018, the Company declared a dividend in the form of the $750 million Brookfield Promissory Note to the sole pre-IPO stockholder. On June 15, 2018, the Company entered into the First Amendment to the 2018 Credit Agreement, which provided for an additional $750 million in aggregate principal amount of Incremental Term Loans. The Company borrowed $750 million in Incremental Term Loans on June 15, 2018. The proceeds of the Incremental Term Loans were used to repay the Brookfield Promissory Note in full. The 2018 Term Loans and the Incremental Term Loans mature on February 12, 2025 and bear interest at a rate equal to either the Adjusted LIBO Rate, plus an applicable margin initially equal to 3.50% per annum, or the ABR Rate, plus an applicable margin initially equal to 2.50% per annum, in each case with one step down of 25 basis points based on achievement of certain public ratings of the 2018 Term Loans, as applicable (see "Liquidity and Capital Resources" for details). The pro forma interest on indebtedness under the 2018 Credit Agreement was estimated using a monthly LIBOR yield curve through February 2025.
(b)
Represents estimated postretirement, pension and related benefits obligations based on actuarial calculations.
(c)
Represents commitments made for purchases related to our ongoing plant expansion projects and committed purchases of raw materials. Includes committed purchases of raw materials for the second half of 2018 for which pricing was established in June and July 2018.
(e)
In addition, letters of credit of $8.7 million were issued under the Old Revolving Facility as of December 31, 2017. These letters of credit were rolled over to the 2018 Revolving Facility in February 2018.
(f)
Represents surety bonds which are renewed annually. If rates were unfavorable, we would use letters of credit under our revolving facility.
Recent Accounting Pronouncements
We discuss recently adopted accounting standards in Note 1, “Organization and Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements.

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(Unaudited)

Description of Our Financing Structure
We discuss our financing structure in more detail in Note 6, “Debt and Liquidity” of the Notes to Condensed Consolidated Financial Statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks primarily from changes in interest rates, currency exchange rates, energy commodity prices and commercial energy rates. We, from time to time, routinely enter into various transactions that have been authorized according to documented policies and procedures to manage these well-defined risks. These transactions relate primarily to financial instruments described below. Since the counterparties to these financial instruments are large commercial banks and similar financial institutions, we do not believe that we are exposed to material counterparty credit risk. We do not use financial instruments for trading purposes.
Our exposure to changes in interest rates results primarily from floating rate long-term debt tied to LIBOR or Euro LIBOR. Our exposure to changes in currency exchange rates results primarily from:
•
sales made by our subsidiaries in currencies other than local currencies;
•
raw material purchases made by our foreign subsidiaries in currencies other than local currencies; and
•
investments in and intercompany loans to our foreign subsidiaries and our share of the earnings of those subsidiaries, to the extent denominated in currencies other than the dollar.
Our exposure to changes in energy commodity prices and commercial energy rates results primarily from the purchase or sale of refined oil products and the purchase of natural gas and electricity for use in our manufacturing operations.
Currency Rate Management. We enter into foreign currency derivatives from time to time to attempt to manage exposure to changes in currency exchange rates. These foreign currency derivatives, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures. Forward exchange contracts are agreements to exchange different currencies at a specified future date and at a specified rate. Purchased foreign currency options are instruments which give the holder the right, but not the obligation, to exchange different currencies at a specified rate at a specified date or over a range of specified dates. Forward exchange contracts and purchased currency options are carried at market value.
The outstanding foreign currency derivatives represented no net unrealized gain or loss as of June 30, 2018 and a net unrealized loss as of $0.1 million as of December 31, 2017 .
Energy Commodity Management . We have entered into commodity derivative contracts to effectively fix some or all of our exposure to refined oil products. The outstanding commodity derivative contracts represented a net unrealized gain of $27.8 million as of June 30, 2018 and a net unrealized gain of $4.7 million as of December 31, 2017 .
Interest Rate Risk Management. We periodically implement interest rate management initiatives to seek to minimize our interest expense and the risk in our portfolio of fixed and variable interest rate obligations.
We periodically enter into agreements with financial institutions that are intended to limit, or cap, our exposure to incurrence of additional interest expense due to increases in variable interest rates. These instruments effectively cap our interest rate exposure. We currently do not have any such instruments outstanding.
Sensitivity Analysis. We use sensitivity analysis to quantify potential impacts that market rate changes may have on the fair values of our foreign currency derivatives and our commodity derivatives. The sensitivity analysis represents the hypothetical changes in value of the hedge position and does not reflect the related gain or loss on the forecasted underlying transaction. As of June 30, 2018 , a 10% appreciation or depreciation in the value of the U.S. dollar against foreign currencies from the prevailing market rates would result in a corresponding decrease of $0.7 million or a corresponding increase of $0.7 million, respectively, in the fair value of the foreign currency hedge portfolio. A 10% increase or decrease in the value of the underlying commodity prices that we hedge would result in a corresponding increase or decrease of $16.8 million in the fair value of the commodity hedge portfolio as of June 30, 2018 . Because of the high correlation between the hedging instrument and the underlying exposure, fluctuations in the value of the instruments are generally offset by reciprocal changes in the value of the underlying exposure.
We had no interest rate derivative instruments outstanding as of June 30, 2018 . A hypothetical increase in interest rates of 100 basis points (1%) would have increased our interest expense by $6.9 million for the six months ended June 30, 2018 .

44
Table of Contents     
PART I (CONT’D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Unaudited)

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Management is responsible for establishing and maintaining adequate disclosure controls and procedures at the reasonable assurance level. Disclosure controls and procedures are designed to ensure that information required to be disclosed by a reporting company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by it in the reports that it files under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2018 . Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these controls and procedures are effective at the reasonable assurance level as of June 30, 2018 .
Changes in Internal Control over Financial Reporting . There have been no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2018 that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

45
Table of Contents
PART II. OTHER INFORMATION
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES


Item 1. Legal Proceedings
Additional information required by this Item is set forth in Note 9, “ Contingencies ” of the Notes to Condensed Consolidated Financial Statements and is incorporated herein by reference.
Item 1A. Risk Factors
There have been no material changes to the Risk Factors disclosed in Part II - Item 1A of our first quarter report on Form10-Q filed on May 7, 2018, which are incorporated herein by reference.
Item 6. Exhibits
Pursuant to the rules and regulations of the SEC, the Company has filed certain agreements as exhibits to this report. These agreements may contain representations and warranties by the parties. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by disclosures made to such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected in the Company’s public disclosure, (iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards different from what may be viewed as material to investors. Accordingly, these representations and warranties may not describe the Company’s actual state of affairs at the date hereof and should not be relied upon.
The exhibits listed in the following table have been filed as part of this Report.
 
Exhibit
Number
Description of Exhibit

2.1
3.1
3.2
4.1
4.2
10.1
10.2
10.18

46
PART II. OTHER INFORMATION
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

10.19
31.1
 
 
31.2
 
 
32.1
 
 
32.2
 
 
101.INS
XBRL Instance Document
 
 
101.SCH
XBRL Taxonomy Extension Schema Document
 
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
 
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
 
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document


47

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
GRAFTECH INTERNATIONAL LTD.
Date:
August 3, 2018
By:
/s/ Quinn J. Coburn
 
 
 
Quinn J. Coburn
 
 
 
Vice President and Chief Financial
Officer (Principal Financial Officer)


