Document:

Exhibit 10.13

 

SWISS SECURITY AGREEMENT dated as of February 12, 2018, made by GRAFTECH SWITZERLAND SA, a Swiss corporation (“Swissco” / the “Assignor”) and JPMORGAN CHASE BANK, N.A. (“JPM” / the “Assignee”) as the Assignee and Collateral Agent for the Secured Parties (such term and each other capitalized term used but not defined herein having the meaning given to it in the Credit Agreement dated as of February 12, 2018, among GrafTech International Ltd., a Delaware corporation, GrafTech Finance Inc., a Delaware corporation, GrafTech Luxembourg II S.à.r.l., a Luxembourg société à responsabilité limitée, having its registered office at 124, boulevard de la Pétrusse, L-2330 Luxembourg and registered with the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés) under number B 167199, Swissco, the Lenders and Issuing Banks from time to time party thereto and JPM, as Administrative Agent and Collateral Agent (as the same may be amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”)).

 

WITNESSETH:

 

WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to make Loans and the Issuing Banks have agreed to issue Letters of Credit, upon the terms and subject to the conditions set forth therein;

 

WHEREAS the Assignor is engaged in related businesses, and each will derive substantial direct and indirect benefit from the making of the Loans and the availability of the Letters of Credit; and

 

WHEREAS it is a condition precedent to the obligations of the Lenders to make the Loans and the Issuing Banks to issue the Letters of Credit that the Assignor shall have executed and delivered this Swiss Security Agreement (this “Agreement”) to the Collateral Agent for the ratable benefit of the Secured Parties;

 

NOW, THEREFORE, in consideration of the premises and to induce the Secured Parties to enter into the Credit Agreement and to induce the Lenders to make their respective Loans and the Issuing Banks to issue Letters of Credit, the Assignor hereby agrees with the Assignee, for the ratable benefit of the Secured Parties, as follows:

 

1. DEFINITIONS AND INTERPRETATION

 

1.1. Definitions

 

Unless otherwise defined therein, capitalized terms used in this Agreement shall have the meanings ascribed to them in Section 1.01 of the Credit Agreement.  The definitions of the Credit Agreement shall apply to this Agreement mutatis mutandis and are hereby incorporated herein by reference as if set forth in full in this Agreement.

 

In this Agreement, the following terms shall have the following meanings:

 

Agreement: shall mean this Swiss Security Agreement;

 

Ancillary Rights: has the meaning ascribed to such term in Section 2.1 below;

 

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Assigned Bank Accounts: means all current or future rights, title, interest and action (including any balances and accrued interest) the Assignor may have or acquire in relation to any bank account which the Assignor now has (such existing bank accounts being listed in Schedule 2 to this Agreement) or may at any time have in the future vis-à-vis any bank or other financial institution;

 

Assigned Receivables: means collectively the existing and future rights of the Assignor to all payments, titles and interests and value added tax, if any, in respect thereof due from the debtors of the Assignor and which derive from the Assignor’s business operations and/or ownership in its assets (including all Ancillary Rights and privileges and benefits thereto (Art. 170 CO)) which it undertakes within its statutory scope, including but not limited to (i) Assigned Bank Accounts, (ii) insurance claims of the Assignor under insurance policies covering the business operations of the Assignor, and (iii) existing and future receivables owed by any of the Affiliates of the Assignor to the Assignor and arising in the course of business of the Assignor, whether contingent or not, incorporated in a title or not;

 

Assignment: means the assignment for security purposes by the Assignor of the Assigned Receivables to the Assignee, acting for itself and for the benefit of the Secured Parties, pursuant to Art. 164 et seq. CO;

 

Assignor: means Graftech Switzerland SA, a company limited by shares organized and incorporated under the laws of Switzerland, having is registered office at 1 Route de Renens, 1030 Bussigny-près-Lausanne, Switzerland;

 

Assignee: means JPMorgan Chase Bank, N.A., a United States national banking association, acting through its office at 383 Madison Avenue, New York 10179, USA;

 

Business Day(s): means a day (other than a Saturday or Sunday) on which banks are open for general business in New York City;

 

CC: means the Swiss Federal Civil Code dated December 10, 1907, as amended from time to time;

 

CO: means the Swiss Federal Code of Obligations, dated March 30, 1911, as amended from time to time;

 

Collateral: means, as the context requires, the Assigned Receivables and/or any other assets over which a Security Interest is created pursuant to this Agreement;

 

Credit Agreement: has the meaning set forth in the recitals of this Agreement;

 

LP: means the Swiss Federal Statute on Debt Collection and Bankruptcy, dated April 1, 1889, as amended from time to time;

 

Notice of Assignment: means a notice of assignment substantially in the form of Schedule 1 to this Agreement.

 

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Security Interest: means the security interest over the Collateral created and perfected under the terms of this Agreement; and

 

Swissco US Pledge Agreement: has the meaning ascribed to such term in Section 3.5 below.

 

1.2. Interpretation

 

References to the Credit Agreement, this Agreement or any other agreement or document shall, where applicable, be deemed to be references to such Credit Agreement, this Agreement, or such other agreement or document as the same may from time to time be, extended, prolonged, amended, restated, supplemented, renewed, or novated, as Persons may accede thereto as a party or withdraw therefrom as a party in part or in whole or be released thereunder in part or in whole and as facilities and financial services are or may from time to time be granted, extended, prolonged, increased, reduced, cancelled, withdrawn, amended, restated, supplemented, renewed or novated thereunder.

 

Clause headings are for ease of reference only and are not to affect the interpretation of this Agreement. Any Person is to be construed to include that Person’s permitted assignees or transferees or successors in title, whether direct or indirect. In the event of any inconsistency between the terms of the Credit Agreement and this Agreement, the terms of this Agreement shall prevail.

 

2. ASSIGNMENT OF RECEIVABLES

 

2.1. Undertaking to Assign and Assignment of Receivables

 

The Assignor agrees (i) to assign to the Assignee (as Collateral Agent, for the benefit and on behalf of the Secured Parties) the Assigned Receivables as security through and until the Termination Date, and (ii) to perfect the Assignment on the date of the Credit Agreement until such time.

 

For the purpose of effecting the Assignment of the Assigned Receivables, the Assignor hereby assigns by way of security to the Assignee (as Collateral Agent, for the benefit and on behalf of the Secured Parties) the Assigned Receivables existing on the date hereof (such existing receivables being listed in Schedules 3 hereof).  The Assignee expressly accepts the Assignment.

 

The Assignor hereby expressly acknowledges that the meaning of the term “Swissco Obligations” (and consequently the extent of its undertaking under this Agreement) is defined by reference to the Credit Agreement and the Assignor expressly confirms that it fully understands and accepts the definition of the term “Swissco Obligations”.

 

The rights of the Assignee, upon the occurrence and during the continuance of an Event of Default, pertaining to the Assigned Receivables hereunder include:

 

(i) the right to receive at any time on or after the date of this Agreement all proceeds relative to any Assigned Receivables;

 

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(ii) the right to receive the proceeds of any insurance, indemnity, warranty, guarantee, or collateral security relating to such Assigned Receivables, including the right against any bank providing a letter of credit or similar credit instrument;

 

(iii) all claims of the Assignor for damages arising out of or for breach of or default under any contract from which the Assigned Receivables derive; and

 

(iv) the right to demand, sue for, recover and give receipts for all moneys payable under any contract from which the Assigned Receivables derive (the rights described in clauses (i) to (iv) above shall mean, collectively, the “Ancillary Rights”).

 

Notwithstanding anything contained in this Agreement or any Loan Document to the contrary, “Collateral” shall not include any Excluded Assets; provided, however, that the Security Interest shall immediately attach to, and the Collateral shall immediately include, any such asset (or portion thereof) upon such asset (or such portion) ceasing to be an Excluded Asset.

 

2.2. Routing of Collections

 

The Assignor shall instruct and shall continue to instruct any debtors of the Assigned Receivables to pay, wire, transfer or credit any payment to the Assigned Bank Accounts.

 

Subject to and in accordance with the terms and conditions of the Credit Agreement and this Agreement, the Assignor shall be authorized to collect all or part of the Assigned Receivables for as long as no Event of Default has occurred and is continuing, and until such time as notified by the Collateral Agent, provided the proceeds of the Assigned Receivables are credited on the Assigned Bank Accounts as per the preceding paragraph.

 

Subject to and in accordance with the terms and conditions of the Credit Agreement, the Assignor shall be authorized to dispose of the Assigned Receivables for as long as no Event of Default has occurred and is continuing.

