SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of
|_| Definitive Proxy Statement the Commission Only (as
|_| Definitive Additional Materials permitted by Rule 14a-6(e)(2))
|_| Soliciting Material Under Rule 14a-12
GRAFTECH INTERNATIONAL LTD.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
PRELIMINARY COPY
[LOGO] GRAFTECH INTERNATIONAL LTD.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 2003 AND
PROXY STATEMENT
This Proxy Statement is dated
April __, 2003.
[LOGO]
GRAFTECH INTERNATIONAL LTD. Brandywine West, 1521 Concord Pike,
Suite 301, Wilmington, DE 19803
GILBERT E. PLAYFORD
Chairman of the Board
Fellow Stockholders:
It is my pleasure to invite you to our annual meeting, which will be held on May
28, 2003, at 10:00 a.m., at our offices located at Brandywine West, 1521 Concord
Pike, Suite 301, Wilmington, Delaware.
In the following pages, you will find the formal notice of our annual meeting
and our proxy statement. After reading the proxy statement, please mark your
votes on the accompanying proxy or vote instruction card, sign it and promptly
return it in the accompanying envelope. Most of our stockholders hold their
shares in street name, and we are offering them the opportunity to vote by
telephone or via the Internet as instructed in the proxy statement or on the
vote instruction card. Please vote by whichever method is most convenient to
ensure your shares are represented at the meeting.
We hope that many of you will be able to attend our annual meeting in person. If
you wish to do so, please indicate your intention where requested on the
accompanying proxy or vote instruction card. In addition, please write your
name, where indicated, on the attached admission ticket and bring it with you to
the meeting.
We appreciate the continuing interest of our stockholders in our business, and
we look forward to seeing you at the meeting.
Sincerely,
Chairman of the Board
[LOGO]
GRAFTECH INTERNATIONAL LTD. Brandywine West, 1521 Concord Pike,
Suite 301, Wilmington, DE 19803
KAREN G. NARWOLD
Vice President, General Counsel,
Human Resources and Secretary
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 2003
The annual meeting of stockholders of GrafTech International Ltd. will be held
at 10:00 a.m. on May 28, 2003, at our offices located at Brandywine West, 1521
Concord Pike, Suite 301, Wilmington, Delaware, for the following purposes:
1. To elect 8 directors to serve on GrafTech's Board of Directors
until the annual meeting of stockholders for 2004.
2. To approve an amendment to the Management Stock Incentive Plan
(Senior Version) to increase the number of shares authorized
for awards to non-employee directors, officers and other
management employees by 2,500,000 shares.
3. To approve an amendment to the Amended and Restated
Certificate of Incorporation of the Corporation to increase
the number of shares of common stock authorized for issuance
by 50,000,000 shares.
4. To transact such other business as may properly come before
the meeting.
To ensure that your shares are represented at the meeting in the event that you
do not attend, please mark your votes on the accompanying proxy or vote
instruction card, sign it, date it and promptly return it in the accompanying
envelope or vote via the Internet or by telephone as instructed in Question 2
under "Questions and Answers" of the accompanying proxy statement or on the
accompanying vote instruction card.
By Order of the Board of Directors,
Vice President, General Counsel,
Human Resources and Secretary
[LOGO]
GRAFTECH INTERNATIONAL LTD. Brandywine West, 1521 Concord Pike,
Suite 301, Wilmington, DE 19803
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS FOR 2003
TABLE OF CONTENTS
PAGE
----
Questions and Answers.................................................................................................... 1
Proposals on Which You May Vote.......................................................................................... 5
Proposal One: Election of Directors..................................................................................... 6
Nominees for the Board of Directors................................................................................ 6
The Board of Directors................................................................................................... 8
Committees of the Board.................................................................................................. 10
Board Committee Membership Roster........................................................................................ 12
Change in Independent Accountants........................................................................................ 13
Audit and Finance Committee Report....................................................................................... 14
Organization, Compensation and Pension Committee Report.................................................................. 15
Director Compensation.................................................................................................... 17
Stock Ownership Guidelines for Directors and Senior Management........................................................... 18
Executive Compensation................................................................................................... 19
Summary Compensation Table......................................................................................... 19
Aggregated Option Exercises in 2002 and Option Values at December 31, 2002......................................... 21
Equity Compensation Plan Information..................................................................................... 23
Retirement Plan Table.............................................................................................. 25
Stock Performance Graph............................................................................................ 27
Security Ownership of Management and Certain Beneficial Owners........................................................... 28
Other Information........................................................................................................ 30
Section 16(a) Beneficial Ownership Reporting Compliance............................................................ 30
Certain Transactions............................................................................................... 30
Limitations on Soliciting Material, Liabilities and Incorporation by Reference..................................... 30
Proposal Two: Amend the Management Stock Incentive Plan (Senior Version) to Increase the Number
of Shares Authorized for Awards to Non-Employee Directors, Officers and Other Management Employees................. 31
Proposal Three: Amend the Amended and Restated Certificate of Incorporation to Increase the
Number of Authorized Shares of Common Stock........................................................................ 37
QUESTIONS AND ANSWERS
--------------------------------------------------------------------------------
1. Q: WHAT IS THE PURPOSE OF THE PROXY?
A: This proxy statement and the accompanying proxy relate to the annual
meeting of stockholders of GrafTech International Ltd., a Delaware
corporation ("GRAFTECH" or the "CORPORATION" and, together with its
subsidiaries, "WE," "US" or "OUR"), for 2003. GrafTech's Board of
Directors is soliciting proxies from stockholders in order to provide
every stockholder an opportunity to vote on all matters submitted to a
vote of stockholders at the meeting, whether or not he or she attends in
person. The proxy authorizes a person other than a stockholder, called
the proxyholder, who will be present at the meeting, to cast the votes
which the stockholder would be entitled to cast at the meeting if the
stockholder were present. It is expected that this proxy statement and
the accompanying proxy will be first mailed or delivered to stockholders
beginning on or about April __, 2003.
Impact on attending in person. Submitting a proxy will not affect your
right to vote in person should you decide to attend our annual meeting.
--------------------------------------------------------------------------------
2. Q: HOW DO I CAST MY VOTE?
A: If you hold your shares in street name (such as in a brokerage account
or in the name of a bank or other nominee), there are four different
ways you may cast your vote. You can vote by: o telephone, by calling
the toll-free number on the vote instruction card. o the Internet, by
logging onto www.proxyvote.com and then following the instructions as
they appear on your computer screen. The Internet voting procedures are
designed to authenticate stockholders' identities, to allow stockholders
to give their voting instructions and to confirm that stockholders'
instructions have been recorded properly. Stockholders voting via the
Internet should understand that there may be costs associated with
electronic access, such as usage charges from Internet access providers
and telephone companies, that must be borne by the stockholder. o
marking, signing, dating and mailing the vote instruction card and
returning it in the envelope provided. o attending and voting at the
meeting, if you marked your vote instruction card that you will attend
the meeting and obtained authorization from your bank, broker or nominee
pursuant to instructions on your vote instruction card. Deadline for
Internet and telephone voting. Votes submitted electronically via the
Internet or by telephone must be received by midnight, eastern daylight
savings time, on May 27, 2003.
If you hold your shares registered in your name, there are two different
ways you may cast your vote. You may vote by: o marking, signing, dating
and mailing the accompanying proxy and returning it in the envelope
provided. o attending and voting at the meeting after you have indicated
your intention to attend the meeting on the accompanying proxy.
--------------------------------------------------------------------------------
3. Q: WHAT MATTERS ARE BEING SUBMITTED TO A VOTE?
A: The only matters known to management to be submitted to a vote of
stockholders at the meeting are:
o Proposal One: Election of directors;
o Proposal Two: Approval of an amendment to the Management Stock
Incentive Plan (Senior Version) to increase the number of shares
authorized for awards to non-employee directors, officers and
other
1
management employees by 2,500,000 shares; and
o Proposal Three: Approval of an amendment to the Amended and Restated
Certificate of Incorporation of the Corporation to increase the
number of shares of common stock authorized for issuance by
50,000,000 shares.
If any of the nominees nominated by GrafTech's Board of Directors is not
available for election at the time of the meeting, discretionary
authority will be exercised by the proxyholders designated in the
accompanying proxy to vote for substitutes designated by GrafTech's
Board of Directors unless GrafTech's Board of Directors chooses to
reduce the number of directors.
--------------------------------------------------------------------------------
4. Q: HOW WILL THE PROXYHOLDERS VOTE MY SHARES?
A: When you give a proxy, regardless of the method by which given, the
proxyholders will vote your shares as instructed on the proxy with
respect to the matters specified on the proxy.
In addition, if other matters are submitted to a vote of stockholders at
the meeting, your proxy on the accompanying form gives the proxyholders
the discretionary authority to vote your shares in accordance with their
best judgment on that matter. Unless you specify otherwise, your shares
will be voted on those matters as recommended by GrafTech's Board of
Directors.
If you submit a proxy but do not mark your votes, your shares will be
voted FOR the election of each nominee that has been nominated by
GrafTech's Board of Directors and FOR the approval of each of Proposal
Two and Three.
--------------------------------------------------------------------------------
5. Q: HOW DO I REVOKE A PROXY?
A: If you hold your shares registered in your name, you may revoke your
proxy by submitting a revised one at any time before the vote to which
the proxy relates. You may also revoke it by submitting a ballot at the
meeting.
If your shares are held in street name, there are special procedures
that you must follow in connection with revoking a proxy submitted via
the Internet or by telephone or voting by ballot at the meeting.
Voting before the deadline of midnight, eastern daylight savings time,
on May 27, 2003. If you submit a proxy via the Internet, by telephone or
by marking, signing and returning the vote instruction card, you may
revoke your proxy at any time and by any method before the deadline.
Voting after the deadline of midnight, eastern daylight savings time, on
May 27, 2003. If you submit a proxy via the Internet, by telephone or by
marking, signing and returning the vote instruction card and wish to
revoke it and submit a new proxy after the deadline has passed, you must
contact your broker, bank or other nominee and follow the requirements
set by your broker, bank or other nominee. We cannot assure you that you
will be able to revoke your proxy and vote your shares by any of the
methods described above.
Voting by ballot at the meeting. If you submit a proxy via the Internet,
by telephone or by marking, signing and returning the vote instruction
card and wish to revoke it and vote at the meeting, you must contact
your broker, bank or other nominee and follow the requirements set by
your broker, bank or other nominee. We cannot assure you that you will
be able to revoke your proxy or attend and vote at the meeting.
6. Q: HOW DO I NAME ANOTHER PROXYHOLDER?
A: You may designate as your proxyholder(s) any person(s) other than those
named on the accompanying proxy by crossing out those names and
inserting the name(s) of the person(s) you wish to have act as your
proxy. No more than three persons should be so designated. In such a
case, you must deliver the proxy to the person(s) you designated and
they must be present and vote at the meeting. Proxies on which other
proxyholders have been designated should not be mailed or delivered to
us.
--------------------------------------------------------------------------------
2
7. Q: WHO MAY VOTE?
A: Stockholders of record as of the close of business on April 1, 2003 are
entitled to notice of the meeting and to vote on each Proposal submitted
to a vote of stockholders at the meeting. A list of stockholders
entitled to vote at the meeting will be available for examination by
stockholders during ordinary business hours during the ten days prior to
the annual meeting at our principal executive offices at Brandywine
West, 1521 Concord Pike, Suite 301, Wilmington, DE 19803.
Each share of common stock, par value $.01 per share, of GrafTech is
entitled to one vote. At April 1, 2003, 57,301,937 shares of common
stock were outstanding. Those shares were held by 185 stockholders of
record.
--------------------------------------------------------------------------------
8. Q: WHAT IF I PARTICIPATE IN THE SAVINGS PLAN?
A: If you participate in the UCAR Carbon Savings Plan, your proxy will
represent both the number of shares registered in your name and the
number of shares (including company matching contributions made in
shares) allocated to your account in the Savings Plan as of April 1,
2003. All of these shares will be voted by the trustee for the Savings
Plan in accordance with your directions on the proxy submitted by you.
--------------------------------------------------------------------------------
9. Q: WHAT IS A QUORUM?
A: A quorum is the minimum number of outstanding shares of common stock,
the holders of which must be present at a meeting in order to duly
convene the meeting. The quorum for our annual meeting is the presence,
in person or by proxy, of holders of a majority of the outstanding
shares of our common stock.
--------------------------------------------------------------------------------
10. Q: WHAT VOTES ARE USED TO DETERMINE THE OUTCOME OF ANY MATTER SUBMITTED
TO A VOTE?
A: Only those votes cast for or against a Proposal are used in determining
the results of a vote.
Abstentions and Broker Non-Votes. The stockholders whose proxies show
abstentions or constitute broker non-votes are included for purposes of
determining the presence of a quorum. With respect to the approval of
any particular Proposal, however, since they are not affirmative votes
for the Proposal they have the same effect as votes against the
Proposal.
--------------------------------------------------------------------------------
11. Q: HOW MANY VOTES ARE REQUIRED FOR EACH NOMINEE TO BE ELECTED AS A MEMBER
OF GRAFTECH'S BOARD OF DIRECTORS?
A: Each nominee must receive a plurality of the votes cast in order to be
elected as a director.
--------------------------------------------------------------------------------
12. Q: HOW MANY VOTES ARE REQUIRED FOR APPROVAL OF EACH OF PROPOSAL TWO AND
THREE?
A: The affirmative vote of the holders of a majority of the outstanding
shares of common stock is required for approval of each of Proposal Two
and Three
--------------------------------------------------------------------------------
13. Q: HOW MUCH DID THIS PROXY SOLICITATION COST?
A: The costs for the solicitation of proxies by GrafTech's Board of
Directors is anticipated to be approximately $20,000, which will be
borne by us. We will request banks, brokers and other nominees,
including custodians and fiduciaries, to forward soliciting material to
beneficial owners of our common stock and will pay such persons for
forwarding such material. In addition to the solicitation of proxies
generally by means of this proxy statement, officers or other employees,
without extra remuneration, may solicit proxies by telephone or other
means of personal contact.
--------------------------------------------------------------------------------
3
14. Q: WHO IS GRAFTECH'S INDEPENDENT ACCOUNTANT AND WILL REPRESENTATIVES
THEREOF BE AVAILABLE TO RESPOND TO QUESTIONS AT THE MEETING?
A: Deloitte & Touche LLP was our independent accountant for 2002. [We have
not yet selected an indpendent accountant for 2003.]
Representatives of Deloitte & Touche will be present at the meeting,
will be given the opportunity to make a statement if they desire to do
so and will respond to appropriate questions of stockholders. Deloitte &
Touche has advised us that neither it nor any of its members has any
direct financial interest in GrafTech as a promoter, underwriter, voting
trustee, director, officer or employee.
--------------------------------------------------------------------------------
15. Q: WHEN ARE STOCKHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING DUE?
A: Any proposal (including any nomination for election to GrafTech's Board
of Directors) which a stockholder wishes to have considered for
inclusion in the proxy statement for the annual meeting of stockholders
for 2004 must be received by the Secretary of GrafTech at GrafTech's
principal executive office on or before _________ ___, 200_ and must
otherwise comply with SEC rules.
GrafTech's By-Laws provide, among other things, that written notice of
any proposal (including any such nomination) by a stockholder must be
received by the Secretary of GrafTech not less than 105 days and not
more than 135 days prior to the meeting before such proposal (or
nomination) is to be brought, except in certain circumstances, and must
contain detailed information regarding the proposal (and, if applicable,
the nominee) and the stockholder making the proposal (or nomination),
including the name of the stockholder and the number of shares of common
stock owned beneficially and of record by the stockholder (including his
or her affiliates, all groups of which he or she is a member and all
persons with whom he or she is acting in concert (in each case
identifying them)). Any proposal (other than a nomination for election
to GrafTech's Board of Directors) which a stockholder wishes to have
considered must also describe, among other things, the stockholder's
material direct or indirect interest in GrafTech (including any material
direct or indirect interest that his or her affiliates, all groups of
which he or she is a member and all persons with whom he or she is
acting in concert) and whether such stockholder (or such affiliates,
groups or persons) has solicited, is soliciting or plans to solicit
proxies in respect of such matter. A stockholder proposing to nominate a
candidate for election to GrafTech's Board of Directors must disclose,
among other things, any professional, commercial, business or familial
relationship that the stockholder (including his or her affiliates, all
groups of which he or she is a member and all persons with whom he or
she is acting in concert (in each case identifying them)) has to the
nominee (including his or her affiliates, all groups of which he or she
is a member and all persons with whom he or she is acting in concert (in
each case identifying them)). The chairperson of the annual meeting for
2004 shall determine whether any such proposal (or nomination) shall
have been properly brought. If such proposal (or nomination) is not
properly brought, then the chairman shall not allow a vote on the
proposal (or nomination).
Proxyholders named in the proxy accompanying the proxy statement for the
annual meeting for 2004 will have discretionary authority to vote on any
proposal submitted, other than a proposal that is included in such proxy
statement.
4
PROPOSALS ON WHICH YOU MAY VOTE
--------------------------------------------------------------------------------
PROPOSAL ONE: ELECTION OF DIRECTORS
You may vote on the election of directors. Unless you specify otherwise, either
when completing your proxy or a subsequent proxy or by casting a ballot in
person at the meeting, your shares represented by a proxy in the form
accompanying this proxy statement and returned to the proxyholders named therein
will be voted for the election to GrafTech's Board of Directors of each of the
eight nominees listed below, beginning on page 6. GRAFTECH'S BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED BELOW.
PROPOSAL TWO: AMEND THE MANAGEMENT STOCK INCENTIVE PLAN (SENIOR VERSION)
TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR AWARDS TO
NON-EMPLOYEE DIRECTORS, OFFICERS AND OTHER MANAGEMENT EMPLOYEES
You may vote on approving an amendment to the Management Stock Incentive Plan
(Senior Version) to increase the number of shares authorized for awards to
non-employee directors, officers and other management employees by 2,500,000
shares. Unless you specify otherwise, either when completing your proxy or a
subsequent proxy or by casting a ballot in person at the meeting, your shares
represented by a proxy in the form accompanying this proxy statement and
returned to the proxyholders named therein will be voted to approve the
amendment. GRAFTECH'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT.
PROPOSAL THREE: AMEND THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
You may vote on approving an amendment to the Amended and Restated Certificate
of Incorporation to increase the number of shares of common stock authorized for
issuance by 50,000,000 shares. Unless you specify otherwise, either when
completing your proxy or a subsequent proxy or by casting a ballot in person at
the meeting, your shares represented by a proxy in the form accompanying this
proxy statement and returned to the proxyholders named therein will be voted to
approve the amendment. GRAFTECH'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE AMENDMENT.
5
PROPOSAL ONE: ELECTION OF DIRECTORS
--------------------------------------------------------------------------------
NOMINEES FOR THE BOARD OF DIRECTORS
The eight nominees listed below were unanimously nominated by GrafTech's Board
of Directors in accordance with recommendations by the Nominating and Governance
Committee. Each nominee has consented to being named as a nominee for election
as a director and agreed to serve if elected. Each nominee who is elected will
serve as a director until his or her successor is elected at the next annual
meeting of stockholders or until his or her earlier removal or resignation.
Except as otherwise described below, if any of the nominees is not available for
election at the time of the meeting, discretionary authority will be exercised
to vote for substitutes designated by GrafTech's Board of Directors unless
GrafTech's Board of Directors chooses to reduce the number of directors.
Management is not aware of any circumstances that would render any nominee
unavailable. The ages of the nominees are given as of March 1, 2003.
GILBERT E. PLAYFORD Director since 1998
Age 55
Mr. Playford has served as the Chairman of the Board
since September 1999. Mr. Playford served as Chief
Executive Officer from June 1998 until January 2003 and
as President from June 1998 until May 2002. Since
January 2003, Mr. Playford has been serving as Chairman
of the Board in an executive capacity. He has announced
that he intends to retire in June 2003 upon the
expiration of his amended employment agreement.
Retirement would not affect the continuation of his
service as a director or Chairman of the Board in a
non-executive capacity.
From January 1996 until June 1998, Mr. Playford was the
President and Chief Executive Officer of LionOre Mining
International Ltd., a Toronto Stock Exchange company
which he founded and which is engaged in mining nickel
in Botswana and nickel/gold in Australia. Prior to
founding LionOre Mining International Ltd., of which he
continues to serve as a director and non-executive
Deputy Chairman, Mr. Playford spent his career with
Union Carbide Corporation. We are the successor to the
Carbon Products Division of Union Carbide. Mr. Playford
began his career in 1972 with Union Carbide in Canada.
In 1989, after several years in Europe and Canada, he
was appointed Corporate Vice President, Strategic
Planning of Union Carbide. In 1990, he became Vice
President, Corporate Holdings of Union Carbide. He
assumed the additional responsibility of President and
Chief Executive Officer of Union Carbide's Canadian
subsidiary in 1991. Mr. Playford was named Vice
President, Treasurer and Principal Financial Officer of
Union Carbide in 1992. In his capacity as Principal
Financial Officer of Union Carbide, he also served as a
nominee of Union Carbide on GrafTech's Board of
Directors from 1992 until our leveraged equity
recapitalization in January 1995. He took on additional
duties as Vice President for Union Carbide's latex and
paint business in 1993. Mr. Playford left Union Carbide
in January 1996.
R. EUGENE CARTLEDGE Director since 1996
Age 73
From 1986 until his retirement in 1994, Mr. Cartledge
was the Chairman of the Board and Chief Executive
Officer of Union Camp Corporation. Mr. Cartledge retired
as Chairman of the Board of Savannah Foods & Industries
Inc. in December 1997, and retired as a director of
Delta Airlines, Inc. and Sunoco, Inc. in May 2002. He is
currently a director of Chase Industries, Inc., Formica
Corporation and Blount International, Inc., and
President of the Cartledge Foundation.