48

REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”), dated as of April 23, 2018, is by and between GrafTech International Ltd., a Delaware corporation (the “ Company ”) and BCP IV GrafTech Holdings LP, a Delaware limited partnership (the “ Sponsor ”). The Sponsor and any other Person who may become a party hereto pursuant to Sections 8 or 13(c) are referred to individually as a “ Stockholder ” or a “ Noteholder ” (depending upon whether such Person holds Registrable Equity Securities or Registrable Debt Securities, respectively) and generally as a “ Holder ” and collectively as the “ Stockholders ,” the “ Noteholders ” and generally as the “ Holders .”
This Agreement replaces in its entirety the Registration Rights Agreement dated as of August 11, 2015 (the “ Original Agreement ”).
WHEREAS, the Company and the Sponsor entered into the Original Agreement, which the Company and the Sponsor hereby replace in its entirety as set forth herein;
WHEREAS, on April 23, 2018, the Company completed an initial public offering (the “ IPO ”) of shares of the Company’s common stock, par value $0.01 per share (the “ Common Stock ”) pursuant to an underwriting agreement dated April 18, 2018; and
WHEREAS, Sponsor desires to have, and the Company desires to grant, certain registration and other rights with respect to the Registrable Securities following the IPO on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
Section 1. Definitions . As used in this Agreement, the following terms shall have the following meanings, and terms used herein but not otherwise defined herein shall have the meanings assigned to them in the Stockholder Rights Agreement dated April 23, 2018.
“ Additional Company Party ” shall mean any subsidiary or other Affiliate of the Company that becomes a party to this Agreement pursuant to Section 8.
“ Adverse Disclosure ” means public disclosure of material non-public information that the Company has determined in good faith (after consultation with legal counsel): (i) would be required to be made in any Registration Statement filed with the SEC by the Company so that such Registration Statement or report would not be materially misleading; (ii) would not be required to be made at such time but for the filing, effectiveness or continued use of such Registration Statement or report; and (iii) the Company has a bona fide business purpose for not disclosing publicly.
“ Affiliate ” shall have the meaning specified in Rule 12b-2 under the Exchange Act.
“ Agreement ” shall have the meaning set forth in the Preamble.
“ Common Stock ” shall have the meaning set forth in the Preamble.
“ Company ” shall have the meaning set forth in the Preamble.
“ Company Group ” shall mean, with respect to Registrable Equity Securities, the Company, and with respect to Registrable Debt Securities, the Company and the Additional Company Parties.
“ Demand Notice ” shall have the meaning set forth in Section 3(a).
“ Demand Registration ” shall have the meaning set forth in Section 3(a).
“ Demand Suspension ” shall have the meaning set forth in Section 9.
“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.
“ Holder ” and “ Holders ” shall have the meanings set forth in the Preamble.
“ Indemnified Party ” shall have the meaning set forth in Section 11(c).
“ Indemnifying Party ” shall have the meaning set forth in Section 11(c).
“ IPO ” shall have the meaning set forth in the Preamble.
“ IPO Lock-up Period ” means the period ending 180 days after the date of the prospectus relating to the IPO.
“ Issuer Free Writing Prospectus ” means an issuer free writing prospectus, as defined in Rule 433 under the Securities Act, relating to an offer of Registrable Securities.
“ Long-Form Registration ” shall have the meaning set forth in Section 3(a).
“ Losses ” shall have the meaning set forth in Section 11(a).
“ Marketed Underwritten Offering ” shall mean a registered Underwritten Offering of Registrable Securities (including any registered underwritten Shelf Offering) that is consummated, withdrawn or abandoned by the applicable Holders following formal participation by the Company’s management in a customary “road show” (including an “electronic road show”) or other similar marketing effort by the Company over a period of at least 48 hours.
“ Noteholder ” and “ Noteholders ” shall have the meanings set forth in the Preamble.
“ Offering Material ” means any “issuer information” filed or required to be filed pursuant to Rule 433(d) under the Securities Act, any written testing-the-waters communication or any road show as defined in Rule 433(h) under the Securities Act.
“ Offering Persons ” shall have the meaning set forth in Section 9(p).
“ Permitted Assignee ” shall have the meaning set forth in 13(c).
“ Person ” shall mean any natural person, corporation, limited partnership, general partnership, limited liability company, joint stock company, joint venture, association, company, estate, trust, bank trust company, land trust, business trust, or other organization, whether or not a legal entity, custodian, trustee-executor, administrator, nominee or entity in a representative capacity and any government or agency or political subdivision thereof.
“ Piggyback Notice ” shall have the meaning set forth in Section 6(a).
“ Piggyback Registration ” shall have the meaning set forth in Section 6(a).
“ Piggyback Request ” shall have the meaning set forth in Section 6(a).
“ Pro Rata Percentage ” means, as of any date, with respect to a Holder, a number of Registrable Securities equal to (i) the number of Registrable Securities held by such Holder as of such date multiplied by (ii) the Pro Rata Sponsor Percentage with respect to the Sponsor for the applicable Registration Statement.
“ Pro Rata Sponsor Percentage ” means an amount equal to the fraction (expressed as a percentage) determined by dividing (A) the number of Registrable Securities that the Sponsor has requested to be registered on the applicable Registration Statement or included in the applicable Shelf Offering (provided that such number shall be reduced by the number of Registrable Securities, if any, that the Sponsor shall withdraw therefrom in accordance with this Agreement by (B) the total number of Registrable Securities held as of the date of such request (or such withdrawal, if applicable) by the Sponsor (and its Affiliates and Permitted Assignees); provided, however, that the Sponsor may freely re-allocate any number of Registrable Securities held by such Sponsor (or any of its Affiliates and Permitted Assignees) to any of its Affiliates (or their Permitted Assignees) for purposes of determining a Pro Rata Sponsor Percentage.
“ Proceeding ” shall mean an action, claim, suit, arbitration or proceeding (including an investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“ Prospectus ” shall mean the prospectus included in any Registration Statement (including a prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A or Rule 430B under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus.
“ Registrable Debt Securities ” shall mean, as of any date of determination, the debt securities of the Company that the Noteholders have acquired or have the right to acquire. As to any particular Registrable Debt Securities, such securities shall cease to be Registrable Debt Securities when (i) they are sold pursuant to an effective Registration Statement under the Securities Act, (ii) such Noteholder is able to dispose of all of its, his or her Registrable Debt Securities pursuant to Rule 144 without any volume limitations or manner of sale limitations thereunder, provided that at such time such Registrable Debt Securities are not required to bear any legend restricting the transfer thereof, or (iii) they shall have ceased to be outstanding.
“ Registrable Equity Securities ” shall mean, as of any date of determination, any shares of Common Stock that the Stockholders have acquired or have the right to acquire and any other securities issued or issuable with respect to any such shares by way of share split, share dividend, distribution, recapitalization, merger, exchange, replacement or similar event or otherwise acquired from time to time. As to any particular Registrable Equity Securities, once issued, such securities shall cease to be Registrable Equity Securities when (i) they are sold pursuant to an effective Registration Statement under the Securities Act, (ii) the Stockholder thereof, together with its, his or her affiliates, beneficially owns less than 1.0% of the shares of Common Stock at such time and such Stockholder is able to dispose of all of its, his or her Registrable Equity Securities pursuant to Rule 144 without any volume limitations or manner of sale limitations thereunder, provided that at such time such Registrable Equity Securities are not required to bear any legend restricting the transfer thereof, or (iii) they shall have ceased to be outstanding.
“ Registrable Securities ” shall mean, as of any date of determination, any Registrable Equity Securities or Registrable Debt Securities.
“ Registration Statement ” shall mean any registration statement of the Company filed, or to be filed with, the SEC under the Securities Act, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement, that covers any of the Registrable Securities pursuant to the provisions of this Agreement.
“ Rule 144 ” shall mean Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.
“ SEC ” shall mean the Securities and Exchange Commission or any successor agency having jurisdiction under the Securities Act.
“ Securities Act ” shall mean the Securities Act of 1933, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.
“ Shelf Holder ” shall have the meaning set forth in Section 4(b).
“ Shelf Offering ” shall have the meaning set forth in Section 4(d).
“ Shelf Registration Statement ” means a Registration Statement of the Company filed with the SEC on Form S-3 (or any successor form or other appropriate form under the Securities Act) for an offering to be made on a continuous basis pursuant to Rule 415 (or any successor provision) under the Securities Act covering all or any portion of the Registrable Securities, as applicable.
“ Shelf Suspension ” shall have the meaning set forth in Section 4(c).
“ Short-Form Registration ” shall have the meaning set forth in Section 3(a).
“ Sponsor ” shall have the meaning set forth in the Preamble.
“ Stockholder ” and “ Stockholders ” shall have the meanings set forth in the Preamble.
“ Take-Down Notice ” shall have the meaning set forth in Section 4(d).
“ Trust Indenture Act ” shall mean the Trust Indenture Act of 1939, as amended from time to time.
“ Underwritten Registration ” and “ Underwritten Offering ” shall mean a registration or offering, as the case may be, in which securities of the Company are sold to an underwriter for reoffering to the public.
“ Well-Known Seasoned Issuer ” shall have the meaning set forth in Rule 405 (or any successor provision) under the Securities Act.
Section 2.      Holders of Registrable Securities . A Person is deemed, and shall only be deemed, to be a Holder of Registrable Securities if such Person owns Registrable Securities or has a right to acquire such Registrable Securities and such Person is a Holder.
Section 3.      Demand Registrations .
(a)      Requests for Registration . Subject to the following paragraphs of this Section 3 and Section 5, the Sponsor shall have the right, by delivering or causing to be delivered a written notice to the Company (a “ Demand Notice ”), to require the Company Group to register pursuant to the terms of this Agreement, under and in accordance with the provisions of the Securities Act, the offer and sale of the number of Registrable Securities requested to be so registered on Form S-3 (which, unless the Sponsor requests otherwise, shall be filed pursuant to Rule 415 under the Securities Act), if the Company is then eligible for such short-form or any similar or successor short-form registration (“ Short-Form Registration ”) or, if the Company is not then eligible for Short-Form Registration, on Form S-1 or any similar or successor long-form registration (“ Long-Form Registration ”) (any such registration, a “ Demand Registration ”); provided, however, that unless the Sponsor requests to have registered all of its Registrable Securities, a Demand Notice for a Marketed Underwritten Offering may only be made if the sale of the Registrable Securities requested to be registered by the Sponsor is reasonably expected to result in aggregate gross cash proceeds in excess of $50,000,000 (without regard to any underwriting discount or commission). Following receipt of a Demand Notice for a Demand Registration in accordance with this Section 3(a), the Company Group shall use its reasonable best efforts to (x) file with the SEC a Registration Statement in accordance with such Demand Notice and the provisions of this Agreement as promptly as reasonably practicable and, in any event, within 30 days following receipt of such Demand Notice in the case of a Short-Form Registration or within 90 days following receipt of such Demand Notice in the case of a Long-Form Registration and (y) cause such Registration Statement to become; provided, however, that if a Demand Notice is delivered prior to the expiration of the IPO Lock-up Period, the Company Group shall not be obligated to file (but shall be obligated to prepare) such Registration Statement prior to the expiration of the IPO Lock-up Period. With respect to any Underwritten Offering to be conducted pursuant to any Demand Registration, the Sponsor shall select the underwriter(s) for such offering, subject to the reasonable satisfaction of the Company.
The Company Group shall use its reasonable best efforts to keep any Registration Statement with respect to any Demand Registration filed pursuant to this Section 3(a) continuously effective under the Securities Act until the earlier to occur of (x) 180 days after the effective date thereof and (y) consummation of the distribution by the Holders of Registrable Securities included in such Registration Statement.
No Demand Registration shall be deemed to have occurred for purposes of this Section 3, and any Demand Notice delivered in connection therewith shall not count as a Demand Notice for purposes of Section 5, if (x) the Registration Statement relating thereto (and covering all Registrable Securities specified in the applicable Demand Notice for sale in accordance with the intended method or methods of distribution specified in such Demand Notice, subject to any cut-back pursuant to Section 3(c)) (i) does not become effective, or (ii) is not maintained continuously effective for the period required pursuant to this Section 3, (y) the offering of the Registrable Securities pursuant to such Registration Statement is subject to a stop order, injunction, or similar order or requirement of the SEC during such period or (z) the conditions to closing specified in any underwriting agreement, purchase agreement, or similar agreement entered into in connection with the registration relating to such request are not satisfied other than as a result of the Sponsor’s actions.
All requests made pursuant to this Section 3 shall: (i) state that it is a notice to initiate a Demand Registration under this Agreement; and (ii) specify the number of Registrable Securities to be registered and the intended method(s) of disposition thereof.
(b)      Company Notices . Within five business days after receipt by the Company of a Demand Notice pursuant to this Section 3, the Company shall deliver a written notice of any such Demand Notice to all Holders of Registrable Securities, which shall offer each such Holder the opportunity to include in the Demand Registration an amount of Registrable Securities up to its Pro Rata Percentage applicable to the Demand Registration as each such Holder may request in writing. The Company Group shall, subject to the provisions of Section 3(c), include in such Demand Registration all such Registrable Securities with respect to which the Company has received written requests for inclusion therein; provided that the Company Group shall not include in such Demand Registration Registrable Securities of any Holder in an amount in excess of such Holder’s Pro Rata Percentage within ten business days after the date that such notice has been delivered, and provided, further, that such Holders must agree to the method of distribution proposed by the Sponsor and, in connection with any Underwritten Registration, the Sponsor (together with the Company and the other Holders including securities in such Underwritten Registration) must enter into an underwriting agreement in the form reasonably approved by the Company and the Sponsor.
(c)      Priority on Demand Registration . If any of the Registrable Securities registered pursuant to a Demand Registration are to be sold in an Underwritten Offering, and the managing underwriter(s) advise the Sponsor in writing that in its good faith opinion the total number or dollar amount of Registrable Securities proposed to be sold in such offering is such as to adversely affect the price, timing or distribution of such offering (including securities proposed to be included by other Holders entitled to include such securities in such Registration Statement pursuant to incidental or piggyback registration rights), then there shall be included in such Underwritten Offering the number or dollar amount of Registrable Securities that in the opinion of such managing underwriter(s) can be sold without adversely affecting such offering, and such number of Registrable Securities shall be allocated as follows:
(i)      first, any Registrable Securities for which inclusion in such Demand Registration was requested by the Sponsor;
(ii)      second, pro-rata among the Holders of Registrable Securities other than the Sponsor that have requested to participate in such Demand Registration on the basis of the percentage of the Registrable Securities requested to be included in such Registration Statement by such Holders;
(iii)      third, pro-rata among any other Holders entitled to include such securities in such Registration Statement pursuant to piggyback registration rights; and
(iv)      fourth, any securities for which inclusion in such Demand Registration was requested by the Company.
No securities excluded from the Underwritten Offering by reason of the managing underwriter(s)’ marketing limitations shall be included in such offering.
(d)      Postponement of Demand Registration . The Company Group may postpone, for a reasonable period of time on one or more occasions not in excess of 90 days in the aggregate (together with any Shelf Suspensions) in any 12-month period, the filing (but not the preparation) of a Registration Statement if the Company delivers to the Sponsor a certificate signed by an executive officer of the Company certifying that such registration would (i) require the Company to make an Adverse Disclosure or (ii) materially interfere with any bona fide material financing, acquisition, disposition or other similar transaction involving the Company or any of its subsidiaries then under consideration. Such certificate shall notify the Sponsor only of the occurrence of such an event and an approximation of the anticipated delay but shall provide no additional information regarding such event to the extent such information would constitute material non-public information. The Sponsor shall keep the information contained in such certificate confidential subject to the same terms set forth in Section 9(p).
If the Company Group shall so postpone the filing of a Registration Statement, the Sponsor shall have the right to withdraw the request for registration by giving written notice to the Company within ten days of the anticipated termination date of the postponement period, as provided in the certificate delivered to the Sponsor and, for the avoidance of doubt, upon such withdrawal, the withdrawn request shall not constitute a Demand Notice; provided that in the event the Sponsor does not so withdraw the request for registration, the Company Group shall continue to prepare a Registration Statement during such postponement such that it shall be in a position to and shall, as promptly as practicable following the expiration of the applicable deferral or suspension period, file or update and use its reasonable efforts to cause the effectiveness of the applicable deferred or suspended Registration Statement.
(e)      Cancellation of a Demand Registration . The Sponsor shall have the right to notify the Company that it has determined that the applicable Registration Statement be abandoned or withdrawn by giving written notice of such abandonment or withdrawal at any time prior to the effective time of such Registration Statement, in which event the Company Group shall abandon or withdraw such Registration Statement; provided, that such Demand Notice underlying such abandonment or withdrawal shall be deemed to be a Demand Notice for purposes of Section 5 unless such Demand Notice is abandoned or withdrawn in response to a material adverse change regarding the Company or a material adverse change in the financial markets generally.
(f)      In addition, any Holder that has requested its Registrable Securities be included in a Demand Registration Statement pursuant to Section 3 may withdraw its Registrable Securities from such Demand Registration Statement at any time prior to the effectiveness of such Demand Registration Statement.
Section 4.      Shelf Registration .
(a)      Request for Shelf Registration . Subject to the following paragraphs of this Section 4 and Section 5, the Sponsor shall have the right, by delivering or causing to be delivered a written notice to the Company (a “ Shelf Notice ”), to require the Company Group to file pursuant to the terms of this Agreement, under and in accordance with the provisions of the Securities Act, a Shelf Registration Statement for the offer and sale from time to time of the number of Registrable Securities requested to be so registered. Following receipt of a Shelf Notice for a Shelf Registration Statement in accordance with this Section 4(a), the Company Group shall use its reasonable best efforts to (x) file promptly with the SEC such Shelf Registration Statement in accordance with such Shelf Notice and the provisions of this Agreement as promptly as reasonably practicable and, in any event, within 30 days following receipt of such Shelf Notice and (y) cause such Shelf Registration Statement to become effective under the Securities Act as promptly as reasonably practicable after the filing thereof; provided, however, that if a Shelf Notice is delivered prior to the expiration of the IPO Lock-up Period, the Company Group shall not be obligated to file (but shall be obligated to prepare) such Shelf Registration Statement prior to the expiration of the IPO Lock-up Period. If, on the date of any such request, the Company does not qualify to file a Shelf Registration Statement under the Securities Act, the provisions of this Section 4 shall not apply, and the provisions of Section 3 shall apply instead.
The Company Group shall use its reasonable best efforts to keep any Shelf Registration Statement filed pursuant to this Section 4(a) continuously effective under the Securities Act in order to permit the Prospectus forming a part thereof to be usable by Shelf Holders until such securities cease to be Registrable Securities.
Any request made pursuant to this Section 4 shall state that it is a notice to initiate the filing of a Shelf Registration Statement under this Agreement, and specify the amount of Registrable Securities to be registered and the intended method(s) of distribution thereof.
(b)      Company Notices . Within five business days after receipt by the Company of a Shelf Notice pursuant to this Section 4, the Company shall deliver a written notice of such Shelf Notice to all Holders of Registrable Securities, which shall offer each such Holder the opportunity to include in the Shelf Registration Statement an amount of Registrable Securities up to its Pro Rata Percentage applicable to the Shelf Registration as each such Holder may request in writing (each such Holder delivering such a request, together with the Sponsor, a “ Shelf Holder ”). The Company Group shall include in such Shelf Registration all such Registrable Securities with respect to which the Company has received written requests for inclusion therein within five business days after the date that such notice has been delivered; provided that the Company Group shall not include in such Shelf Registration Registrable Securities of any Holder in an amount in excess of such Holder’s Pro Rata Percentage.