 

2.3. Notification of Debtors of the Assigned Receivables I Payment Instruction

 

2.3.1 Notification

 

Upon the occurrence and during the continuance of an Event of Default, and after the Collateral Agent shall have notified Holdings (except that no such notice shall be required in the case of an Event of Default under clause (h) or (i) of Section 7.01 of the Credit Agreement), the Assignee, acting for itself and on behalf of the Secured Parties shall be authorized to request the Assignor to notify any current and future debtors of the Assigned Receivables of their assignment by way of a Notice of Assignment. The Assignee shall further have the right to notify the Assignment to the relevant debtors at any time if the Assignor does not comply with the Assignee’s request to proceed to such notification as per this Section within two Business Days from the Assignee’s request.

 

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2.3.2. Payment Instructions and other Measures by the Assignee

 

In the event the Assignee is entitled to notification (or to request the Assignor to proceed to such notification) under Section 2.3.1 above, the Assignee shall in addition be authorized, but not obliged, to instruct the debtors of the Assigned Receivables to effect payment on a bank account as specified by the Assignee, and to take other measures the Assignee deems to be adequate for the preservation of the Assigned Receivables in favor of the Secured Parties.

 

2.3.3. Obligations of the Assignor

 

Upon the occurrence and during the continuance of an Event of Default, and after the Collateral Agent shall have notified Holdings (except that no such notice shall be required in the case of an Event of Default under clause (h) or (i) of Section 7.01 of the Credit Agreement), the Assignor shall cooperate with the Assignee and use its best efforts in assisting the Assignee in relation to the payment of the Assigned Receivables, and shall pay any amounts paid directly to the Assignor in relation to the Assigned Receivables to the Assignee acting on behalf of the Secured Parties by transferring said amounts into a bank account as specified by the Assignee, until such time as the Security Interests created under this Agreement shall be released in accordance with Section 6.1.1 of this Agreement.

 

2.4. Reporting upon Occurrence and during Continuance of an Event of Default

 

Upon the occurrence and during the continuance of an Event of Default, the Assignor shall deliver to the Assignee within 3 Business Days thereof, an updated list of Assigned Receivables identifying each Assigned Receivable outstanding as of the Business Day before the occurrence of such Event of Default (specifying at least name and address of the debtor, the amount due and the due date) substantially in the form and including the information as set forth in Schedule 3 to this Agreement.

 

2.5. Waiver of Banking Secrecy with Respect to Assigned Bank Accounts

 

The Assignor shall release the respective bank(s) from the banking secrecy to the extent required for the Assignee to assign the Assigned Bank Accounts and perform its rights and obligations in relation thereto. To that effect, the Assignor shall, within ten Business Days from the date hereof, send a Notice of Assignment to the banks (substantially in the form of Schedule 1) with which the Assigned Bank Accounts are opened.

 

Subject to and in accordance with the terms and conditions of the Loan Documents the Assignor shall be authorized (subject to revocation by the Assignee as of the occurrence of an Event of Default) to use any balance on the Assigned Bank Accounts for as long as no Event of Default has occurred and is continuing. Upon the occurrence and during the continuance of an Event of Default, the Assignee shall be authorized to revoke such authorization; provided that such authorization shall automatically be revoked upon the  occurrence and during the continuance of any Event of Default under clause (h) or (i) of Section 7.01 of the Credit Agreement.

 

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3. PURPOSE, EFFECTS AND LIMITATIONS OF THE SECURITY INTEREST

 

3.1. Purpose of Security Interest

 

The Security Interest created and perfected under this Agreement provides the Assignee, as Collateral Agent, for the benefit and on behalf of the Secured Parties, with a security interest securing the Swissco Obligations.

 

3.2. First Priority Lien

 

The Collateral shall be delivered so that this Agreement, together with such delivery, creates in favour of the Assignee, as Collateral Agent, for the benefit and on behalf of the Secured Parties, a first priority lien on, and first priority security interest in such Collateral.

 

3.3. Continuing Security Interest

 

This Agreement shall create a continuing Security Interest over the Collateral irrespective of any intermediate payment or satisfaction of any or all Swissco Obligations

 

3.4. Additional and Independent Security Interest

 

The Security Interest created and perfected over the Collateral hereunder shall be in addition to and independent of any existing or future guarantees and other security interests which may at any time be held by the Assignee from the Assignor or any other Person in respect of the whole or any part of the Swissco Obligations and may be enforced independently of any such other guarantees or other security interests.

 

The release of individual items of Collateral from the Security Interest does not affect the Security Interest on other items of Collateral.

 

3.5. Conflicts

 

The parties hereto acknowledge that (a) the Assignor and the Assignee, among other parties, have entered into that certain Swissco New York Law Pledge Agreement, dated the date hereof (the “Swissco US Pledge Agreement”), pursuant to which the Assignor has pledged to the Assignee certain equity and debt securities owned by it as security for the Swissco Obligations, and (b) certain of such debt securities may constitute Collateral under this Agreement. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of the Swissco US Pledge Agreement, the terms and conditions of this Agreement shall prevail, except to the extent the context or applicable law may require.

 

Notwithstanding anything herein to the contrary, (i) the Liens and security interests granted to the Assignee for the ratable benefit of the Secured Parties pursuant to this Agreement and (ii) the exercise of any right or remedy by the Assignee hereunder or the application of  proceeds of any Collateral, are subject to the provisions of any Customary Intercreditor Agreement contemplated by the Credit Agreement, if and to the extent applicable and/or in effect.

 

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3.6                              Limitations

 

If and to the extent the Assignor secures and/or guarantees any Upstream and Cross-Stream Obligations (as such terms are defined in the Credit Agreement), and not obligations that are the Assignor’s primary obligations or the primary obligations of Foreign Subsidiaries that are direct or indirect subsidiaries of the Assignor, the following limitations shall apply:

 

(a)     Maximum amount which may be secured or guaranteed by the Assignor:

 

The aggregate:

 

(i)                                     liability of the Assignor; and

(ii)                                  use of proceeds from the enforcement of the Collateral of the Assignor,

 

under this Agreement and any and all other Loan Documents shall not exceed the amount of the Assignor’s freely disposable equity in accordance with Swiss law, presently being the total shareholder equity less the total of (a) the aggregate share capital and (b) statutory reserves (including reserves for own shares and revaluations as well as agio) to the extent such reserves cannot be transferred into unrestricted, distributable reserves, and (c) the blocked amount (as determined by the Assignor’s statutory auditor) corresponding to the Assignor’s intra-group claims resulting from upstream or cross-stream loans not granted at arm’s length conditions. The amount of freely disposable equity shall be determined on the basis of an audited annual or interim balance sheet of the Assignor.

 

This limitation shall only apply to the extent it is a requirement under applicable law at the time (a) the Assignor is required to perform or (b) Collateral of the Assignor is enforced under the Loan Documents.  Such limitation shall not free the Assignor from its obligations in excess of the freely disposable equity, but merely postpone the performance date thereof until such times when the Assignor has again freely disposable equity if and to the extent such freely disposable equity is available.  The limitation shall not apply to the extent the Assignor guarantees any amounts borrowed under any Loan Document that are lent to the Assignor or to wholly owned direct or indirect subsidiaries of the Assignor, and shall accordingly not apply to the Collateral of the Assignor being enforced as security/guarantee for the obligations of the Assignor or the obligations of direct or indirect subsidiaries of the Assignor.

 

The Assignor shall and Luxembourg Holdco or any successor shareholder of the Assignor which is a party to a Loan Document shall procure that the Assignor will, take and cause to be taken all and any action (including, without limitation, (a) the passing of any shareholders’ resolutions to approve any payment or other performance under this Agreement or any other Loan Document, and (b) the obtaining of any confirmations which may be required as a matter of Swiss mandatory law in force at the time the Assignor is required to make a payment or perform other obligations under this Agreement or any other Loan Document) in order to allow a prompt payment of amounts owing by the Assignor under the Loan  Documents, a prompt use of proceeds from the Collateral of the Assignor as well as the performance by the Assignor of other obligations under the Loan Documents with a minimum of limitations.

 

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If the enforcement of the obligations of the Assignor under the Loan Documents would be limited due to the effects referred to in this clause, the Assignor shall further, to the extent permitted by applicable law and Swiss accounting standards and upon request by the Administrative Agent, write up or sell any of its assets that are shown in its balance sheet with a book value that is significantly lower than the market value of the assets, in case of sale, however, only if such assets are not necessary for the Assignor’s business and such sale is permitted under this Agreement or any other Loan Document.