MARY B. CRANSTON Director since 2000
Age 55
Ms. Cranston is a partner and has served since 1999 as
Chairperson of Pillsbury Winthrop LLP, an international
law firm. Ms. Cranston is based in San Francisco,
California. Ms. Cranston has been practicing complex
litigation, including antitrust, telecommunications and
securities litigation, with Pillsbury Winthrop LLP since
1975. She is a director of the San Francisco Chamber of
Commerce, the Bay Area Council and the Commonwealth
Club, and a trustee of the San Francisco Ballet and
Stanford University.
6
JOHN R. HALL Director since 1995
Age 70
Mr. Hall was Chairman of the Board and Chief Executive
Officer of Ashland Inc. from 1981 until his retirement
in January 1997 and September 1996, respectively. Mr.
Hall had served in various engineering and managerial
capacities at Ashland Inc. since 1957. He retired as
Chairman of Arch Coal Inc. in 1998. He served as a
director of Reynolds Metals Company from 1985 to 2000.
Mr. Hall currently serves as a member of the Boards of
Bank One Corporation, Canada Life Assurance Company, CSX
Corporation, Humana Inc. and USEC Inc. Mr. Hall
graduated from Vanderbilt University in 1955 with a
degree in Chemical Engineering and later served as
Vanderbilt's Board Chairman from 1995 to 1999. Mr. Hall
also serves as Chairman of the Blue Grass Community
Foundation and the Commonwealth Fund for Kentucky
Educational Television, and as President of the Markey
Cancer Center Foundation.
HAROLD E. LAYMAN Director since March 2003
Age 56
From 2001 until his retirement in 2002, Mr. Layman was
President and Chief Executive Officer of Blount
International, Inc. Prior thereto, Mr. Layman served in
other capacities with Blount International, including
President and Chief Operating Officer from 1999 to 2001,
Executive Vice President and Chief Financial Officer
from 1997 to 2000, and Senior Vice President and Chief
Financial Officer from 1993 to 1997. From 1981 through
1992, he held various financial management positions
with VME Group/Volvo AB. From 1970 to 1980, Mr. Layman
held various operations and financial management
positions with Ford Motor Company. He is currently a
director of Blount International and Von Hoffman
Holdings Inc.
FERRELL P. MCCLEAN Director since 2002
Age 56
Ms. McClean was the Managing Director and Senior Advisor
to the head of the Global Oil & Gas Group in Investment
Banking at J.P. Morgan Chase & Co. from 2000 through the
end of 2001. She joined J.P. Morgan & Co. Incorporated
in 1969 and founded the Leveraged Buyout and
Restructuring Group within the Mergers & Acquisitions
Group in 1986. From 1991 until 2000, Ms. McClean was the
Managing Director and co-headed the Global Energy Group
within the Investment Banking Group at J.P. Morgan & Co.
Ms. McClean is currently a director of Unocal
Corporation.
MICHAEL C. NAHL Director since 1999
Age 60
Mr. Nahl is Senior Vice President and Chief Financial
Officer of Albany International Corporation, a
manufacturer of paper machine clothing, which are the
belts of fabric that carry paper stock through the paper
production process. Mr. Nahl joined Albany International
Corporation in 1981 as Group Vice President, Corporate
and was appointed to his present position in 1983. Mr.
Nahl is a director of Lindsay Manufacturing Co. and a
member of the Chase Manhattan Corporation Northeast
Regional Advisory Board.
CRAIG S. SHULAR Director since January 2003
Age 50
Mr. Shular became Chief Executive Officer and a director
in January 2003 and has served as President since May
2002. From May 2002 through December 2002, he also
served as Chief Operating Officer. From August 2001 to
December 2002, he served as Executive Vice President of
our former Graphite Power Systems Division. He served as
Vice President and Chief Financial Officer from January
1999, with the additional duties of Executive Vice
President, Electrode Sales and Marketing from February
2000. From 1976 through 1998, he held various financial,
production and business management positions at Union
Carbide, including the Carbon Products Division from
1976 to 1979.
7
THE BOARD OF DIRECTORS
--------------------------------------------------------------------------------
STRUCTURE OF THE BOARD
o Under the By-Laws, GrafTech's Board of Directors fixes the number of
directors. GrafTech's Board of Directors currently consists of eight
members, each of whom is an independent director (within the meaning of the
current and proposed rules of the NYSE) except for Messrs. Playford and
Shular.
o GrafTech's Board of Directors has established three standing committees,
each of which is entirely comprised of independent directors, and
periodically establishes other committees, in each case so that certain
important matters can be addressed in greater depth than may be possible in
a meeting of the entire Board. Members of the Audit and Finance Committee
must be independent within the meaning of the Sarbanes-Oxley Act of 2002 as
well as independent within the meaning of the current and proposed rules of
the NYSE. Further, the composition of the membership of Audit and Finance
Committee must satisfy the expertise requirements of the current and
proposed rules of the NYSE and must include an audit committee financial
expert within the meaning of the rules of the SEC.
MEETINGS OF THE BOARD
o GrafTech's Board of Directors met 10 times during 2002.
o Each director who was then serving attended at least 75% of the total
number of meetings of GrafTech's Board of Directors and meetings of
committees of GrafTech's Board of Directors of which he or she was a
member, except for Ms. Cranston, who attended 71% of such meetings.
COMMITTEES OF THE BOARD
A description of the functions of each committee is set forth on page 10 and
the members of each standing committee at April 1, 2003 and the number of
meetings held by each standing committee in 2002 are set forth on page 12.
All committees have the authority to retain and pay advisors and conduct
investigations without further approval of GrafTech's Board of Directors or
management. All such advisors shall report and be responsible directly to the
committee which retains them, including the independent accountant (who is
required to be retained by the Audit and Finance Committee).
BOARD AND COMMITTEE CHARTERS
GrafTech's Board of Directors and each committee has written corporate
governance guidelines (called charters) that, at a minimum, are intended to
satisfy the requirements of the current and proposed rules of the NYSE. These
guidelines cover such matters as purpose and powers, composition, meetings,
procedures, primary responsibilities, and additional activities which GrafTech's
Board of Directors or the committee should periodically consider undertaking.
Each committee is authorized to exercise all power of GrafTech's Board of
Directors with respect to matters within the scope of its charter.
Nothing in the charters of GrafTech's Board of Directors or of any committee
shall expand or increase the duties, responsibilities or liabilities of any
member under any circumstance beyond those otherwise then existing under
applicable law.
CORPORATE GOVERNANCE
The charter of GrafTech's Board of Directors provides, among other things, that:
o a majority of the directors shall be independent within the meaning of the
current and proposed rules of the NYSE;
o if a member of the Audit and Finance Committee simultaneously serves on an
audit committee of more than three public companies, GrafTech's Board of
Directors must determine that such simultaneous service would not impair
the ability of such member to effectively serve on the Audit and Finance
Committee;
8
o no director will be nominated for election or re-election if he or she
would be age 74 or older at the time of election, unless special
circumstances so warrant;
o GrafTech's Board of Directors shall meet in regular sessions at least six
times annually (including the annual retreat described below);
o GrafTech's Board of Directors shall have an annual extended retreat with
executive officers at which there will be a full review of financial
statements and financial disclosures, long-term strategies, plans and
risks, and current developments in corporate governance; and
o non-management directors will meet in executive session at least once
annually.
The charter requires GrafTech's Board of Directors, in consultation with the
General Counsel, to establish a means for stockholders and employees to
communicate with non-management directors and that the name of each such
presiding director and the means for such communication shall be disclosed in
the annual proxy statement. A majority of the non-management directors choose
the director who presides at the meetings of non-management directors. R. Eugene
Cartledge is currently serving as such presiding director. Any such
communication to the presiding director should be directed to either one of the
following individuals: M. Ridgway Barker or Randi-Jean G. Hedin, Kelley Drye &
Warren LLP, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, CT 06901, (203)
324-1400 (phone), (203) 327-2669 (fax), and mrbarker@kelleydrye.com or
rhedin@kelleydrye.com.
CODE OF CONDUCT AND ETHICS
We have had for many years a Code of Conduct and Ethics, and have recently
strengthened it. The Code of Conduct and Ethics applies to all employees,
including senior executives and financial officers, as well as all directors. It
is intended, at a minimum, to comply with the current and proposed rules of the
NYSE as well as the Sarbanes-Oxley Act of 2002 and the rules adopted thereunder
by the SEC. A copy of our Code of Conduct and Ethics is available on our Web
site at http://www.graftech.com. The information contained on the Web site is
not part of this proxy statement.
9
COMMITTEES OF THE BOARD
--------------------------------------------------------------------------------
AUDIT AND FINANCE COMMITTEE
The Audit and Finance Committee assists GrafTech's Board of Directors in
discharging and performing its duties and responsibilities with respect to the
financial affairs of the Corporation. Without limiting the scope of such
activities, the Committee shall:
o select, retain, evaluate and, as appropriate, terminate and replace the
independent accountant;
o review and, as appropriate, approve, prior to commencement, all audit and
non-audit services to be provided by the independent accountant;
o review regularly with the independent accountant any audit problems or
difficulties and management's response thereto;
o resolve or direct the resolution of all material disagreements between
management and the independent accountant regarding accounting and
financial reporting;
o review periodically (i) all critical accounting policies and practices,
(ii) all significant accounting estimates, (iii) all significant off
balance sheet financing arrangements and their effect on the financial
statements, (iv) all significant valuation allowances and liability,
restructuring and other reserves, and (v) the effect of regulatory and
accounting initiatives;
o meet at least once annually with management, the director of the internal
audit department, the General Counsel and the independent accountant in
separate private sessions;
o review, evaluate and, as appropriate, approve all transactions with
affiliates, related parties, directors and executive officers;
o assess at least annually the adequacy of codes of conduct, including codes
relating to ethics, integrity, conflicts of interest, confidentiality,
public disclosure and insider trading and, as appropriate, adopt changes
thereto;
o direct the establishment of procedures for the receipt and retention of,
and the response to, complaints received regarding accounting, internal
control or auditing matters; and
o direct the establishment of procedures for the confidential and anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
The charter of the Committee is attached to this proxy statement as Appendix A.
ORGANIZATION, COMPENSATION AND PENSION COMMITTEE
The Organization, Compensation and Pension Committee assists GrafTech's Board of
Directors in discharging and performing its duties and responsibilities with
respect to management compensation and succession, employee benefits and
director compensation. Without limiting the scope of such activities, the
Committee shall:
o annually determine the compensation of the chief executive officer and the
corporate goals and objectives relevant thereto and evaluate the
performance of the chief executive officer in light of such goals and
objectives;
o review and evaluate compensation (including incentive compensation) for
senior management and determine compensation for directors;
o review organizational systems and plans, including those relating to
management development and succession planning, including contingency
planning for unanticipated sudden developments; and
10
o administer stock-based compensation plans.
NOMINATING AND GOVERNANCE COMMITTEE
The Nominating and Governance Committee assists GrafTech's Board of Directors in
discharging and performing its duties and responsibilities with respect to
nomination of directors, selection of committee members, assessment of
performance of GrafTech's Board of Directors and other corporate governance
matters. Without limiting the scope of such activities, the Committee shall:
o review candidates for nomination for election as directors submitted by
directors, officers, employees and stockholders; and
o review at least annually the current directors of GrafTech's Board of
Directors to determine whether such individuals are independent under the
current and proposed rules of the NYSE and the Sarbanes-Oxley Act of 2002.
To submit a nominee for election as a director for consideration by the
Nominating and Governance Committee, a stockholder must submit a written request
to that effect to the Secretary of GrafTech at GrafTech's principal executive
office. Any such request will be subject to the requirements described in the
Answer to Question 15 on page 4.
11
BOARD COMMITTEE MEMBERSHIP ROSTER
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
ORGANIZATION, NOMINATING AND
NAME AUDIT AND FINANCE COMPENSATION AND PENSION GOVERNANCE
--------------------------------------------------------------------------------------------------------------------------------
GILBERT E. PLAYFORD
--------------------------------------------------------------------------------------------------------------------------------
R. EUGENE CARTLEDGE x x(1)
--------------------------------------------------------------------------------------------------------------------------------
MARY B. CRANSTON(2) x x
--------------------------------------------------------------------------------------------------------------------------------
JOHN R. HALL x(1) x(3)
--------------------------------------------------------------------------------------------------------------------------------
HAROLD E. LAYMAN(2) x
--------------------------------------------------------------------------------------------------------------------------------
THOMAS MARSHALL(4) x
--------------------------------------------------------------------------------------------------------------------------------
FERRELL P. MCCLEAN x
--------------------------------------------------------------------------------------------------------------------------------
MICHAEL C. NAHL(5) x(1)
--------------------------------------------------------------------------------------------------------------------------------
CRAIG S. SHULAR
--------------------------------------------------------------------------------------------------------------------------------
NUMBER OF MEETINGS IN 2002 11 9 2
--------------------------------------------------------------------------------------------------------------------------------
(1) Committee Chairperson.
(2) On March 10, 2003, Mr. Layman replaced Ms. Cranston as a member of the
Audit and Finance Committee, at which time Ms. Cranston joined the
Organization, Compensation and Pension Committee.
(3) On March 10, 2003, Mr. Hall replaced Mr. Nahl as a member of the Nominating
and Governance Committee.
(4) Mr. Marshall, having attained the mandatory retirement age set by
GrafTech's Board of Directors, will retire as a director effective May 28,
2003.
(5) Mr. Nahl has been designated by GrafTech's Board of Directors as an audit
committee financial expert within the meaning of the rules of the SEC.
12
CHANGE IN INDEPENDENT ACCOUNTANT
--------------------------------------------------------------------------------
On May 8, 2001, GrafTech's Board of Directors, upon the recommendation of the
Audit and Finance Committee, appointed Deloitte & Touche LLP as the independent
accountant to audit the financial statements of GrafTech and its consolidated
subsidiaries for the fiscal year ending December 31, 2001. Deloitte & Touche
replaced GrafTech's prior independent accountant, KPMG LLP. GrafTech's Board of
Directors appointed Deloitte & Touche after the completion of a proposal
process.
The report of KPMG on the consolidated financial statements of GrafTech as of
and for the fiscal year ended December 31, 2000 did not contain any adverse
opinion or disclaimer of opinion. This report was not qualified or modified as
to uncertainty, audit scope or accounting principles. During the fiscal year
ended December 31, 2000 and during the period between December 31, 2000 and May
8, 2001, there were no disagreements between KPMG and GrafTech on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
KPMG, would have caused KPMG to make reference to the subject matter of the
disagreements in connection with its report. Furthermore, during the fiscal year
ended December 31, 2000 and during the period between December 31, 2000 and May
8, 2001, there were no reportable events (as described in Paragraph 304(a)(1)(v)
of Regulation S-K adopted by the SEC).
During the fiscal year ended December 31, 2000 and during the period between
December 31, 2000 and May 8, 2001, neither GrafTech nor anyone on its behalf
consulted Deloitte & Touche regarding either (i) the application of accounting
principles to a specified transaction (either completed or proposed) or the type
of audit opinion that might be rendered on GrafTech's consolidated financial
statements or (ii) any matter that was either the subject of a disagreement (as
described in Paragraph 304(a)(1)(iv) of Regulation S-K adopted by the SEC) or a
reportable event (as described in Paragraph 304(a)(1)(v) of Regulation S-K
adopted by the SEC).
GrafTech provided KPMG with a copy of this disclosure and requested KPMG to
furnish GrafTech with a letter addressed to the SEC stating whether it agrees
with the above statements. A copy of KPMG's letter was filed as an exhibit to
the Current Report on Form 8-K filed by GrafTech with the SEC on May 15, 2001 to
report this event.
13
AUDIT AND FINANCE COMMITTEE REPORT
--------------------------------------------------------------------------------
GrafTech's management is responsible for its financial reporting, including
design and implementation of internal controls and preparation of consolidated
financial statements in accordance with generally accepted accounting
principles. GrafTech's independent accountant is responsible for auditing those
consolidated financial statements. The Committee is responsible for overseeing
those activities. The Committee does not and is not required to prepare or
review financial records, prepare or audit financial statements, design or
implement internal controls, make estimates or select principles used for
financial reporting, or identify or eliminate financial risks or non-compliance
with applicable law. Therefore, the Committee relies, without independent
verification, on representations and information provided by management
(including executive, financial, legal and internal audit management) and
representations and reports by the independent accountant that, among other
things, the consolidated financial statements have been prepared with integrity
and objectivity and in conformity with generally accepted accounting principles,
the independent accountant is in fact "independent" and an audit does in fact
provide reasonable assurance as to the matters covered thereby.
The Committee reviewed and discussed GrafTech's audited consolidated financial
statements for the year ended December 31, 2002 with GrafTech's management and
Deloitte & Touche LLP, GrafTech's independent accountant. The Committee also
discussed with Deloitte & Touche the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communications with Audit Committees).
This included a discussion of the independent accountant's judgment as to the
quality, as well as the acceptability, of GrafTech's accounting principles and
such other matters that generally accepted auditing standards require to be
discussed with an audit committee. The Committee also received the written
disclosures and the letter from Deloitte & Touche required by Independence
Standards Board Standard No. 1 (Independence Discussion with Audit Committees)
and the Committee discussed with Deloitte & Touche the independence of Deloitte
& Touche from GrafTech and its management. The Committee also determined that
the provision of non-audit services by Deloitte & Touche to GrafTech and its
subsidiaries was compatible with the maintenance by Deloitte & Touche of its
independence from GrafTech.
Based on its review and discussions noted above, the Committee recommended to
GrafTech's Board of Directors that it approve, and GrafTech's Board of Directors
approved, the inclusion of GrafTech's audited consolidated financial statements
in GrafTech's Annual Report on Form 10-K for the year ended December 31, 2002
filed with the SEC.
All professional services rendered by Deloitte & Touche during 2002 were
furnished at customary rates. Below is a summary of the fees GrafTech and its
subsidiaries paid to Deloitte & Touche for services provided in 2002:
o AUDIT FEES: GrafTech and its subsidiaries paid Deloitte & Touche
approximately $908,225 in connection with its audit of the annual
consolidated financial statements for 2002 and its reviews of the quarterly
consolidated financial statements for 2002.
o FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES: Neither
GrafTech nor its subsidiaries paid any financial information systems design
and implementation fees to Deloitte & Touche for 2002.
o ALL OTHER FEES: GrafTech and its subsidiaries paid Deloitte & Touche
approximately $1,728,718 of other fees, including:
o approximately $540,459 for tax and related services in connection with
the corporate realignment of GrafTech's subsidiaries;
o approximately $360,246 for other tax services, including tax compliance
services; and
o approximately $471,602 for services in connection with assurance
services associated with GrafTech's refinancing activities.
AUDIT AND FINANCE COMMITTEE
as of December 31, 2002
Michael C. Nahl, Chairperson
Mary B. Cranston
Ferrell P. McClean
14
ORGANIZATION, COMPENSATION AND PENSION COMMITTEE REPORT
--------------------------------------------------------------------------------
The philosophy of GrafTech's Board of Directors and the Committee has always
been, and continues to be, to compensate management in a manner and an amount
that enables GrafTech to seek to:
o attract and retain qualified individuals and motivate them to devote
effort, initiative and ability commensurate with the extraordinary
challenges that GrafTech faces; and
o align their interests with the interests of stockholders.
GrafTech seeks to implement this philosophy, with respect to management
employees, through a combination of base compensation (including benefits) and
stock- and cash-based incentives. In general, base compensation is intended to
be sufficient to attract and retain qualified employees. Stock-based incentive
compensation is designed to reward management for increases in the market value
of the common stock. The Committee believes that this is the primary interest of
stockholders and that, over the long term, improvements in the performance of
GrafTech's business will be the primary driver of such increases. The Committee
also recognizes that, notwithstanding improvements in performance, increases in
market value may not be realized on a timely basis due to external factors
beyond management's control. The Committee believes that cash-based incentive
compensation is an important element in keeping management focused on improving
GrafTech's performance despite the impact of those external factors on
stock-based incentives.
Implementation of this philosophy is tempered by several factors. First,
competition for qualified management employees is intense. Second, GrafTech
continues to be highly leveraged and focused on maximizing uses of available
cash to reduce debt and satisfy legacy antitrust obligations incurred due to
activities of former management. At the same time, it has encountered
challenging economic and industry conditions. Moreover, these same factors
create extraordinary demands, in terms of time, effort and commitment, on our
management employees.
Consistent with this philosophy and these factors, compensation of senior
management for 2002 consisted primarily of base salary and restricted stock. For
2002, each of these components was awarded to the Chief Executive Officer by
GrafTech's Board of Directors based on recommendations of the Committee and to
the other members of senior management by GrafTech's Board of Directors based on
recommendations by the Chief Executive Officer as well as the Committee. For
2003, each of these components has been or will be awarded to the Chief
Executive Officer by the Board based on recommendations by the Committee and to
other members of senior management after the Committee reviews recommendations
with respect thereto by the Chief Executive Officer .
Base salary for each member of senior management is determined after taking into
account his or her current or new position and current base salary, salaries and
other compensation offered by other companies for individuals in equivalent
positions, the performance during the prior year of the business or functional
unit for which he or she was responsible and, to the extent relevant, the
geographic area in which he or she is or will be employed.
Annual cash bonuses awarded to each member of senior management are determined
based on the factors mentioned above, achievement of specified goals during the
prior year and performance of GrafTech as a whole during the prior year. Annual
cash bonuses for each year are determined and payable in the following year. The
specified goals for 2002 related to return on invested capital, net debt and
strategic milestones. While those goals were achieved in part, annual cash
bonuses for 2002 were not awarded by GrafTech's Board of Directors due to
GrafTech's financial performance during 2002. The specified goals for 2003
relate to cash flow from GrafTech's lines of businesses and strategic
milestones.
Stock options, restricted stock and other equity-based awards granted to each
member of senior management are determined based on the same factors as those
mentioned above. A grant of 412,200 shares of restricted stock was made in March
2002 to over 170 management employees, including members of senior management.