(c)      Suspension of Registration . The Company Group may postpone the filing or suspend the continued use, for a reasonable period of time on one or more occasions not in excess of 90 days in the aggregate (together with any Demand Suspensions) in any 12-month period, of the Shelf Registration Statement (a “ Shelf Suspension ”) if the Company delivers to the Shelf Holders a certificate signed by an executive officer of the Company certifying that such filing or continued use of would (i) require the Company to make an Adverse Disclosure or (ii) materially interfere with any bona fide material financing, acquisition, disposition or other similar transaction involving the Company or any of its subsidiaries then under consideration; provided, however, that such Shelf Suspension shall terminate at such earlier time as the Company would no longer be required to make any Adverse Disclosure or such filing or continued use would no longer so interfere. Such certificate shall notify the Shelf Holders only of the occurrence of such an event and and approximation of the anticipated delay but shall provide no additional information regarding such event to the extent such information would constitute material non-public information. The Shelf Holders receiving such certificate shall keep the information contained in such certificate confidential subject to the same terms set forth in Section 9(p). In the case of a Shelf Suspension, the Shelf Holders agree to suspend use of the applicable Prospectus and any Issuer Free Writing Prospectus in connection with any sale or purchase of, or offer to sell or purchase, Registrable Securities, upon delivery of the notice referred to above. The Company shall promptly notify the Shelf Holders upon the termination of any Shelf Suspension, amend or supplement the Prospectus and any Issuer Free Writing Prospectus, if necessary, so it does not contain any untrue statement or omission and furnish to the Shelf Holders such numbers of copies of the Prospectus and any Issuer Free Writing Prospectus as so amended or supplemented as the Shelf Holders may reasonably request. The Company Group agrees, if necessary, to supplement or make amendments to the Shelf Registration Statement if required by the registration form used by the Company Group for the applicable Registration or by the instructions applicable to such registration form or by the Securities Act or the rules or regulations promulgated thereunder, or as may reasonably be requested by the Sponsor.
(d)      Shelf Take Downs . An offering or sale of Registrable Securities pursuant to a Shelf Registration Statement (each, a “ Shelf Offering ”) may, subject to Section 5, be initiated at any time by the Sponsor. If the Sponsor elects by written request to the Company (each, a “ Take-Down Notice ”), a Shelf Offering shall be in the form of an Underwritten Offering, then the Company Group shall amend or supplement the Shelf Registration Statement as may be necessary in order to enable such Registrable Securities to be offered and sold pursuant to the Shelf Offering in accordance with the provisions of this Agreement. With respect to any Shelf Offering that is an Underwritten Offering, the Sponsor shall select the underwriter(s) for such offering, subject to the reasonable satisfaction of the Company. Except as set forth in this Section 4(d), the Sponsor shall not be required to permit the offer and sale of Registrable Securities by other Shelf Holders in connection with any Shelf Offering by the Sponsor. In connection with any Shelf Offering that is a Marketed Underwritten Offering:
(i)      the Company shall deliver a written notice to all Shelf Holders other than the Sponsor, which shall offer each such Shelf Holder the opportunity to include in the Shelf Offering an amount of Registrable Securities up to its Pro Rata Percentage applicable to the Demand Registration as each such Shelf Holder may request in writing within five business days after the date that such notice has been delivered; provided that such Shelf Holder must agree to the method of distribution proposed by the Sponsor and enter into an underwriting agreement in the form reasonably approved by the Company and the Sponsor; and
(ii)      in the event that the managing underwriter(s) of such Shelf Offering advises the Sponsor in writing that in their good faith opinion the total number or dollar amount of Registrable Securities proposed to be sold in such Shelf Offering is such as to adversely affect the price, timing or distribution of such offering, then the managing underwriter(s) may limit the number of Registrable Securities which would otherwise be included in such Shelf Offering in the same manner as described in Section 3(c) with respect to a limitation of Registrable Securities to be included in a Demand Registration.
Section 5.      Limitation on Registration and Underwritten Offerings
(a)      Notwithstanding the rights and obligations set forth in Sections 3 and 4, after the Sponsor holds less than 50% of the outstanding Common Stock of the Company, in no event shall the Company Group be obligated to take any action to effect any Demand Registration or any Marketed Underwritten Offerings at the request of the Sponsor, if (i) with respect to Registrable Equity Securities, the Company Group has effected a total of five (5) Demand Registrations and/or Marketed Underwritten Offerings at the request of the Sponsor after such time and (ii) with respect to any series of Registrable Debt Securities, the Company has effected a total of three (3) Demand Registrations and/or Marketed Underwritten Offerings at the request of the Sponsor for such series of Registrable Debt Securities after such time.
(b)      Notwithstanding the rights and obligations set forth in Sections 3 and 4, in no event shall the Company Group be obligated to take any action to effect more than two Demand Registrations and/or Marketed Underwritten Offerings by the Sponsor in any 365-day period.
(c)      For the avoidance of doubt, the Sponsor shall have the right to obligate the Company Group to effect an unlimited number of Shelf Offerings that are not Marketed Underwritten Offerings and, if the Sponsor holds 50% or more of the outstanding Common Stock of the Company, an unlimited number of Demand Registrations and Underwritten Offerings and Shelf Offerings of any kind.
Section 6.      Piggyback Registration .
(a)      Right to Piggyback . Except with respect to a Demand Registration or Shelf Registration, the procedures for which are addressed in Sections 3 and 4, respectively, if the Company proposes to file a registration statement under the Securities Act with respect to an offering of securities, whether or not for sale for its own account and whether or not an Underwritten Offering or an Underwritten Registration (other than a registration statement (i) on Form S-4, Form S-8 or any successor forms thereto or (ii) filed to effectuate an exchange offer or any employee benefit or dividend reinvestment plan), then the Company shall give prompt written notice of such filing no later than ten business days prior to the filing date (the “ Piggyback Notice ”) to all of the Holders of Registrable Equity Securities or Registrable Debt Securities, as applicable. The Piggyback Notice shall offer such Holders the opportunity to include (or cause to be included) in such registration statement the number of applicable Registrable Securities as each such Holder may request (each, a “ Piggyback Registration ”). Subject to Section 6(b), the Company shall include in each such Piggyback Registration all applicable Registrable Securities with respect to which the Company has received written requests for inclusion therein (each a “ Piggyback Request ”) within ten business days after notice has been given to the applicable Holder; provided that the Company shall not include in any Piggyback Registration Registrable Securities of any Holder in an amount in excess of such Holder’s Pro Rata Percentage. The Company shall not be required to maintain the effectiveness of the Registration Statement for a Piggyback Registration beyond the earlier to occur of (x) 180 days after the effective date thereof and (y) consummation of the distribution by the Holders of the Registrable Securities (other than those making Piggyback Requests) included in such Registration Statement. With respect to any such Underwritten Offering to be conducted by the Company, the Company shall select the underwriter(s) for such offering, subject to the reasonable satisfaction of the Sponsor in the event that the Sponsor shall request inclusion of Registrable Securities therein.
(b)      Priority on Piggyback Registrations . If any of the Registrable Securities to be registered pursuant to the registration giving rise to the rights under this Section 6 are to be sold in an Underwritten Offering, the Company shall use reasonable best efforts to cause the managing underwriter(s) of a proposed Underwritten Offering to permit Holders of Registrable Securities who have timely submitted a Piggyback Request in connection with such offering to include in such offering all Registrable Securities included in each Holder’s Piggyback Request on the same terms and subject to the same conditions as any other securities, if any, of the Company included in the offering. Notwithstanding the foregoing, if the managing underwriter(s) of such Underwritten Offering advise the Company in writing that it is their good faith opinion the total number or dollar amount of securities that such Holders, the Company and any other Persons having rights to participate in such registration, intend to include in such offering is such as to adversely affect the price, timing or distribution of the securities in such offering, then there shall be included in such Underwritten Offering the number or dollar amount of securities that in the opinion of such managing underwriter(s) can be sold without so adversely affecting such offering, and such number of Registrable Securities shall be allocated as follows: (i) first, all securities proposed to be sold by the Company for its own account; (ii) second, all Registrable Securities requested to be included in such registration by the Holders pursuant to this Section 6, pro rata among such Holders on the basis of the percentage of the Registrable Securities requested to be included in such Registration Statement by such Holders; and (iii) third, all other securities requested to be included in such Registration Statement by other Holders of securities entitled to include such securities in such Registration Statement pursuant to piggyback registration rights; provided that any Holder may, prior to the effectiveness of the Registration Statement, withdraw its request to be included in such registration pursuant to this Section 6.
Section 7.      Restrictions on Public Sale by Holders of Registrable Securities .
(a)      With respect to any Underwritten Offering of Registrable Equity Securities pursuant to this Agreement (including with respect to a Shelf Offering pursuant to Section 4(c) hereof), the Company will cause each of its executive officers and directors to sign a customary “lock up” agreement containing provisions consistent with those contemplated pursuant to Section 7(c) and agrees not to (i) offer, pledge, 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, submit or file with the SEC a registration statement under the Securities Act relating to, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or publicly disclose the intention to make any offer, sale, pledge, disposition, submission or filing, 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 Common Stock or any such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, without the prior written consent of the Underwriters of such Underwritten Offering (other than (A) a registration statement on Form S-8 or any successor forms thereto, (B) Common Stock issued upon the exercise of options, (C) the grant by the Company of awards under stock plans and (D) the issuance of Common Stock or other securities in connection with acquisitions, joint ventures or other strategic transactions) for its own account, within 75 days (plus, a then customary “booster shot” extension to the extent required to permit research analysts to publish research reports compliant with Rule 139 under the Securities Act pursuant to FINRA Rule 2241 (or a successor thereto)) after the date of the Prospectus (or Prospectus supplement if the offering is made pursuant to a Shelf Registration) for such offering except as may otherwise be agreed with the Sponsor.
(b)      With respect to any Underwritten Offering of Registrable Debt Securities pursuant to this Agreement (including with respect to a Shelf Offering pursuant to Section 4(c) hereof), the Company agrees not to (i) offer, pledge, 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, submit or file with the SEC a registration statement under the Securities Act relating to, any debt securities issued or guaranteed by the Company or any subsidiary or other Affiliate of the Company and having a tenor of more than one year, or publicly disclose the intention to make any offer, sale, pledge, disposition, submission or filing, or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of any such debt securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of such debt securities, in cash or otherwise, without the prior written consent of the Underwriters of such Underwritten Offering (other than the issuance of debt securities in connection with acquisitions, joint ventures or other strategic transactions) for its own account, within 75 days after the date of the Prospectus (or Prospectus supplement if the offering is made pursuant to a Shelf Registration) for such offering except as may otherwise be agreed with the Sponsor.
(c)      Each Stockholder of Registrable Equity Securities agrees with all other Stockholders of Registrable Securities and the Company in connection with any Underwritten Offering of Registrable Equity Securities made pursuant to a Registration Statement filed pursuant to Section 3 or Section 4, as applicable, if requested in writing by the managing underwriter(s) in such offering, it will not (i) subject to customary exceptions, effect any public sale or distribution of any of the Company’s securities (except as part of such Underwritten Offering), including a sale pursuant to Rule 144 or any swap or other economic arrangement that transfers to another Person any of the economic consequences of owning Common Stock, or (ii) give any Demand Notice during the period commencing on the date of the Prospectus pursuant to which such Underwritten Offering may be made and continuing for not more than 75 days after the date of such Prospectus (or Prospectus supplement if the offering is made pursuant to a Shelf Registration), plus a then customary “booster shot” extension to the extent required to permit research analysts to publish research reports compliant with Rule 139 under the Securities Act pursuant to FINRA Rule 2241 (or a successor thereto). In connection with any Underwritten Offering made pursuant to a Registration Statement filed pursuant to Section 3 or Section 4, the Sponsor shall be responsible for negotiating all “lock-up” agreements with the underwriters and, in addition to the foregoing provisions of this Section 7, the Stockholders agree to execute the form so negotiated; provided, that the form so negotiated is reasonably acceptable to the Sponsor and consistent with the agreement set forth in this Section 7 and that the Company’s executive officers and directors shall also have executed a form of agreement substantially similar to the agreement so negotiated, subject to customary exceptions applicable to natural persons.
Section 8.      Registrable Debt Securities . To the extent that the Sponsor or any of its Affiliates hold debt securities of the Company or any of its subsidiaries or other Affiliates in an aggregate amount greater than 10% of the aggregate outstanding principal amount of such series of debt securities, such securities shall be treated as Registrable Debt Securities hereunder. If such debt securities are issued or guaranteed by any subsidiary or other Affiliate of the Company, the Company shall cause entity to become a party to this Agreement by executing a counterpart to this Agreement substantially in the form attached hereto as Exhibit B and deliver such counterpart to the Sponsor no later than five business days following the execution thereof.
Section 9.      Registration Procedures . If and whenever the Company Group is required to effect the registration of any Registrable Securities under the Securities Act as provided in Section 3 or Section 4, the Company Group shall use its reasonable best efforts to effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company Group shall cooperate in the sale of the securities and shall use its reasonable best efforts, as promptly as practicable to the extent applicable, to:
(a)      prepare and file with the SEC a Registration Statement or Registration Statements on such form as shall be available for the sale of the Registrable Securities by the Holders thereof or by the Company in accordance with the intended method or methods of distribution thereof and in accordance with this Agreement, and use its reasonable best efforts to cause such Registration Statement to become effective and to remain effective as provided herein; provided, however, that before filing a Registration Statement or Prospectus or any amendments or supplements thereto (including documents that would be incorporated or deemed to be incorporated therein by reference), the Company shall furnish or otherwise make available to the Holders of the Registrable Securities covered by such Registration Statement, their counsel and the managing underwriters, if any, copies of all such documents proposed to be filed, which documents will be subject to the reasonable review and comment of such counsel, and such other documents reasonably requested by such counsel, including any comment letter from the SEC, and, if requested by such counsel, provide such counsel reasonable opportunity to participate in the preparation of such Registration Statement and each Prospectus included therein and such other opportunities to conduct a reasonable investigation within the meaning of the Securities Act, including reasonable access to the Company’s books and records, officers, accountants and other advisors. The Company Group shall not file any such Registration Statement or Prospectus or any amendments or supplements thereto (including such documents that, upon filing, would be incorporated or deemed to be incorporated by reference therein) with respect to a Demand Registration to which the Sponsor, its counsel, or the managing underwriters, if any, shall reasonably object, in writing, on a timely basis, unless, in the opinion of the Company’s counsel, such filing is necessary to comply with applicable law;
(b)      prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective during the period provided herein and comply in all material respects with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; and cause the related Prospectus to be supplemented by any Prospectus supplement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of the securities covered by such Registration Statement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act;
(c)      notify each selling Holder of Registrable Securities, its counsel and the managing underwriters, if any, promptly, and (if requested by any such Person) confirm such notice in writing, (i)  when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (i)  of any request by the SEC or any other federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, (i)  of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (i)  if at any time the Company Group has reason to believe that the representations and warranties of the Company Group contained in any agreement (including any underwriting agreement) contemplated by Section 9(o) below cease to be true and correct, (i)  of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, and (i)  if the Company Group has knowledge of the happening of any event that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not 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 that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (which notice shall notify the selling Holders only of the occurrence of such an event and shall provide no additional information regarding such event to the extent such information would constitute material non-public information);
(d)      prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of a Registration Statement, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction at the earliest date reasonably practicable;
(e)      if requested by the managing underwriters, if any, or the Sponsor in connection with an Underwritten Offering, promptly include in a Prospectus supplement or post-effective amendment such information as the managing underwriters, if any, and the Sponsor may reasonably request in order to permit the intended method of distribution of such securities and make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received such request; provided, however, that the Company Group shall not be required to take any actions under this Section 9 that are not, in the opinion of counsel for the Company, in compliance with applicable law;
(f)      furnish or make available to each selling Holder of Registrable Securities, its counsel and each managing underwriter, if any, without charge, at least one conformed copy of the Registration Statement, the Prospectus and Prospectus supplements, if applicable, and each post-effective amendment thereto, including financial statements (but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits, unless requested in writing by such Holder, counsel or underwriter); provided that the Company may furnish or make available any such documents in electronic format;
(g)      deliver to each selling Holder of Registrable Securities, its counsel, and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of Prospectus) and each amendment or supplement thereto as such Persons may reasonably request from time to time in connection with the distribution of the Registrable Securities; provided that the Company may furnish or make available any such documents in electronic format (other than, in the case of an Underwritten Offering, upon the request of the managing underwriters thereof for printed copies of any such Prospectus or Prospectuses); and the Company, subject to the last paragraph of this Section 9, hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any such amendment or supplement thereto;
(h)      prior to any Underwritten Offering of Registrable Securities, register or qualify or cooperate with the selling Holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or “blue sky” laws of such jurisdictions within the United States as any seller or underwriter reasonably requests in writing and to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective pursuant to this Agreement and to take any other action that may be necessary or advisable to enable such Holders of Registrable Securities to consummate the disposition of such Registrable Securities in such jurisdiction; provided, however, that the Company Group will not be required to (i) qualify generally to do business in any jurisdiction where would not otherwise be required to qualify but for this Agreement or (ii) take any action that would subject it to taxation or general service of process in any such jurisdiction where it would not otherwise be subject but for this Agreement;
(i)      cooperate with, and direct the Company’s agents to cooperate with, the selling Holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely settlement of any offering or sale of Registrable Securities, including the preparation and delivery of certificates (not bearing any legends) or book-entry (not bearing stop transfer instructions) representing Registrable Securities to be sold after receiving written representations from each Holder of such Registrable Securities that the Registrable Securities represented by the certificates so delivered by such Holder will be transferred in accordance with the Registration Statement and, in connection therewith, if reasonably required by the Company’s agents, the Company shall promptly after the effectiveness of the registration statement cause an opinion of counsel as to the effectiveness of any Registration Statement to be delivered to and maintained with its agent, together with any other authorizations, certificates and directions required by the agent which authorize and direct the agent to issue such Registrable Securities without restriction upon sale by the Holder of such shares of Registrable Securities under the Registration Statement;