 

(b)                                Swiss Withholding Tax

 

(i)                                    If so required under applicable law (including double tax treaties) at the time it is required to make a payment under this Agreement or any other Loan Document, the Assignor:

 

(A)                               shall use its best efforts to ensure that such payments can be made without deduction of Swiss withholding tax (Verrechnungssteuer), or with deduction of Swiss withholding tax at a reduced rate, by discharging the liability to such tax by notification pursuant to applicable law (including tax treaties) rather than payment of the tax;

 

(B)                               shall deduct the Swiss withholding tax at such rate (being 35% at the date hereof) as is in force from time to time if the notification procedure pursuant to sub-paragraph (A) above does not apply; or shall deduct the Swiss withholding tax at the reduced rate resulting after discharge of part of such tax by notification if the notification procedure pursuant to sub-paragraph (A) applies for a part of the Swiss withholding tax only; and shall pay within the time allowed any such taxes deducted to the Swiss Federal Tax Administration; and

 

(C)                               shall promptly notify the Administrative Agent that such notification or, as the case may be, deduction has been made, and provide the Administrative Agent with evidence that such a notification of the Swiss Federal Tax Administration has been made or, as the case may be, such taxes deducted have been paid to the Swiss Federal Tax Administration.

 

(ii)                                 If the Assignor is required under applicable law (including double tax treaties) to deduct Swiss withholding tax at the time the Collateral Agent is enforcing the Collateral of Assignor, the Administrative Agent shall deduct from the proceeds from such enforcement the Swiss withholding tax at such rate (being 35% at the date hereof) as is in force from time to time and shall pay without delay, any such taxes deducted to the Swiss Federal Tax Administration.

 

(iii)                              In the case of a deduction of Swiss withholding tax, the Assignor shall use its best efforts to ensure that any Person that is entitled to a full or partial refund of the Swiss withholding tax deducted from such payment under this Agreement or any other Loan Document or the proceeds of the enforcement of the Collateral of the Assignor, will, as soon as possible after such deduction:

 

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4. REPRESENTATIONS AND WARRANTIES

 

4.1. Representations and Warranties of the Assignor

 

The Assignor hereby warrants and represents for as long as any Swissco Obligations remain outstanding as follows:

 

(i) Due incorporation: the Assignor is duly incorporated and validly existing under the laws of Switzerland with full power and authority to conduct its business.

 

(ii) Power: the Assignor has the power to enter into this Agreement and to perform its obligations hereunder.

 

(iii) Corporate Actions: all necessary corporate actions required in connection with the entry into, performance under, the validity and enforceability of this Agreement and, in particular but not limited to, the creation and perfection of the Security Interest, and the transactions contemplated hereby and thereby have been taken, obtained or effected and are in full force and effect.

 

(iv) Consents: no approvals, consents, licenses, exemptions, filings, registrations, notarizations and other matters, official or otherwise, are required in connection with the entry into, performance under, the validity and enforceability of this Agreement and, in particular but not limited to, the creation and perfection of the Security Interest, and the transactions contemplated hereby and thereby.

 

(v) Title in Collateral/Validity of Security Interest: the Assignor has good and marketable title of full ownership to all Collateral and such Collateral are free and clear of any pledge, Lien, charge, security interest or other encumbrance, except for (a) Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement and (ii) minor defects in title that do not interfere with the Assignor’s ability to conduct its business as currently conducted or as proposed to be conducted or to utilize such properties constituting the Collateral, in each case to the extent the failure to have such good and marketable title of full ownership could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(vi) Validity and Enforceability of Agreement: this Agreement constitutes legal, valid and binding obligations of the Assignor, enforceable in accordance with its terms, subject to applicable insolvency law affecting creditors’ rights in general.

 

(vii) Valid Security Interest: this Agreement constitutes a valid and effective Assignment of the Assigned Receivables.

 

(viii) First Priority: the Agreement creates a first priority lien on, and first priority Security Interest in, such Collateral.

 

(ix) Non-conflict: the execution and delivery of this Agreement including the creation and perfection of the Security Interest, and the performance by the Assignor of any of its obligations hereunder (a) do not and will not conflict with (x) any law or regulation or any 

 

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official or judicial order, (y) the articles of association and organizational by-laws of the Assignor, or (z) any agreement or document to which the Assignor is a party or which is binding upon it, nor result in the creation or imposition of any encumbrance on any of its assets pursuant to the provisions of any such agreement or document, or (b) will not result in the creation or imposition of or obliges the Assignor to create any Lien on the undertaking, assets, rights or revenues of the Assignor, except as expressly provided for herein.

 

5. COVENANTS OF ASSIGNOR

 

5.1. Continuing Support

 

The Assignor hereby covenants until the Termination Date as follows:

 

The Assignor shall, at its own expense, promptly execute and deliver to the Assignee all documents (in particular all documents and/or titles incorporating the Assigned Receivables, if any such documents and/or titles exist), declarations, certificates, registrations, filings and other instruments and shall take all actions necessary or that the Assignee may reasonably request, in order to create, perfect, maintain and protect the Security Interests created hereby (including instigating legal proceedings to ensure the existence, enforceability and value of the Assigned Receivables) and the Assignor shall assist the Assignee in exercising and enforcing the rights and remedies of the Assignee, as Collateral Agent, for the benefit and on behalf of the Secured Parties under this Agreement with respect to the Collateral.  In particular, the Assignor undertakes to allow the Assignee to review the books and other documents the Assignee deems necessary for the purpose of verifying the existence and value of the Collateral, provided that any such review shall be conducted during normal business hours and in a manner which is not disruptive to the business of the Assignor, in each case subject to (x) Liens permitted pursuant to Section 6.02 of the Credit Agreement, (y) transfers made in compliance with the Credit Agreement, and (z) the rights of the Assignor under Section 9.14 of the Credit Agreement and corresponding provisions of the Security Documents to obtain a release of the Liens created under the Security Documents.

 

5.2. Transmission of Information

 

The Assignor shall furnish to the Assignee promptly upon receipt thereof copies of all notices, requests and other documents received by it in relation to the Collateral according to which (i) the validity or enforceability of the Security Interest created over the Collateral, (ii) the value of the Collateral, or (iii) the possibilities of the Collateral’s liquidation and/or realization as contemplated by this Agreement are (A) materially negatively affected or (B) threatened to be materially negatively affected and likely to occur.

 

5.3. Negative Pledge

 

Other than to the extent created by this Agreement, the Assignor shall not create, incur, assume or suffer to exist any Lien upon or with respect to the Collateral, other than Liens permitted pursuant to Section 6.02 of the Credit Agreement.

 

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5.4. Prohibition on the Disposal of Collateral

 

Except as otherwise permitted by the Credit Agreement and this Agreement, the Assignor shall not:

 

(i) dispose of the Collateral;

 

(ii) sell, factor or assign book or other debts forming part of the Collateral; or

 

(iii) sign any kind of agreement that provides for the non-assignability or the assignability subject to the prior written consent of a third party of the Assigned Receivables.

 

5.5. Performance of Contractual Obligations

 

The Assignor shall timely and fully perform and comply with all material provisions, covenants and other obligations required to be observed by it under the contracts from which the Assigned Receivables derive.

 

5.6. No Set-off, etc.

 

The Assignor shall take all commercially reasonable steps and comply with all applicable laws to procure that no set-off, counterclaim, credit, discount, allowance, right to make any deduction or any justification for the non-payment of the amounts payable on account of the Assigned Receivables will at any time be allowed to arise in relation to an Assigned Receivable (whether by the respective debtor or otherwise), other than in the ordinary course of business in accordance with past practice and the Assignor shall not amend, grant any extension of time for payment, waiver or other indulgence in relation to an Assigned Receivable, except to the extent permitted by the Credit Agreement.

 

6. TERMINATION AND RELEASE OF SECURITY INTEREST

 

6.1. Termination

 

6.1.1. Condition

 

The Security Interest created hereunder shall be terminated and released automatically on the Termination Date.  The Security Interest and all other security interests granted hereby shall also automatically terminate and be released at the time or times and in the manner set forth in Section 9.14 of the Credit Agreement.

 

6.2. Release and Re-transfer of Collateral

 

Subject to the satisfaction of the conditions specified in Section 6.1.1 above, the Assignee hereby undertakes to forthwith release the Security Interest created hereunder and, to re-assign and/or retransfer the Collateral, where such re-assignment and/or re-transfer is required, and at the reasonable request of the Assignor, execute such documents as may be required to release the Collateral or may be reasonably requested by the Assignor.