The vesting of the restricted stock was accelerated by GrafTech's Board of
Directors on June 28, 2002 in recognition of extraordinary efforts by employees
under difficult circumstances, including the absence of cash bonuses for the
second year in a row. No stock options were granted to members of senior
management in 2002.
Subject to the provisions of his amended employment agreement, Mr. Playford's
compensation for 2002 was determined on the same basis as other members of
senior management (commensurate with his position). Mr. Playford's original
employment agreement and an amendment thereto that became effective in July 2002
are described on page 21. The Committee approved this amendment in order to
enable him to defer any decision on his part regarding renewal or non-renewal of
his employment agreement
15
until the end of 2002. The Committee believed that such deferral was important
to enable management to continue to focus on demands of the challenging business
conditions and to enable the Committee to continue to evaluate succession plans.
In light of GrafTech's financial performance, Mr. Playford did not receive any
annual cash bonus in 2002 (for 2001) or in 2003 (for 2002). He received 54,000
of the shares of restricted stock awarded in 2002 as described above.
Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility by
public companies of certain executive compensation in excess of $1 million per
executive per year, but excludes from the calculation of the $1 million limit
certain elements of compensation, including performance-based compensation,
provided that certain requirements are met. While the Committee and GrafTech's
Board of Directors consider the impact of Section 162(m) in connection with
implementing the philosophy described above, they do not believe that Section
162(m) is a significant factor in determining the amount or types of
compensation to be paid to senior management or the conditions to payment of
such compensation.
ORGANIZATION, COMPENSATION
AND PENSION COMMITTEE
as of December 31, 2002
John R. Hall, Chairperson
R. Eugene Cartledge
Thomas Marshall
16
DIRECTOR COMPENSATION
--------------------------------------------------------------------------------
The philosophy of GrafTech's Board of Directors has always been, and continues
to be, to compensate non-employee directors in a manner and an amount that
enables us to attract and retain qualified and experienced individuals, motivate
them to devote time and effort commensurate with the challenges that GrafTech
faces and align their interests with the interests of stockholders. Competition
for and retention of qualified and experienced directors is particularly intense
in the current corporate governance environment. Moreover, the challenges that
we face create significant demands, in terms of time, effort and ability, on our
non-employee directors. GrafTech's Board of Directors seeks to implement this
philosophy through a combination of cash payments and stock-based incentives
that achieves an appropriate total compensation level. Currently, non-employee
directors are entitled to receive the compensation described below.
o Annual Retainer: $25,000 ($27,000, if chairperson of one or more
committees).
o Meeting Fee: $1,000 for each Board and committee meeting attended,
including attendance by telephone.
o Stock Option Grants: Options for the purchase of shares of common stock as
described below.
Employee directors do not receive compensation for rendering services as
directors. All directors are entitled to reimbursement for expenses incurred in
rendering services as directors.
STOCK OPTION GRANTS. GrafTech's Board of Directors has adopted a policy of
granting to non-employee directors then serving options to purchase that number
of shares of common stock fixed annually by GrafTech's Board of Directors or,
beginning in 2003, the Organization, Compensation and Pension Committee (the
"ANNUAL GRANTS"). For 2002 and 2003, GrafTech's Board of Directors fixed that
number of shares of common stock so that the value of the options granted
approximates $33,000. For 2002, that number was 6,200 shares and, for 2003, was
12,800 shares. GrafTech's Board of Directors has also adopted a policy of
granting to non-employee directors options to purchase 5,000 shares of common
stock (the "INITIAL GRANTS") as well as a prorated portion of the Annual Grants
upon their initial election as directors. All of these options vest one year
after the date of grant so long as the director is then serving as a director.
The exercise price per share of these options is fair market value on the date
of grant, which is defined under the relevant stock incentive plan as the
closing sale price of a share of common stock on the last trading date preceding
the date of grant. Vested options granted to a non-employee director expire upon
the earlier of ten years after the date of grant or four years after the
director ceases to be a director. Other provisions relating to these options are
the same as those relating to options granted to management employees as
described on page 22.
OTHER COMPENSATION. GrafTech's Board of Directors has in the past and the
Organization, Compensation and Pension Committee may in the future award
additional cash- or stock-based compensation to one or more directors for
special services rendered to GrafTech.
Non-employee directors have in the past agreed to accept, in lieu of cash
payment of retainers and accrued meeting fees, a grant of options with a value
that approximates the amount of such retainers and accrued meeting fees. Options
granted in lieu of retainers vest ratably over the year to which the retainers
relate. Options granted in lieu of accrued meeting fees vest immediately. The
exercise price, terms and other provisions are the same as those described
above. No such options were granted for service as a director in 2002. The
Organization, Compensation and Pension Committee has authorized us to offer
non-employee directors the opportunity to receive deferred stock in lieu of a
portion of their retainers and accrued meeting fees for services in 2003.
Neither the offer nor any acceptance is contingent upon stockholder approval of
Proposal Two. Deferred stock is a share of common stock which has been awarded
to a recipient for delivery at a later date, but is not subject to forfeiture.
Such later date is the earlier of a date specified by the recipient (that is in
a year after the year during which the election is made), the date on which a
change of control (as described on page 23) occurs or the date on which the
recipient ceases to be a director.
17
STOCK OWNERSHIP GUIDELINES FOR DIRECTORS AND SENIOR MANAGEMENT
--------------------------------------------------------------------------------
Currently, GrafTech's Board of Directors has adopted guidelines for ownership of
common stock by directors and senior management. Compliance with the guidelines
is voluntary.
Under the guidelines, each non-employee director should, within a reasonable
period of time after election as a director, own shares of common stock with a
market value equal to at least two times his or her annual retainer. GrafTech's
Board of Directors has adopted a policy providing that we will not finance the
purchase or holding of these shares by directors.
In addition, under the guidelines, certain members of senior management should,
within five years after appointment as a member of senior management, own shares
of common stock with a market value equal to his or her annual base salary (or,
in the case of the Chief Executive Officer, three times his or her annual base
salary).
18
EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
The following table sets forth certain information concerning compensation
received by the Chief Executive Officer at December 31, 2002 and each of our
other four most highly compensated executive officers at December 31, 2002 who
received total salary and bonus compensation in excess of $100,000 for services
rendered in all capacities (including service as a director of GrafTech or an
officer or director of one or more of our subsidiaries) during our last fiscal
year. The individuals listed in the following table are sometimes called the
"named executive officers."
SUMMARY COMPENSATION TABLE(A)
-------------------------------------------------------------------------------- -----------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS
------------------------------------ ------------------------ --------------
NAME AND PRINCIPAL POSITIONS VARIABLE OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
AT COMPENSATION COMPENSATION STOCK UNDERLYING COMPENSATION
DECEMBER 31, 2002 YEAR SALARY (B) (C) AWARDS(D) OPTIONS (E)
-------------------------------- --------- ------------------------------------- ------------------------ --------------
GILBERT E. PLAYFORD 2002 $650,000 $ -- $337,205 $ 581,580 -- $85,029
Chairman of the Board and Chief 2001 650,000 -- 200,729 -- 274,000 83,695
Executive Officer(f) 2000 650,000 -- 213,447 1,756,000 300,000 86,474
----------------------------------------------------------------------------------------------------------------------------
CORRADO F. DE GASPERIS 2002 235,318 -- 134,212 177,705 -- 22,481
Vice President, Chief Financial 2001 218,333 -- 55,584 -- 57,500 13,683
Officer and Chief Information 2000 205,668 -- 22,364 -- 90,000 14,033
Officer(g)
----------------------------------------------------------------------------------------------------------------------------
SCOTT C. MASON 2002 303,687 -- 51,940 215,400 -- 27,052
Executive Vice President, Advanced 2001 270,963 -- 44,266 -- 87,000 16,854
Energy Technology(h) 2000 168,750 155,000 93,614 -- 230,000 5,625
----------------------------------------------------------------------------------------------------------------------------
KAREN G. NARWOLD 2002 235,318 -- 208,162 177,705 -- 14,809
Vice President, General Counsel, 2001 212,500 -- 45,218 -- 57,500 11,419
Human Resources and Secretary(i) 2000 195,000 -- 27,847 -- 70,000 12,387
----------------------------------------------------------------------------------------------------------------------------
CRAIG S. SHULAR 2002 388,242 -- 216,808 215,400 -- 18,996
President and Chief Operating 2001 279,297 -- 58,623 -- 87,000 18,449
Officer(j) 2000 266,667 -- 27,683 -- 130,000 19,213
----------------------------------------------------------------------------------------------------------------------------
(a) Includes, for each year, compensation earned but deferred under
compensation deferral or other applicable plans or statutory provisions.
(b) For Mr. Mason, for 2000, consists of a one-time sign-on bonus paid upon
commencement of employment.
(c) Includes for 2002, 2001 and 2000 (respectively and as applicable, except as
otherwise noted): for Mr. Playford, $32,655, $7,268 and $17,843, for Mr. De
Gasperis, $6,175, $5,925 and $3,750, for Mr. Mason, $6,175, $4,440 and
$13,475, for Ms. Narwold, $6,175, $5,925 and $3,750, and for Mr. Shular,
$6,175, $5,925 and $3,750, of financial planning services and related tax
advice and, in certain cases, tax return preparation services; for Mr.
Playford, $279,676, $136,923 and $172,319, for Mr. De Gasperis, $32,525,
$14,791 and $18,614, for Mr. Mason, $4,111, $19,016 and $18,099, for Ms.
Narwold, $56,570, $12,677 and $15,954, and for Mr. Shular, $74,424, $19,016
and $23,933, of imputed interest income and reimbursement for tax
liabilities on non-interest bearing loans made under various programs and,
for 2002, loan forgiveness and reimbursement for tax liabilities thereon as
described under "Certain Transactions" on page 30; for Mr. Playford,
$21,176, $19,576 and $23,285, for 2000, for Mr. Mason, $14,750, for 2002,
for Ms. Narwold, $20,541, and for 2002, for Mr. Shular, $41,186, of
reimbursement for miscellaneous expenses and, if applicable, reimbursement
for tax liabilities thereon; for Mr. Playford, $3,698, $36,962 and $0, for
Mr. De Gasperis, $45,512, $34,868 and $0, for Mr.
19
Mason, $41,654, $20,810 and $47,290, for Ms. Narwold, $124,876, $26,616 and
$8,143, and for Mr. Shular, $24,257, $22,721 and $0, of reimbursement for
relocation expenses and, if applicable, reimbursement for tax liabilities
thereon; and for 2002 and 2001, for Mr. Shular, $70,766 and $10,961, for
allowances for international service; and, for 2002, for Mr. De Gasperis, a
one-time special recognition award of $50,000.
(d) For 2002, based on $10.77, the closing price of the common stock on the
NYSE on February 28, 2002, the day prior to the date of grant; and, for
2000, for Mr. Playford, based on $17.56, the closing price of the common
stock on the NYSE on January 5, 2000, the date of grant. At December 31,
2002, based on $5.96, the closing price of the common stock on the NYSE on
such date, the number and value of shares held was: for Mr. Playford,
54,000 shares at $321,840 and 100,000 shares at $596,000, for Mr. De
Gasperis, 10,824 shares at $64,511, for Mr. Mason, 13,210 shares at
$78,732, for Ms. Narwold, 10,824 shares at $64,511, and for Mr. Shular,
14,310 shares at $85,288. The shares granted to Mr. Playford in 2000 will
vest upon his retirement on June 22, 2003. Any dividend payable on the
common stock shall be payable on all unvested shares of restricted stock
upon vesting.
(e) Includes for 2002, 2001 and 2000 (respectively and as applicable, except as
otherwise noted): for Mr. Playford, $74,100, $74,062 and $77,100, for Mr.
De Gasperis, $4,977, $4,050 and $4,803, for Mr. Mason, $11,163 and $10,479,
for Ms. Narwold, $6,809, $5,044 and $6,012, and for Mr. Shular, $10,996,
$12,074 and $12,838, for annual life insurance premiums paid under a split
dollar life program; for Mr. Playford, $10,929, $9,633 and $9,374, for Mr.
De Gasperis, $10,214, $9,633 and $9,230, for Mr. Mason, $8,011, $6,375 and
$5,625, for Ms. Narwold, $8,000, $6,375 and $6,375, and for Mr. Shular,
$8,000, $6,375 and $6,375, for employer contributions to the Savings Plan;
and, for 2002, for Mr. De Gasperis, $7,290, and for Mr. Mason, $7,878, for
employer contributions to a defined contribution retirement plan. The
amount of the whole life insurance portion of the split dollar life
contract reported as paid for the executive is the entire premium minus
that portion of the premium actually paid by the executive. We recover our
contributions following the later of attainment of age 65 or fifteenth year
of participation. The split dollar life program was terminated effective
March 31, 2003.
(f) Mr. Playford joined us as Chief Executive Officer and President in June
1998 and served as President until May 2002 and Chief Executive Officer
until December 2002. He became Chairman of the Board in September 1999.
(g) Mr. De Gasperis joined us as Controller in July 1998, became Vice President
and Chief Information Officer in February 2000 and became Vice President,
Chief Financial Officer and Chief Information Officer in August 2001.
(h) Mr. Mason joined us as Director of Mergers and Acquisitions of GrafTech and
Chief Financial Officer of our subsidiary, Advanced Energy Technology Inc.,
in April 2000, became Executive Vice President, Advanced Energy Technology
Division, in August 2001 and became President, Graphite Power Systems, in
January 2003.
(i) Ms. Narwold joined us as Regulatory and Commercial Counsel in July 1990,
became Assistant General Counsel in May 1995, became Deputy General Counsel
in January 1999, became Vice President, General Counsel and Secretary in
September 1999 and became Vice President, General Counsel, Human Resources
and Secretary in August 2001.
(j) Mr. Shular joined us as Vice President and Chief Financial Officer in
January 1999, became Executive Vice President, Electrode Sales and
Marketing, and Chief Financial Officer in February 2000, became Executive
Vice President, Graphite Power Systems Division, in August 2001, became
President and Chief Operating Officer in May 2002 and became Chief
Executive Officer and President in January 2003.
OPTION GRANTS, EXERCISES AND VALUES
No options to purchase shares of common stock were granted to the named
executive officers during 2002. The following table sets forth certain
information relating to the exercise of previously granted options by the named
executive officers during 2002.
20
AGGREGATED OPTION EXERCISES IN 2002
AND OPTION VALUES AT DECEMBER 31, 2002
-------------------------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT DECEMBER 31, 2002 DECEMBER 31, 2002
NAME EXERCISE REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
-------------------------------------------------------------------------------------------------------------------------------
GILBERT E. PLAYFORD -- -- 941,000/233,000 $0/$0
-------------------------------------------------------------------------------------------------------------------------------
CORRADO F. DE GASPERIS -- -- 168,500/75,000 0/0
-------------------------------------------------------------------------------------------------------------------------------
SCOTT C. MASON -- -- 145,000/172,000 0/0
-------------------------------------------------------------------------------------------------------------------------------
KAREN G. NARWOLD -- -- 127,579/76,667 0/0
-------------------------------------------------------------------------------------------------------------------------------
CRAIG S. SHULAR -- -- 265,000/102,000 0/0
-------------------------------------------------------------------------------------------------------------------------------
EMPLOYMENT AND OTHER AGREEMENTS
In June 1998, we entered into a five-year employment agreement with Mr. Playford
to serve as President and Chief Executive Officer, which was amended in August
2001 and July 2002. The agreement, as amended in 2001, provided for automatic
renewal for successive additional one-year terms, unless we gave written notice
of non-renewal no later than 90 days prior to any renewal date or Mr. Playford
gave written notice of non-renewal at least one year prior to the first renewal
date or nine months prior to any subsequent renewal date. In July 2002, the
agreement was further amended to enable Mr. Playford to defer any decision on
his part regarding renewal or non-renewal until the end of 2002. This amendment
also provided that, following the promotion of Mr. Shular to President (which
promotion was made in May 2002), Mr. Playford would thereafter serve as Chairman
of the Board and Chief Executive Officer. This amendment further provided that,
if Mr. Playford gave notice of non-renewal before the end of 2002, then
GrafTech's Board of Directors would have the right at any time to elect a new
Chief Executive Officer and, upon such election, Mr. Playford would become an
executive Chairman of the Board. Mr. Playford has elected to retire on June 22,
2003 (which is the expiration date of the agreement) and gave such a notice of
non-renewal. Mr. Shular was elected Chief Executive Officer effective January 1,
2003. As an executive Chairman of the Board, Mr. Playford will continue to serve
under the amended agreement as an employee and a senior executive officer until
June 22, 2003.
Under the original agreement, Mr. Playford was entitled to receive a base salary
in 2002 (as previously increased by GrafTech's Board of Directors) of $650,000
and an annual cash bonus for 2002 (commensurate with his position). In addition,
for the purpose of calculating Mr. Playford's benefits under the UCAR Carbon
Retirement Program, (1) Mr. Playford earns, ratably over the initial five-year
term of the agreement, credit for 26.5 years of prior service, substantially all
of which was with Union Carbide, and (2) the amount of benefits receivable by
Mr. Playford under the UCAR Carbon Retirement Program will be likewise ratably
offset by the amount of benefits receivable by him under the Union Carbide
Retirement Program. The amendments did not change these provisions. Under the
amended agreement, Mr. Playford is entitled to an annual salary of $400,000 in
2003 and an annual cash bonus of $250,000 for 2003. These amounts are prorated
for the period through his retirement on June 22, 2003 or his earlier
termination of employment. In addition, under the amended agreement, for
purposes of calculating benefits under our retirement, disability and other
benefit plans only, upon retirement on June 22, 2003 or earlier termination of
employment due to death or disability, Mr. Playford shall be deemed to have
received a cash bonus equal to 100% of his target award for 2002 (which was
$487,500) and a salary for 2003 equal to the greater of $650,000 (prorated on
the same basis as described above) or his actual salary earned.
At the time he entered into the original agreement, Mr. Playford received
options to purchase 300,000 shares of common stock. The exercise price per share
of the options ($30.58 per share) was equal to the fair market value at the date
of grant, which was defined at that time under the relevant stock incentive plan
as the average of the high and low trading prices for the 20 business days
immediately preceding the date of grant. The options expire in January 2007. In
1998, Mr. Playford received options to purchase 300,000 shares of common stock.
The options have an exercise price per share of $17.06 and expire in September
2008. In 2000, Mr. Playford received options to purchase 300,000 shares of
common stock. The options have an exercise price per share of $8.56 and expire
in December 2010. In 2001, Mr. Playford received options to purchase 274,000
shares of common stock. The options have an exercise price of $8.85 per share.
Options covering 41,000 of these shares vested on the date of grant and options
covering the remaining 233,000 of these shares will vest in September 2003 or
sooner if accelerated pursuant to the amended agreement. The options expire in
September 2011. Other provisions relating to the options
21
are described below. In recognition of Mr. Playford's appointment as Chairman of
the Board in September 1999, in addition to President and Chief Executive
Officer, and to provide incentives to him during difficult operating
circumstances, GrafTech's Board of Directors approved a grant to Mr. Playford of
100,000 shares of restricted stock, of which 70,000 shares were to vest in June
2003 and 30,000 shares were to vest in December 2004, in both cases assuming Mr.
Playford was still employed by us. The grant was effective on January 1, 2000.
Under the amended agreement, upon his retirement on June 22, 2003, all unvested
options and restricted stock granted to Mr. Playford shall vest.
The original agreement provides for termination (subject to certain notice and
other procedural provisions) by us for cause or without cause or by Mr. Playford
for good reason and contains a noncompetition covenant which continues for a
period of two years beyond the expiration of the then current term. If we
terminate Mr. Playford's employment without cause or Mr. Playford resigns for
good reason, then Mr. Playford will be entitled to severance payments and
enhanced pension benefits and all of his years of prior service, substantially
all of which was with Union Carbide, will be immediately recognized. Those
severance payments will equal 2.99 times the sum of Mr. Playford's base salary
and the cash bonus paid or payable for the calendar year ending on or
immediately before termination. Mr. Playford's pension benefits will be enhanced
by assuming that he had an additional three years of age and three years of
service. These benefits are payable commencing immediately following termination
of employment and are not reduced for early commencement of benefits. The
amendments did not change these provisions.
We have agreed that, for the purpose of calculating Mr. Mason's and Mr. Shular's
benefits under the UCAR Carbon Retirement Program, Mr. Mason and Mr. Shular
earn, ratably over five years, credit for 18.5 years and 22.5 years,
respectively, of prior service, all of which was with Union Carbide, with the
same offset arrangement as Mr. Playford. We have agreed to accelerate the
earning of prior years of service for Messrs. Mason and Shular upon the freezing
of the UCAR Carbon Retirement Program as of March 31, 2003 as described under
"Retirement Program" on page 24.
GrafTech's Board of Directors has approved severance compensation agreements for
the named executive officers and other members of senior management. In the case
of the named executive officers, the agreements provide for severance
compensation equal to 2.99 times the officer's base salary and, with respect to
U.S. employees, extended insurance coverage and reimbursement for certain excise
tax liabilities (and income tax liabilities on this reimbursement). The officers
are entitled to the compensation if they are terminated (other than for cause)
or resign for good reason within three years after a change of control. A change
of control has the same meaning under the agreements as it has under the stock
incentive plans described below
STOCK-BASED INCENTIVE PLANS
We maintain several plans which provide for the grant of awards or rights to
management employees that are valued or measured in whole or in part in
reference to, or are otherwise based on, the common stock, including options,
restricted stock, phantom stock, stock units and performance shares.
Non-employee directors are eligible to receive awards under one of the plans.
The plans have been and, subject to limitations imposed by the rules of the
NYSE, may be amended from time to time without stockholder approval (except in
the case of one plan, certain amendments of which would require shareholder
approval, under which 373,000 shares of common stock remain available for
issuance). The number of shares of common stock still reserved under plans in
which named executive officers and non-employee directors are eligible to
participate was 5,962,504 as of April 1, 2003, of which 4,837,771 were subject
to then outstanding options. Any shares subject to, and the exercise or
measurement prices of, awards are subject to adjustment for stock dividends,
stock splits, and certain business combinations and other events.