(j)      upon the occurrence of, and its knowledge of, any event contemplated by Section 9(c)(vi) above, prepare a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus (then in effect) or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the Holder of the Registrable Securities being sold thereunder, such that the Registration Statement will not 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 will 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 light of the circumstances under which they were made, not misleading;
(k)      prior to the effective date of the Registration Statement relating to the Registrable Securities, provide a CUSIP number for the Registrable Securities;
(l)      cause any indenture in connection with the registration of the Registrable Debt Securities to be qualified under the Trust Indenture Act, as applicable; cooperate with the related trustee and the Noteholders to effect such changes to such Indenture as may be required for such indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and execute, and use their reasonable best efforts to cause such trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner;
(m)      provide and cause to be maintained a transfer agent and registrar for all Registrable Equity Securities covered by such Registration Statement from and after a date not later than the effective date of such Registration Statement;
(n)      cause all Registrable Securities covered by such Registration Statement to be listed on a national securities exchange if the particular class of Registrable Securities is at tha time listed on such exchange, as the case may be, prior to the effectiveness of such Registration Statement;
(o)      enter into such agreements (including underwriting agreements in form, scope and substance as is customary in Underwritten Offerings and such other documents reasonably required under the terms of such underwriting agreements, including customary legal opinions and auditor “comfort” letters) and take all such other actions reasonably requested by the Sponsor in connection therewith (including those reasonably requested by the managing underwriters, if any) to expedite or facilitate the disposition of such Registrable Securities;
(p)      in connection with a customary due diligence review, make available for inspection by a representative of the selling Holders with Registrable Securities, any underwriter participating in any such disposition of Registrable Securities, if any, and any counsel or accountants retained by such selling Holders or underwriter (collectively, the “ Offering Persons ”), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information and participate in customary due diligence sessions in each case reasonably requested by any such representative, underwriter, counsel or accountant in connection with such Registration Statement, provided, however, that any information that is not generally publicly available at the time of delivery of such information shall be kept confidential by such Offering Persons unless (i) disclosure of such information is required by court or administrative order or in connection with an audit or examination by, or a blanket document request from, a regulatory or self-regulatory authority, bank examiner or auditor, (ii) disclosure of such information, in the reasonable judgment of the Offering Persons, is required by law or applicable legal process (including in connection with the offer and sale of securities pursuant to the rules and regulations of the SEC), (iii) such information is or becomes generally available to the public other than as a result of a non-permitted disclosure or failure to safeguard by such Offering Persons in violation of this Agreement or (iv) such information (A) was known to such Offering Persons (prior to its disclosure by the Company) from a source other than the Company when such source, to the knowledge of the Offering Persons, was not bound by any contractual, legal or fiduciary obligation of confidentiality to the Company with respect to such information, (B) becomes available to the Offering Persons from a source other than the Company when such source, to the knowledge of the Offering Persons, is not bound by any contractual, legal or fiduciary obligation of confidentiality to the Company with respect to such information or (C) was developed independently by the Offering Persons or their respective representatives without the use of, or reliance on, information provided by the Company. In the case of a proposed disclosure pursuant to (i) or (ii) above, such Person shall be required to give the Company written notice of the proposed disclosure prior to such disclosure (except in the case of (ii) above when a proposed disclosure was or is to be made in connection with a Registration Statement or Prospectus under this Agreement and except in the case of clause (i) above when a proposed disclosure is in connection with a routine audit or examination by, or a blanket document request from, a regulatory or self-regulatory authority, bank examiner or auditor);
(q)      cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA, including the use of reasonable best efforts to obtain FINRA’s pre-clearance or pre-approval of the Registration Statement and applicable Prospectus upon filing with the SEC; and
(r)      in the case of a Underwritten Offering, cause the senior executive officers of the Company to participate in the customary “road show” presentations that may be reasonably requested by the managing underwriter or underwriters in any such offering and otherwise to facilitate, cooperate with and participate in each proposed offering contemplated herein and customary selling efforts related thereto.
Each Holder of Registrable Securities as to which any registration is being effected shall furnish to the Company in writing such information required in connection with such registration regarding such seller and the distribution of such Registrable Securities as the Company may, from time to time, reasonably request in writing as a condition for any Registrable Securities to be included in the applicable registration hereunder. For the avoidance of doubt, failure of any Holder of Registrable Securities to furnish the Company with such information as requested by the Company pursuant to the preceding sentence shall relieve the Company of any obligation hereunder to include the applicable Registrable Securities in the Registration Statement with respect to which such information was requested.
Each Holder of Registrable Securities agrees if such Holder has Registrable Securities covered by such Registration Statement that, upon receipt of any written notice from the Company of the happening of any event of the kind described in Section 9(c)(ii), (iii), (iv), (v) or (vi) (“ Demand Suspension ”), such Holder will forthwith discontinue disposition of such Registrable Securities pursuant to such Registration Statement or Prospectus until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 9(j), or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus; provided, however, that the time periods under Section 3 with respect to the length of time that the effectiveness of a Registration Statement must be maintained shall automatically be extended by the amount of time the Stockholder is required to discontinue disposition of such securities.
Notwithstanding anything herein to the contrary and subject to applicable law and regulation, the Company Group may satisfy any obligation hereunder to file a Registration Statement or to have a Registration Statement become effective by a specified date by designating, by notice to the Holders, a registration statement that previously has been filed with the SEC or become effective, as the case may be, as the relevant Registration Statement for purposes of satisfying such obligation, and all references to any such obligation or Registration Statement shall be construed accordingly; provided, that such previously filed registration statement may be amended to add the number of Registrable Securities, and, to the extent necessary, to identify as selling securityholders those Holders required to be included in the Registration Statement pursuant to the terms of this Agreement.
Section 10.      Registration Expenses . All fees and expenses incurred by the Company Group and incident to the performance of or compliance with this Agreement by the Company Group (including without limitation (i) all registration and filing fees (including fees and expenses with respect to (A) all SEC, stock exchange or trading system and FINRA registration, listing, filing and qualification and any other reasonable fees associated with such filings, including with respect to counsel for the underwriters and any qualified independent underwriter in connection with FINRA qualifications, (B) rating agencies and (C) compliance with securities or “blue sky” laws, including any reasonable fees and disbursements of counsel for the underwriters in connection with “blue sky” qualifications of the Registrable Securities pursuant to Section 9(h)), (ii) fees and expenses of the financial printer, (iii) messenger, telephone and delivery expenses of the Company Group, (iv) fees and disbursements of counsel for the Company Group, (v) fees and disbursements of all independent certified public accountants, including the expenses of any special audits and/or “comfort letters” required by or incident to such performance and compliance) and (vi) all reasonable fees and expenses of one counsel retained by the Holders of Registrable Securities, shall be borne by the Company Group, whether or not any Registration Statement is filed or becomes effective. All underwriters’ discounts and selling commissions, in each case related to Registrable Securities registered in accordance with this Agreement, shall be borne by the Holders of Registrable Securities included in such registration pro rata among each other on the basis of the number of Registrable Securities so registered.
In addition, the Company Group shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.
Section 11.      Indemnification .
(a)      Indemnification by the Company Group . The Company Group shall indemnify and hold harmless each Holder of Registrable Securities whose Registrable Securities are covered by a Registration Statement or Prospectus, its Affiliates, directors and officers from and against any and all losses, claims, damages and liabilities (including, without limitation, reasonable legal fees and other reasonable expenses incurred and documented in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred) (collectively, “ Losses ”), joint or several, that arise out of, or are based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any Prospectus, Issuer Free Writing Prospectus or Offering Material, or caused by any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Holder furnished to the Company in writing by such Holder expressly for use therein.
(b)      Indemnification by Holder of Registrable Securities . Each Holder of Registrable Securities shall indemnify and hold harmless, severally and not jointly, the Company Group, its directors, its officers 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 indemnity set forth in paragraph (a) above, but only with respect to any Losses, joint or several, that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement, Prospectus, Issuer Free Writing Prospectus or Offering Material.
(c)      Conduct of Indemnification Proceedings . If any Person shall be entitled to indemnification hereunder (each, an “ Indemnified Party ”), such Indemnified Party shall give prompt notice to the party from which such indemnity is sought (each, an “ Indemnifying Party ”) of any claim or of the commencement of any Proceeding with respect to which such Indemnified Party seeks indemnification or contribution pursuant hereto; provided, however, that the delay or failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party from any obligation or liability except to the extent that the Indemnifying Party has been materially prejudiced by such delay or failure. The Indemnifying Party shall have the right, exercisable by giving written notice to an Indemnified Party promptly after the receipt of written notice from such Indemnified Party of such claim or Proceeding, to, unless in the Indemnified Party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, assume, at the Indemnifying Party’s expense, the defense of any such claim or Proceeding, with counsel reasonably satisfactory to such Indemnified Party; provided, however, that an Indemnified Party shall have the right to employ separate counsel in any such claim or Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless: (i) the Indemnifying Party agrees to pay such fees and expenses; (ii) the Indemnifying Party fails to assume the defense of such claim within a reasonable time after receipt of notice of such claim from the Indemnified Party; (iii) in the reasonable judgment of any such Indemnified Party (based upon advice of its counsel) a conflict of interest exists and the Indemnifying Party cannot assume the defense of such claim or Proceeding; or the Indemnifying Party fails to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, in which case the Indemnified Party shall have the right to employ separate counsel and to assume the defense of such claim or proceeding at the Indemnifying Party’s expense; provided, further, however, that the Indemnifying Party shall not, in connection with any one such claim or Proceeding or separate but substantially similar or related claims or Proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one firm of attorneys (together with appropriate local counsel) at any time for all of the Indemnified Parties. Whether or not such defense is assumed by the Indemnifying Party, such Indemnifying Party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld). The Indemnifying Party shall not consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release, in form and substance reasonably satisfactory to the Indemnified Party, from all liability in respect of such claim or litigation for which such Indemnified Party would be entitled to indemnification hereunder. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such proceeding in a manner not inconsistent with this Section 11) shall be paid to the Indemnified Party, as incurred, promptly upon receipt of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder, provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification under this Section 11).
(d)      Contribution . If the indemnification provided for in this Section 11 is unavailable to an Indemnified Party in respect of any Losses (other than in accordance with its terms), then each applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party, on the one hand, and Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made (or omitted) by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission.
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 11 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 11(d), an Indemnifying Party that is a selling Stockholder of Registrable Securities shall not be required to contribute any amount in excess of the amount that such Indemnifying Party has otherwise been, or would otherwise be, required to pay pursuant to Section 11 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.
(e)      Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the Underwritten Offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.
Section 12.      Rule 144 . The Company shall use reasonable best efforts to: (i) file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner, to the extent required from time to time to enable all Holders to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144; and (ii) so long as any Registrable Securities are outstanding, furnish Holders thereof upon request (A) a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act, and of the Exchange Act and (B) a copy of the most recent annual or quarterly report of the Company (except to the extent the same is available on the SEC’s Electronic Data Gathering, Analysis, and Retrieval system).
Section 13.      Miscellaneous .
(a)      Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Sponsor. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Stockholders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Stockholders of Registrable Securities may be given by Stockholders of at least a majority of the Registrable Securities being sold by such Holders pursuant to such Registration Statement.
(b)      Notices . All notices required to be given hereunder shall be in writing and shall be deemed to be duly given if personally delivered, telecopied and confirmed, emailed and confirmed or mailed by certified mail, return receipt requested, or overnight delivery service with proof of receipt maintained, at the following address (or any other address that any such party may designate by written notice to the other parties): if to the Company, to the address of its principal executive offices; if to any Holder, at such Holder’s address as set forth on the records of the Company or such other address as such Holder notifies the Company Group in writing. Any such notice shall, if delivered personally, be deemed received upon delivery; shall, if delivered by telecopy or email, be deemed received on the first business day following confirmation; shall, if delivered by overnight delivery service, be deemed received the first business day after being sent; and shall, if delivered by mail, be deemed received upon the earlier of actual receipt thereof or five business days after the date of deposit in the United States mail.
(c)      Successors and Assigns; Stockholder Status . Each party may assign all or a portion of its rights hereunder to any Person to which such party Transfers (as defined in the Stockholder Rights Agreement) (each such Person, a “ Permitted Assignee ”).  Pursuant to the Stockholder Rights Agreement, the Stockholders may not Transfer any shares of Common Stock to any Person identified as a “Prohibited Transferee.” This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties, including subsequent holders of Registrable Securities acquired, directly or indirectly, from the Holders in compliance with any restrictions on transfer or assignment; provided, however, that (x) the Company may not assign this Agreement (in whole or in part) without the prior written consent of the Holders with a majority of the Registrable Securities and (y) such successor or assign shall not be entitled to such rights unless the successor or assign shall have executed and delivered to the Company an Addendum Agreement substantially in the form of Exhibit A hereto (which shall also be executed by the Company Group) promptly following the acquisition of such Registrable Securities. Except as provided in Section 11 with respect to an Indemnified Party, nothing expressed or mentioned in this Agreement is intended or shall be construed to give any Person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, remedy or claim under, in or in respect of this Agreement or any provision herein contained.
(d)      Counterparts . This Agreement may be executed in two or more counterparts and delivered by facsimile, pdf or other electronic transmission with the same effect as if all signatory parties had signed and delivered the same original document, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
(e)      Headings; Construction . The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Unless the context requires otherwise: (i) pronouns in the masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa; (ii) the term “including” shall be construed to be expansive rather than limiting in nature and to mean “including, without limitation,”; (iii) references to sections and paragraphs refer to sections and paragraphs of this Agreement; and (iv) the words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder” and words of similar import refer to this Agreement as a whole, including Exhibit A hereto, and not to any particular subdivision unless expressly so limited.
(f)      Governing Law . This Agreement and all claims arising out of or based upon this Agreement or relating to the subject matter hereof shall be governed by and construed in accordance with, the laws of the State of New York.
(g)      Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
(h)      Entire Agreement . This Agreement by and between the Company and the Sponsor is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Company with respect to Registrable Securities. This Agreement, supersedes all prior agreements and understandings between the parties with respect to such subject matter.
(i)      Securities Held by the Company or its Subsidiaries . Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its subsidiaries shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.
(j)      Specific Performance; Further Assurances . The parties hereto recognize and agree that money damages may be insufficient to compensate the Holders of any Registrable Securities for breaches by the Company of the terms hereof and, consequently, that the equitable remedy of specific performance of the terms hereof will be available in the event of any such breach. The parties hereto agree that in the event the registrations and sales of Registrable Securities are effected pursuant to the laws of any jurisdiction outside of the United States, such parties shall use their respective reasonable best efforts to give effect as closely as possible to the rights and obligations set forth in this Agreement, taking into account customary practices of such foreign jurisdiction, including executing such documents and taking such further actions as may be reasonably necessary in order to carry out the foregoing.
(k)      Term . This Agreement shall terminate with respect to a Holder on the date on which such Holder ceases to hold Registrable Securities; provided, that, such Holder’s rights and obligations pursuant to Section 11, as well as the Company’s obligations to pay expenses pursuant to Section 11, shall survive with respect to any registration statement in which any Registrable Securities of such Holders were included. From and after the date of this Agreement, the Company shall not, without the consent of the Sponsor, enter into any agreement with any Person giving, including any Holder or prospective Holder of any securities of the Company, any registration rights (i) the terms of which are more favorable than, senior to or conflict with, the registration rights granted to the Holders hereunder or (ii) permitting such Person to exercise a demand registration right during the period expiring on the second anniversary of the date hereof; provided, that, the Company may enter into an agreement granting such rights if such agreement provides the Holders with piggyback rights consistent with those granted to the Holders pursuant to Section 6, and, if such agreement contains any underwriter cutbacks consistent with Section 6(b), then the Holders shall participate with such other Holders on a pro rata basis; and provided, further, that the Company may enter into an agreement granting such demand rights in connection with the issuance of securities of the Company pursuant to (i) a bona fide material acquisition, disposition or other similar transaction involving the Company or any of its subsidiaries, (ii) the terms of any employment agreement or arrangement or employee benefit plan of the Company or any of its subsidiaries, (iii) an exchange of indebtedness of the Company into equity and (iv) a proposed resale of convertible securities of the Company by any Holder thereof, in each case, to the extent that the entering into of such an agreement is customary in a transaction of the type contemplated.
(l)      Consent to Jurisdiction; Waiver of Jury Trial . The parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of the courts of the State of New York located in New York County and the federal courts of the United States of America located in New York County, and appropriate appellate courts therefrom, over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby, and each party hereby irrevocably agrees that all claims in respect of such dispute or proceeding may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. This consent to jurisdiction is being given solely for purposes of this Agreement and is not intended to, and shall not, confer consent to jurisdiction with respect to any other dispute in which a party to this Agreement may become involved.
Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action, or proceeding of the nature specified in the paragraph above by the mailing of a copy thereof in the manner specified by the provisions of Section 13(b).
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed as of the date first above written.
 