 

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6.3. Costs, Taxes and Duties regarding the Release of Collateral

 

The Assignor shall reimburse the Assignee for any costs, taxes and duties resulting from the re-assignment and/or re-transfer of the Collateral.  The Collateral Agent shall be entitled to set-off and deduct, respectively, such costs, taxes and duties from the Collateral to be released.

 

7. ENFORCEMENT AND REALISATION

 

7.1. Enforcement Proceedings

 

Upon the occurrence and during the continuance of an Event of Default, the Assignee shall be entitled to, immediately and, unless required by law, with prior notification of the Assignor (except that no such notice shall be required in the case of an Event of Default under clause (h) or (i) of Section 7.01 of the Credit Agreement), but without granting another grace period and in addition to other rights and remedies provided for herein or otherwise available to it to be exercised from time to time, notify the Assignment to the relevant debtors of the Assigned Receivables, and collect and enforce the Assigned Receivables.

 

The Collateral Agent, acting reasonably, shall have the right to obtain from the Assignor all information and documents deemed necessary in the reasonable opinion of the Collateral Agent, to ascertain the existence and particulars of the Assigned Receivables.

 

To the extent that the collection of the Assigned Receivables is not possible or is deemed unduly burdensome in the sole opinion of the Collateral Agent, the latter shall be entitled to sell the whole or any part of the Assigned Receivables at public auction or private sale, without demand of performance or notice of intention to effect any such disposition or of the time and place thereof (except where such notice is required by applicable law and cannot be waived), and without regard to the enforcement procedure provided for by the LP, and apply the proceeds thereof (less all costs and expenses) to the discharge of the Swissco Obligations.  Any sale shall be conducted in a commercially reasonable manner and to the extent permitted by applicable law.

 

The Assignee shall be entitled to allocate in its entire discretion the proceeds collected pursuant to this Section in discharging the Swissco Obligations which have become immediately due and payable, regardless of the creditor or nature (principal or interest) of such Swissco Obligations.

 

7.2. Additional Right of the Assignee

 

Upon the occurrence and during the continuance of an Event of Default, the Assignee, as Collateral Agent, for the benefit and on behalf of the Secured Parties, shall furthermore be entitled to do the following with respect to the Collateral:

 

(i) Power of Attorney: the Assignee may in its capacity as Collateral Agent, and for the benefit and on behalf of the Secured Parties, represent the Secured Parties in connection with the Loan Documents before all courts and authorities and in connection with the establishment of public deeds and real estate transactions, to take legal actions and

 

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remedies, enforce judgements and settlement arrangements, instigate and proceed with debt enforcement and bankruptcy proceedings as well as to accept and release assets in dispute.

 

(ii) Power of Attorney of the Assignor: the Assignee is entitled, in the name and for the account of the Assignor, to take all action in connection with the administration, conservation of value and realization of the Security Interests.

 

(iii) Notification: the Assignee may notify any other obligor under the Loan Documents, debtors of the Assigned Receivables, and other interested Persons in Switzerland and abroad of the realization of Security Interest or instruct the Assignor to make such notification.

 

7.3. Diligence, Limited Liability and Indemnification of the Collateral Agent

 

7.3.1. Diligence

 

The Assignee shall perform its responsibilities under this Agreement, in its capacity as Collateral Agent, for the benefit and on behalf of the Secured Parties or, if so stipulated in this Agreement, of the Assignor, with the necessary diligence.

 

7.3.2. Limitation of Liability

 

Any liability of the Assignee or any of its employees or agents for anything done or omitted in the performance of the Assignee’s responsibilities under this Agreement shall be excluded except in the event of gross negligence or willful default by the Assignee or any of its employees or agents.

 

7.3.3. Indemnification

 

The provisions of Section 9.03(b) of the Credit Agreement are incorporated herein by reference, mutatis mutandis; provided that each reference therein to a “Co-Borrower” shall be deemed to be a reference to the “Assignor” and each reference therein to the “Administrative Agent” shall be deemed to be a reference to the “Assignee.”

 

8. ASSIGNMENT AND TRANSFERS

 

The rights and obligations of the Assignor under this Agreement may not be assigned or transferred without the prior written consent of the Assignee. Nothing in this Agreement  shall be construed as limiting the right of the Loan Parties to assign their rights and obligations under the Credit Agreement.

 

9. MISCELLANEOUS

 

9.1. Notices

 

All notices and other communications provided for in this Agreement shall be in writing and shall be delivered in the manner provided for notices in Section 9.01 of the Credit Agreement.

 

13

 

9.2. Binding Effect

 

This Agreement supersedes any prior arrangement between the parties hereto with respect to the subject matter hereof, in particular a certain “Swiss Security Agreement” dated April 28, 2010, as confirmed and amended from time to time, and all rights and obligations hereunder, shall inure to the benefit of and be binding upon the parties hereto and their permitted successors and assigns.

 

For the avoidance of any doubt, all outstanding receivables assigned to the Collateral Agent pursuant to the above-mentioned “Swiss Security Agreement” dated April 28, 2010, shall be deemed to be an integral part of the Assigned Receivables under this Agreement.

 

9.3. Entire Agreement/Modifications

 

This Agreement constitutes the entire agreement between the parties hereto and may be modified only by a written agreement signed by the parties hereto.

 

9.4. Severability

 

If any term or provision hereof, or the application thereof to any Person or circumstance, shall to any extent be contrary to any applicable law or otherwise invalid or unenforceable, the remainder of this Agreement or the application of such term or provision to Persons or circumstances other than those as to which it is contrary, invalid, or unenforceable shall not be affected thereby and, to the extent consistent with the overall intent hereof as evidenced by this Agreement taken as a whole, shall be enforced to the fullest extent permitted by applicable law.

 

9.5. Counterparts

 

This Agreement shall be executed in two counterparts by the different parties hereto on separate counterparts, each of which when executed and delivered shall constitute an original but all the counterparts together shall constitute one and the same instrument.

 

10. LAW AND JURISDICTION

 

10.1. Governing Law

 

This Agreement shall be governed by, and shall be construed in accordance with, the laws of Switzerland.

 

10.2. Jurisdiction

 

Any legal action or proceeding with respect to this Agreement, shall be submitted exclusively to (i) the jurisdiction of the Supreme Court of the State of New York and the United States District Court of the Southern District of New York, in each case sitting in the Borough of Manhattan in the City of New York, and any appellate court from any thereof or (ii) the ordinary courts of the canton of Geneva. By execution and delivery of this Agreement, the Assignor hereby accepts for itself and in respect of its property, the exclusive jurisdiction of

 

14

 

either of the aforesaid courts.  The parties hereto hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions.

 

[signature pages follow]

 

15

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

	
GRAFTECH SWITZERLAND SA
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Quinn J. Coburn
    	
 
    
	
 
    	
 
    	
 
    
	
Name: 
    	
Quinn J. Coburn
    	
 
    
	
 
    	
 
    	
 
    
	
Title: 
    	
Attorney-in-fact
    	
 
    
	
 
    	
 
    	
 
    
	
Place: 
    	
Brooklyn Heights, OH
    	
 
    

 

[Signature Page to Security Agreement—GrafTech Switzerland SA]

 

16

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

	
GRAFTECH SWITZERLAND SA
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Quinn J. Coburn
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
Quinn J. Coburn
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
Attorney-in-fact
    	
 
    
	
 
    	
 
    	
 
    
	
Place:
    	
Brooklyn Heights, OH
    	
 
    

 

[Signature Page to Security Agreement—GrafTech Switzerland SA]

 

17

 

	
GRAFTECH SWITZERLAND SA
    	
JPMORGAN CHASE BANK,   N.A.
    
	
 
    	
 
    
	
By:
    	
By: 
    	
/s/ James Shender
    
	
 
    	
 
    	
 
    
	
Name:
    	
Name: 
    	
James Shender
    
	
 
    	
 
    	
 
    
	
Title:
    	
Title: 
    	
Vice President
    
	
 
    	
 
    	
 
    
	
Place:
    	
Location: 
    	
New York, NY
    

 

[Signature Page to Swiss Security Agreement]

 

18Exhibit 10.14

 

TAX RECEIVABLE AGREEMENT

 

dated as of

 

[·]

 

between

 

GrafTech International Ltd.

 

and

 

Brookfield Capital Partners IV GP, Ltd

 

i

 

ARTICLE I
 DEFINITIONS

 

	
Section 1.01.
    	