Management employees have been and may be granted vested or unvested awards at
the discretion of GrafTech's Board of Directors or the Organization,
Compensation and Pension Committee. Unvested awards granted to management
employees have vested or may vest on satisfaction of such employment or
performance conditions as may be imposed by GrafTech's Board of Directors or the
Organization, Compensation and Pension Committee at the time of grant.
GrafTech's Board of Directors or the Organization, Compensation and Pension
Committee has the right to accelerate the vesting of any or all unvested awards
at any time. The exercise price per share of options is determined by GrafTech's
Board of Directors or the Organization, Compensation and Pension Committee at
the time of grant and may not be less than the fair market value of a share of
common stock. The definition of fair market value under those plans means the
closing sale price of a share of common stock on the last trading day preceding
the date of grant. The exercise price of options may, under certain
circumstances, be paid with the proceeds from the sale of shares to be issued
upon exercise of such options. A third-party broker assists in the
administration of the plans. All options which have been granted, and
substantially all options which may be granted, under the plans are nonqualified
stock options. Options awarded to employees expire on, among other dates, the
date fixed by GrafTech's Board of Directors or the Organization, Compensation
and Pension Committee at the time the options are granted, but must expire
within 10 years after the date of grant (except in the case of one plan which
previously provided that options must expire within 12 years of the date of
grant). Subject to the limitations with respect to term and exercise price of
options described above, GrafTech's Board of Directors or the Organization,
Compensation and Pension Committee has the authority to establish the terms and
conditions of all awards at the time
22
such awards are granted, including, without limitation, terms and conditions
relating to settlement in cash or shares of common stock or a combination
thereof, performance measures, tandem or reload features, registration with the
SEC, withholding of taxes, transferability, forfeiture and clawback,
anti-dilution and adjustments to reflect dividends and distributions, and
exercise.
All unvested awards become vested upon the occurrence of a change of control. In
addition, we have the right to cancel substantially all outstanding options in
the event of a change of control, in which event we are required to pay
optionees an amount equal to the difference between the exercise price of the
canceled options and the fair market value of the underlying shares. A change of
control occurs on:
o the date on which any person or group becomes the beneficial owner of 15%
or more of the then outstanding common stock or voting securities of
GrafTech;
o the date on which any person or group acquires the right to vote on any
matter, by proxy or otherwise, with respect to 15% or more of the then
outstanding common stock or voting securities of GrafTech;
o the date, at the end of any two-year period, on which individuals, who at
the beginning of such period were directors of GrafTech, or individuals
nominated or elected by a vote of two-thirds of such directors or directors
previously so elected or nominated, cease to constitute a majority of
GrafTech's Board of Directors;
o the date on which stockholders of GrafTech approve a complete liquidation
or dissolution of GrafTech; or
o the date on which GrafTech consummates certain reorganizations, mergers,
asset sales or similar transactions.
The following table sets forth certain information relating to the shares of
common stock that may be issued under our stock-based incentive plans at
April 1, 2003.
EQUITY COMPENSATION PLAN INFORMATION(1)
--------------------------------------------- ---------------------------- ------------------------ ---------------------------
PLAN CATEGORY A B C
--------------------------- ----------------------- --------------------------
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
ISSUED UPON EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN A)
--------------------------------------------- ---------------------------- ------------------------ ---------------------------
Equity compensation plans approved by
stockholders (2) 2,519,270 $16.82 992,199
--------------------------------------------- ---------------------------- ------------------------ ---------------------------
Equity compensation plans not approved
by stockholders (3) 6,712,445 $14.39 2,562,358
--------------------------------------------- ---------------------------- ------------------------ ---------------------------
Total 9,231,715 $14.94 3,554,557(4)
--------------------------------------------- ---------------------------- ------------------------ ---------------------------
(1) Does not include the shares that are the subject of Proposal Two.
(2) Includes the Management Stock Incentive Plan (Original Version), the 1995
Equity Incentive Plan and a portion of the reserved shares under the
Management Stock Incentive Plan (Senior Version).
(3) Includes the Management Stock Incentive Plan (Mid-Management Version), the
1996 Mid-Management Equity Incentive Plan and a portion of the shares
reserved under the Management Stock Incentive Plan (Senior Version). For a
description of the material terms of these plans, see "Stock-Based
Incentive Plans" on page 22.
(4) Of these shares, 1,124,733 shares are available for awards to non-employee
directors and officers within the meaning of the rules of the NYSE.
23
COMPENSATION DEFERRAL PLAN
We maintain a compensation deferral plan for the benefit of U.S.-paid management
employees who participate in a cash bonus or other variable compensation
programs. The plan is effective for compensation that would otherwise be payable
on or after January 1, 2000. Under the plan, participants are able to defer up
to 85% of their variable compensation, up to 50% of their base salary and up to
100% of their lump sum payments from our nonqualified retirement plans.
Distributions from the plan generally will be made upon retirement or other
termination of employment, unless further deferred by the participant. In
addition, a participant may irrevocably elect to receive interim distributions
prior to retirement or other termination of employment.
SAVINGS PLAN
We maintain the UCAR Carbon Savings Plan, which is qualified under Sections
401(a) and 401(k) of the Internal Revenue Code of 1986. All of our regular,
full-time U.S. employees are eligible to participate in the Savings Plan.
Assets in the Savings Plan are held in four types of accounts: an after-tax
account to which participants may make contributions on an after-tax basis; a
before-tax account to which participants may make contributions on a pre-tax
basis; a company contribution account to which matching contributions are
allocated; and an employer contribution account to which certain additional
company contributions are allocated. The maximum employee contribution (pre-tax
and after-tax combined) for any year for any participant other than union
employees is 50% of such participant's compensation (subject to statutory
limits). For union employees, the maximum is 17 1/2% of such compensation.
We make a matching contribution for each participant who elects to contribute to
the Savings Plan. For participants other than union employees, the matching
contribution is 100% of the first 3% of compensation and 50% of the next 2% of
compensation that a participant contributes. For union employees, the matching
contribution is 50% of the amount contributed by the employee to the extent that
the employee contributes between 1% and 7 1/2% of the employee's compensation.
Effective January 1, 2002, for participants other than union employees, in
addition to matching contributions, we make an additional employer contribution
each year equal to 2.5% of the participant's compensation up to the social
security taxable wage base for the year, plus 5% of compensation above the
social security wage base. Prior to April 1, 2003, certain employees (who
elected to remain in the qualified retirement plan described below) were not
eligible for these additional employer contributions. A participant becomes
fully vested in these additional employer contributions once he or she has
completed five years of service.
Contributions to the Savings Plan are invested, as the employee directs, in
various funds offered under the Savings Plan from time to time, including funds
that invest entirely in our common stock (either at fair market value in a
regular stock fund or, prior to January 1, 2003, subject to restrictions on
resale and reinvestment, at a discount of 10% from fair market value in a
discount stock fund). Distributions from the Savings Plan are generally made
upon retirement or other termination of employment, unless deferred by the
participant.
Effective January 1, 2003, the Savings Plan was amended to provide that matching
contributions shall be made in shares of common stock in lieu of cash. In
addition, as of that date, the discounted common stock fund was eliminated as an
investment option under the Savings Plan, and all shares held in that fund were
transferred to the regular stock fund.
RETIREMENT PROGRAM
Prior to February 25, 1991, substantially all of our domestic employees
participated in the Union Carbide Retirement Program. Effective February 25,
1991, we adopted the UCAR Carbon Retirement Program, which was similar to the
Union Carbide Retirement Program at that time and consisted of a qualified
retirement plan and several nonqualified retirement plans. The cost of the UCAR
Carbon Retirement Program is borne entirely by us. Retirement and death benefits
related to employee service through February 25, 1991 are covered by the Union
Carbide Retirement Program. Benefits paid by the Union Carbide Retirement
Program are based on final average pay through February 25, 1991 plus salary
increases (not to exceed 6% per year) through January 26, 1995. All of our
employees who retired prior to February 25, 1991 are covered under the Union
Carbide Retirement Program. Subject to certain limitations, all service and
earnings recognized under the Union Carbide Retirement Program prior to February
25, 1991 are recognized under the UCAR Carbon Retirement Program.
Prior to January 1, 2002, the UCAR Carbon Retirement Program covered
substantially all of our employees in the U.S. and certain U.S. nationals
employed by our foreign subsidiaries. Effective January 1, 2002, all employees
other than union employees and certain eligible employees who elected to remain
in the qualified retirement plan ("GRANDFATHERED PARTICIPANTS"), ceased accruing
benefits under the qualified retirement plan and began receiving the additional
employer contributions under the Savings Plan
24
described above. With respect to the named executive officers, Messrs. Playford
and Shular and Ms. Narwold were eligible to elect, and did elect, to remain in
the qualified retirement plan. Effective March 31, 2003, all Grandfathered
Participants, other than the union employees, also ceased accruing benefits
under the qualified retirement plan and, effective April 1, 2003, began
receiving the additional employer contribution under the Savings Plan described
above. In connection with the cessation of all benefit accruals under the
qualified retirement plan, benefit accruals under the plan for all participants
other than union employees and Grandfathered Participants were frozen as of
December 31, 2001. For Grandfathered Participants, all benefits were frozen as
of March 31, 2003. The applicable date when a participant's benefit was frozen
is called the "BENEFIT FREEZE DATE."
The following table sets forth, for employees who elected to remain in the UCAR
Carbon Retirement Program (and not employees who received the additional
employer contribution under the Savings Plan described above for 2002), the
estimated annual benefits payable, based on the indicated credited years of
service and the indicated average annual compensation used in calculating
benefits, assuming a normal retirement at age 65 in 2002, under the Union
Carbide Retirement Program and the UCAR Carbon Retirement Program on a combined
basis.
RETIREMENT PLAN TABLE
-------------------------------------------------------------------------------------------------------------------------------
YEARS OF SERVICE
AVERAGE ANNUAL -----------------------------------------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35 40
-------------------------------------------------------------------------------------------------------------------------------
$ 100,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000
150,000 33,570 45,000 56,520 67,500 78,750 90,000
250,000 56,520 75,000 93,750 112,500 131,250 150,000
500,000 112,500 150,000 187,500 225,000 262,500 300,000
1,000,000 225,000 300,000 375,000 450,000 525,000 600,000
-------------------------------------------------------------------------------------------------------------------------------
Under the UCAR Carbon Retirement Program, the monthly amount of an employee's
retirement benefit upon retirement at age 65 is a percentage of average monthly
compensation received during the 36-month period preceding the Benefit Freeze
Date, or the highest average monthly compensation received during any three
calendar years in the ten calendar years preceding the Benefit Freeze Date if it
would result in a higher pension benefit, multiplied by the number of years of
service credit, less up to 50% of projected primary Social Security benefits and
less any public or other GrafTech provided pension (except any military pension
or any benefit under the Social Security Act). An employee who is (1) age 62 or
over with ten or more years of service credit or (2) whose age and service
credit add up to 85 may voluntarily retire earlier than age 65 with a retirement
benefit unreduced because of early retirement, based on years of service credit
at the date of retirement. The compensation covered by the UCAR Carbon
Retirement Program includes salary and certain variable compensation, including
group profit sharing in an amount up to 8% through 1999, and 12% thereafter, of
the employee's base salary. The benefits payable reflected in the preceding
table are calculated on a straight life annuity basis and are subject to an
offset for such Social Security benefits.
For federal income tax purposes, the amount of benefits that can be paid from a
qualified retirement plan is restricted. We have adopted nonqualified retirement
plans for payment of those benefits at retirement that cannot be paid from our
qualified retirement plan. Employees who retire after January 1, 1994 may elect
to receive the payment of benefits from these nonqualified retirement plans
monthly or in a lump sum. Benefits under certain of these nonqualified
retirement plans, under certain circumstances, may be terminated if GrafTech's
Board of Directors determines that an employee has engaged in activities which
are detrimental to the interests of, or are in competition with, us. Except with
respect to years of service as described above for Messrs. Playford, Mason and
Shular, the practical effect of these nonqualified retirement plans, together
with the qualified retirement plan, is to calculate benefits to all employees,
including those who are officers, on a uniform basis.
Benefits under these nonqualified retirement plans are generally paid out of our
general assets, although they may also be paid through grantor trusts adopted by
us or by purchase of annuities. When we purchase annuities, this does not
increase the after-tax amount of benefits to which employees are entitled, but
does relieve us of liability (and relieve beneficiaries of risk of non-payment
by us) with respect to the benefits under the nonqualified retirement plans
covered by such annuities.
In connection with the changes to the qualified retirement plan, all benefits
under the nonqualified retirement plans as of March 31, 2003 were frozen and the
lump sum value of such benefits was transferred to the accounts relating to
additional employer contributions under the Savings Plan described above.
Beginning April 1, 2003, in lieu of benefits under the nonqualified retirement
plans, eligible employees shall be credited, each year, in the accounts relating
to additional employer contributions under the Savings Plan described above,
with a percentage of their compensation in excess of $200,000.
25
The following table sets forth, as of March 31, 2003, the number of years of
service credited to the named executive officers under the UCAR Carbon
Retirement Program and the number of such years credited for service with Union
Carbide, which vested under the UCAR Carbon Retirement Program as of March 31,
2003.
--------------------------------------------------- ---------------------------------- -----------------------------------
TOTAL NUMBER INCLUDES THE
TOTAL NUMBER OF YEARS CREDITED FOLLOWING NUMBER OF YEARS
UNDER UCAR CARBON RETIREMENT CREDITED FOR SERVICE WITH UNION
NAME PROGRAM CARBIDE
--------------------------------------------------- ---------------------------------- -----------------------------------
GILBERT E. PLAYFORD 31 26.5
--------------------------------------------------- ---------------------------------- -----------------------------------
CORRADO F. DE GASPERIS 4 -
--------------------------------------------------- ---------------------------------- -----------------------------------
SCOTT C. MASON 21 18.5
--------------------------------------------------- ---------------------------------- -----------------------------------
KAREN G. NARWOLD 12 -
--------------------------------------------------- ---------------------------------- -----------------------------------
CRAIG S. SHULAR 26 22.5
--------------------------------------------------- ---------------------------------- -----------------------------------
BENEFIT SECURITY
We have adopted grantor trusts to assist us in providing for payment of certain
nonqualified retirement and other benefit plan obligations to management as well
as certain compensation deferred by management and earnings thereon under the
Compensation Deferral Plan. Except in the case of the Compensation Deferral
Program (which is funded) and in cases where we have purchased annuities in
respect of any such obligations as described under "Retirement Program" on
page 24, all of these obligations are otherwise payable out of our general
assets. These obligations include accrued benefits under nonqualified
retirement plans and severance obligations under employment and other
agreements.
The trusts contain a benefits protection account which makes funds available to
the Administrative Committee of the trusts (which is comprised of our employees)
to assist participants and their beneficiaries in enforcing their claims with
respect to those obligations, compensation and earnings upon a change of
control. We may from time to time contribute assets to or, with the approval of
a majority of GrafTech's Board of Directors, withdraw assets from the trusts
(other than from the benefits protection account, to which $250,000 has been
contributed), except that no withdrawal can be made after a change of control
until all such obligations, compensation and earnings are paid or discharged.
GrafTech has contributed 426,400 shares of common stock to the trusts and is in
the process of contributing an additional 1,573,600 shares of common stock to
the trusts. GrafTech is registering such shares for resale for the benefit of
the trusts and intends to resell such shares in order to meet obligations
arising under voluntary and selective severance programs and expected retirement
of Mr. Playford and several senior managers. GrafTech's Board of Directors may
amend or terminate the trusts at any time prior to a change of control. Upon a
change of control, the trusts become irrevocable, GrafTech is required to make
contributions to the trusts sufficient to discharge and pay such obligations,
compensation and earnings and the Administrative Committee is required to use
the amounts held in the trusts for such purposes. Upon a change of control, no
amendment of the trusts may be adopted without the written consent of a majority
of the participants and the beneficiaries who are receiving benefits thereunder.
Consistent with the requirements of applicable law, the assets of the trusts are
subject to the claims of creditors of GrafTech in the event of GrafTech's
insolvency or bankruptcy. For purposes of the grantor trusts, a change of
control has the same definition as that described with respect to the stock
incentive plans.
26
STOCK PERFORMANCE GRAPH
The graph set forth below shows cumulative total return to stockholders on an
initial investment, as of December 31, 1997, of $100 in the common stock as
compared to an initial investment, as of December 31, 1997, of $100 in the
Standard & Poor's 400 Midcap Index and the NYSE Industrials Index over the
period from December 31, 1997 through December 31, 2002. Total return assumes
dividend reinvestment. The performance shown on the graph is not necessarily
indicative of future performance.
[GRAPH OMITTED]
-------------------------------------------------------------------------------------------------------------------------------
31 DEC 98 31 DEC 99 31 DEC 00 31 DEC 01 31 DEC 02
-----------------------------------------------------------------------
GRAFTECH INTERNATIONAL LTD. $ 44.60 $ 44.60 $ 24.41 $ 26.79 $ 14.92
-------------------------------------------------------------------------------------------------------------------------------
S&P MIDCAP 400 INDEX 119.08 136.59 160.50 159.54 136.39
-------------------------------------------------------------------------------------------------------------------------------
NYSE INDUSTRIALS 119.56 134.91 132.83 123.39 99.50
-------------------------------------------------------------------------------------------------------------------------------
27
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
--------------------------------------------------------------------------------
The following table sets forth, at April 1, 2003, the number and percentage of
outstanding shares of common stock owned, both actually and beneficially as
determined pursuant to the rules promulgated by the SEC, by:
o each stockholder known by us to own more than 5% of the outstanding shares
of common stock;
o each director of GrafTech;
o each of the named executive officers; and
o all directors and executive officers as a group.
Actual ownership is the same as beneficial ownership, except that it does not
include options, some of which may be out-of-the-money as described in the
footnotes to the following table.
The number of shares of common stock outstanding as of April 1, 2003 was
57,301,937.
-------------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF
PERCENTAGE OF TOTAL NUMBER OF OUTSTANDING
NUMBER OF OUTSTANDING SHARES SHARES
SHARES ACTUALLY SHARES (ACTUAL BENEFICIALLY (BENEFICIAL
BENEFICIAL OWNER OWNED OWNERSHIP) Owned(a) OWNERSHIP)
-------------------------------------------------------------------------------------------------------------------------------
William Blair & Company(b) 5,968,465 10.4% 5,968,465 10.4%
222 West Adams Street - 34th Floor
Chicago, IL 60606
-------------------------------------------------------------------------------------------------------------------------------
Frontier Capital Management LLC(b) 4,108,121 7.2% 4,108,121 7.2%
99 Summer Street
Boston, MA 02110
-------------------------------------------------------------------------------------------------------------------------------
Gabelli Fund, LLC(b) 3,586,545 6.3% 3,586,545 6.3%
One Corporate Center
Rye, NY 10580
-------------------------------------------------------------------------------------------------------------------------------
Strong Capital Management, Inc.(b) 3,207,965 5.6% 3,207,965 5.6%
100 Heritage Reserve
Menomonee Falls, WI 53051
-------------------------------------------------------------------------------------------------------------------------------
Gilbert E. Playford(c) 271,733 * 1,212,733 2.1%
-------------------------------------------------------------------------------------------------------------------------------
Corrado F. De Gasperis(d) 52,926 * 221,426 *
-------------------------------------------------------------------------------------------------------------------------------
Scott C. Mason 17,685 * 162,685 *
-------------------------------------------------------------------------------------------------------------------------------
Karen G. Narwold 12,272 * 139,851 *
-------------------------------------------------------------------------------------------------------------------------------
Craig S. Shular 46,774 * 311,774 *
-------------------------------------------------------------------------------------------------------------------------------
R. Eugene Cartledge 34,600 * 68,130 *
-------------------------------------------------------------------------------------------------------------------------------
Mary B. Cranston(e) 2,000 * 35,231 *
-------------------------------------------------------------------------------------------------------------------------------
John R. Hall 12,000 * 43,350 *
-------------------------------------------------------------------------------------------------------------------------------
Harold E. Layman -- * -- *
-------------------------------------------------------------------------------------------------------------------------------
Thomas Marshall 25,400 * 59,700 *
-------------------------------------------------------------------------------------------------------------------------------
Ferrell P. McClean(f) 13,400 * 23,721 *
-------------------------------------------------------------------------------------------------------------------------------
Michael C. Nahl 11,200 * 46,930 *
-------------------------------------------------------------------------------------------------------------------------------
Directors and executive officers as a group (13 503,835 * 2,443,676 4.3%
persons)
-------------------------------------------------------------------------------------------------------------------------------
* Represents holdings of less than one percent.
28
(a) Includes shares subject to vested options as follows: for Mr. Playford,
941,000 shares, all of which are out-of-the-money; for Mr. De Gasperis,
168,500 shares, all of which are out-of-the-money; for Mr. Mason, 145,000
shares, all of which are out-of-the-money; for Ms. Narwold, 127,579 shares,
all of which are out-of-the-money; for Mr. Shular, 265,000 shares, all of
which are out-of-the-money; for Mr. Cartledge, 33,530 shares, all of which
are out-of-the-money; for Ms. Cranston, 33,231 shares, all of which are
out-of-the-money; for Mr. Hall, 31,350 shares, all of which are
out-of-the-money; for Mr. Marshall, 34,300 shares, all of which are
out-of-the-money; for Ms. McClean, 10,321 shares, all of which are
out-of-the-money; and for Mr. Nahl, 35,730 shares, all of which are
out-of-the-money; and for directors and executive officers as a group,
1,939,841 shares, all of which are out-of-the-money.
(b) Based solely upon the most recent amended Schedule 13G or Schedule 13D
filed through April 1, 2003 by such stockholder with the SEC. Such
stockholder may be part of a group which filed the amended Schedule 13G or
Schedule 13D jointly.
(c) Includes 1,200 shares owned by Mr. Playford's spouse.
(d) Includes 4,500 shares owned by Mr. De Gasperis' spouse.