 
GRAFTECH INTERNATIONAL LTD.
 
 
 
 
 
 
By:
 /s/ Quinn J. Coburn
 
 
Name:
Quinn J. Coburn
 
 
Title:
Chief Financial Officer, Vice President Finance and Treasurer
 


 
 
BCP IV GRAFTECH HOLDINGS LP
 
 
 
By its general partner, BPE IV (Non-Cdn) GP LP,
 
 
 
By its general partner, Brookfield Capital Partners Ltd.,
 
 
 
/s/ A.J. Silber
 
Name: A.J. Silber
 
Title: Officer
 
 
 
/s/ Dave Gregory
 
Name: Dave Gregory
 
Title: Officer


EXHIBIT A
ADDENDUM AGREEMENT

This Addendum Agreement is made this      day of                     , 20        , by and between (the “ New Holder ”) and GrafTech International Ltd. (the “ Company ”), pursuant to a Registration Rights Agreement dated as of April 23, 2018 (the “ Agreement ”), by and between the Company and the Sponsor. Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to them in the Agreement.
W I T N E S S E T H:
WHEREAS, the Company has agreed to provide registration rights with respect to the Registrable Securities as set forth in the Agreement; and
WHEREAS, the New Holder has acquired Registrable Securities directly or indirectly from a Holder; and
WHEREAS, the Company and the Holders have required in the Agreement that all persons desiring registration rights pursuant to the Agreement must enter into an Addendum Agreement binding the New Holder to the Agreement to the same extent as if it were an original party thereto;
NOW, THEREFORE, in consideration of the mutual promises of the parties, the New Holder acknowledges that it has received and read the Agreement and that the New Holder shall be bound by, and shall have the benefit of, all of the terms and conditions set out in the Agreement to the same extent as if it were an original party to the Agreement (or as otherwise provided therein) and shall be deemed to be a Holder thereunder.
 
 
 
 
New Holder
 
Address:
 
 
 
   
Agreed to on behalf of GrafTech International Ltd. pursuant to Section 13(c) of the Agreement.
 
 
GRAFTECH INTERNATIONAL LTD.
 
 
 
 
By:
 
 
 
Printed Name and Title


EXHIBIT B
COUNTERPART TO REGISTRATION RIGHTS AGREEMENT

The undersigned hereby absolutely, unconditionally and irrevocably agrees as an Additional Company Party (as defined in the Registration Rights Agreement, dated April 23, 2018 by and between GrafTech International Ltd., a Delaware corporation, and BCP IV GrafTech Holdings LP, a Delaware limited partnership) to be bound by the terms and provisions of such Registration Rights Agreement.
IN WITNESS WHEREOF, the undersigned has executed this counterpart as of [•], 2018.
 
 
[ADDITIONAL COMPANY PARTY]
 
 
 
 
 
 
By
 
 
Name:
 
Title:


1



 
 
STOCKHOLDER RIGHTS AGREEMENT
by and between
GRAFTECH INTERNATIONAL LTD.
and
BCP IV GRAFTECH HOLDINGS LP
Dated as of April 23, 2018
 
 


TABLE OF CONTENTS
Article I

GOVERNANCE
1.1 Board of Directors.     1
Article II

OTHER COVENANTS
2.1 Information Rights.     3
2.2 Transfer Restrictions     3
Article III

REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Stockholders     4
3.2 Representations and Warranties of the Company     4
Article IV

DEFINITIONS
4.1 4.1 Defined Terms     4
4.2 Terms Generally     7
Article V

MISCELLANEOUS
5.1 Term     7
5.2 Amendments and Waivers     7
5.3 Successors and Assigns     7
5.4 Confidentiality     7
5.5 Severability     8
5.6 Counterparts     8
5.7 Entire Agreement     8
5.8 Governing Law; Jurisdiction     8
5.9 WAIVER OF JURY TRIAL     8
5.10 Specific Performance     8
5.11 No Third-Party Beneficiaries     8
5.12 Notices     8



STOCKHOLDER RIGHTS AGREEMENT, dated as of April 23, 2018 (as may be amended from time to time, this “ Agreement ”), by and between GrafTech International Ltd., a Delaware corporation (the “ Company ”), and BCP IV GrafTech Holdings LP, a limited partnership formed under the laws of Delaware (the “ Initial Stockholder ”). This Agreement replaces in its entirety the Stockholder Rights Agreement by and among the Company and the Initial Stockholder dated as of August 11, 2015 (the “ Previous Stockholder Agreement ”).
W I T N E S S E T H :
WHEREAS, simultaneously with the execution and delivery of this Agreement by the parties hereto, the Company and the Initial Stockholder have entered into a Registration Rights Agreement, dated as of April 23, 2018 (as may be amended from time to time, the “ Registration Rights Agreement ”), pursuant to which, among other things, the Company grants the Initial Stockholder certain registration and other rights with respect to the Common Stock; and
WHEREAS, on April 18, 2018, the Company and the Initial Stockholder executed an underwriting agreement dated April 18, 2018 (the “ Underwriting Agreement ”) related to the Company’s IPO;
WHEREAS, the parties hereto wish to replace in their entirety the terms of the Previous Stockholder Agreement to provide for certain governance rights and other matters, and to set forth the rights and obligations of the Initial Stockholder following the IPO; and
NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:
Article I

GOVERNANCE
1.1      Board of Directors.
(a)      Prior to the IPO Closing, the Approved Holders and the Company shall take all Necessary Action to cause the total number of directors constituting the board of directors of the Company (the “ Board ”) to be fixed at seven (7) directors as of the IPO Closing, (i) three (3) of whom shall be Designated Directors (as defined below), (ii) three (3) of whom shall each satisfy the requirements to qualify as an Independent Director (each, an “ Unaffiliated Independent Director ”) and (iii) one (1) of whom shall be the Chief Executive Officer of the Company. The Approved Holders and the Company shall take all Necessary Action to cause the Chairman of the Board (the “ Chairman ”) to be chosen from among the Designated Directors.
At the IPO Closing, the Designated Directors shall be Denis A. Turcotte, Ron A. Bloom and Jeffrey C. Dutton; the Chief Executive Officer director shall be David J. Rintoul; the Unaffiliated Independent Directors shall be Anthony R. Taccone, Michel J. Dumas and Brian L. Acton; and the Chairman shall be Denis A. Turcotte. In connection with the IPO Closing, the foregoing directors shall be divided into three classes of directors, each of whose members, following the initial classification of the Board, shall be elected for staggered three-year terms as follows:
(1)
the Class I directors shall include Denis A. Turcotte and Michel J. Dumas;
(2)
the Class II directors shall include Ron A. Bloom, Brian L. Acton and David J. Rintoul; and
(3)
the Class III directors shall include Jeffrey C. Dutton and Anthony R. Taccone.
The initial term of the Class I directors shall expire at the Company’s 2019 annual meeting of stockholders at which directors are elected. The initial term of the Class II directors shall expire at the Company’s 2020 annual meeting of stockholders at which directors are elected. The initial term of the Class III directors shall expire at the Company’s 2021 annual meeting at which directors are elected.
(b)      On or before the first anniversary of the IPO Closing, the Company, the Approved Holders and the Board shall take all Necessary Action to (i) cause the total number of directors constituting the Board to be increased by one (1)
director to a total of eight (8) directors, (ii) fill the newly created directorship resulting therefrom with an individual who qualifies as an Unaffiliated Independent Director and (iii) cause such director to be appointed as a Class III director.
(c)      For so long as the Approved Holders own or control at least twenty-five percent (25%) of the outstanding Common Stock, the Majority Approved Holders shall have the right to designate for nomination the higher of 37.5% of the total number of directors or three (3) directors (each, a “ Designated Director ”), and each class of directors shall include one (1) Designated Director. In the event the Approved Holders do not own or control at least twenty-five percent (25%) of the outstanding Common Stock, the Approved Holders shall promptly cause all Designated Directors to promptly tender their resignations from the Board. The Board (excluding the Designated Directors) shall have the right, but not the obligation, to accept the Designated Directors’ resignations. If the Board (excluding the Designated Directors) votes to accept such resignations, the Designated Directors shall cease to be members of the Board. If the Board (excluding the Designated Directors) votes not to accept such resignations, the Designated Directors shall continue to serve as members of the Board until the next annual meeting of stockholders, regardless of the time remaining in their respective terms of office.
(d)      For so long as the Majority Approved Holders have the right to designate directors for nomination pursuant to Section 1.1(c) , the Board shall recommend that one (1) such designee be included in the slate of nominees in the class to be elected or appointed to the Board at the next (and each applicable subsequent) annual or special meeting of stockholders, subject in each case to such designee’s satisfaction of all applicable requirements regarding service as a director of the Company under the Company’s Amended and Restated By-Laws, Applicable Law and NYSE rules (or the rules of the principal market on which the Common Stock is then listed) regarding service as a director and such other criteria and qualifications for service as a director applicable to all directors of the Company as in effect on the date thereof; provided, however, that in no event shall any such designee’s relationship with the Approved Holders or their Affiliates (or any other actual or potential lack of independence resulting therefrom) be considered to disqualify such designee from being a member of the Board pursuant to this Section 1.1 .
(e)      Within one (1) year (or any shorter period that may be required by applicable laws, regulations or stock exchange listing rules and regulations) after the Company ceases to qualify as a “controlled company” as defined by NYSE rules (or the rules of the principal market on which the Common Stock is then listed), the Approved Holders shall take all Necessary Action to ensure that a sufficient number of the directors qualify as “independent directors” as defined by NYSE rules (or the rules of the principal market on which the Common Stock is then listed) to ensure that the Company and its Board complies with NYSE rules (or the rules of the principal market on which the Common Stock is then listed) regarding director independence.
(f)      For so long as the Majority Approved Holders have the right to designate directors for nomination pursuant to Section 1.1(c) :
(i)      the Company or the Board shall (i) to the extent necessary cause the total number of directors constituting the Board to be fixed at a number sufficient to permit such persons to be added as members of the Board, (ii) nominate such persons for election to the Board and (iii) recommend that the Company’s stockholders vote in favor of the persons designated for nomination by the Majority Approved Holders in all subsequent stockholder meetings. In the event of the death, disability, resignation or removal of any person designated by the Majority Approved Holders as a member of the Board, subject to the continuing satisfaction of the applicable threshold set forth in Section 1.1(c) , the Majority Approved Holders may designate a person satisfying the criteria and qualifications set forth in Section 1.1(d)  to replace such person and the Company shall cause such newly designated person to fill such resulting vacancy. So long as any person designated by the Majority Approved Holders as a member of the Board is eligible to be so designated in accordance with this Section 1.1 , the Company shall not take any action to remove such person as such a director without cause without the prior written consent of the Majority Approved Holders;
(ii)      the Board shall appoint one (1) Designated Director as a member of each committee of the Board (excluding the Audit Committee and any committee formed to review or approve of transactions or matters involving conflicts of interest with any Majority Approved Holder), which Designated Director shall be the chair of such committee, in each case subject to compliance with NYSE rules (or the rules of the principal market on which the Common Stock is then listed) and U.S. Securities and Exchange Commission rules and regulations regarding qualification and independence and the publicly disclosed qualifications of such committee established by the Board prior to the date of this Agreement;
(iii)      the Company or the Board shall not delegate the general powers of the Board to any committee or sub-committee that does not include at least one (1) Designated Director as a member except the Audit Committee and any committee or sub-committee formed to for the primary purpose of reviewing, approving or recommending transactions or matters involving conflicts of interest between the Corporation and its subsidiaries, on the one hand, and any Majority Approved Holder, on the other hand;
(iv)      each Designated Director shall be entitled to compensation consistent with the compensation received by other members of the Board, including any fees and equity awards, and reimbursement for reasonable, out-of-pocket and documented expenses incurred in attending meetings of the Board and its committees; and
(v)      the Company shall provide each Designated Director with the same rights to exculpation, indemnification and advancement of expenses that it provides to the other members of the Board.
ARTICLE II     