Definitions
    	
1
    
	
 
    	
 
    
	
ARTICLE II
    
	
DETERMINATION OF   REALIZED TAX BENEFIT
    
	
 
    	
 
    
	
Section 2.01.
    	
Pre-IPO Tax Asset   Utilization
    	
9
    
	
Section 2.02.
    	
Tax Benefit Schedule
    	
9
    
	
Section 2.03.
    	
Procedures, Amendments
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    
	
TAX BENEFIT   PAYMENTS
    
	
 
    	
 
    	
 
    
	
Section 3.01.
    	
Payments
    	
10
    
	
Section 3.02.
    	
No Duplicative Payments
    	
11
    
	
 
    	
 
    
	
ARTICLE IV
    
	
TERMINATION
    
	
 
    	
 
    
	
Section 4.01.
    	
Termination, Breach of   Agreement, Change of Control
    	
12
    
	
Section 4.02.
    	
Early Termination   Schedule
    	
14
    
	
Section 4.03.
    	
Payment upon Early   Termination
    	
14
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    
	
LATE PAYMENTS,   ETC
    
	
 
    	
 
    	
 
    
	
Section 5.01.
    	
Late Payments by the   Corporation
    	
15
    
	
Section 5.02.
    	
Compliance with   Indebtedness and Applicable Law
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    
	
CONSISTENCY;   COOPERATION
    
	
 
    	
 
    	
 
    
	
Section 6.01.
    	
The Existing   Stockholders Representative’s Participation in Corporation Tax Matters
    	
16
    
	
Section 6.02.
    	
Consistency
    	
16
    
	
Section 6.03.
    	
Cooperation
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    
	
MISCELLANEOUS
    
	
 
    	
 
    	
 
    
	
Section 7.01.
    	
Notices
    	
17
    
	
Section 7.02.
    	
Counterparts
    	
18
    
	
Section 7.03.
    	
Entire Agreement; Third   Party Beneficiaries
    	
18
    
	
Section 7.04.
    	
Governing Law
    	
18
    
	
Section 7.05.
    	
Severability
    	
18
    
	
Section 7.06.
    	
Successors; Assignment;   Amendments; Waivers
    	
19
    

 

ii

 

	
Section 7.07.
    	
Titles and Subtitles
    	
20
    
	
Section 7.08.
    	
Resolution of Disputes
    	
20
    
	
Section 7.09.
    	
Reconciliation
    	
21
    
	
Section 7.10.
    	
Withholding
    	
22
    
	
Section 7.11.
    	
Affiliated   Corporations; Admission of the Corporation into a Consolidated Group;   Transfers of Corporate Assets
    	
23
    
	
Section 7.12.
    	
Confidentiality
    	
23
    
	
Section 7.13.
    	
Headings
    	
24
    
	
Section 7.14.
    	
Appointment of Existing   Stockholders Representative
    	
24
    

 

iii

 

This TAX RECEIVABLE AGREEMENT (as amended from time to time, this “Agreement”), dated as of [•], is hereby entered into by and between GrafTech International Ltd., a Delaware corporation (the “Corporation”) and Brookfield Capital Partners IV GP, Ltd., an Ontario corporation, in its capacity as representative of the Existing Stockholders (the “Existing Stockholders Representative”).

 

RECITALS

 

WHEREAS, the Existing Stockholders (as defined below), in the aggregate, hold 100% of the common stock of the Corporation, directly or indirectly, immediately prior to the closing of the IPO (as defined below);

 

WHEREAS, the Corporation intends to effect the IPO;

 

WHEREAS, after the IPO, the Corporation and its Subsidiaries (as defined below) (the “Taxable Entities” and each a “Taxable Entity”) will have certain federal net operating losses (“NOLs”), previously taxed income under Section 959 of the Code (as defined below), foreign tax credits, and certain net operating losses in GrafTech Switzerland S.A (collectively, “Tax Assets”) that relate to periods (or portions thereof) ending prior to the date of the IPO (the “Pre-IPO Tax Assets”);

 

WHEREAS, the Pre-IPO Tax Assets may reduce the reported liability for Taxes (as defined below) that the Taxable Entities might otherwise be required to pay;

 

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the effect of the Pre-IPO Tax Assets on the reported liability for Taxes of the Taxable Entities; and

 

WHEREAS, this Agreement is intended to provide payments to the Existing Stockholders in an amount equal to eighty-five percent (85%) of the aggregate reduction in the reported liability for Taxes of the Taxable Entities from the utilization of the Pre-IPO Tax Assets.

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01.                                    Definitions.  As used in this Agreement, the terms set forth in this Article I shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).

 

“Advisory Firm” means any law or accounting firm that is (A) nationally recognized as being expert in Tax matters and (B) that is agreed to by the Corporation and the Existing Stockholders Representative.

 

C-1

 

“Advisory Firm Report” shall mean (a) an attestation report from the Advisory Firm expressing an opinion on management’s assertion as to whether the Tax Benefit Schedule and/or the Early Termination Schedule has been prepared, in all material respects, in accordance with the Agreement, or (b) another type of report or letter from the Advisory Firm related to whether the information in the Tax Benefit Schedule and/or the Early Termination Schedule has been prepared in a manner consistent with the terms of the Agreement.

 

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.

 

“Agreed Rate” means LIBOR plus 100 basis points.

 

“Agreement” is defined in the preamble of this Agreement.

 

“Amended Schedule” is defined in Section 2.03(b) of this Agreement.

 

“Bankruptcy Code” means Title 11 of the United States Code.

 

“Board” means the board of directors of the Corporation.

 

“Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America, the State of Texas or the State of New York shall not be regarded as a Business Day.”

 

Change of Control” means:

 

(i)                                     a merger, reorganization, consolidation or similar form of business transaction directly involving the Corporation or indirectly involving the Corporation through one or more intermediaries unless, immediately following such transaction, more than 50% of the voting power of the then outstanding voting stock or other equities of the Corporation resulting from consummation of such transaction (including, without limitation, any parent or ultimate parent corporation of such Person that as a result of such transaction owns directly or indirectly the Corporation and all or substantially all of the Corporation’s assets) is held by the existing Corporation equityholders or their Affiliates (determined immediately prior to such transaction and related transactions); or

 

(ii)                                  a transaction in which the Corporation, directly or indirectly, sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to another Person other than an Affiliate; or

 

(iii)                               a transaction in which there is an acquisition of control of the Corporation by a Person or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) or 14(d) of the Securities and Exchange Act of 1934, as amended, or any successor provisions thereto.  For purposes of this definition, the term “control” shall mean the possession, directly or indirectly, of the power to either (i) vote more than 50% of the securities having ordinary voting power for the election of directors (or comparable positions in the case of partnerships and limited liability companies), or

 

2

 

(ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise (for the avoidance of doubt, consent rights do not constitute control for the purpose of this definition); or

 

(iv)                              a transaction in which individuals who constitute the Board on the effective date of this Agreement (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the effective date of this Agreement, whose election or nomination for election is either (A) contemplated by a written agreement among equity holders of the Corporation on the effective date of this Agreement or (B) was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Corporation in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Corporation as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall be deemed to be an Incumbent Director; or

 

(v)                                 the liquidation or dissolution of the Corporation.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

“Corporation” is defined in the preamble of this Agreement.

 

“Corporation Return” means the U.S. federal income tax return of the Taxable Entities filed with respect to any Taxable Year.

 

“Default Rate” means LIBOR plus 500 basis points.

 

“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or any other event (including the execution of a Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax.

 

“Divestiture” means the sale of any Taxable Entity, other than any such sale that is or is part of a Change of Control.

 

“Divestiture Acceleration Payment” is defined in Section 4.03(c) of this Agreement.

 

“Early Complete Termination” is defined in Section 4.01(b) of this Agreement.

 

“Early Termination Date” means (i) in the event of an Early Complete Termination, sixty calendar days following the date the Early Termination Notice is delivered under Section 4.01(b), (ii) in the event of a breach of this Agreement to which Section 4.01(c) applies, the date

 

3

 

of such breach, (iii) in the event of a Change of Control, the effective date of such Change of Control and (iv) in the event of a Divestiture, the effective date of such Divestiture.

 

“Early Termination Event” means (i) an Early Complete Termination, (ii) a breach of this Agreement to which Section 4.01(c) applies and (iii) a Change of Control.

 

“Early Termination Notice” is defined in Section 4.01(b) of this Agreement.

 

“Early Termination Payment” is defined in Section 4.03(b) of this Agreement.