(e) Includes 2,000 shares owned by the Mary & Harold Cranston Family Trust, of
which Ms. Cranston is Trustee.
(f) Includes 10,000 shares owned by Ms. McClean's spouse.
29
OTHER INFORMATION
--------------------------------------------------------------------------------
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires GrafTech's
directors and officers and holders of more than 10% of the outstanding shares of
common stock to file with the SEC initial reports of ownership, and reports of
changes in ownership, of common stock and other equity securities of GrafTech.
GrafTech believes that, during 2002, its directors and officers and holders of
more than 10% of the outstanding shares of common stock complied with all
reporting requirements under Section 16(a).
CERTAIN TRANSACTIONS
GrafTech's Board of Directors adopted an executive employee loan program in
September 1998. All members of senior management were eligible to participate in
the program. Under the program, participants were able to borrow, on a full
recourse basis, an amount equal to up to their annual base salary (or, in the
case of the Chief Executive Officer, three times his annual base salary). The
loans were non-interest-bearing and became due upon the earlier to occur of
termination of employment or the expiration of five years from the date of
borrowing. We agreed to reimburse the borrowers for the incremental income tax
liability (at such time as such liability is incurred) due on the interest
income imputed because of the interest-free nature of the loans. The largest
aggregate amount of each such loan outstanding during 2002 was: $1,620,000 for
Mr. Playford; $175,000 for Mr. De Gasperis; $225,000 for Mr. Mason; $150,000 for
Ms. Narwold; $225,000 for Mr. Shular; and an aggregate of $2,395,000 for all
executive officers as a group. No loans were made in 2002.
GrafTech's Board of Directors adopted an executive employee stock purchase
program. All members of senior management were eligible to participate in the
program. Under the program, participants were able to purchase shares of common
stock from GrafTech in an amount equal to up to their annual base salary (or, in
the case of the Chief Executive Officer, three times his annual base salary).
The purchase price per share under the program equaled the closing price of a
share of common stock on the last trading day prior to the date of purchase.
Since all eligible participants had already purchased prior to 2002 virtually
all shares which they could have purchased under the program, no member of
senior management purchased shares of common stock under the program during
2002.
In the 2002 first quarter, these programs were closed. In the 2002 second
quarter, all of the outstanding loans under the executive employee loan program,
an aggregate of $3 million, were repaid with shares of common stock, valued at
the closing sale price on the date of repayment. To the extent that any employee
did not have a sufficient number of shares of common stock to repay his or her
loan in full, we forgave and cancelled the balance of the loan to that employee
and reimbursed that employee for the tax liability on the income attributable to
the cancellation of such indebtedness. The number of shares used to make such
repayment, the amount of the loan cancelled and the amount of the reimbursement
thereon was 104,516 shares, $1,619,998 and $252,791 for Mr. Playford, 11,290
shares, $174,995 and $29,364 for Mr. De Gasperis, 16,013 shares, $224,991 and $0
for Mr. Mason, 5,676 shares, $149,984 and $53,806 for Ms. Narwold, and 12,996
shares, $224,993 and $70,725 for Mr. Shular.
LIMITATIONS ON SOLICITING MATERIAL, LIABILITIES AND INCORPORATION BY REFERENCE
In accordance with the rules and regulations of the SEC, the following
information set forth in this proxy statement shall not be deemed to be
soliciting material within the meaning of Regulations 14A and 14C under the
Securities Exchange Act of 1934, filed with the SEC under the Exchange Act or
otherwise subject to Regulations 14A or 14C or 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 or the Exchange Act, notwithstanding
any general incorporation by reference of this proxy statement into any other
document filed with the SEC:
o information under "The Board of Directors" on page 8 and "Board Committee
Membership Roster" on page 12 regarding the independence or expertise of
any particular director;
o the information under "Change in Independent Accountant" on page 13,
"Audit and Finance Committee Report" on page 14 and "Organization,
Compensation and Pension Committee Report" on page 15; and
o the information under "Stock Performance Graph" on page 27.
30
PROPOSAL TWO: AMEND THE MANAGEMENT STOCK INCENTIVE PLAN
(SENIOR VERSION) TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR
AWARDS TO NON-EMPLOYEE DIRECTORS, OFFICERS AND OTHER MANAGEMENT EMPLOYEES
--------------------------------------------------------------------------------
GrafTech's Board of Directors has adopted, subject to approval by the
stockholders, and is proposing for such approval, an amendment to the Management
Stock Incentive Plan (Senior Version), or "MSIP". The amendment would increase
the number of shares of common stock as to which awards may be made under the
MSIP by 2,500,000 shares. Under the MSIP, awards can be made to non-employee
directors, officers (which, for purposes of this Proposal Two, has the same
meaning as under the rules of the NYSE) and other management employees.
If approved by stockholders, the amendment would become effective immediately.
To become effective, the amendment must be approved by the affirmative vote of
the holders of a majority of the outstanding shares of common stock.
GrafTech's Board of Directors recommends that stockholders vote FOR the
amendment.
--------------------------------------------------------------------------------
1. Q: WHY SHOULD THE NUMBER OF SHARES AS TO WHICH AWARDS MAY BE MADE TO
NON-EMPLOYEE DIRECTORS, OFFICERS AND OTHER MANAGEMENT EMPLOYEES UNDER
THE MSIP BE INCREASED?
A: Our philosophy has always been, and continues to be, to compensate
non-employee directors, officers and other management employees in a
manner and an amount that enables us to:
o attract and retain qualified and experienced individuals and
motivate them to devote time and effort commensurate with the
extraordinary challenges that we face; and
o align their interests with the interests of stockholders.
Under our compensation programs and consistent with our philosophy, we
adopt annually plans to pay cash bonuses to management employees based
on, among other factors, achievement of specified goals and our
financial performance during the prior year. While those goals were
achieved in part, in each of 2000, 2001 and 2002, annual cash bonuses
for those years were not awarded by GrafTech's Board of Directors in
order to maximize use of available cash to reduce debt. In lieu thereof,
options were awarded for 2000 and 2001 (in addition to, and as part of,
regular annual option awards) and restricted stock was awarded for 2002.
Similarly, a significant portion of the compensation of our non-employee
directors is stock-based and, in order to maximize available cash and to
exemplify their commitment to GrafTech, our non-employee directors have
in the past agreed to accept, in lieu of cash payments to which they
were entitled, additional stock-based compensation with a value that
approximates the amount of such payments, as described on page 17.
These actions have substantially depleted the pool of shares available
for awards to non-employee directors and officers.
Notwithstanding the extraordinary efforts of our non-employee directors,
officers and other management employees to significantly improve product
quality, reduce costs, reposition our global production network and
streamline our work processes, resulting in an anticipated return to
profitability, virtually all of the stock-based incentives we have
awarded are substantially under water.
GrafTech's Board of Directors believes that it is essential to provide
effective new stock-based incentives to continue to retain and motivate
our non-employee directors, officers and other management employees.
GrafTech's Board of Directors also believes that the pool of shares
available for awards is insufficient to provide levels of stock-based
compensation on a sustaining meaningful basis for both non-employee
directors and officers for 2003 and subsequent years. As a result,
GrafTech's Board of Directors believes that the MSIP should be amended
to increase the pool of shares available for this purpose.
--------------------------------------------------------------------------------
2. Q: WHAT TYPES OF STOCK-BASED COMPENSATION HAS GRAFTECH AWARDED IN THE PAST?
A: The only awards made under our stock-based compensation plans (including
the MSIP) consist of awards of restricted stock (all of which have
become fully vested, non-forfeitable and freely transferable) and
options (some of which have
31
been cancelled, forfeited or exercised and the balance of which are
outstanding).
--------------------------------------------------------------------------------
3. Q: WHAT STOCK-BASED COMPENSATION WAS AWARDED TO NON-EMPLOYEE DIRECTORS,
OFFICERS AND OTHER MANAGEMENT EMPLOYEES IN 2002 AND 2003?
A: No stock-based compensation was awarded to officers and other management
employees in 2002 or 2003, except for an award of an aggregate of
412,200 shares of restricted stock to over 170 management employees in
2002, as described on page 15.
No stock-based compensation was awarded to non-employee directors in
2002 or 2003, except for awards of options as part of their annual
compensation as described on page 17.
--------------------------------------------------------------------------------
4. Q: HOW MANY OPTIONS DO NON-EMPLOYEE DIRECTORS AND OFFICERS CURRENTLY HOLD?
A: The following table sets forth information as to options held by
non-employee directors and officers at April 1, 2003.
------------------------------------ ------------------------- ------------------ ---------------------------
NUMBER OF SHARES
NAME OF GROUP EXERCISE PRICE RANGE COVERED EXPIRATION DATE RANGE
------------------------------------ ------------------------- ------------------ ---------------------------
------------------------------------
Non-Employee Directors Less than $5.00 15,135 2013
------------------------- ------------------ ---------------------------
$5.00-$9.99 87,910 2010-2011
------------------------- ------------------ ---------------------------
$10.00-$14.99 49,701 2012
------------------------- ------------------ ---------------------------
More than $15.00 40,851 2007-2010
------------------------- ------------------ ---------------------------
Total 193,597
------------------------- ------------------ ---------------------------
-----------------------------------
Named Executive Officers Less than $5.00 0 -
------------------------- ------------------ ---------------------------
$5.00-$9.99 1,232,046 2007-2011
------------------------- ------------------ ---------------------------
$10.00-$14.99 250,000 2008-2010
------------------------- ------------------ ---------------------------
More than $15.00 991,000 2006-2008
------------------------- ------------------ ---------------------------
Total 2,473,046
------------------------- ------------------ ---------------------------
-----------------------------------
TOTAL OF ALL NON-EMPLOYEE
DIRECTORS AND OFFICERS LESS THAN $5.00 15,135 2013
------------------------- ------------------ ---------------------------
$5.00-$9.99 1,319,956 2007-2011
------------------------- ------------------ ---------------------------
$10.00-$14.99 299,701 2008-2012
------------------------- ------------------ ---------------------------
MORE THAN $15.00 1,031,851 2006-2010
------------------------- ------------------ ---------------------------
TOTAL 2,666,643
------------------------- ------------------ ---------------------------
The options were granted under the MSIP, the Management Stock Incentive
Plan (Original Version) and, in the case of officers who were not
officers at the time of grant, under the Management Stock Incentive
Plan (Mid-Management Version) and the 1996 Mid-Management Equity
Incentive Plan.
--------------------------------------------------------------------------------
5. Q: WHAT OPTIONS ARE OUTSTANDING UNDER ALL STOCK-BASED COMPENSATION PLANS?
A: The following tables set forth certain information about the outstanding
options.
OPTIONS HELD BY CURRENT EMPLOYEES AND NON-EMPLOYEE DIRECTORS
(EXCLUDING EMPLOYEES WHO HAVE ANNOUNCED RETIREMENT OR
WHO ARE SUBJECT TO VOLUNTARY OR SELECTIVE SEVERANCE PROGRAMS IN 2003)(1)
------------------------------------- -------------------------------------- -------------------------------
NUMBER OF SHARES COVERED
EXERCISE PRICE RANGE (VESTED/UNVESTED) EXPIRATION DATE RANGE
------------------------------------- -------------------------------------- -------------------------------
15,135
Less than $5.00 (0/15,135) 2013
------------------------------------- -------------------------------------- -------------------------------
69,000
$5.00-$7.59 (0/69,000) 2013
------------------------------------- -------------------------------------- -------------------------------
111,073
$7.60(2) (111,073/0) 2007
------------------------------------- -------------------------------------- -------------------------------
32
------------------------------------- -------------------------------------- -------------------------------
NUMBER OF SHARES COVERED
EXERCISE PRICE RANGE (VESTED/UNVESTED) EXPIRATION DATE RANGE
------------------------------------- -------------------------------------- -------------------------------
2,370,940
$7.61-$8.99 (1,235,640/1,135,300) 2010-2012
------------------------------------- -------------------------------------- -------------------------------
135,271
$9.00-$11.99 (51,271/84,000) 2012
------------------------------------- -------------------------------------- -------------------------------
1,310,551
$12.00-$19.99 (1,085,341/225,210) 2008-2010
------------------------------------- -------------------------------------- -------------------------------
109,300
$20.00-$29.99 (102,633/6,667) 2008-2009
------------------------------------- -------------------------------------- -------------------------------
646,000
$30.00 and higher (505,000/141,000) 2007-2008
------------------------------------- -------------------------------------- -------------------------------
4,767,270
Total (3,090,958/1,676,312)
------------------------------------- -------------------------------------- -------------------------------
(1) Options held by Mr. Playford are included although he has
announced his retirement effective June 22, 2003. If Mr.
Playford is reelected as a director at the Annual Meeting of
Stockholders to be held on May 28, 2003, he will become a
non-employee director upon his retirement from GrafTech.
(2) Consists of options granted in connection with our leveraged
equity recapitalization in 1995 that was sponsored by The
Blackstone Group.
OPTIONS HELD BY ALL OTHER PERSONS
(CONSISTING OF FORMER DIRECTORS AND FORMER EMPLOYEES, INCLUDING
EMPLOYEES WHO HAVE ANNOUNCED RETIREMENT OR WHO ARE SUBJECT TO
VOLUNTARY OR SELECTIVE SEVERANCE PROGRAMS IN 2003)
---------------------------------------- -------------------------------------- ----------------------------
EXERCISE PRICE RANGE NUMBER OF SHARES EXPIRATION DATE
---------------------------------------- -------------------------------------- ----------------------------
Less than $5.00 0 -
------------------------------------- -------------------------------------- -------------------------------
$5.00-$7.59 12,800 -
------------------------------------- -------------------------------------- -------------------------------
$7.60 1,310,561 2007
------------------------------------- -------------------------------------- -------------------------------
$7.61-$8.99 1,134,110 2010-2012
---------------------------------------- -------------------------------------- ----------------------------
$9.00-$11.99 19,730 2012
---------------------------------------- -------------------------------------- ----------------------------
$12.00-$19.99 1,142,762 2008-2010
---------------------------------------- -------------------------------------- ----------------------------
$20.00-$29.99 32,132 -
---------------------------------------- -------------------------------------- ----------------------------
$30.00 and higher 812,350 2007-2008
---------------------------------------- -------------------------------------- ----------------------------
Total 4,464,445
---------------------------------------- -------------------------------------- ----------------------------
--------------------------------------------------------------------------------
6. Q: WHAT IS GRAFTECH'S OVERHANG?
A: Overhang is defined as the ratio of the number of shares of common stock
subject to outstanding options (regardless of whether they are
"in-the-money" and regardless of whether, if they are
"out-of-the-money", they are likely to become "in-the-money" before they
expire) to the sum of that number plus the number of outstanding shares
of common stock. Effective overhang is similarly defined, but only takes
into account those shares of common stock that are reasonably likely to
be "in-the-money" in the reasonably foreseeable future.
At April 1, 2003, our overhang was 13.9%. We believe, however, that our
effective overhang is substantially lower because the exercise prices of
a substantial percentage of our outstanding options are significantly
higher than the current trading level of the common stock.
Moreover, overhang attributable to options held by our current
non-employee directors and our current management employees (excluding
those who have announced retirement or who are subject to our voluntary
or selective severance programs in 2003) is only 7.2%. Most of these
options held by current employees are held by employees who joined us to
replace our former management team and who have devoted extraordinary
efforts to strengthen and grow our business (and, at the same time,
satisfy the legacy antitrust obligations incurred due to the activities
of former management). Under current conditions, the 4,767,270 options
held by current employees and non-employee directors provide only
limited incentive to retain and motivate these employees. For example:
o if the price of the common stock increased 100% from the closing
price per share of the common stock on April 1, 2003, only 1.8% of
the options outstanding at April 1, 2003 held by those current
employees (as well as our current non-employee directors)(or 84,135
options) would be "in-the-money";
o if the price increased 200%, that percentage would be 4.4% (or
210,208 options); and
o if the price increased 300%, that percentage would be 55.2% (or
2,632,419 options).
33
--------------------------------------------------------------------------------
7. Q: WHAT OPTIONS HAVE BEEN REPRICED BY GRAFTECH?
A: We have never repriced options.
--------------------------------------------------------------------------------
8. Q: HOW MANY SHARES ARE CURRENTLY AUTHORIZED AND AVAILABLE FOR AWARDS TO
NON-EMPLOYEE DIRECTORS, OFFICERS AND OTHER MANAGEMENT EMPLOYEES?
A: At April 1, 2003, there remained 3,070,234 shares reserved under the
MSIP and, of these shares, 2,318,501 shares were subject to outstanding
options. In addition, at April 1, 2003, there remained 2,519,270 shares
reserved under the Management Stock Incentive Plan (Original Version),
all of which were subject to outstanding options and which, if such
options are cancelled or forfeited, become reserved under the MSIP.
Further, at April 1, 2003, there remained 7,196,768 shares authorized
for issuance under other stock-based incentive plans and, of these
shares, 4,393,944 shares were subject to outstanding options. Therefore,
at April 1, 2003, there remained 12,786,272 shares reserved under all of
our stock-based incentive plans and, of these plans, 3,554,557 were
available for awards to non-employee directors, officers and other
management employees. Of these available shares, 1,124,733 shares were
available for awards made to officers (and, to the extent not used
therefor, other management employees) and, of these shares, 751,733
shares were also available for awards made to non-employee directors.
In addition, 2,429,824 shares were available for awards made to
management employees who are not officers.
The MSIP provides that, in the event of a stock dividend, stock split,
share combination or other nonrecurring corporate transaction,
GrafTech's Board of Directors or the Organization, Compensation and
Pension Committee shall make such adjustments in the number and type of
awards authorized by, and shares subject to, the MSIP and in the number
and type of shares covered by, and exercise prices and other provisions
of, outstanding awards as well as make such other amendments to the
MSIP, as GrafTech's Board of Directors or the Organization, Compensation
and Pension Committee, in good faith, determines to be appropriate and
equitable.
--------------------------------------------------------------------------------
9. Q: WHAT ARE THE STOCK-BASED COMPENSATION PLANS IN WHICH NON-EMPLOYEE
DIRECTORS, OFFICERS AND OTHER MANAGEMENT EMPLOYEES ARE ELIGIBLE TO
PARTICIPATE?
A: The MSIP is the only stock-based compensation plan in which non-employee
directors have been eligible to participate since 2000.
The MSIP and the 1995 Equity Incentive Plan are the only stock-based
compensation plans in which officers have been eligible to participate.
Management employees who are not officers have been eligible to
participate in the MSIP, the 1995 Equity Incentive Plan, the Management
Stock Incentive Plan (Original Version), the Management Stock Incentive
Plan (Mid-Management Version) and the 1996 Mid-Management Equity
Incentive Plan.
--------------------------------------------------------------------------------
10. Q: WHO IS ELIGIBLE TO PARTICIPATE IN THE MSIP?
A: Eligibility to participate in the MSIP is limited to non-employee
directors, officers and other management employees. In recent years, we
have granted awards under the MSIP only to non-employee directors and
officers and we have granted awards to other management employees under
other plans. We expect to continue this practice in the future.
34
--------------------------------------------------------------------------------
11. Q: WHO WILL BE ELIGIBLE TO PARTICIPATE IN AWARDS AS TO SHARES SUBJECT TO
THE AMENDMENT?
A: Only non-employee directors, officers and other management employees,
including officers, will be eligible to participate in awards with
respect to the shares of common stock subject to the amendment. There
are currently seven non-employee directors. There are currently about
170 management employees eligible to participate, with participation
based on their level of seniority and their performance. The
performance of the Chief Executive Officer is evaluated by the
Organization, Compensation and Pension Committee. The performance of
other officers is evaluated by the Chief Executive Officer, who
reviews his evaluation with the Organization, Compensation and Pension
Committee. The performance of other management employees is evaluated by
the Chief Executive Officer or their respective supervisors, as
appropriate. As described in the Answer to Question 10 above, we expect
that most of the shares would be used for awards to non-employee
directors and officers.
--------------------------------------------------------------------------------
12. Q: WHAT AWARDS ARE LIKELY TO BE GRANTED TO NON-EMPLOYEE DIRECTORS, OFFICERS
OR OTHER MANAGEMENT EMPLOYEES UNDER THE MSIP IN THE FUTURE?
A: Awards may be made to officers and other management employees under the
MSIP in the discretion of GrafTech's Board of Directors or the
Organization, Compensation and Pension Committee and, therefore,
are not determinable at this time. It is the intention of GrafTech's
Board of Directors and the Organization, Compensation and Pension
Committee to focus on performance-based targets for future grants to
officers and other management employees. The Organization, Compensation
and Pension Committee expects, however, that awards will be made to
non-employee directors as described on page 17.
--------------------------------------------------------------------------------
13. Q: WHAT TYPES OF AWARDS MAY BE MADE UNDER THE MSIP?
A: The MSIP provides for the grant of awards or rights that are valued or
measured in whole or in part in reference to, or are otherwise based on,
the common stock, including options, restricted stock, phantom stock,
stock units and performance shares.
The provisions of the MSIP are the same as those of all of our other
stock-based incentive plans, which are described on page 22. Among
other things, the MSIP provides that the exercise price per share of
options awarded under the MSIP may not be less that the fair market
value of a share of common stock on the date of grant. Fair market value
is defined as the closing sale price of the common stock on the last
trading day preceding the date of grant. In addition, the term of
options awarded under the MSIP may not exceed ten years.
--------------------------------------------------------------------------------
14. Q: WHO ADMINISTERS THE MSIP?
A: The MSIP is administered by the Organization, Compensation and Pension
Committee, subject to the ultimate authority of GrafTech's Board of
Directors; provided, however, that the Organization, Compensation and
Pension Committee may delegate routine administration of the MSIP to the
Chief Executive Officer.
--------------------------------------------------------------------------------
15. Q: HOW MAY THE MSIP BE AMENDED OR TERMINATED IN THE FUTURE?
A: The MSIP may be amended by GrafTech's Board of Directors at any time;
provided, however, that no suspension, termination or amendment of the
MSIP may adversely affect the rights of any participant with respect to
outstanding awards prior to the date of such suspension, termination or
amendment without the consent of such participant. Pursuant to the
current rules of the NYSE, any amendment which increases the number of
shares of common stock (not previously listed on the NYSE) as to which
awards may be made under the MSIP would require stockholder approval.