OTHER COVENANTS
2.1      Information Rights.
(a)      For as long as the Majority Approved Holders have the right to designate at least one (1) director for nomination pursuant to Section 1.1(c) , and subject to Section 5.4 and reasonable restrictions imposed by the Company to comply with antitrust, export control and other Laws and to avoid disclosure to competitors, suppliers and vendors, the Company shall permit the Approved Holders or any authorized representatives designated by the Approved Holders reasonable access to visit and inspect any of the properties of the Company or any of its subsidiaries, including its and their books of accounting and other records, and to discuss its and their affairs, finances and accounts with its and their officers, all upon reasonable notice and at such reasonable times and as often as the Approved Holders may reasonably request. Any investigation pursuant to this Section 2.1 shall be conducted during normal business hours and in such manner as not to interfere unreasonably with the conduct of the Company and its subsidiaries.
(b)      For as long as the Approved Holders have the right to designate at least one (1) director for nomination pursuant to Section 1.1(c) , subject to Section 5.4 , the Company shall provide to the Approved Holders all written information that is provided to the Board at substantially the same time at which such information is first delivered or otherwise made available in writing to the Board; provided, however, that the Company shall not be required to provide information to the extent it would reasonably be expected to result in the loss of attorney-client or other applicable privilege or a violation of antitrust, export control or other Laws.
(c)      Nothing herein shall require the Company or any of its subsidiaries to disclose any information to the extent (i) prohibited by Applicable Law, (ii) that the Company reasonably believes such information to be competitively sensitive or proprietary information or (iii) that such disclosure would reasonably be expected to cause a violation of any agreement to which the Company or any of its subsidiaries is a party or would cause a risk of loss of privilege to the Company or any of its subsidiaries (provided that the Company shall use reasonable best efforts to make appropriate substitute arrangements under circumstances where the restrictions in clauses (i), (ii) and/or (iii) apply).
2.2      Transfer Restrictions . Without the prior written consent of the Company, which consent may be granted or withheld or conditioned in its sole discretion, no Stockholder may Transfer any shares of Common Stock or interests therein to any Persons listed on Exhibit A attached hereto (“ Prohibited Transferees ”); provided that no such restriction shall apply to a Transfer in a widely distributed registered public offering. Prohibited Transferees shall also include the subsidiaries and Affiliates of each Person listed on Exhibit A .



ARTICLE III     

REPRESENTATIONS AND WARRANTIES
3.1      Representations and Warranties of the Stockholders . The Initial Stockholder, as of the date hereof, and each other Stockholder, as of the date such Stockholder becomes a party to this Agreement, hereby represent and warrant to the Company as follows:
(a)      Such Stockholder has been duly formed, is validly existing and is in good standing under the laws of its jurisdiction of organization. Such Stockholder has all requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.
(b)      The execution and delivery by such Stockholder of this Agreement and the performance by such Stockholder of its obligations under this Agreement does not and will not conflict with, violate any provision of, or require the consent or approval of any Person under, Applicable Law, the organizational documents of such Stockholder, or any Contract to which such Stockholder is a party or to which any of its assets are subject.
(c)      The execution, delivery and performance of this Agreement by the such Stockholder has been duly authorized by all necessary corporate (or similar) action on the part of such Stockholder. This Agreement has been duly executed and delivered by such Stockholder and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms, subject to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.
3.2      Representations and Warranties of the Company . The Company hereby represents and warrants to the Initial Stockholder as of the date hereof as follows:
(a)      The Company is a duly incorporated and validly existing corporation in good standing under the laws of the State of Delaware. The Company has all requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.
(b)      The execution and delivery by the Company of this Agreement and the performance of the obligations of the Company under this Agreement do not and will not conflict with, violate any provision of, or require any consent or approval of any Person under, (i) Applicable Law, (ii) the organizational documents of the Company, or (iii) any Contract to which the Company is a party or to which any assets of the Company and its subsidiaries are subject, in case of clauses (i) and (iii), except as would not be reasonably expected to have a material adverse effect on the business, properties, management, financial position, stockholders’ equity, results of operations or prospects of the Company and its subsidiaries, taken as a whole or on the performance by the Company of its obligations under this Agreement.
(c)      The execution, delivery and performance of this Agreement by the Company has been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the Stockholders, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.
ARTICLE IV     

DEFINITIONS
4.1      4.1      Defined Terms . Capitalized terms when used in this Agreement have the following meanings:
“ Affiliate ” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “ control ,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms
“ controlling ,” “ controlled by ” and “ under common control with ” have correlative meanings. For purposes of this Agreement, none of the Stockholders and their respective Affiliates shall be deemed to be Affiliates of the Company or any of its subsidiaries.
“ Agreement ” has the meaning set forth in the Preamble.
“ Applicable Law ” means all applicable provisions of (i) constitutions, statutes, laws, rules, regulations, ordinances, codes or orders of any Governmental Entity, and (ii) any orders, decisions, injunctions, judgments, awards or decrees of any Governmental Entity.
“ Approved Holders ” means the Initial Stockholder and any Permitted Transferees.
“ Board ” has the meaning set forth in Section 1.1(a) .
“ Chairman ” has the meaning set forth in Section 1.1(a) .
“ Common Stock ” means the common stock, par value $0.01 of the Company.
“ Company ” has the meaning set forth in the Preamble.
“ Confidential Information ” means any and all confidential or proprietary information pertaining to (i) the Company or its Affiliates, or the respective businesses and operations thereof, furnished or made available by the Company to, any Stockholder; provided , that “Confidential Information” shall not include information that (A) is, at the time of disclosure, already in such Stockholder’s possession (provided, however, that such information is not known by the Stockholder to be subject to an obligation of confidentiality owed to the Company or any other Person), (B) is or becomes generally available to the public other than as a result of a disclosure by such Stockholder or any of its Representatives in violation of this Agreement or any applicable confidentiality or non-disclosure agreement, (C) becomes available to such Stockholder on a non-confidential basis from a source other than the Company or its Representatives (provided, however, that such source is not known by the Stockholder to be bound by an obligation of confidentiality owed to the Company or any other Person) or (D) such Stockholder can demonstrate was independently developed by such Stockholder or its Affiliates without reference to, incorporation of or other use of any Confidential Information or information from any source that is known by the Stockholder to be bound by an obligation of confidentiality owed to the Company or any other Person.
“ Contract ” means any contract, agreement, obligation, note, bond, mortgage, indenture, guarantee, agreement, subcontract, lease or undertaking (whether written or oral and whether express or implied).
“ Designated Director ” has the meaning set forth in Section 1.1(c) .
“ Equity-based Security ” means capital stock (including a new class of common stock of the Company other than Common Stock), any preferred stock or any other equity-like or hybrid securities (including debt securities with equity components), including options, warrants, convertibles, exchangeable or exercisable securities, stock appreciation rights or any other security or arrangement whose economic value is derived for the value of the equity of the Group Companies.
“ Governmental Entity ” means any foreign, federal or local government, or regulatory or enforcement authority of any such government or any court, administrative agency or commission or other authority or instrumentality of any such government.
“ Independent Director ” means a director that satisfies both (a) the requirements to qualify as an “independent director” under the stock exchange rules of the stock exchange on which the Common Stock are then-currently listed and (b) the independence criteria set forth in Rule 10A-3 under the Exchange Act, as amended from time to time.
“ Initial Stockholder ” has the meaning set forth in the Preamble.
“ IPO ” means the Company’s initial public offering of Common Stock.
“ IPO Closing ” means the closing of the IPO.
“ Law ” means any applicable federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, order, edict, decree, rule, regulation, ruling or other legally binding requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity.
“ Majority Approved Holders ” means, as of any date, the Approved Holders holding a majority of the Common Stock then held by all Approved Holders.
“ Majority Stockholders ” means, as of any date, the Stockholders holding a majority of the Common Stock of the Company on a fully-diluted, as converted basis then held by all Stockholders.
“ Necessary Action ” means, with respect to a specified result, all actions, to the fullest extent permitted by applicable law, necessary to cause such result, including, without limitation, (i) voting or providing a written consent or proxy with respect to the Common Stock, (ii) causing the adoption of Stockholders’ resolutions and amendments to organizational documents, (iii) executing agreements and instruments and (iv) making, or causing to be made, with any Governmental Entity, all filings, registrations or similar actions that are required to achieve such result.
“ NYSE ” means the New York Stock Exchange.
“ Percentage Ownership ” means, as to any Stockholder and as of any date, the percentage equal to (i) the aggregate number of shares of Common Stock held by such Stockholder on a fully diluted as-converted basis divided by (ii) the total number of outstanding shares of Common Stock of the Company on a fully diluted, as-converted basis.
“ Permitted Transferee ” means a Person (other than a Prohibited Transferee) to which the Initial Stockholder has Transferred Common Stock following written approval thereof by the Board, which approval shall not be unreasonably withheld, and that executes a joinder agreement substantially in the form attached hereto as Exhibit B ; provided , that controlled Affiliates of Brookfield Asset Management Inc. shall be deemed approved by the Board for the purposes of this definition.
“ Person ” means any natural person, corporation, partnership, limited liability company, firm, association, trust, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.
“ Previous Stockholder Agreement ” has the meaning set forth in the Preamble.
“ Prohibited Transferees ” has the meaning set forth in Section 2.2 .
“ Registration Rights Agreement ” has the meaning set forth in the Recitals.
“ Representative ” means, with respect to any Person, any director, officer, employee, Affiliate, advisor (including any financial advisor, legal counsel, accountant or consultant), agent or other representative of such Person.
“ Securities Act ” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ Stockholders ” means the Initial Stockholder and any Person (i) (x) who acquires Common Stock, whether from a Stockholder or, (y) to whom any rights, interests or obligations hereunder are assigned pursuant to Section 5.3 and (ii) in the case of both (i)(x) and (i)(y), who executes a written joinder agreement substantially in the form attached hereto as Exhibit B .
“ Transfer ” by any person means directly or indirectly, whether by merger, consolidation or otherwise, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any securities owned by such person or of any interest (including any voting interest) in any securities owned by such person.
“ Unaffiliated Independent Director ” has the meaning set forth in Section  1.1(a) .
“ Underwriting Agreement ” has the meaning set forth in the Preamble.
4.2      Terms Generally . The words “hereby,” “herein,” “hereof,” “hereunder” and words of similar import refer to this Agreement as a whole and not merely to the specific section, paragraph or clause in which such word appears. All references herein to “Articles” and “Sections” shall be deemed references to Articles and Sections of this Agreement unless the context shall otherwise require. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” References to “$” or “dollars” means United States dollars. The definitions given for terms in this Article IV and elsewhere in this Agreement shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. References herein to any agreement or letter shall be deemed references to such agreement or letter as it may be amended, restated or otherwise revised from time to time.
ARTICLE V     