 

“Early Termination Rate” means the lesser of (i) 6.5% per annum, compounded annually, and (ii) LIBOR plus 100 basis points.

 

“Early Termination Schedule” is defined in Section 4.02 of this Agreement.

 

“Existing Stockholders” means (i) the common stockholders and (ii) any Person who acquires rights under this Agreement pursuant to Section 7.06(a) (and such Person shall be considered an Existing Stockholder for purposes of this Agreement to the extent the transferor was so considered); provided, however, that any Person considered an Existing Stockholder shall cease to be an Existing Stockholder when such Person no longer holds any rights under this Agreement pursuant to Section 7.06(a).

 

“Existing Stockholders Representative” is defined in the preamble of this Agreement.

 

“Expert” is defined in Section 7.09(a) of this Agreement.

 

“Individual Stockholder” means any Existing Stockholder that is an individual or an Affiliate of an individual.

 

“Individual Termination Payment” is defined in Section 4.01(f) of this Agreement.

 

“Interest Amount” is defined in Section 3.01(b) of this Agreement.

 

“IPO” shall mean the initial public offering of common stock of the Corporation pursuant to the Registration Statement.

 

“ITR Payment” means any Tax Benefit Payment, Early Termination Payment, Divestiture Acceleration Payment or Individual Termination Payment required to be made by the Corporation to the Existing Stockholders under this Agreement.

 

“LIBOR” means for each month (or portion thereof) during any period, an interest rate per annum equal to the rate per annum reported, on the date two days prior to the first day of such month, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBO” or by any other publicly available source of such market rate) for London interbank offered rates for U.S. dollar deposits for such month (or portion thereof), provided that if (i) adequate and reasonable means do not exist for ascertaining LIBOR and such circumstances are unlikely to be temporary or (ii) the supervisor for the administrator of LIBOR or a Governmental Authority having jurisdiction over the Existing

 

4

 

Stockholders Representative or the Corporation has made a public statement identifying a specific date after which LIBOR shall no longer be used for determining interest rates for loans, then the Corporation and the Existing Stockholders Representative shall endeavor to establish an alternate rate of interest to LIBOR that gives due consideration to the then prevailing market convention for determining a comparable rate of interest in the United States at such time, and shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable, provided further that the alternate rate of interest shall be no less than the interest rate equal to LIBOR of the prior month.

 

“Material Objection Notice” has the meaning set forth in Section 4.02.

 

“Net Tax Benefit” has the meaning set forth in Section 3.01(b).

 

“NOLs” is defined in the preamble of this Agreement

 

“Objection Notice” has the meaning set forth in Section 2.03(a).

 

“Ownership Percentage” means, in the case of any Existing Stockholder, a fraction the numerator of which is the number of common shares in the Corporation owned by such Existing Stockholder as of immediately prior to the closing of the IPO and the denominator is the number of common shares in the Corporation outstanding as of immediately prior to the closing of the IPO.

 

“Payment Date” means any date on which a payment is required to be made pursuant to this Agreement.

 

“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

 

“Post-IPO Tax Assets” means any Tax Asset arising in a Taxable Year or portion thereof beginning after the date of the IPO, which shall include the allocation of any Tax Assets arising in a Straddle Year as set forth in the definition of Pre-IPO Tax Assets.

 

“Pre-IPO Tax Assets” is defined in the preamble of this Agreement; provided, however, that in order to determine whether an Tax Asset is a Pre-IPO Tax Asset or a Post-IPO Tax Asset, the Taxable Year of the relevant Taxable Entity that includes the effective date of the IPO (the “Straddle Year”) shall be deemed to end as of the close of March 31, 2018; provided, further, however, that the Corporation and the Existing Stockholders Representative shall, acting reasonably, together determine the amount of any Tax Asset arising in the Straddle Year, or any portion thereof, that is included in the amount of Pre-IPO Tax Assets; provided, further, however, that any Transferred Tax Assets taken into account in calculating a Divestiture Acceleration Payment shall not be considered Pre-IPO Tax Assets.

 

“Realized Tax Benefit” means, for a Taxable Year, the reduction in the liability for federal income Taxes of the Corporation for such Taxable Year resulting from the Pre-IPO Tax Assets under the Agreement (giving effect to the principles of Section 3.02).  If all or a portion of the liability for Taxes for the Taxable Year arises as a result of an audit by a Taxing Authority of

 

5

 

any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

 

“Reconciliation Dispute” has the meaning set forth in Section 7.09(a) of this Agreement.

 

“Reconciliation Procedures” shall mean those procedures set forth in Section 7.09 of this Agreement.

 

“Registration Statement” means the registration statement on Form S-1 of the Corporation.

 

“Schedule” means any Tax Benefit Schedule and any Early Termination Schedule.

 

“Subsidiaries” means, with respect to any Person, as of any date of determination, any other Person as to which such Person, owns, directly or indirectly, or otherwise controls more than 50% of the voting power or other similar interests or the sole general partner interest or managing member or similar interest of such Person.

 

“Tax Asset” is defined in the preamble of this Agreement.

 

“Tax Benefit” is defined in Section 3.01(b) of this Agreement.

 

“Tax Benefit Payment” is defined in Section 3.01(a) of this Agreement.

 

“Tax Benefit Schedule” is defined in Section 2.02 of this Agreement.

 

“Tax Return” means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.

 

“Taxable Entity” is defined in the preamble of this Agreement.

 

“Taxable Year” means a taxable year as defined in Section 441(b) of the Code (and, therefore, for the avoidance of doubt, may include a period of less than 12 months for which a Tax Return is made) ending on or after the date of the IPO.

 

“Taxes” means any and all U.S. federal taxes, assessments or similar charges measured with respect to net income or profits and any interest related to such Tax.

 

“Taxing Authority” shall mean any domestic, foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.

 

“Transfer” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, by operation of law or otherwise.

 

6

 

“Transferred Tax Assets” means, in the event of a Divestiture, the Pre-IPO Tax Assets attributable to the Taxable Entity that is sold in such Divestiture to the extent such Pre-IPO Tax Assets are transferred with such Taxable Entity under applicable Tax law following the Divestiture (disregarding any limitation on the use of such Pre-IPO Tax Assets as a result of the Divestiture) and do not remain under applicable Tax law with the Corporation or any of its Subsidiaries (other than the Taxable Entity that is sold in such Divestiture).

 

“Treasury Regulations” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.

 

“Valuation Assumptions” shall mean, as of an Early Termination Date, the assumptions that (i) in each Taxable Year ending on or after such Early Termination Date, each Taxable Entity will generate an amount of taxable income in accordance with management’s preexisting projections (or, in the absence of such projections, as projected in good faith by management in a manner consistent with its projections for other purposes), (ii) the utilization of the Pre-IPO Tax Assets for such Taxable Year or future Taxable Years, as applicable, will be determined based on the Tax laws in effect on the Early Termination Date and (iii) the federal income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code as in effect on the Early Termination Date.  For the purposes of clause (i) of this definition, the taxable income projections made by the management of the Corporation shall be subject to the Reconciliation Procedures.  Such assumptions shall relate only to the projected income and loss of the Taxable Entities (extending the same beyond the years of projection, as applicable, at the same imputed growth rate), and shall include only the utilization of Tax attributes subject to the Agreement and not any anticipated future attributes that might result from acquisitions, dispositions, recapitalizations or refinancings.  For the avoidance of doubt, in the event of a Change of Control or Divestiture, such assumptions shall not take into account any (i) Tax attributes (including Tax assets) of any entity other than the relevant Taxable Entity involved in the Change of Control or Divestiture or (ii) changes in the relevant Taxable Entities’ stand-alone Tax position that might result from the transaction giving rise to the Change of Control or Divestiture.

 

ARTICLE II

 

DETERMINATION OF REALIZED TAX BENEFIT

 

Section 2.01.                                    Pre-IPO Tax Asset Utilization.  The Corporation, on the one hand, and the Existing Stockholders, on the other hand, acknowledge that the Taxable Entities may utilize the Pre-IPO Tax Assets to reduce the amount of Taxes that the Taxable Entities would otherwise be required to pay in the future.