Pursuant to proposed rules of the NYSE, any amendment which constitutes
a material revision to the MSIP would require stockholder approval.
35
--------------------------------------------------------------------------------
16. Q: WHAT FEDERAL INCOME TAX CONSEQUENCES APPLY TO OPTIONS AWARDED UNDER THE
MSIP?
A: The following summary of certain material U.S. federal income tax
consequences applicable to stock options awarded under the MSIP does not
purport to be a complete discussion of all of the possible U.S. federal
income tax consequences of receiving such an award and is included for
general information only. Further, it does not address any state, local
or foreign income or other tax consequences. The discussion is based on
the provisions of the U.S. federal income tax law as of the date hereof,
which is subject to change retroactively as well as prospectively. A
participant will not recognize any income upon the grant of a stock
option under the MSIP. Upon exercise of the option (if the shares are
not subject to a substantial risk of forfeiture), the participant will
recognize ordinary compensation income in an amount equal to the excess,
if any, of the fair market value of the shares on the date of exercise
over the exercise price, and the Corporation will qualify for a
deduction in the same amount, subject
to Section 162(m) of the Internal Revenue Code of 1986 and a requirement
that the compensation be reasonable. The Corporation will be required to
comply with applicable federal income tax withholding requirements with
respect to the amount of ordinary compensation income recognized by the
participant. When the shares are sold, the participant will recognize
gain or loss equal to the difference, if any, between the amount
realized and the sum of the exercise price and the ordinary compensation
income recognized. Such gain or loss will be treated as short-term or
long-term capital gain or loss if the shares are capital assets,
depending upon the length of time that the participant held the shares.
--------------------------------------------------------------------------------
17. Q: WHAT WAS A RECENT CLOSING SALE PRICE PER SHARE OF THE COMMON STOCK?
A: On April 1, 2003, the closing price per share of common stock as
reported by the NYSE was $2.85.
36
PROPOSAL THREE: AMEND THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
--------------------------------------------------------------------------------
GrafTech's Board of Directors has adopted, subject to approval by the
stockholders, and is proposing for such approval, the following amendment to the
Amended and Restated Certificate of Incorporation of the Corporation:
"The first sentence of Article "SIXTH" of the Amended and Restated
Certificate of Incorporation of GrafTech International Ltd. be, and
hereby is, amended in its entirety to be and read as follows:
The aggregate number of shares of all classes of capital stock
which the Corporation shall have authority to issue is one
hundred sixty million (160,000,000), of which one hundred
fifty million (150,000,000) shall be common stock, par value
$.01 per share (the "Common Stock"), and ten million
(10,000,000) shall be preferred stock, par value $.01 per
share (the "Preferred Stock")."
To become effective, the amendment must be approved by the affirmative vote of
the holders of a majority of the outstanding shares of common stock.
GrafTech's Board of Directors recommends that stockholders vote FOR the
amendment.
--------------------------------------------------------------------------------
1. Q: HOW WOULD THE AMENDMENT AFFECT THE AUTHORIZED SHARES OF CAPITAL STOCK OF
GRAFTECH?
A: The amendment would increase the number of authorized shares of
GrafTech's common stock from 100,000,000 shares to 150,000,000 shares.
The amendment would not affect the number of authorized shares of
preferred stock.
--------------------------------------------------------------------------------
2. Q: HOW MANY SHARES OF COMMON STOCK ARE CURRENTLY AVAILABLE FOR FUTURE
ISSUANCE?
A: At April 1, 2003, 57,301,937 shares of common stock were outstanding
and 16,051,009 shares (including the shares desribed in Proposal Two)
were reserved for use under employee benefit plans and stock-based
incentive plans (including shares reserved for use under the Savings
Plan). In addition, we expected to contribute an aggregate of
3,073,600 shares to the trust for our qualified retirement plan and our
benefits protection trust. Accordingly, 23,568,854 shares of common
stock are available for future issuance.
--------------------------------------------------------------------------------
3. Q: WHO HAS THE AUTHORITY TO ISSUE COMMON STOCK?
A: GrafTech's Board of Directors has the authority to issue common stock
(including the shares subject to this Proposal Three), without the
approval of stockholders unless such approval is required by the rules
of the NYSE.
--------------------------------------------------------------------------------
4. Q: WHY SHOULD THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK BE INCREASED?
A: At April 1, 2003 and after taking into account shares reserved or
expected to be used as described in the Answer to Question 2 above, we
had about 23,268,854 shares of common stock available for general
corporate purposes, including acquisitions, public or private offerings
for cash or in exchange for debt, and compensation of directors,
officers, employees and others. Use of shares for such purposes is
subject to applicable laws, including the rules of the NYSE and the SEC.
GrafTech's Board of Directors regularly evaluates our needs and
opportunities to use shares of common stock to:
o satisfy or fund obligations or as substitutes for cash payments
(including those with respect to compensation of directors, officers
and employees);
37
o raise additional equity capital for funding emerging business
and/or deleveraging; or
o acquire companies or businesses in exchange, in whole or in part,
for common stock.
While it has not made any decisions and we have no offers, commitments
or understandings with respect thereto, GrafTech's Board of Directors
believes any such opportunities that may become available are likely to
become available under circumstances that would require prompt action
and significant flexibility on our part.
Accordingly, GrafTech's Board of Directors believes that it would be in
the best interests of the Corporation and its stockholders to increase
the number of authorized shares of common stock to provide GrafTech's
Board of Directors with authorized shares sufficient to enable it to
promptly act upon any such opportunity.
--------------------------------------------------------------------------------
5. Q: WOULD THE AMENDMENT CHANGE ANY RIGHTS ASSOCIATED WITH THE CAPITAL STOCK?
A: The amendment would not change any of the rights, restrictions, terms or
provisions relating to the common stock or the preferred stock.
--------------------------------------------------------------------------------
6. Q: ARE STOCKHOLDERS ENTITLED TO DISSENTERS' RIGHTS OF APPRAISAL WITH
RESPECT TO THE AMENDMENT?
A: Under the General Corporation Law of the State of Delaware, stockholders
are not entitled to appraisal rights with respect to the amendment.
GrafTech will not independently provide stockholders with any such
right.
--------------------------------------------------------------------------------
7. Q: ARE STOCKHOLDERS ENTITLED TO PREEMPTIVE RIGHTS WITH RESPECT TO THE
ISSUANCE OF COMMON STOCK?
A: Holders of common stock do not have preemptive rights with respect to
the issuance of common stock.
--------------------------------------------------------------------------------
8. Q: HOW WOULD THE FUTURE ISSUANCE OF COMMON STOCK AFFECT STOCKHOLDERS?
A: Any future issuance of common stock, other than on a pro-rata basis,
would dilute the percentage ownership and voting interest of then
current stockholders.
--------------------------------------------------------------------------------
9. Q: IS THERE A POTENTIAL ANTI-TAKEOVER EFFECT WITH RESPECT TO THE AMENDMENT?
A: The increased number of unissued and authorized shares of common stock
could, under certain circumstances, have an anti-takeover effect by, for
example, permitting issuances that would dilute the percentage ownership
and voting interest of a person seeking to effect a change in the
composition of GrafTech's Board of Directors, contemplating a tender or
exchange offer or contemplating the combination of GrafTech with another
company.
The amendment is not being proposed in response to any effort of which
management is aware to accumulate common stock or obtain control of
GrafTech and is not part of a plan by management to recommend to
GrafTech's Board of Directors and stockholders a series of amendments to
the Amended and Restated Certificate of Incorporation. Other than the
amendment, GrafTech's Board of Directors does not currently contemplate
recommending the adoption of any other amendments to the Amended and
Restated Certificate of Incorporation that could be construed to affect
the ability of third parties to take over or change the control of
GrafTech.
--------------------------------------------------------------------------------
10. Q: WHAT WOULD THE PROCEDURE BE FOR INCREASING THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK?
A: If the stockholders approve the amendment, we will promptly file a
Certificate of Amendment with the Secretary of State of the State of
Delaware to amend the Amended and Restated Certificate of Incorporation.
The amendment would become effective on the date of the filing of the
Certificate of Amendment.
38
APPENDIX A
GRAFTECH INTERNATIONAL LTD.
CHARTER OF THE AUDIT AND FINANCE COMMITTEE
I. PURPOSE AND POWER
The Committee has been established by the Board to assist the Board in
discharging and performing the duties and responsibilities of the Board with
respect to the financial affairs of the Corporation and its subsidiaries,
affiliates and related parties (collectively, the "GROUP"), including:
o The identification, assessment and management of financial risks and
uncertainties.
o The continuous improvement in financial systems.
o The integrity of financial statements and financial disclosures.
o The compliance with legal and regulatory requirements.
o The qualifications, independence and performance of the independent
accountants.
o The capabilities, resources and performance of the internal audit
department.
o The full and open communication with and among the independent
accountants, management, internal auditors, counsel, employees, the
Committee and the Board.
The Committee has the right to exercise any and all power and authority
of the Board with respect to matters within the scope of this Charter, subject
to the ultimate power and authority of the Board. The Board shall continue to
have the ultimate duty and responsibility to manage or direct the management of
the business and affairs of the Corporation.
The Committee has the authority to conduct any and all investigations
it deems necessary or appropriate, to contact directly the independent
accountants, the internal audit department and other employees and advisors and
require them to provide any and all information and advice it deems necessary or
appropriate, and to retain legal, accounting or other advisors it deems
necessary or appropriate.
The Committee has the authority to set aside for payment, pay and
direct the payment of the independent accountants for their reviews and audits
of financial statements and all other services as well as such legal, accounting
and other advisors.
The independent accountants shall report directly to the Committee, and
shall be accountable to the Committee and the Board, for their reviews and
audits of financial statements and all other services.
II. COMPOSITION
The Committee shall be comprised of that number of directors (but not
less than three) as may be determined from time to time by the Board. Each
member of the Committee shall be an independent director within the meaning of
the rules of the NYSE and the Sarbanes-Oxley Act of 2002 and shall be free from
any relationship that may interfere with the exercise of his or her judgment
independent from management. A copy of those rules is attached to the charter of
the Nominating and Governance Committee.
A member of the Committee may not, other than in his or her capacity as
a member of the Committee, the Board or any other committee of the Board, (i)
accept any consulting, advisory or other compensatory fee from the Group or (ii)
be affiliated with the Group.
All members of the Committee shall be financially literate. At least
one member of the Committee shall have accounting or financial management
expertise, and, effective for fiscal years beginning after July 15, 2003, must
constitute an
A-1
"audit committee financial expert."1 Members of the Committee may enhance their
familiarity with finance and accounting matters by participating in educational
programs conducted by the NYSE, the Corporation, an advisor or others.
The Nominating and Governance Committee shall recommend directors to be
elected or terminated as members of the Committee. The members of the Committee
shall be elected by the Board at the annual organizational meeting of the Board
or at such other times as the Board may determine. Each member of the Committee
shall serve until the next annual organizational meeting of the Board or the
earlier of his or her termination as a member of the Committee by the Board, the
election of his or her successor as a member of the Committee or his or her
death, resignation or removal. Unless a Chair is elected by the Board, the
members of the Committee may designate a Chair by a majority vote.
III. MEETINGS
The Committee shall meet in regular sessions at least four times
annually and in special sessions as circumstances warrant. Committee members are
expected to attend meetings and to spend the time needed to properly discharge
their responsibilities.
The Committee shall meet at least once annually with management, the
director of the internal audit department, the General Counsel and the
independent accountants in separate executive sessions to discuss any matters
that the Committee or any of them believe should be discussed privately.
A majority of the members of the Committee shall constitute a quorum
for the transaction of business. The act of a majority of the members present at
any meeting at which there is a quorum shall be the act of the Committee.
The Committee shall keep minutes of its meetings and other proceedings.
IV. PROCEDURES
The Committee shall determine its meeting schedule, the agenda for each
meeting, the information to be provided to it before or at each meeting and all
other matters relating to the conduct of its meetings and other activities.
The Chair of the Committee shall establish and distribute (or request
the Secretary to distribute) to each Committee member prior to each meeting an
agenda for the meeting. Each Committee member is free to raise at any meeting
subjects that are not on the agenda for that meeting.
Information that is important to understanding the business to be
conducted at a meeting should generally be distributed to the Committee members
at least one week (or, if that is not feasible, as soon as practicable) before
the meeting, and Committee members should review these materials before the
meeting.
It is the sense of the Board that, subject to Section V below, the
activities and procedures of the Committee should remain flexible so that it may
appropriately respond to changing circumstances.
V. PRIMARY ACTIVITIES
--------------------
1 A person with:
o an understanding of GAAP and financial statements and audit committee
functions;
o experience in preparing, auditing, analyzing or evaluating financial
statements that present breadth and level of complexity of accounting
issues that are generally comparable to those that can reasonably be
expected to be raised by the Corporation's financial statements, or
experience actively supervising persons engaged in such activities, who
acquired such experience through any of:
>> education and experience as a principal financial officer,
principal accounting officer, controller, public accountant or
auditor or experience in one or more positions that involve the
performance of similar functions;
>> experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant,
auditor or person performing similar functions, or experience
overseeing or assessing performance of companies or public
accountants with respect to preparation, auditing or evaluation of
financial statements; or
>> other relevant experience; and
o an ability to assess general application of such principles in
connection with accounting for estimates, accruals and reserves.
A-2
Without limiting the scope of the preceding provisions of this Charter,
the Committee shall:
Corporate Governance
1. Report on its meetings, proceedings and other activities at each
meeting of the Board.
2. Review and assess the adequacy of this Charter at least annually.
Submit changes to this Charter to the Board for approval.
3. Conduct an annual self-assessment to determine whether the Committee is
functioning effectively, including evaluating the Committee's
contributions to the Corporation, with a specific emphasis on areas in
which such contributions could be improved.
4. Review, evaluate and, as appropriate, approve all transactions with
affiliates, related parties, directors and executive officers.2
5. Direct the establishment of procedures for the receipt and retention
of, and the response to, complaints received regarding accounting,
internal control or auditing matters.
6. Direct the establishment of procedures for the confidential and
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
7. Review and assess at least annually the adequacy of the Corporation's
Code of Conduct and Ethics, including codes relating to ethics,
integrity, conflicts of interest, confidentiality, public disclosure
and insider trading. Adopt appropriate changes.
Public Reporting
8. Cause this Charter to be included in the annual proxy statement at
least once every three years in accordance with the rules of the SEC.
9. Prepare annually the report to stockholders to be included in the
annual proxy statement as required by the rules of the SEC. 3
10. Review, prior to filing, all annual reports on Form 10-K, quarterly
reports on Form 10-Q and interim reports on Form 8-K to be filed with
the SEC. Discuss with management and the independent accountants, prior
to filing, the financial statements (including the notes thereto) and
the disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations." 4, 5
11. Review, prior to public dissemination, all press releases related to
historical or prospective earnings or financial performance, including
the use of "pro forma" or "adjusted" information, as well as
information related thereto provided to analysts, ratings agencies,
lenders, stockholders or others.
12. Obtain from the chief executive officer and chief financial officer
assurances that the chief executive officer and chief financial officer
are meeting their obligations to the Committee, the independent
accountants and the public under certification requirements established
by the SEC, the NYSE and the Sarbanes-Oxley Act of 2002.
------------------------
2 This shall not apply to transactions with majority owned subsidiaries or
compensation of directors or executive officers.
3 The report must state whether the Committee has (i) reviewed and discussed
the audited financial statements with management, (ii) discussed certain
matters related to the conduct of the audit as set forth in SAS 61, (iii)
received written disclosures from the independent accountants regarding
their independence as required by ISB No. 1 and discussed with the
independent accountants their independence and (iv) recommended to the
Board that the audited financial statements be included in the annual
report on Form 10-K to be filed with the SEC.
4 This shall not require prior review where such review is or may be
impracticable, such as certain filings under Regulation FD or filings with
respect to certain items in current reports on Form 8-K.
5 The Chair may represent the entire Committee for purposes of this review
with respect to quarterly and interim reports.
A-3
Independent Accountants
13. Select, retain, evaluate and, as appropriate, terminate and replace the
independent accountants (and the Committee shall have the sole
authority to take any such action).
14. Obtain and review, at least once annually, a report by the independent
accountants describing (i) their internal quality control procedures,
(ii) any material issues raised by the most recent internal quality
control review or peer review or by any inquiry or investigation by any
governmental or professional authority within the preceding five years,
in each case with respect to one or more independent audits carried out
by them, (iii) all material steps taken to deal with any such issues
and (iv) all relationships between them and the Group.
15. Review annually the independence of the independent accountants by (i)
receiving from the independent accountants a formal written statement
delineating all relationships between the independent accountants and
the Group in accordance with ISB No.1, (ii) discussing with the
independent accountants all disclosed relationships between the
independent accountants and the Group and all other disclosed
relationships that may impact the objectivity and independence of the
independent accountants and (iii) discussing with management its
evaluation of the independence of the independent accountants.
16. Review and, as appropriate, approve, prior to commencement, all audit
services (including comfort letters in connection with securities
underwritings and tax services) and all non-audit services to be
provided by the independent accountants. 6
17. Review with the independent accountants annually all compensation to
the independent accountants for all audit and non-audit services.
Audits and Accounting
18. Review with the independent accountants annually the plan, scope,
staffing and timing of their audit.
19. After completion of the audit of the financial statements, review with
management, the director of internal audits and the independent
accountants the audit report, the management letter relating to the
audit report, all significant questions (resolved or unresolved) that
arose and all significant difficulties that were encountered during the
audit, the disposition of all audit adjustments identified by the
independent accountants, all significant financial reporting issues
encountered and judgments made during the course of the audit
(including the effect of different assumptions and estimates on the
financial statements) and the cooperation afforded or limitations
(including restrictions on scope or access), if any, imposed by
management on the conduct of the audit.
20. Review with management and the independent accountants all reports
delivered by the independent accountants in accordance with Section
10A(k)7 of the Securities Exchange Act of 1934 with respect to critical
accounting policies and practices used, alternative treatments of
financial information available under GAAP and other written
communications (including letters under SAS No. 50) between the
independent accountants and management, together with their
ramifications and the preferred treatment by the independent
accountants.
21. Review all items required to be communicated to the independent
accountants in accordance with SAS No. 61.
--------------------
6 The Committee may designate one member to approve such non-audit services,
but that member must inform the Committee of the approval at the next
meeting of the Committee. All such approvals must be disclosed in periodic
reports filed with the SEC. See footnote 10 for a list of prohibited
non-audit services.
7 Section 10A(k) requires independent accountants to report timely to the
Committee: (a) critical accounting policies and practices to be used; (b)
alternative treatments of financial information within GAAP that have been
discussed with management, ramifications of the use of such alternative
disclosures and treatments, and treatment preferred by the independent
accountants; and (c) other material written communications between the
independent accountants and management, such as management letters or
schedules of unadjusted differences.
A-4
22. Review with management and the independent accountants at least once
annually all correspondence with regulatory authorities and all
employee complaints or published reports that raise material issues
regarding the financial statements or accounting policies.
23. Review regularly with the independent accountants significant
disagreements between the independent accountants and management and
resolve or direct the resolution of all material disagreements between
management and the independent accountants regarding accounting and
financial reporting.
Other
24. Review contingencies which could reasonably be expected to have
significant impact on financial performance or condition.
25. Review at least annually best practices with respect to internal
controls. Direct changes as appropriate.
V. DISCRETIONARY ACTIVITIES
It is the sense of the Board that the Committee should periodically
evaluate whether and the extent to which to undertake one or more of the
following activities:
Independent Accountants
1. Review whether to adopt a policy of rotating the independent
accountants on a regular basis or otherwise.
2. Obtain and review all written reports issued with respect to the
results of inspections of the independent accountants conducted by the
Public Company Accounting Oversight Board.
3. Obtain from the independent accountants assurances that no person
associated with the independent accountants and engaged in providing
any service to the Group is under suspension from being associated with
a registered public accounting firm pursuant to Section 1058 of the
Sarbanes-Oxley Act of 2002.9
4. Obtain from the independent accountants assurances that the independent
auditors have not performed and will not perform any non-audit services
prohibited by Section 10A(g)10 of the Securities Exchange Act of 1934.9
5. Obtain from the independent accountants assurance that the lead audit
partner has been and will be rotated at least once every five years in
accordance with Section 10A(j)11 of the Securities Exchange Act of
1934.9
6. Obtain from the independent accountants assurance that the independent
accountants comply with all auditing, quality control and independence
standards to be established by the Public Company Accounting Oversight
Board.
-----------------------
8 Section 105 requires the Public Company Accounting Oversight Board to
establish fair procedures for investigating and disciplining registered
public accounting firms and their associated persons. That Board may
sanction such firms or their associated persons for refusing to testify,
produce documents or otherwise cooperate with it in an investigation or
for failing to supervise. Rules to be adopted by that Board may require
testimony to be given or audit work papers to be produced, and allows it
to share information with other government agencies. That Board may
investigate such firms' acts or practices that may violate the
Sarbanes-Oxley Act of 2002 or securities laws relating to audit reports,
and establish procedures as to sanctions to be applied.
9 The Committee should consider whether to include these items in the
engagement letter with the independent accountants.
10 Section 10A(g) makes it unlawful for the independent accountants to
provide, contemporaneously with the audit, any non-audit service,
including tax services, unless the Committee approves the activity in
advance. Certain non-audit services are prohibited regardless of approval
by the Committee. These prohibited services are: (1) bookkeeping or other
services related to the Corporation's accounting records or financial
statements; (2) financial information systems design and implementation;
(3) appraisal or valuation services, fairness opinions, or
contribution-in-kind reports; (4) actuarial services; (5) internal audit
outsourcing services; (6) management functions or human resources; (7)
broker or dealer, investment adviser, or investment banking services; and
(8) legal services and expert services unrelated to the audit.