MISCELLANEOUS
5.1      Term . This Agreement will be effective as of the date hereof and, except as otherwise set forth herein shall terminate automatically (without any action by any party hereto) as to each Stockholder when such Stockholder ceases to hold any Common Stock.
5.2      Amendments and Waivers . Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only upon the prior written consent of the Company and the Majority Stockholders. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Applicable Law.
5.3      Successors and Assigns . Except as otherwise provided below, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, in whole or in part (whether by operation of law or otherwise), without the prior written consent of the Company and the Majority Stockholders. Notwithstanding the foregoing, (i) subject to the execution of a joinder agreement substantially in the form set forth as Exhibit B, a Stockholder may assign all or any portion of its rights, interests or obligations under this Agreement to any Person (other than a Prohibited Transferee) to which such Stockholder assigns or transfers Common Stock and (ii) this Agreement may be assigned by operation of law by the Company. This Agreement will be binding upon, inure to the benefit of, and be enforceable by the parties and their respective permitted successors and assigns. Any attempted assignment in violation of this Section 5.3 shall be void.
5.4      Confidentiality . The parties recognize that, in connection with the performance of this Agreement, the Company may provide the Stockholders with access to, or otherwise furnish the Stockholders with, certain Confidential Information. The Stockholders shall keep all Confidential Information strictly confidential and not disclose any such Confidential Information to any other Person, except as may be required by Applicable Law, or at the request of any applicable Governmental Entity; provided , however , that each Stockholder may disclose such Confidential Information to its Representatives who need to know such Confidential Information for purposes of such Stockholder’s investment in the Company and who agree to be bound by the terms of this Section 5.4 . Furthermore, each Stockholder shall not, and shall cause its Representatives not to, use any Confidential Information for any purpose whatsoever other than to evaluate its investment in the Company. Each Stockholder shall take precautions that are reasonable, necessary and appropriate to guard the confidentiality of the Confidential Information and shall treat such Confidential Information with at least the same degree of care which it applies to its own confidential and proprietary information. In the event that any Stockholder (or any Affiliates thereof) is required by Applicable Law, or at the request of any applicable Governmental Entity, to disclose any Confidential Information, it shall, to the extent permitted by Applicable Law, provide prompt written notice to the Company to enable the Company to seek an appropriate protective order or remedy. Each Stockholder hereby acknowledges and agrees that all Confidential Information is and shall at all times remain the sole and exclusive property of the Company or its Affiliates. For the avoidance of doubt, the terms of this Section 5.4 shall survive the termination of this Agreement.
5.5      Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any Applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
5.6      Counterparts . This Agreement may be executed in two (2) or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that each party need not sign the same counterpart.
5.7      Entire Agreement . This Agreement (including the documents and the instruments referred to in this Agreement) constitutes the entire agreement among the parties or to which they are subject and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of the transactions contemplated hereby and thereby.
5.8      Governing Law; Jurisdiction . This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware (excluding choice-of-law principles of the laws of such State that would permit the application of the laws of a jurisdiction other than such State), without regard to any applicable conflicts-of-law principles. The parties hereto agree that any suit, action or proceeding brought by any party to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought exclusively in the Court of Chancery of the State of Delaware or, if such court lacks subject matter jurisdiction, the state or federal courts in the State of Delaware. Each of the parties hereto submits to the exclusive jurisdiction of any such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
5.9      WAIVER OF JURY TRIAL . TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
5.10      Specific Performance . The parties hereto agree that irreparable damage may occur if any provision of this Agreement is not performed in accordance with the terms hereof and that the parties shall be entitled to seek an injunction or injunctions or other equitable relief to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any court set forth in Section 5.8 , in addition to any other remedy to which they are entitled at law or in equity.
5.11      No Third-Party Beneficiaries . Nothing in this Agreement shall confer any rights upon any Person other than the parties hereto and each such party’s respective heirs, successors and permitted assigns, all of whom shall be third-party beneficiaries of this Agreement.
5.12      Notices . All notices and other communications in connection with this Agreement shall be in writing and shall be deemed given if delivered personally, sent via facsimile (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to the Company, to:
GrafTech International Ltd.
982 Keynote Circle
Brooklyn Heights, Ohio 44131
Attn:                Chief Financial Officer
E-mail:            quinn.coburn@graftech.com
Fax:                 216-676-2143
with copies (which shall not constitute notice) to:
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006
Attn:
Sandra L. Flow
 
 
Adam Fleisher
 
E-mail:
sflow@cgsh.com
 
 
afleisher@cgsh.com
 
Fax:
212-225-3999
 

If to the Initial Stockholder, to:
BCP IV GrafTech Holdings LP
250 Vesey Street, 15 th Floor,
Brookfield Place
New York, New York 10281
Attn:
Jaspreet Dehl
 
E-mail:
Jaspreet.Dehl@brookfield.com
 
Fax:
212-417-7184
 

with a copy (which shall not constitute notice) to:
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006
Attn:
Sandra L. Flow
 
 
Adam Fleischer
 
E-mail:
sflow@cgsh.com
 
 
afleisher@cgsh.com
 
Fax:
212-225-3999
 

[ Signature pages follow ]


IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement by their authorized representatives as of the date first above written.

 
 
 
GRAFTECH INTERNATIONAL LTD.
 
 
 
 
By:
/s/ Quinn J. Coburn
 
 
Name: Quinn J. Coburn
 
 
Title: Chief Financial Officer, Vice President Finance and Treasurer



 
BCP IV GRAFTECH HOLDINGS LP
 
 
 
 
By its general partner, BPE IV (Non-Cdn) GP LP,
 
 
 
 
 
By its general partner, Brookfield Capital Partners Ltd.,
 
 
 
 
 
/s/ A.J. Silber
 
 
Name: A.J. Silber
 
 
Title: Officer
 
 
 
 
 
/s/ Dave Gregory
 
 
Name: Dave Gregory
 
 
Title: Officer



EXHIBIT A
PROHIBITED TRANSFEREES
The following names are based on information available and minor discrepancies shall not be deemed to exclude such entities from the definition of Prohibited Transferees.
Energoprom Group
Graphite India Limited
Electrocarbon S.A. (also known as Slatina)
HEG Limited
Henan Sanli Carbon Products Co., Ltd.
Hunan Yinguang Carbon Co., Ltd.
Xuzhou Jiang Long Carbon Co., Ltd.
Jinneng Datong Carbon Co., Ltd.
Kaifeng Carbon Company Limited
Hebei Shuntian Electrode Co. Ltd, fka (Laishui Long Great Wall Electrode Co., Ltd.)
Fangda Group (Fushun, Chengdu, Hefei and Lanzhou)
Liaoyang Carbon Co., Ltd.
Liaoyang Shoushan Carbon Factory
Linyi County Lubei Carbon Co., Ltd.
Linzhou Electrical Carbon Co., Ltd
Linzhou Hongqiqu Electrical Carbon Co., Ltd.
Nantong Yangzi Carbon Co., Ltd. (also known as Nantong River-East Carbon Joint Stock Co., Ltd.)
Nippon Carbon Company, Co., Ltd.
SEC Carbon Limited
SGL Group
Shandong Basan Carbon Co., Ltd.
Shijiazhuang Huanan Carbon Factory
Showa Denko K.K.
Sinosteel Carbon Co., Ltd. (Jilin, Songjiang)
Showa Denko Sichuan Carbon Co., Ltd.
Superior Graphite
Tokai Carbon Co., Ltd.
Ukrainian Graphite Pubjsc (also known as Ukrainsky Grafit Company)
Henglongjiang Xinyuan Carbon Co., Ltd.
Pingdingshan Sanji Carbon Co., Ltd.
Dandong Xinxing Carbon Co., Ltd.
Neimeng Xinghe Xingyong Carbon
Fushun Jinli Petrochemical Co., Ltd.
Linghai Hongfeng Carbon Co., Ltd.
Shanxi Zhiyao Carbon Co., Ltd.
Xinghe Muzi Carbon Co., Ltd.
Xuzhou Jinno Graphite Co., Ltd.
Datong Xincheng Carbon Co., Ltd.
Shanxi Hongte—SGL JV
Xinzhengshi Yudian Carbon Co., Ltd.
Handan Huayuan Carbon Co., Ltd.
Mersen S.A.
Toyo Tanso Co. Ltd.
Ibiden Co., Ltd.
Phillips 66 Company
C-Chem Co., Ltd.
Mitsubishi
Nippon Steel Chemical Co.


Sumitomo Corporation
Koch Industries, Inc.
The Morgan Crucible Company PLC


EXHIBIT B
JOINDER AGREEMENT
GrafTech International Ltd.
982 Keynote Circle
Brooklyn Heights, Ohio 44131
Attention: Chief Financial Officer
Ladies and Gentlemen:
Reference is made to the Stockholder Rights Agreement, dated as of April 23, 2018 (as such agreement may have been or may be amended from time to time) (the “ Agreement ”), by and among GrafTech International Ltd., a Delaware corporation, BCP IV GrafTech Holdings LP, a limited partnership formed under the laws of Delaware and any other parties identified on the signature pages of any joinder agreements substantially similar to this joinder agreement executed and delivered in accordance with the Agreement. Capitalized terms used but not otherwise defined herein have the meanings set forth in the Agreement.
The undersigned agrees that, as of the date written below, the undersigned shall become a party to the Agreement, and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as a “Stockholder,” as though an original party thereto. The undersigned represents and warrants that the representations and warranties set forth in Section 3.1 of the Agreement are true and correct in all respects as of the date hereof.
[SIGNATURE PAGE FOLLOWS]


IN WITNESS WHEREOF, the undersigned has executed this Joinder as of the [        ]th day of [                    ], [            ].

 
 
 
[                            ]
 
 
 
 
By:
 
 
Name:
 
Title:




EXECUTION VERSION

FIRST AMENDMENT dated as of June 15, 2018 (this “ Amendment ”), is made and entered into by and among GRAFTECH INTERNATIONAL LTD., a Delaware corporation (“ GrafTech ”), GRAFTECH FINANCE INC., a Delaware corporation (“ Finance ”), GRAFTECH LUXEMBOURG II S.À.R.L., a Luxembourg société à responsabilité limitée , having its registered office at 124, boulevard de la Pétrusse, L-2330 Luxembourg and registered with the Luxembourg Trade and Companies Register ( Registre de Commerce et des Sociétés ) under number B 167199 (“ Luxembourg Holdco ”), GRAFTECH SWITZERLAND SA, a Swiss corporation (“ Swissco ”), each of the entities listed as an “Incremental Term Lender” on the signature pages hereto (each, an “ Incremental Term Lender ”), JPMORGAN CHASE BANK, N.A. (“ JPMorgan ”), as Administrative Agent (in such capacity, the “ Administrative Agent ”) and for purposes of Sections 5 and 6 hereof only, each of the entities listed as a “Guarantor” on the signature pages hereto (such entities together with Finance and GrafTech, the “ US Loan Parties ”), which upon satisfaction of the conditions to effectiveness thereto, amends the CREDIT AGREEMENT dated as of February 12, 2018 (as amended, supplemented or otherwise modified prior to the date hereof, the “ Credit Agreement ”), among GrafTech, Finance, Luxembourg Holdco, Swissco, the lenders and issuing banks from time to time party thereto, and JPMorgan, as administrative agent and collateral agent. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Credit Agreement.
WHEREAS, Finance intends to incur incremental term loans in an aggregate principal amount not to exceed $750,000,000 (the “ Incremental Term Increase ”, and the loans thereunder, the “ Incremental Term Loans ”), the proceeds of which will be used (a) to repay approximately $750,000,000 in principal amount of the outstanding Indebtedness of GrafTech under the promissory note dated April 19, 2018, between GrafTech, as issuer, and BCP IV GrafTech Holdings LP, a Delaware limited partnership, as the initial holder, together with interest and fees payable thereon (the transactions in this clause (a), the “ Note Refinancing ”), (b) to pay fees and expenses related to the Transactions (as defined below) and (c) to the extent of any such proceeds remaining after the application in accordance with the foregoing clauses (a) and (b), for general corporate purposes of Finance and its subsidiaries as permitted under the Credit Agreement (the transactions described in this paragraph, collectively, the “ Transactions ”);
WHEREAS, JPMorgan, Citibank, N.A. (or an affiliate thereof), Credit Suisse Loan Funding LLC, HSBC Securities (USA) Inc. and Royal Bank of Canada have been appointed to act as joint lead arrangers and joint bookrunners with respect to this Amendment (collectively, the “ Arrangers ”);
WHEREAS, Finance has requested (a) pursuant to Section 2.20 of the Credit Agreement, that the Incremental Term Lenders commit to make the Incremental Term Loans on the Amendment Effective Date (as defined below) (the commitment of each Incremental Term Lender to provide its applicable portion of the Incremental Term Loans, as set forth opposite such Incremental Term Lender’s name on Schedule I hereto, is such Incremental Term Lender’s “ Incremental Term Commitment ”) and (b) that the Credit Agreement be amended in the manner provided herein (as so amended, the “ Amended Credit Agreement ”); and
WHEREAS, the Incremental Term Lenders are willing to make the Incremental Term Loans to Finance on the Amendment Effective Date on the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the above premises and the agreements, provisions and covenants herein contained, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree, on the terms and subject to the conditions set forth herein, as follows:
SECTION 1. Incremental Term Increase.
(a)      Subject to the satisfaction of the conditions set forth in Section 4 below, each Incremental Term Lender agrees, severally and not jointly, to make, on the Amendment Effective Date, Incremental Term Loans to Finance in an aggregate principal amount equal to its Incremental Term Commitment. The proceeds of the Incremental Term Loans shall be used by Finance for the purposes set forth in the recitals to this Amendment.
(b)      On and after the Amendment Effective Date, (i) each reference to the terms “Initial Term Commitment” and “Commitments” in the Loan Documents shall be deemed to include the Incremental Term Commitments, (ii) each reference to the terms “Initial Term Loan”, “Term Loan” and “Loans” in the Loan Documents shall be deemed to include the Incremental Term Loans and (iii) each reference to the terms “Initial Term Lender”, “Term Lender” and “Lender” in the Loan Documents shall be deemed to include the Incremental Term Lenders.
(c)      On and after the Amendment Effective Date, the Incremental Term Increase shall constitute an “Incremental Term Increase” as contemplated by Section 2.20 of the Credit Agreement, and the Incremental Term Loans shall be part of the same Class of Term Loans as the Initial Term Loans for all purposes of the Loan Documents. Commencing on the Amendment Effective Date, the Interest Period for the Initial Term Loans (including, for the avoidance of doubt, the Incremental Term Loans) shall be the Interest Period in effect for the Initial Term Loans immediately prior to the Amendment Effective Date.
(d)      Finance may make only one Borrowing under the Incremental Term Commitments on the Amendment Effective Date. Any amount borrowed under this Section 1 and subsequently repaid or prepaid may not be reborrowed. Each Incremental Term Lender’s Incremental Term Commitment shall terminate immediately and without further action on the Amendment Effective Date after giving effect to the initial funding of such Incremental Term Lender’s Incremental Term Loans on the Amendment Effective Date. The Incremental Term Loans shall be denominated in dollars.
(e)      Each Incremental Term Lender (i) confirms that a copy of the Credit Agreement and the other applicable Loan Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Amendment and make an Incremental Term Loan, have been made available to such Incremental Term Lender; (ii) agrees that it will (together with any affiliates that it acts through as it deems appropriate), independently and without reliance upon the Administrative Agent or Arrangers, or any other Lender or agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Amended Credit Agreement or the other applicable Loan Documents, including this Amendment; (iii) appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under the Amended Credit Agreement and the other Loan Documents as are delegated to the Administrative Agent and the Collateral Agent, as the case may be, by the terms thereof, together with such powers as are reasonably incidental thereto; and (iv) acknowledges and agrees that upon the Amendment Effective Date such Incremental Term Lender shall be a “Lender” and an “Additional Term Lender” under, and for all purposes of, the Amended Credit Agreement and the other Loan Documents, and shall be subject to and bound by the terms thereof, and shall perform all the obligations of and shall have all rights of a Lender and an Additional Term Lender thereunder.
(f)      The Incremental Term Loans will be funded to Finance on the Amendment Effective Date net of a discount equal to 1.00% of the principal amount thereof; provided that the Incremental Term Lenders may determine that, in lieu of such Incremental Term Loans being issued at a discount, Finance shall pay upfront fees to the Incremental Term Lenders in the aggregate amount of 1.00% of the principal amount of the Incremental Term Loans on the Amendment Effective Date (or a combination of such discount and/or upfront fees not to exceed 1.00% of such principal amount in the aggregate may be required, as determined and notified by the Incremental Term Lenders to Finance prior to the Amendment Effective Date).
SECTION 2.      Amendment to Credit Agreement. Upon satisfaction of the conditions set forth in Section 4 below on the Amendment Effective Date, Section 2.10 of the Credit Agreement is hereby amended by replacing the table in paragraph (a) of such Section in its entirety with the following table:
Payment Date
Amortization Payment
September 30, 2018
$28,125,000
December 31, 2018
$28,125,000
March 31, 2019
$28,125,000
June 30, 2019
$28,125,000
September 30, 2019
$28,125,000
December 31, 2019
$28,125,000
March 31, 2020
$28,125,000
June 30, 2020
$28,125,000
September 30, 2020
$28,125,000
December 31, 2020
$28,125,000
March 31, 2021
$28,125,000
June 30, 2021
$28,125,000
September 30, 2021
$28,125,000
December 31, 2021
$28,125,000
March 31, 2022
$28,125,000
June 30, 2022
$28,125,000
September 30, 2022
$28,125,000
December 31, 2022
$28,125,000
March 31, 2023
$28,125,000
June 30, 2023
$28,125,000
September 30, 2023
$28,125,000
December 31, 2023
$28,125,000
March 31, 2024
$28,125,000
June 30, 2024
$28,125,000
September 30, 2024
$28,125,000
December 31, 2024
$28,125,000