 

Section 2.02.                          Tax Benefit Schedule.  Within ninety (90) calendar days after the filing of the Corporation Return for any Taxable Year for which there is a Realized Tax Benefit, the Corporation shall provide to the Existing Stockholders Representative a schedule showing, in reasonable detail, (i) the calculation of the Realized Tax Benefit for such Taxable Year, (ii) the calculation of any payment to be made to the Existing Stockholders pursuant to Article III with respect to such Taxable Year, and (iii) all requested supporting information pursuant to Section

 

7

 

2.03(a) of this Agreement reasonably necessary to support the calculation of such payment (a “Tax Benefit Schedule”).  The Tax Benefit Schedule will become final as provided in Section 2.03(a) and may be amended as provided in Section 2.03(b) (subject to the procedures set forth in Section 2.03(a)).

 

Section 2.03.                          Procedures, Amendments.

 

(a)                                 Procedure.  Whenever the Corporation delivers to the Existing Stockholders Representative an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.03(b), and including any Early Termination Schedule or amended Early Termination Schedule, the Corporation shall also (x) deliver to the Existing Stockholders Representative, at the Existing Stockholders Representative’s request (and upon reasonable notice), any schedules, valuation reports, and work papers providing reasonable detail regarding the preparation of the Schedule or an Advisory Firm Report with respect to such Schedule and (y) allow the Existing Stockholders Representative and its advisors reasonable access at no cost to the appropriate representatives at each of the Corporation and/or the Advisory Firm in connection with a review of such Schedule.  The applicable Schedule shall become final and binding on all parties on the thirtieth (30th) calendar day after the Existing Stockholders Representative receives any Schedule or amendment thereto, unless the Existing Stockholders Representative provides the Corporation with notice prior to such thirtieth (30th) calendar day after receipt of such Schedule of a material objection, made in good faith, to such Schedule (“Objection Notice”).  If the parties, for any reason, are unable to successfully resolve the issues raised in any Objection Notice within thirty (30) calendar days of receipt by the Corporation of such Objection Notice, the Corporation and the Existing Stockholders Representative shall employ the Reconciliation Procedures.

 

(b)                                 Amended Schedule.  The applicable Schedule for any Taxable Year may be amended from time to time by the Corporation (i) in connection with a Determination affecting such Schedule, (ii) to correct material inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to the Existing Stockholders Representative, (iii) to comply with the Expert’s determination under the Reconciliation Procedures, or (iv) to reflect a material change (relative to the amounts in the original Schedule) in the Realized Tax Benefit for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year, in each case with respect to any Taxable Entity (such amended Schedule, an “Amended Schedule”); provided, however, that such a change under clause (i) attributable to an audit of a Tax Return by an applicable Taxing Authority shall not be taken into account on an Amended Schedule unless and until there has been a Determination with respect to such change. The Corporation shall provide any Amended Schedule to the Existing Stockholders Representative within thirty (30) calendar days of the occurrence of an event referred to in clauses (i) through (iv) of the preceding sentence, and any such Amended Schedule shall be subject to the procedures set forth in Section 2.03(a).

 

8

 

ARTICLE III

 

TAX BENEFIT PAYMENTS

 

Section 3.01.                                    Payments.

 

(a)                                 Except as provided in Section 5.02, within five Business Days of a Tax Benefit Schedule with respect to a Taxable Year becoming final in accordance with Section 2.03(a), the Corporation shall pay to each Existing Stockholder its share (based on such Existing Stockholder’s Ownership Percentage) of the Tax Benefit for such Taxable Year determined pursuant to Section 3.01(b) (each a “Tax Benefit Payment”), provided that no payment shall be made pursuant to this Section 3.01 to any Individual Stockholder who received at any time prior to the date of such payment an Individual Termination Payment pursuant to Section 4.01(f).  Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to a bank account previously designated by the applicable Existing Stockholder to the Corporation or as otherwise agreed by the Corporation and the applicable Existing Stockholder.  For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including, without limitation, estimated U.S. federal income tax payments.

 

(b)                                 The “Tax Benefit” means an amount, not less than zero, equal to eighty-five percent (85%) of the sum of the Net Tax Benefit and the Interest Amount.  The “Net Tax Benefit” with respect to a Taxable Year shall equal (i) the Taxable Entities’ Realized Tax Benefit, if any, required to be reflected on the Tax Benefit Schedule for such Taxable Year, plus (ii) for each prior Taxable Year, the excess, if any, of the Realized Tax Benefit reflected on an Amended Schedule over the Realized Tax Benefit reflected on the original Tax Benefit Schedule, minus (iii) for each prior Taxable Year, the excess, if any, of the Realized Tax Benefit reflected on the original Tax Benefit Schedule over the Realized Tax Benefit reflected on the Amended Schedule for such prior Taxable Year, minus (iv) eighty-five percent (85%) of any fees and other compensation payable by the Corporation to consultants for the purpose of obtaining advice on tax planning in order to maximize the Taxable Entities’ Realized Tax Benefit for such Taxable Year; provided, however, that to the extent any of the adjustments described in this Section 3.01(b)(ii) or (iii) was reflected in the calculation of the Tax Benefit Payment for any Taxable Year, such adjustments shall not be taken into account in determining the Net Tax Benefit for any subsequent Taxable Year; and provided, further, that for the avoidance of doubt, the Existing Stockholders shall not be required to return any portion of any previously made Tax Benefit Payment.  The “Interest Amount” shall equal the interest on any Net Tax Benefit calculated at the Agreed Rate from the due date (without extensions) for filing the Corporation Return with respect to Taxes for the Taxable Year for which the Net Tax Benefit is being measured until the Payment Date.

 

Section 3.02.                                    No Duplicative Payments.  It is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement. It is also intended that the provisions of this Agreement provide that 85% of the Taxable Entities’ Realized Tax Benefit for all Taxable Years be paid to the Existing Stockholders pursuant to this Agreement. Carryovers or carrybacks of any NOL or other Tax item shall be considered to be subject to the rules of the Code and the Treasury Regulations or the appropriate provisions of Tax law, as applicable, governing the use, limitation and expiration

 

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of carryovers or carrybacks of the relevant type; provided, however, that Pre-IPO Tax Assets treated as resulting in a Realized Tax Benefit for one Taxable Year shall not be treated as resulting in a Realized Tax Benefit for any other Taxable Year, and, for purposes of determining the Realized Tax Benefit for any Taxable Year, each Taxable Entity shall be assumed (a) to utilize any item of loss, deduction or credit arising in such Taxable Year (and permitted to be utilized in such Taxable Year) before carrying back or carrying forward to such Taxable Year any NOL that is permitted to be so carried back or carried forward, (b) to utilize any available Pre-IPO Tax Asset that is permitted (or, for the avoidance of doubt, that would be so permitted but for such Other Tax Asset) to be carried back or carried forward to such Taxable Year before utilizing any Other Tax Asset, and (c) to utilize any Pre-IPO Tax Asset in the first Taxable Year in which such Pre-IPO Tax Asset is permitted to be utilized; provided, further, however, that, notwithstanding any other provision, the Corporation and the Existing Stockholders Representative shall, acting reasonably, together determine the extent to which a Pre-IPO Tax Asset can be carried back or carried forward to a Straddle Year or any portion thereof. If a carryover or carryback of any Tax item includes a portion that is attributable to the Pre-IPO Tax Assets and another portion that is not, the Corporation shall be assumed to utilize the portion attributable to the Pre-IPO Tax Assets before utilizing such other portion.

 

ARTICLE IV

 

TERMINATION

 

Section 4.01.                                    Termination, Breach of Agreement, Change of Control.

 

(a)                                 This Agreement shall terminate at the time that there is no potential for any future Tax Benefit Payments to be made to the Existing Stockholders under this Agreement.

 

(b)                                 Early Complete Termination. Except as provided in Section 5.02, the Corporation may elect to terminate this Agreement (an “Early Complete Termination”) by (i) delivering to the Existing Stockholders Representative notice of its intention to exercise such right (“Early Termination Notice”) and (ii) paying to the Existing Stockholders (1) the Early Termination Payment, (2) any Tax Benefit Payment agreed to by the Corporation and the Existing Stockholders as due and payable but unpaid as of the Early Termination Date and (3) any Tax Benefit Payment due for the Taxable Year ending prior to, with or including the date of the Early Termination Notice.  In the event of an Early Complete Termination, the Early Termination Payment shall be calculated utilizing the Valuation Assumptions (substituting references to the date of such Early Termination Notice for references to the Early Termination Date in the definition of Valuation Assumptions).