11 Section 10A(j) makes it unlawful for the independent accountants to
provide audit services if either the lead or reviewing audit partner has
performed audit services for the Corporation in each of the Corporation's
five previous fiscal years.
A-5
7. Obtain from the independent accountants assurance that the independent
accountants have not and will not violate the conflict of interest
provisions set forth in Section 10A(l)12 of the Securities Exchange Act
of 1934.9
8. Obtain from the independent accountants assurance that they will inform
management concerning any information coming to their attention
indicating that an illegal act has or may have occurred.9
9. Review the experience and qualifications of the senior members of the
audit team of the independent accountants.
10. Review the extent to which accountants other than the independent
accountants are used and the reasons for such use.
11. Obtain from and review with the independent accountants a report on the
assessment made by management as to the effectiveness of the internal
control structure and procedures as required pursuant to Section 40413
of the Sarbanes-Oxley Act of 20029.
Internal Audits
12. Review the resources, plans, activities, staffing and organizational
structure of the internal audit department.
13. Review the appointment, performance and replacement of the director of
internal audits.
14. Review all audits and reports prepared by the internal audit department
together with management's response.
15. Review with management, the director of internal audits and the
independent accountants the adequacy of financial reporting and
internal control systems, the scope and results of the internal audit
program and the cooperation afforded or limitations, if any, imposed by
management on the conduct of the internal audit program.
Accounting
16. Review auditing, internal control and financial reporting principles,
policies and practices, and presentation of financial statements.
Review with management, the director of internal audits and the
independent accountants adopted or proposed changes in those
principles, policies and practices and the impact on the financial
statements. Review the effect on those policies and practices of
pronouncements and initiatives of the SEC, the Public Company
Accounting Oversight Board, other regulatory authorities and the
accounting profession.
17. Review with management, the director of internal audits and the
independent accountants, at least annually, (i) all significant
accounting estimates, (ii) all significant off balance sheet financing
arrangements and their effect on the financial statements and (iii) all
significant valuation allowances and liability, restructuring and other
reserves.
Controls and Systems
18. Review with management, the director of internal audits and the
independent accountants the extent to which recommended changes to or
improvements in auditing, accounting, financial reporting and internal
control systems have been implemented.
19. Review the adequacy of auditing, accounting, financial reporting and
internal control resources.
Public Reporting
------------------------
12 Section 10A(l) makes it unlawful for the independent accountants to
perform any audit service if the Corporation's CEO, controller, CFO, chief
accounting officer or equivalent officer was employed by the independent
accountants and participated in any capacity in the audit during the
one-year period before the beginning date of the audit.
13 Section 404 requires the SEC to prescribe rules requiring each annual
report on Form 10-K to contain an internal control report stating
management's responsibility for establishing and maintaining adequate
internal control structures and financial reporting procedures, and
containing an assessment of the effectiveness of such structures and
procedures as of the end of the Corporation's most recent fiscal year.
Section 404 also requires the independent accountants to attest to and
report on management's assessment of the internal controls. Such
attestation may not be the subject of a separate engagement, and must be
made in accordance with standards to be adopted by the Public Company
Accounting Oversight Board.
A-6
20. Review with management policies and practices relating to disclosure of
material information to the public, analysts, rating agencies, lenders,
stockholders and others, including compliance with Regulation FD and
other applicable laws.
Compliance
21. Review with the General Counsel, management and the director of
internal audits the procedures for monitoring compliance with laws and
policies on business integrity, ethics and conflicts of interest,
including foreign corrupt practice, antitrust and insider trading
matters.
22. Review with the General Counsel compliance with applicable laws,
including all material regulatory inquiries.
Risk Assessment
23. Review with management compliance with covenants under debt issues and
credit facilities.
24. Review with management and the independent accountants market,
operational and financial risk assessment and management policies and
practices, including related corporate approval requirements and
internal auditing systems and initiatives to minimize such risks.
25. Review contingencies that could reasonably be expected to have
significant impact on financial performance or condition.
26. Review with the General Counsel all legal matters that may have a
significant impact on financial condition or performance.
Finance
27. Review with management and the independent accountants financial
condition, liquidity and funding requirements, including short-term and
long-term capital expenditure plans and working capital needs.
28. Review and, as appropriate, approve the amounts, timing, types and
terms of public and private stock and debt issues and credit
facilities.
29. Review with management financial planning policies and practices and
financial objectives.
Other
30. Review policies for hiring of employees or former employees of the
independent accountants.
31. Review reports on expenses of executive officers and directors.
VI. LIMITATIONS
Notwithstanding anything contained herein to the contrary, the duties
and responsibilities of the Committee and each of its members is one of
oversight and neither the Committee nor any of its members shall have any duty
or responsibility to:
o plan, conduct or provide resources for audits;
o determine that financial statements have been properly prepared or
financial disclosures are full and complete;
o guarantee or provide other assurance that there are no financial
risks or uncertainties or that such risks or uncertainties have been
reduced or eliminated; or
o act as an expert or provide guarantees, representations, warranties,
professional or other certifications or assurance with respect to,
or verify, any matter within the scope of this Charter.
A-7
VII. QUALIFIED LEGAL COMPLIANCE COMMITTEE
The Committee is hereby designated and shall constitute a Qualified
Legal Compliance Committee within the meaning of the rules of the SEC. As such,
the Committee shall adopt written procedures for the confidential receipt,
retention and consideration of any report of evidence of a material violation
within the meaning of the Standards of Professional Conduct for Attorneys
adopted by the SEC. In addition, as such, the Committee shall:
o inform the General Counsel and the Chief Executive Officer of any
report of evidence of such a material violation (unless the
Committee reasonably believes that it would be futile to report
evidence of such a material violation to the General Counsel and the
Chief Executive Officer, in which case the Committee may report the
evidence directly to the Board);
o determine whether an investigation thereof is necessary or
appropriate and, if so: notify the Board thereof; initiate an
investigation, which may be conducted either by the General Counsel
or by external counsel; and retain such additional expert personnel
as the Committee deems necessary or appropriate; and
o at the conclusion of any such investigation: recommend that the
Company implement an appropriate response thereto; and inform the
General Counsel, the Chief Executive Officer and the Board of the
results of such investigation and the appropriate remedial measures
to be adopted.
The Committee shall take all other appropriate action, including notifying the
SEC, if the Company fails in any material respect to implement an appropriate
response that the Committee has recommended.
VIII. WEB SITE
This Charter shall be placed on the Corporation's web site.
Date: February 25, 2003
A-8
APPENDIX B
Explanatory Note: The GrafTech International Ltd. Management Stock Incentive
Plan (Senior Management Version), as amended to reflect Proposal Two, is filed
herewith pursuant to Instruction 3 to Item 10 of Schedule 14A and is not part of
the proxy statement.
THE GRAFTECH INTERNATIONAL LTD.
MANAGEMENT STOCK INCENTIVE PLAN
(SENIOR MANAGEMENT VERSION)
This Management Stock Incentive Plan was originally adopted as
the Management Stock Option Plan by the Board of Directors of GrafTech
International Ltd. (formerly, UCAR International Inc.) as of January 26, 1995.
It was subsequently amended. This document restates the Plan as amended
(including amendments to eliminate provisions which are no longer operative or
which have been adopted concurrently with this restatement) through March 31,
2003.
ARTICLE I
PURPOSE OF PLAN
The Plan has been adopted by the Board to provide for the
grant of stock options, restricted stock and other equity based awards to
management employees of the Company and its Subsidiaries and non-employee
directors of the Company as a part of the compensation and incentive
arrangements for such employees and directors. The Plan is intended to advance
the best interests of the Company by granting to them an ownership interest in
the Company or a right to acquire such an ownership interest, thereby motivating
them to contribute to the success of the Company and to remain in the employ or
service of the Company and its Subsidiaries. It is anticipated that the
availability of stock options, restricted stock and other equity based awards
under the Plan will also enhance the Company's and its Subsidiaries' ability to
attract and retain individuals of exceptional talent to contribute to the
sustained progress, growth and profitability of the Company.
ARTICLE II
DEFINITIONS
For purposes of the Plan, except where the context clearly
indicates otherwise, the following terms shall have the meanings set forth
below:
"Acceleration Event" shall mean an event with respect to which
the Plan or the relevant Award Agreement provides for the acceleration of the
vesting or exercisability of an Award.
"Affiliate" shall mean, with respect to any Person, (i) any
other Person that directly or indirectly Controls, is Controlled by or is under
common Control with such Person or (ii) any director, officer, partner or
employee of such Person or any Person specified in clause (i) above.
"Award" shall mean an award of an Option, Restricted Share or
Other Award granted under the Plan.
"Award Agreement" shall mean the relevant Option Agreement,
Restricted Share Agreement or Other Award Agreement between a Participant and
the Company.
"Board" shall mean the Board of Directors of the Company.
"Cause," if relevant to a particular Participant, shall have
the meaning of "Cause" set forth in such Participant's Award Agreement.
"CEO" shall mean the Chief Executive Officer of the Company.
"Change of Control" shall mean the occurrence of any of the
following events:
(i) any "person" or "group" within the meaning of
Section 13(d) or 14(d)(2) of the Exchange Act becomes the
beneficial owner of 15% or more of the then outstanding Common
Stock or 15% or more of the then
B-1
outstanding voting securities of the Company;
(ii) any "person" or "group" within the meaning of
Section 13(d) or 14(d)(2) of the Exchange Act acquires by
proxy or otherwise the right to vote on any matter or question
with respect to 15% or more of the then outstanding Common
Stock or 15% or more of the combined voting power of the then
outstanding voting securities of the Company;
(iii) Present Directors and New Directors cease for
any reason to constitute a majority of the Board (and, for
purposes of this clause (iii), "Present Directors" shall mean
individuals who at the beginning of any consecutive
twenty-four month period were members of the Board and "New
Directors" shall mean individuals whose election by the Board
or whose nomination for election as directors by the Company's
stockholders was approved by a vote of at least two-thirds of
the directors then in office who were Present Directors or New
Directors);
(iv) the stockholders of the Company approve a plan
of complete liquidation or dissolution of the Company; or
(v) consummation of:
(x) a reorganization, restructuring,
recapitalization, reincorporation, merger or consolidation of
the Company (a "Business Combination") unless, following such
Business Combination, (a) all or substantially all of the
individuals and entities who were the beneficial owners of the
Common Stock and the voting securities of the Company
outstanding immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the
common equity securities and the combined voting power of the
voting securities of the corporation or other entity resulting
from such Business Combination outstanding after such Business
Combination (including, without limitation, a corporation or
other entity which as a result of such Business Combination
owns the Company or all or substantially all of the assets of
the Company or the Group (and, for purposes hereof, the
"Group" refers to the Company and its Subsidiaries,
collectively) either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership immediately prior to such Business Combination of
outstanding Common Stock and the combined voting power of the
outstanding voting securities of the Company, respectively,
(b) no "person" or "group" within the meaning of Section 13(d)
or 14(d)(2) of the Exchange Act (excluding (1) any corporation
or other entity resulting from such Business Combination and
(2) any employee benefit plan (or related trust) of the Group
or any corporation or other entity resulting from such
Business Combination) beneficially owns 15% or more of the
common equity securities or 15% or more of the combined voting
power of the voting securities of the corporation or other
entity resulting from such Business Combination outstanding
after such Business Combination, except to the extent that
such beneficial ownership existed prior to such Business
Combination with respect to the Common Stock and the voting
securities of the Company, and (c) at least a majority of the
members of the board of directors (or similar governing body)
of the corporation or other entity resulting from such
Business Combination were members of the Board at the time of
the execution of the initial agreement providing for such
Business Combination or at the time of the action of the Board
approving such Business Combination, whichever is earlier; or
(y) any sale, lease, exchange or other
transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the
Company or the Group, whether held directly or indirectly
through one or more subsidiaries (excluding any pledge,
mortgage, grant of security interest, sale-leaseback or
similar transaction, but including any foreclosure sale),
provided, that, for purposes of clauses (v) (x) and (v) (y)
above, the divestiture of less than substantially all of the
assets of the Company or the Group in one transaction or a
series of related transactions, whether effected by sale,
lease, exchange, spin-off, sale of stock of or merger or
consolidation of a subsidiary, transfer or otherwise, shall
not constitute a Change of Control of the Company.
Notwithstanding the foregoing, a Change of Control of the
Company shall not be deemed to occur:
(I) pursuant to clause (i) or (ii) above, solely
because 15% or more of the then outstanding Common Stock or the then
outstanding voting securities of the Company is or becomes beneficially
owned or is directly or indirectly held or acquired by one or more
employee benefit plans (or related trusts) maintained by the Group; or
B-2
(II) pursuant to clause (v)(y) above, (1) if the
Board determines that any sale, lease, exchange or other transfer does
not involve all or substantially all of the assets of the Company or
the Group or (2) unless the Board determines otherwise, solely because
of the consummation of a transaction or a series of transactions
pursuant to which the Group sells, distributes to the Company's
stockholders, or otherwise transfers or disposes of any or all of its
ownership of its natural, acid-treated and flexible graphite business,
however owned (including ownership through one or more dedicated
subsidiaries and holding companies therefor and successors thereto).
For purposes hereof, references to "beneficial owner" and
correlative phrases shall have the same definition as set forth in Rule
13d-3 under the Exchange Act (except that ownership by underwriters for
purposes of a distribution or offering shall not be deemed to be
"beneficial ownership") and references to the Exchange Act or rules and
regulations thereunder shall mean those in effect on June 29, 2000.
"Code" or "Internal Revenue Code" shall mean the Internal
Revenue Code of 1986, as amended, and any successor statute.
"Committee" shall mean the Organization, Compensation and
Pension Committee of the Board.
"Common Stock" shall mean the common stock of the Company.
"Company" shall mean GrafTech International Ltd., a Delaware
corporation.
"Control" (including, with correlative meaning, all
conjugations thereof) shall mean with respect to any Person, the ability of
another Person to control or direct the actions or policies of such first
Person, whether by ownership of voting securities, by contract or otherwise.
"Director" shall mean any individual who is a member of the
Board and who is not an employee of the Company or a Subsidiary.
"Disability" shall mean the inability of a Participant to
perform in all material respects his duties and responsibilities to the Company
and the Subsidiaries by reason of a physical or mental disability or infirmity,
which inability is reasonably expected to be permanent and has continued (i) for
a period of six consecutive months or (ii) such shorter period as the Company
may determine. A Participant (or his representative) shall furnish the Company
with satisfactory medical evidence documenting the Participant's disability or
infirmity.
"Employee" shall mean any employee of the Company or any of
the Subsidiaries and, unless otherwise indicated, any Director.
"Employee Loan" shall mean any loan made to a Participant on
the Recapitalization Closing Date to assist the Participant in paying certain
income tax liability.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exercise Price" shall mean the amount that a Participant
must pay to exercise an Option with respect to one share of Common Stock subject
to such Option.
"Fair Market Value" shall mean (i) with respect to any Option
granted prior to September 29, 1998, the average of the high and low trading
prices of the Common Stock for the 20 business days immediately preceding the
day of the valuation, (ii) with respect to any Option or Restricted Share
granted after September 29, 1998 or any Other Award granted after January 15,
2003, the closing sale price (or, if there is none, the average of the closing
bid and asked prices) of the Common Stock on the last trading day preceding the
day of the valuation and (iii) with respect to any Option granted on September
29, 1998 after the close of trading, the closing sale price of the Common Stock
on that day (i.e., $17.06).
"Good Reason," if relevant to a particular Participant, shall
have the meaning of "Good Reason" set forth in such Participant's Award
Agreement.
"Grant Date" shall mean, with respect to the initial grant of
Options hereunder, the Recapitalization Closing Date and, thereafter, shall mean
the date the relevant Options are granted pursuant to the Plan.
B-3
"Option" shall mean, with respect to any Participant, (a) any
Time Option, Performance Option or Standard Option and (b) any Award issued in
respect of an Option referred to in clause (a) above by way of distribution or
in connection with a merger, consolidation, reorganization, recapitalization or
similar event.
"Option Agreement" shall mean the relevant Option Agreement
between a Participant and the Company.
"Option Shares" shall mean, with respect to any Participant,
(a) any shares of Common Stock (or other shares of capital stock of the Company)
issuable or issued by the Company upon exercise of any Option by such
Participant and (b) any shares of the capital stock of the Company issuable or
issued in respect of any of the shares described in clause (a) above by way of
stock dividend or other distribution, stock split, merger, consolidation,
reorganization, recapitalization or similar event.
"Other Award" shall mean, with respect to any Participant, (a)
any award or right that is valued or measured in whole or in part by reference
to, or is otherwise based on, Common Stock, including an award of shares of
Common Stock (other than (i) an award of an Option or a Restricted Share or (ii)
an "incentive stock option" within the meaning of Section 422 of the Code or any
successor provisions) and (b) any award issued in respect of any Other Award
referred to in clause (a) above by way of distribution or in connection with a
merger, consolidation, reorganization, recapitalization or similar event. Other
Awards permitted under the Plan shall include, without limitation, (a) phantom
stock, stock units, performance shares, stock options and restricted shares of
Common Stock with terms different than those specified herein for Options and
Restricted Shares, and unrestricted shares of Common Stock and (b) awards and
rights with respect to compensation previously earned or accrued.
"Other Award Agreement" shall mean the relevant Other Award
Agreement between a Participant and the Company.
"Participant" shall mean any individual who holds an
outstanding Award granted under the Plan.
"Performance Options" shall mean the options described in
Section 5.2.
"Person" shall mean an individual, a partnership, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Plan" shall mean this Management Stock Incentive Plan, as
amended from time to time (formerly known as the Management Stock Option Plan).
"Recapitalization" shall mean the recapitalization of the
Company pursuant to the Recapitalization Agreement.
"Recapitalization Agreement" shall mean the Recapitalization
and Stock Purchase Agreement dated as of November 14, 1994 among Union Carbide
Corporation, a New York corporation, Mitsubishi Corporation, a Japanese
corporation, the Company and UCAR International Acquisition Inc., a Delaware
corporation.
"Recapitalization Closing Date" shall mean the closing date of
the Recapitalization (i.e., January 26, 1995).
"Recapitalization Price" shall mean the per share price paid
in the Recapitalization (i.e., $7.60).
"Restricted Share" shall mean, with respect to any
Participant, (a) any share of Common Stock granted to the Participant under the
Plan and (b) any award issued in respect of a Restricted Share referred to in
clause (a) above by way of stock dividend or other distribution, stock split,
merger, consolidation, reorganization, recapitalization or similar event.
"Restricted Share Agreement" shall mean the relevant
Restricted Share Agreement between a Participant and the Company.
"Retirement," if relevant to a particular Participant, shall
have the meaning of "Retirement" set forth in such Participant's Award
Agreement.
B-4
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Standard Options" shall mean the options described in Section
5.2A.
"Subsidiary" shall mean any corporation of which the Company
owns, directly or through one or more Subsidiaries, a fifty percent (50%) or
more equity interest in such corporation or has the right to nominate fifty
percent (50%) or more of the members of the board of directors or other
governing body of such corporation.
"Time Options" shall mean the options described in Section
5.1.
"Transfer" shall mean, with respect to any Award, the gift,
sale, assignment, transfer, pledge, hypothecation or other disposition (whether
for or without consideration and whether voluntary, involuntary or by operation
of law) of such Award or any interest therein.
ARTICLE III
LIMITATION ON AVAILABLE SHARES
3.1 Available Shares. The aggregate number of shares of
Common Stock with respect to which Awards may be granted under the Plan shall
not exceed 3,070,234, plus that number of shares which are subject to options
outstanding at April 1, 2003 under the Management Stock Incentive Plan
(Original Version) and which are subsequently cancelled or forfeited; provided,
however, that such aggregate number of shares of Common Stock shall be subject
to adjustment in accordance with the provisions of Section 10.2.
3.2 Status of Option Shares and Restricted Shares. The shares
of Common Stock as to which Awards were or may be granted under the Plan or
which have been or are delivered or deliverable as or upon exercise of Awards
consist of (i) new issue shares, the issuance of which to officers of the
Company (within the meaning of the rules of the New York Stock Exchange) or
directors of the Company was approved by stockholders as then required by the
New York Stock Exchange and (ii) treasury shares which shall have been
previously listed on the New York Stock Exchange. To the extent that any Awards
are forfeited or expire (including, without limitation, termination prior to
vesting or exercise), the shares of Common Stock in respect of which such Awards
were granted shall become available for Awards granted pursuant to the Plan or
any other plan or agreement approved by the Committee. For purposes of
calculating the number of shares of Common Stock used and available for use
under the Plan, only shares of Common Stock subject to Awards that have been or,
by their terms, may be settled by delivery of shares of Common Stock shall be
deemed to have been used or reserved for use.
ARTICLE IV
GRANT OF OPTIONS, RESTRICTED SHARES AND OTHER AWARDS
4.1 Options and Restricted Shares. Options and Restricted
Shares may be granted to Employees. Initially, Options shall be granted by the
Board. Thereafter, the Committee or the Board shall grant Options and Restricted
Shares to Employees (other than Directors) after consultation with the CEO and
the Board or the Committee shall grant Options and Restricted Shares to
Directors. Except as otherwise provided herein, the Committee or the Board shall
establish the terms and conditions applicable to Options and Restricted Shares
granted by it at the time of grant, which terms and conditions shall be set
forth in the relevant Option Agreements and Restricted Share Agreements.
4.2 Exercise Price. The Exercise Price of Time Options and
Performance Options granted hereunder shall be not less than the Fair Market
Value of the Option Shares subject to such Options, determined as of the
relevant Grant Date. For purposes of the initial grant of Time Options and
Performance Options hereunder, the Exercise Price of such Options shall be the
Recapitalization Price. The Exercise Price of Standard Options granted hereunder
shall be specified by the Committee or the Board at the time of grant and set
forth in the relevant Option Agreements, but in no event shall the Exercise
Price of a Standard Option be less than the Fair Market Value of a share of
Common Stock on the relevant Grant Date.