SECTION 3.      Representations and Warranties. Each of GrafTech and Finance hereby represents and warrants to the Administrative Agent and the Lenders that:
(a)      (i) the execution, delivery and performance of this Amendment by GrafTech and Finance have been duly authorized by all corporate and stockholder action required to be obtained by GrafTech and Finance and (ii) this Amendment has been duly executed and delivered by GrafTech and Finance and constitutes a legal, valid and binding obligation of GrafTech and Finance, enforceable against each of GrafTech and Finance in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors’ rights generally and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and
(b)      on and as of the Amendment Effective Date and after giving effect to this Amendment, the representations and warranties of each US Loan Party set forth in the Credit Agreement are true and correct in all material respects, except to the extent such representations and warranties expressly relate to an earlier date; provided that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” or by similar language shall be true and correct in all respects on such date.
SECTION 4.      Effectiveness. This Amendment shall become effective on the date (the “ Amendment Effective Date ”) on which each of the following conditions is satisfied:
(a)      The Administrative Agent shall have executed this Amendment and shall have received counterparts hereof duly executed and delivered by Swissco, Luxembourg Holdco, the US Loan Parties and the Incremental Term Lenders.
(b)      The Administrative Agent shall have received a duly authorized and validly delivered Borrowing Request with respect to the Borrowing of the Incremental Term Loans to be made on the Amendment Effective Date.
(c)      The Administrative Agent shall have received a copy of (i) each Organizational Document of each US Loan Party certified, to the extent applicable, as of a recent date by the applicable Governmental Authority, (ii) signature and incumbency certificates of the Responsible Officers of each US Loan Party, (iii) copies of resolutions of the board of directors or managers, shareholders, partners, and/or similar governing bodies of each US Loan Party approving and authorizing the execution, delivery and performance of the Amendment, certified as of the Effective Date by a secretary, an assistant secretary or a Responsible Officer of such US Loan Party as being in full force and effect without modification or amendment, (iv) a good standing certificate from the applicable Governmental Authority of each US Loan Party’s jurisdiction of incorporation, organization or formation.
(d)      The Administrative Agent shall have received a certificate, dated the Amendment Effective Date and signed by a Responsible Officer of Holdings, to the effect that (i) on and as of the Amendment Effective Date, after giving effect to this Amendment, no Default or Event of Default shall have occurred or be continuing and (ii) the representations and warranties of the US Loan Parties set forth in Article III of the Credit Agreement (as amended hereby and adjusted as provided in Section 2 above) are true on, and as of, the Amendment Effective Date.
(e)      The Administrative Agent shall have received a written opinion (addressed to the Administrative Agent and the Incremental Term Lenders and dated the Effective Date) of each of (i) Cleary Gottlieb Steen & Hamilton LLP, New York counsel for the US Loan Parties and (ii) Richards, Layton & Finger, P.A., Delaware counsel for the US Loan Parties, in each case in form and substance reasonably satisfactory to the Administrative Agent.
(f)      The Administrative Agent and the Arrangers shall have received, at least three Business Days prior to the Amendment Effective Date, all documentation and other information about the US Loan Parties as shall have been reasonably requested in writing at least ten Business Days prior to the Amendment Effective Date by the Administrative Agent or the Arrangers that they shall have reasonably determined is required by regulatory authorities under applicable “know your customer” and anti‑money laundering rules and regulations, including without limitation the USA PATRIOT Act.
(g)      The Administrative Agent shall have received, in immediately available funds, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by GrafTech or Finance under the Credit Agreement and under Section 5(g) hereof.
(h)      The Administrative Agent shall have received, in immediately available funds, for the account of each Incremental Term Lender, any upfront fees due under Section 1(f) hereof, and GrafTech and Finance shall have paid all other fees payable by them in connection with this Amendment.
(i)      The Administrative Agent shall have received a certificate from the chief financial officer of GrafTech certifying as to the solvency of GrafTech and its Subsidiaries on a consolidated basis after giving effect to the Transactions, substantially in the form of Exhibit S to the Credit Agreement.
SECTION 5.      Miscellaneous.
(a)      Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(b)      Waiver of Jury Trial . EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5(b).
(c)      Jurisdiction . Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York and of the United States District Court of the Southern District of New York, in each case sitting in the Borough of Manhattan in the City of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Amendment, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding shall be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in any Loan Document shall affect any right that any Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding to enforce any award or judgment or exercise any rights under the Security Documents against any Collateral in any other forum in which Collateral is located.
(d)      Waiver of Objection to Venue and Forum Non Conveniens . Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Amendment in any court referred to in paragraph (c) of this Section 5. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(e)      Consent to Service of Process . Each party to this Amendment irrevocably consents to service of process in the manner provided for notices in Section 9.01 of the Credit Agreement. Nothing in any Loan Document will affect the right of any party to this Amendment to serve process in any other manner permitted by law.
(f)      Counterparts. This Amendment may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment.
(g)      Expenses; Indemnity; Damage Waiver. Sections 9.03(a), (b), (d), (e), (f) and (g) of the Credit Agreement are hereby incorporated, mutatis mutandis , by reference as if such Sections were set forth in full herein and shall apply, mutatis mutandis , to each Arranger, in its capacity as such, as if each reference to the Administrative Agent under the Credit Agreement were a reference to such Arranger hereunder, including, for the avoidance of doubt, liabilities, losses, damages, claims, costs, expenses and disbursements arising out of the arrangement and syndication of the Incremental Term Loans; provided that, notwithstanding anything else therein, the expense reimbursement provisions of Section 9.03(a) of the Credit Agreement shall only apply as provided hereinabove if the Amendment Effective Date and the funding of the Incremental Term Loans occurs.
(h)      No Other Amendments; Confirmation. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute an amendment of or otherwise affect the rights and remedies of the Lenders 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 Finance, Swissco or Luxembourg Holdco to a consent to, or an 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. This Amendment shall apply and be effective only with respect to the provisions of the Credit Agreement specifically referred to herein. On and after the Amendment Effective Date, any reference to the Credit Agreement in any Loan Document shall mean the Credit Agreement as amended by this Amendment. This Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.
(i)      Headings. The section headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.
SECTION 6.      Reaffirmation . Each of Swissco, Luxembourg Holdco and each US Loan Party hereby consents to this Amendment and the transactions contemplated hereby. Each US Loan Party agrees that, notwithstanding the effectiveness of this Amendment, (a) the Collateral Agreement, the Guarantee Agreement and each of the other Security Documents to which it is a party continue to be in full force and effect, (b) affirms and confirms its guarantee of the Secured Obligations and the pledge and grant of a security interest in its assets as Collateral pursuant to the Security Documents to secure the Secured Obligations, all as provided in the Loan Documents and (c) acknowledges and agrees that such guarantee, pledge and grant continues in full force and effect in respect of, and to secure, the Secured Obligations, including the Incremental Term Loans. Without limiting the foregoing, nothing herein contained shall be construed as a novation of any of the Loan Documents or a substitution or novation of the Secured Obligations or instruments guaranteeing or securing the same, which Loan Documents, Secured Obligations and instruments shall remain and continue in full force and effect.
SECTION 7.      Post-Effective Requirements. Within 60 days after the Amendment Effective Date (or such later date acceptable to the Administrative Agent in its sole discretion in writing), Holdings or Finance shall deliver to the Administrative Agent:
(a)      either:
(i)      confirmation from local counsel in each jurisdiction where a Mortgaged Property is located, in form and substance reasonably satisfactory to the Administrative Agent, to the effect that the recording of the existing Mortgage is the only filing or recording necessary to give constructive notice to third parties of the lien created by such Mortgage as security for the Secured Obligations (as defined in each Mortgage), including the amendment of the Secured Obligations contemplated hereby, for the benefit of the Secured Parties and no other documents, instruments, filings, recording, re-recordings, re-filings or other actions, including, without limitation, the payment of any mortgage recording taxes or similar taxes, are necessary or appropriate under applicable law in order to maintain the continued enforceability, validity or priority of the lien created by such Mortgage as security for the Secured Obligations, including the Secured Obligations evidenced by this Amendment and the other documents executed in connection therewith, for the benefit of the Secured Parties; or
(ii)      (x) Mortgage amendments reflecting the amendment of the Secured Obligations contemplated hereby (the “ Mortgage Amendments ”) in form and substance reasonably satisfactory to the Administrative Agent, with respect to each Mortgaged Property, each duly executed and delivered by an authorized officer of each party thereto and in form suitable for filing and recording in all filing or recording offices that the Administrative Agent may deem necessary or desirable and, (y) in connection with any Mortgage Amendment delivered pursuant to this clause (ii), a T-38 endorsement for the Mortgaged Property in Texas and a “Nothing Further” or equivalent certificate for the Mortgaged Property in Pennsylvania, in each case reasonably satisfactory to the Administrative Agent and with respect to the applicable title insurance policy delivered in connection with each Mortgage; and
(b)      evidence that the reasonable fees, costs and expenses have been paid, to the extent invoiced, in connection with the preparation, execution, filing and recordation of the items delivered pursuant to this Section 7, including, without limitation, reasonable attorneys’ fees, title insurance premiums, filing and recording fees, title insurance company coordination fees, documentary stamp, mortgage and intangible taxes and title search charges and other charges incurred in connection herewith.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written.

GRAFTECH INTERNATIONAL LTD.

   by ____________________ ._________
 
Name:
 
Title:

GRAFTECH FINANCE INC.

   by ____________________ ._________
 
Name:
 
Title:


GRAFTECH LUXEMBOURG II S.À.R.L.,

   by ____________________ ._________
 
Name:
 
Title:

GRAFTECH SWITZERLAND SA,

   by ____________________ ._________
 
Name:
 
Title:




JPMORGAN CHASE BANK, N.A., as an Incremental Term Lender and as Administrative Agent,

   by ______________ ___________
 
Name:
 
Title:

ACKNOWLEDGMENT AND CONSENT

Each of the Subsidiaries below in its capacity as a Guarantor hereby acknowledges and consents to this Amendment.


GRAFTECH GLOBAL ENTERPRISES INC.
GRAFTECH INTERNATIONAL HOLDINGS INC.
GRAFTECH TECHNOLOGY LLC
GRAFTECH NY INC.
GRAPHITE ELECTRODE NETWORK LLC
GRAFTECH SEADRIFT HOLDING CORP.
GRAFTECH DE LLC
GRAFTECH HOLDINGS INC.
SEADRIFT COKE L.P.
GRAFTECH USA LLC
GRAFTECH ADVANCED GRAPHITE MATERIALS LLC

   By _______________________________
 
Name: Quinn J. Coburn
 
Title: Vice President and Treasurer



Incremental Term Lenders

Incremental Term Lender
Incremental Term Commitment
JPMorgan Chase Bank, N.A.

$750,000,000

TOTAL:

$750,000,000







EXHIBIT 31.1.0
CERTIFICATION
I, David J. Rintoul, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of GrafTech International Ltd. (the “Registrant”);
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5.
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
 
By:
 
/s/ David J. Rintoul
 
 
David J. Rintoul
President and Chief Executive Officer,
(Principal Executive Officer)
 
 
August 3, 2018





EXHIBIT 31.2.0
CERTIFICATION
I, Quinn J. Coburn, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of GrafTech International Ltd. (the “Registrant”);
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5.
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
 
By:
 
/s/ Quinn J. Coburn
 
 
Quinn J. Coburn
Vice President, and Chief Financial Officer
(Principal Accounting Officer)
 
 
August 3, 2018





EXHIBIT 32.1.0
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In accordance with the rules and regulations of the Securities and Exchange Commission, the following Certification shall not be deemed to be filed with the Commission under the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, notwithstanding any general incorporation by reference of the Quarterly Report of GrafTech International Ltd. (the “Corporation”) on Form 10-Q for the period ended June 30, 2018 , as filed with the Commission on the date hereof (the “Report”), into any other document filed with the Commission.
In connection with the Report, I, David J. Rintoul, President and Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation.
By:
 
/s/ David J. Rintoul
 
 
David J. Rintoul
President and Chief Executive Officer,
(Principal Executive Officer)
 
 
August 3, 2018
 





EXHIBIT 32.2.0
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In accordance with the rules and regulations of the Securities and Exchange Commission, the following Certification shall not be deemed to be filed with the Commission under the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, notwithstanding any general incorporation by reference of the Quarterly Report of GrafTech International Ltd. (the “Corporation”) on Form 10-Q for the period ended June 30, 2018 , as filed with the Commission on the date hereof (the “Report”), into any other document filed with the Commission.
In connection with the Report, I, Quinn J. Coburn, Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation.
By:
 
/s/ Quinn J. Coburn
 
 
Quinn J. Coburn
Vice President, and Chief Financial Officer
(Principal Accounting Officer)
 
 
August 3, 2018