4.3 Form of Option. Options granted under the Plan shall be
non-qualified stock options and are not intended to be "incentive stock options"
within the meaning of Section 422 of the Code or any successor provisions.
Options
B-5
shall be exercisable with respect to the number of Option Shares covered
by the Option to the extent they become exercisable and shall thereafter be
exercisable until they expire or are terminated.
4.4 Available Options. All Options granted under the Plan
prior to September 29, 1998 have been Time Options or Performance Options.
Notwithstanding anything to the contrary contained herein, only Standard Options
shall be granted to Employees (other than Directors) under the Plan on or after
September 29, 1998 and only Time Options or Standard Options shall be granted to
Directors under the plan on or after September 29, 1998.
4.5 Other Awards. Commencing January 16, 2003, Other Awards
may be granted to Employees. The Committee or the Board shall grant Other Awards
to Employees (other than Directors) after consultation with the CEO and the
Board or the Committee shall grant Other Awards to Directors. Other Awards may
be granted alone or in addition to any other Awards granted under the Plan. The
Board or the Committee shall establish the terms and conditions applicable to
Other Awards granted by it at the time of grant, which terms and conditions
shall be set forth in the relevant Award Agreement or in amendments to the Plan.
Such terms and conditions may include, without limitation, settlement in cash or
shares of Common Stock or a combination thereof (which form of settlement may be
either prescribed by the Board or the Committee or subject to the discretion of
the Company or the Participant), performance measures, tandem or reload
features, vesting schedules (and provisions regarding acceleration of vesting),
registration provisions (including indemnification and contribution
arrangements), terms and conditions relating to withholding of taxes,
transferability provisions, forfeiture and clawback provisions, anti-dilution
provisions and provisions relating to adjustments to reflect business
combinations, provisions relating to dividends and distributions, and exercise
provisions (including provisions relating to conditional exercises, net
exercises and payment of exercise prices with outstanding shares of Common
Stock).
ARTICLE V
EXERCISABILITY OF OPTIONS
5.1 Time Options. Except as otherwise provided in the
relevant Option Agreement or Section 5.3, all then outstanding Time Options
became vested and exercisable prior to March 1, 2002.
5.2 Performance Options. Except as otherwise provided in the
relevant Option Agreement or Section 5.3, all then outstanding Performance
Options became vested and exercisable prior to March 1, 2002.
5.2A Standard Options. Except as otherwise provided in the
Plan, Standard Options shall be subject to such terms and conditions as are
established by the Committee or the Board at the time of grant and set forth in
the relevant Option Agreements. Except as otherwise provided in the relevant
Option Agreement or Section 5.3, a Standard Option shall vest and become
exercisable at such time or under such circumstances as the Committee or the
Board shall determine and specify in the relevant Option Agreement.
5.3 Acceleration Events. The Committee or the Board may, but
are not required to, provide for the accelerated vesting and exercisability of
Standard Options at the time of grant and any such provisions shall be set forth
in the relevant Option Agreements. The Committee or the Board may, in its
discretion, accelerate the vesting and exercisability of any or all Options at
any time and for any reason.
ARTICLE VI
EXERCISE OF OPTIONS
6.1 Right to Exercise. During the lifetime of a Participant,
Options may be exercised only by such Participant (except that, in the event of
his Disability, Options may be exercised by his or her legal guardian or legal
representative). In the event of the death of a Participant, exercise of Options
shall be made only by the executor or administrator of the deceased
Participant's estate or the Person or Persons to whom the deceased Participant's
rights under Options shall pass by will or the laws of descent and distribution.
6.2 Procedure for Exercise. Vested Options may be exercised
in whole or in part with respect to any portion that is exercisable. To exercise
an Option, a Participant (or such other Person who shall be permitted to
exercise the Option as set forth in Section 6.1) must complete, sign and deliver
to the Company a notice of exercise in such form as the Company may from time to
time adopt and provide to a Participant (the "Exercise Notice"), together with
payment in full of
B-6
the Exercise Price multiplied by the number of shares of Common Stock with
respect to which the Option is exercised. Payment of the Exercise Price shall be
made in cash (including check, bank draft or money order). The right to exercise
the Option shall be subject to the satisfaction of all conditions set forth in
the relevant Option Agreement and Exercise Notice. In lieu of paying the
Exercise Price, upon a Participant's (or such other Person's) request, with the
Committee's or the Board's consent, the Company shall give the Participant a
number of shares of Common Stock equal to (A) divided by (B) where (A) is the
excess of the (i) the Fair Market Value of a share of Common Stock on the date
of exercise, over (ii) the Exercise Price, multiplied by (iii) the number of
shares for which the Option is being exercised, and (B) is the Fair Market Value
of a share of Common Stock on the date of exercise.
6.3 Option Agreements and Option Programs. To the extent that
the relevant Option Agreement or any stock option administration program
provides for different administrative, clerical or operational activities than
those provided for in this Article VI and such different activities are not
materially inconsistent with the purposes of this Article VI, then such other
provision shall govern.
6.4 Conditional Exercise in Contemplation of an Acceleration
Event. In contemplation of an Acceleration Event, a Participant may
conditionally exercise at least 15 days prior to the Acceleration Event all or a
portion of his Options which are exercisable and which will become exercisable
upon the occurrence of the Acceleration Event. Such conditional exercise shall
become null and void if the anticipated Acceleration Event does not occur within
six (6) months following the date of such conditional exercise. A conditional
exercise shall become binding upon a Participant (and such Participant shall
become obligated to pay the Exercise Price therefor) upon the occurrence of the
Acceleration Event.
6.5 Withholding of Taxes. The Company shall withhold from any
Participant from any amounts due and payable by the Company to such Participant
(or secure payment from such Participant in lieu of withholding) the amount of
any withholding or other tax due from the Company with respect to any Option
Shares issuable under the Plan, and the Company may defer such issuance unless
indemnified to its satisfaction.
ARTICLE VII
EXPIRATION OF OPTIONS
7.1 Expiration Date. Time Options and Performance Options
shall expire at 5:00 p.m. Eastern Standard Time on the day prior to the twelfth
anniversary of the Grant Date or upon such earlier time as provided in the
relevant Option Agreements and Standard Options shall expire at 5:00 p.m.
Eastern Standard Time on the tenth anniversary of the Grant Date or on such
earlier date as shall be specified by the Committee or the Board at the time of
grant and set forth in the relevant Option Agreements (as applicable, the
"Expiration Date").
7.2 Limited Stock Appreciation Right. Upon a Participant's
request, the Company may, in its sole discretion, cancel any vested Option (in
whole or in part) granted hereunder and pay the affected Participant the excess
of the (i) the Fair Market Value of a share of Common Stock, over (ii) the
Exercise Price, multiplied by (iii) the number of shares for which the Option is
being cancelled (the "Cancellation Amount"); provided, however, that coincident
with any transaction which is reasonably likely to result in a Change of Control
the Company may in its sole discretion, without a Participant's consent, cancel
any Option (in whole or in part) granted hereunder and pay the affected
Participant the Cancellation Amount.
ARTICLE VIIA
RESTRICTED SHARES
7A.1 Dividends. If the Board declares a special or
extraordinary dividend or distribution payable on the Common Stock, the Company
shall notify each Participant who (on the record date for determination of
stockholders entitled to receive such dividend or distribution) holds unvested
Restricted Shares of the amount of the dividend or distribution which such
Participant would have received if such Restricted Shares had vested prior to
such record date. Upon the vesting of such Restricted Shares, such dividend or
distribution shall be promptly paid, in cash if such dividend or distribution
was a cash dividend or distribution or in securities or other property if such
dividend or distribution was a dividend or distribution of securities or other
property, to such Participant. If any of such Restricted Shares are forfeited or
fail to vest, the Participant shall forfeit all rights to any such dividend or
distribution and it shall revert to the Company.
7A.2 Acceleration Events. The Committee or the Board may, but
are not required to, provide for the
B-7
accelerated vesting of Restricted Shares at the time of grant and any such
provisions shall be set forth in the relevant Restricted Share Agreement(s). The
Committee or the Board may, in its discretion, accelerate the vesting of any or
all Restricted Shares at any time and for any reason.
7A.3 Withholding of Taxes. The Company and its Subsidiaries
shall withhold or deduct from any or all payments or amounts due to or held for
the Participant or require payment by the Participant of an amount equal to all
taxes (including social security and medical (including FICA), and other
governmental charges of any kind as well as income and other taxes) required to
be withheld or deducted with respect to any and all taxable income and other
amounts attributable to the Restricted Shares. The procedures and arrangements
with respect thereto shall be set forth in the relevant Restricted Stock
Agreement.
ARTICLE VIII
RIGHTS AND LIMITATIONS
8.1 Dividend Equivalents. The following Sections 8.1(a),
8.1(b) and 8.1(c) shall apply to Options granted prior to September 29, 1998.
The following Section 8.1(d) shall apply to Options granted on or after
September 29, 1998.
(a) If the Board declares a special or extraordinary
dividend in connection with a recapitalization, reorganization, restructuring or
other nonrecurring corporate event to the holders of Common Stock, the Company
shall pay to an escrow account on behalf of each Participant an amount (the
"Dividend Equivalent") equal to the dividend they would have received had they
directly owned each Option Share subject to Time Options and each Option Share
with respect to which Performance Options are vested.
(b) Upon a Participant's exercise of a Time Option or
Performance Option, the Company shall offset the Exercise Price of each Option
Share subject to such Option in respect of which a Dividend Equivalent was paid
by the Dividend Equivalent set aside with respect to such Option Share. Any
Dividend Equivalent in excess of the Exercise Price shall be paid in cash at the
time the dividend is paid.
(c) If the Time Options or Performance Options of a
Participant with respect to which a Dividend Equivalent is set aside are
terminated or cancelled prior to the date such Options are exercised, the
Participant shall forfeit the right to the Dividend Equivalent and any amounts
set aside in the Participant's escrow account in respect of such Dividend
Equivalent shall revert to the Company.
(d) If the Board declares a special or extraordinary
dividend payable on the Common Stock in connection with a recapitalization,
reorganization, restructuring or other nonrecurring corporate event, the Company
shall notify each Participant who (on the record date for determination of
stockholders entitled to receive such dividend) holds vested Standard Options or
vested Time Options granted on or after September 29, 1998 of the amount of the
dividend (the "Dividend Adjustment") which such Participant would have received
if such Participant had owned the Option Shares subject to such Options. Upon
such Participant's exercise of any of such Options, (i) the Company shall reduce
the Exercise Price of such Options (but not below $.01) by the amount of the
Dividend Adjustment with respect to the Option Shares issuable upon such
exercise and (ii) to the extent that such Dividend Adjustment exceeds the amount
of such reduction, such excess shall be promptly paid in cash to such
Participant. If any of such Options expire or are terminated or cancelled prior
to exercise thereof, the Participant shall forfeit all rights to all Dividend
Adjustments.
8.2 Registration of Option Shares and Restricted Shares.
(a) Registration. The Company shall file, at its own
expense, a registration statement or statements on Form S-8 or Form S-3, as
appropriate, to register the issuance or resale of the Option Shares and the
Restricted Shares.
(b) Limitations on Resale. Any resale of the Option
Shares or the Restricted Shares pursuant to such registration statement or
statements shall be subject to (i) the continued effectiveness, at the Company's
discretion, of such registration statement or statements and (ii) any blackout,
insider trading, short-swing profits or other restrictions on trading activity
which the Company may impose or to which the Participant may be subject, by law,
under Company policies or otherwise.
B-8
(c) Indemnification. Any Participant for whom the resale
of Option Shares or Restricted Shares is included in such registration statement
or statements will indemnify the Company, each of its directors and officers and
each Person who Controls the Company (other than such Participant) against all
claims, losses, damages, expenses and liabilities (or actions in respect
thereof) arising out of or based upon any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement or
statements, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company, each of its directors and
officers and each Person Controlling the Company (other than such Participant)
for all legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged statement) or omission (or alleged omission) is made in such
registration statement or statements in reliance upon and in conformity with
written information furnished to the Company by such Participant with respect to
such Participant and expressly stated to be specifically for use therein;
provided, however, that the liability of any such Participant under this Section
8.2(c) shall be limited to the amount of proceeds received by such Participant
in the resale giving rise to such liability.
8.3 Transfer of Options. Options may not be Transferred
(other than by will or descent), except that Options may be Transferred to the
Company to secure indebtedness on any Employee Loan.
8.4 Transfer of Restricted Shares. Unless otherwise
determined by the Board or the Committee and in accordance with the vesting
conditions set forth in the relevant Restricted Share Agreement, Restricted
Shares may not be Transferred until the termination or lapse of all restrictions
relating to such Restricted Shares.
8.5 Agreements. Award Agreements may contain such additional
provisions (including rights, restrictions and obligations), not materially
inconsistent with the Plan, as may be approved by the Board or the Committee or
by the officers of the Company pursuant to authority delegated to them by the
Board or the Committee.
ARTICLE IX
ADMINISTRATION
9.1 Plan Administrator. Subject to the ultimate authority of
the Board, the Plan shall be administered by the Committee; provided, however,
that the Committee may delegate to the CEO responsibility for the routine
administration of the Plan.
9.2 Option Grants. The Committee and the Board shall have
authority to select Employees (other than Directors) to receive Awards and to
grant Awards (except for the initial grant of Options, which shall be granted by
the Board) to Employees (other than Directors) in such amounts as it shall
determine, in its full discretion, after consultation with the CEO; provided,
however, that the Board or the Committee may delegate to the CEO responsibility
to designate Employees (other than Directors) to participate in a pool of
Standard Options and Restricted Shares, the terms and conditions of which
(including the aggregate number of shares subject to Options and Restricted
Shares within the pool) shall have been specified by the Board or the Committee.
9.3 Additional Authority. As between a Participant and the
Company: the Committee and the Board shall have the sole and complete
responsibility and authority to (a) interpret and construe the terms of the
Plan, (b) correct any defect, error or omission or reconcile any inconsistency
in the Plan or in any Award Agreement and (c) make all other determinations and
take all other actions necessary or advisable for the implementation and
administration of the Plan; and the Committee's or the Board's determination on
matters within its authority shall be conclusive and binding upon the
Participants, the Company and all other Persons. The authority of the Committee
and the Board granted under this Article IX shall be additive to the authority
granted to them under Section 4.1.
ARTICLE X
MISCELLANEOUS
10.1 Amendment, Suspension and Termination of Plan. The Board
may amend or terminate the Plan at any time. No suspension, termination or
amendment of or to the Plan shall affect adversely the rights of any Participant
with respect to Awards granted hereunder prior to the date of such suspension,
termination or amendment without the consent of such Participant.
B-9
10.2 Adjustments.
(a) [omitted]
(b) Changes in Common Stock. In the event of a stock
dividend, stock split, share combination or other nonrecurring corporate
transaction, the Committee or the Board shall make such adjustments in the
number and type of Awards authorized by and shares subject to the Plan and the
number and type of shares covered by outstanding Awards and the Exercise Prices
specified therein and such other amendments to the Plan as the Board or the
Committee, in good faith, determines to be appropriate and equitable.
10.3 [omitted]
10.4 No Right to Participate. Except as otherwise agreed by
the Company, no Employee shall have a right to be selected as a Participant or,
having been so selected, to be selected again to receive a grant of Options.
10.5 No Employment Contract. Nothing in the Plan shall
interfere with or limit in any way the right of the Company or any of the
Subsidiaries to terminate any Participant's employment at any time (with or
without Cause) or shall confer upon any Participant any right to continued
employment by the Company or any of the Subsidiaries for any period of time or
to continue such employee's present (or any other) rate of compensation.
10.6 Construction of Plan. This terms of the Plan shall be
administered in accordance with the laws (excluding conflict of interest laws)
of the State of New York (as to grants made prior to March 1, 2002) or the State
of Delaware (as to grants made on or after March 1, 2002).
B-10
--------------------------------------------------------------------------------
ADMISSION TICKET
GRAFTECH INTERNATIONAL LTD.
ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 2003 AT 10:00 A.M.
GRAFTECH INTERNATIONAL LTD.
BRANDYWINE WEST
1521 CONCORD PIKE, SUITE 301
WILMINGTON, DELAWARE
PRESENT THIS TICKET TO ADMIT ONE STOCKHOLDER AND ONE GUEST
Name of Stockholder:____________________________________________________________
Address:________________________________________________________________________
(See reverse side for directions)
--------------------------------------------------------------------------------
FROM PHILADELPHIA AIRPORT (APPROXIMATELY 25 MINUTES):
1. Take I-95 South towards Delaware (stay in the left lanes where I-95 splits
and becomes I-95 and 495; remain on I-95 South - DO NOT TAKE 495).
2. Continue on I-95 South into Delaware.
3. Take Exit 8B US-202 Concord Pike (North) towards West Chester.
4. Merge onto Concord Pike and stay in right lane.
5. Go through the 1st traffic light (intersection with Foulk Road) then make
your first right into the Complex. 6. GrafTech is in the Brandywine West
Building - 3rd floor (take a left when you get off the
elevators on the 3rd floor).
FROM BWI AIRPORT (APPROXIMATELY 1.5 HOURS):
1. Follow I-195 West.
2. Take the MD-295/Baltimore Washington Pkwy North Exit #2A toward
I-695/Baltimore.
3. Merge onto MD-295 North.
4. Take I-895 Harbor Tunnel Throughway Exit.
5. Merge onto Harbor Tunnel Throughway which becomes I-95 North.
6. Follow I-95 North to Delaware.
7. Take Exit 8 US-202 Concord Pike towards West Chester/Wilmington. STAY LEFT AT
FORK IN RAMP.
8. Merge onto US-202 and stay in right lane.
9. Just past the intersection with Foulk Road make a right into the Complex.
FROM WILMINGTON TRAIN STATION (APPROXIMATELY 20 MINUTES):
1. Follow signs to I-95 North.
2. Go Northeast on N. French Street.
3. Turn left onto E. 2nd Street/DE-48 W.
4. Turn Left onto Martin Luther King Jr. Blvd/US 13.
5. Stay straight pulling onto Martin Luther King Jr Blvd.
6. Take the I-95 North Ramp.
7. Follow I-95 North to the US 202 Concord Pike Exit #8.
8. The exit splits, stay left for US 202 North.
9. Merge onto Concord Pike and stay in right lane.
10.Just past the intersection with Foulk Road make a right into the Complex.
11.GrafTech is in the Brandywine West Building.
PROXY CARD
A. ELECTION OF DIRECTORS
The Board of Directors recommends a vote FOR the listed nominees.
-------------------------------- -------- ------------ ----------------------------- -------- -----------
FOR WITHHOLD FOR WITHOLD
-------------------------------- -------- ------------ ----------------------------- -------- -----------
-------------------------------- -------- ------------ ----------------------------- -------- -----------
01 - Gilbert E. Playford |_| |_| 05 - Harold E. Layman |_| |_|
-------------------------------- -------- ------------ ----------------------------- -------- -----------
-------------------------------- -------- ------------ ----------------------------- -------- -----------
02 - R. Eugene Cartledge |_| |_| 06 - Ferrell P. McClean |_| |_|
-------------------------------- -------- ------------ ----------------------------- -------- -----------
-------------------------------- -------- ------------ ----------------------------- -------- -----------
03 - Mary B. Cranston |_| |_| 07 - Michael C. Nahl |_| |_|
-------------------------------- -------- ------------ ----------------------------- -------- -----------
-------------------------------- -------- ------------ ----------------------------- -------- -----------
04 - John R. Hall |_| |_| 08 - Craig S. Shular |_| |_|
-------------------------------- -------- ------------ ----------------------------- -------- -----------
B. ISSUES
The Board of Directors recommends a vote FOR each of the following Proposals.
1. Amend the Management Stock Incentive Plan (Senior Version) to increase
the number of shares authorized for issuance to non-employee directors,
officers and other management employees by 2,500,000 shares.
|_| For |_| Against |_| Abstain
2. Amend the Amended and Restated Certificate of Incorporation to increase
the number of shares of common stock authorized for issuance by
50,000,000 shares.
|_| For |_| Against |_| Abstain
If you plan to attend the meeting, please check here. |_|
In their discretion, the Proxies are authorized to vote upon such other matters
as may properly come before the meeting or any adjournment or postponement
thereof. Receipt of notice of the meeting and the related proxy statement is
acknowledged.
C. AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
The signature on this Proxy should correspond exactly with the stockholder name
printed to the left. In the case of joint tenancies, both stockholders should
sign. Persons signing as Attorney, Executor, Administrator, Trustee or Guardian
should give their full title.
Signature 1 - Signature 2 -
Please keep signature with the box Please keep signature with the box Date (mm/dd/yyyy)
--------------------------------------------- ---------------------------------------- -------------------------------
--------------------------------------------- ---------------------------------------- -------------------------------
PROXY - GRAFTECH INTERNATIONAL LTD.
P.O. Box 11202, New York, NY 10203-0202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF GRAFTECH
INTERNATIONAL LTD. FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 28, 2003
The undersigned appoints Gilbert E. Playford, Craig S. Shular, Corrado F. De
Gasperis and Karen G. Narwold, and each of them, with full power of substitution
in each, the proxies of the undersigned, to represent the undersigned and vote
all shares of GrafTech International Ltd. Common Stock which the undersigned may
be entitled to vote at the Annual Meeting of Stockholders to be held on May 28,
2003, and at any adjournment or postponement thereof, as indicated on the
reverse side.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is given, this Proxy will be
voted FOR the election for the nominees and FOR each of the Proposals listed on
the reverse side. If you are a participant in the UCAR Carbon Savings Plan (the
"Savings Plan"), the front of this Proxy shows units allocated to you under the
Savings Plan. The actual number of shares allocated to you and which will be
voted on your behalf at the Annual Meeting of Stockholders in respect of such
units may vary slightly in accordance with the provisions of the Savings Plan.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
(Continued, and to be dated and signed, on the other side)