 

(c)                                  Breach. In the event that the Corporation breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due (as described below), failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and the Corporation shall pay to the Existing Stockholders (1) the Early Termination Payment, (2) any Tax Benefit Payment agreed to by the Corporation and the Existing Stockholders as due and payable but unpaid as of the Early Termination Date and (3) any Tax Benefit Payment due for

 

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the Taxable Year ending prior to, with or including the date of a breach. Notwithstanding the foregoing in the event that the Corporation breaches this Agreement, the Existing Stockholders shall be entitled to elect to receive the amounts set forth in (1), (2) and (3) above or to seek specific performance of the terms hereof. In the event of a breach of a material obligation under this Agreement, the Early Termination Payment shall be calculated utilizing the Valuation Assumptions. The parties agree that, subject to Section 5.02, the failure to make any payment pursuant to this Agreement within three months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three months of the date such payment is due, provided that in the event that payment is not made within three months of the date such payment is due, the Existing Stockholders (through the Existing Stockholders Representative) shall be required to give written notice to the Corporation that the Corporation has breached its material obligations and so long as such payment is made within five Business Days of the delivery of such notice to the Corporation, the Corporation shall no longer be deemed to be in material breach of its obligations under this Agreement.

 

(d)                                 Change of Control. In the event of a Change of Control, then all obligations hereunder shall be accelerated and the Corporation shall pay to the Existing Stockholders (1) the Early Termination Payment, (2) any Tax Benefit Payment agreed to by the Corporation and the Existing Stockholders as due and payable but unpaid as of the Early Termination Date and (3) any Tax Benefit Payment due for any Taxable Year ending prior to, with or including the effective date of a Change of Control. In the event of a Change of Control, the Early Termination Payment shall be calculated utilizing the Valuation Assumptions.

 

(e)                                  Divestiture Acceleration Payment. In the event of a Divestiture, the Corporation shall pay to the Existing Stockholders the Divestiture Acceleration Payment in respect of such Divestiture, which shall be calculated utilizing the Valuation Assumptions.

 

(f)                                   Elective Individual Termination. Except as provided in Section 5.02, the Corporation may elect to terminate the rights of any Individual Stockholder under this Agreement by paying to such Individual Stockholder a termination payment (the “Individual Termination Payment”) as reasonably determined by the Corporation, provided that such election and the amount of such Individual Termination Payment shall, as reasonably practical, use the Valuation Assumptions (substituting references to the date of such Individual Termination Payment for references to the Early Termination Date in the definition of Valuation Assumptions). The Corporation must receive approval from the Existing Stockholders Representative, such approval not to be unreasonably withheld, conditioned or delayed, to exercise its rights under this (f) with respect to any Individual Stockholder that is an executive officer of the Corporation as of the date of the elective individual termination.

 

Section 4.02.                                    Early Termination Schedule.  In the event of a Change of Control or a Divestiture, the Corporation shall deliver to the Existing Stockholders Representative no later than sixty calendar days prior to such Change of Control or Divestiture, as applicable, and in the case of an Early Complete Termination, contemporaneously with the Early Termination Notice, a schedule (the “Early Termination Schedule”) showing in reasonable detail the information required or requested pursuant to the first sentence of Section 2.02 and the calculation of the

 

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Early Termination Payment or the Divestiture Acceleration Payment, respectively (including the projections of the Taxable Entities’ taxable income under clause (i) of the Valuation Assumptions). The Early Termination Schedule shall become final and binding on all parties unless the Existing Stockholders Representative, within fifteen calendar days after receiving the Early Termination Schedule provides the Corporation with notice of a material objection to such Schedule made in good faith (“Material Objection Notice”). If the parties for any reason are unable to successfully resolve the issues raised in such notice within thirty (30) calendar days after receipt by the Corporation of the Material Objection Notice, the Corporation and the Existing Stockholders Representative shall employ the Reconciliation Procedures.

 

Section 4.03.                                    Payment upon Early Termination.

 

(a)                                 Except as provided in Section 5.02, no later than the Early Termination Date, the Corporation shall pay to each Existing Stockholder its share (based on such Existing Stockholder’s Ownership Percentage) of an amount equal to the Early Termination Payment or Divestiture Acceleration Payment and any other payment required to be made pursuant to Sections 4.01(b), (c) and (d). Such payment shall be made by wire transfer of immediately available funds to a bank account designated by the applicable Existing Stockholders or as otherwise agreed by the Corporation and the Existing Stockholder.

 

(b)                                 The “Early Termination Payment,” as of the Early Termination Date (other than an Early Termination Date arising under clause (iv) of the definition thereof) shall equal with respect to the Existing Stockholders the present value, discounted at the Early Termination Rate as of such date, of all Tax Benefit Payments that would be required to be paid by the Corporation to the Existing Stockholders beginning from the Early Termination Date assuming the Valuation Assumptions are applied, provided that in the event of a Change of Control, the Early Termination Payment shall be calculated without giving effect to any limitation on the use of the Pre-IPO Tax Assets resulting from the Change of Control. For purposes of calculating the present value pursuant to this Section 4.03(b) of all Tax Benefit Payments that would be required to be paid, it shall be assumed that absent the Early Termination Event all Tax Benefit Payments would be paid on the due date (without extensions) for filing the Corporation Return with respect to Taxes for each Taxable Year. The computation of the Early Termination Payment is subject to the Reconciliation Procedures.

 

(c)                                  The “Divestiture Acceleration Payment,” as of the date of any Divestiture, shall equal with respect to the Existing Stockholders the present value, discounted at the Early Termination Rate as of such date, of the Tax Benefit Payments resulting solely from the Transferred Tax Assets that would be required to be paid by the Corporation to the Existing Stockholders beginning from the date of such Divestiture assuming the Valuation Assumptions are applied, provided that the Divestiture Acceleration Payment shall be calculated without giving effect to any limitation on the use of the Transferred Tax Assets resulting from the Divesture. For purposes of calculating the present value pursuant to this Section 4.03(c) of all Tax Benefit Payments that would be required to be paid, it shall be assumed that absent the Divestiture all Tax Benefit Payments would be paid on the due date (without extensions) for filing the Corporation Return with respect to Taxes for each Taxable Year. The computation of the Divestiture Acceleration Payment is subject to the Reconciliation Procedures.

 

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ARTICLE V

 

LATE PAYMENTS, ETC.

 

Section 5.01.                                    Late Payments by the Corporation.  The amount of all or any portion of any ITR Payment not made to the Existing Stockholders when due under the terms of this Agreement shall be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such ITR Payment was due and payable.

 

Section 5.02.                                    Compliance with Indebtedness and Applicable Law.  Notwithstanding anything to the contrary provided herein, if, at the time any amounts become due and payable hereunder, (a) the Corporation is not permitted, pursuant to the terms of its outstanding indebtedness, to pay such amounts, (b) (i) the Corporation does not have the cash on hand to pay such amounts or payment of such dividends would give rise to a material adverse effect, as certified by the Corporation’s Chief Financial Officer, and (ii) no Subsidiary of the Corporation is permitted, pursuant to the terms of its outstanding indebtedness or other applicable law, to pay dividends to the Corporation to allow it to pay such amounts, or (c) payments of such amounts would violate applicable law then, in each case, the Corporation shall, by notice to the Existing Stockholders Representative, be permitted to defer the payment of such amounts until the condition described in clause (a), (b) or (c) is no longer applicable, in which case such amounts (together with accrued and unpaid interest thereon as described in the immediately following sentence) shall become due and payable immediately. If the Corporation defers the payment of any such amounts pursuant to the foregoing sentence, such amounts shall accrue interest at the Agreed Rate per annum, from the date that such amounts originally became due and owing pursuant to the terms hereof to the date that such amounts were paid.  The Corporation agrees to take commercially reasonable actions to cause its direct and indirect Subsidiaries to pay dividends (including, to the extent commercially reasonable, access any revolving credit facility or other source of liquidity to facilitate the payment of such dividends), to the extent consistent with the terms of their outstanding indebtedness and any applicable law, to the extent necessary to make payments hereunder.

 

ARTICLE VI

 

CONSISTENCY; COOPERATION

 

Section 6.01.                                    The Existing Stockholders Representative’s Participation in Corporation Tax Matters.  Except as otherwise provided herein, the Corporation shall have full responsibility for, and sole discretion over, all Tax matters concerning the Corporation and each Taxable Entity including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes, subject to a requirement that the Corporation act in good faith in connection with its control of any matter which is reasonably expected to affect any Existing Stockholder’s rights and obligations under this Agreement. Notwithstanding the foregoing, the Corporation shall promptly notify the Existing Stockholders Representative of, and keep the Existing Stockholders Representative reasonably informed with respect to, the portion of any audit of the Corporation or any Taxable Entity by a Taxing Authority the outcome of which is reasonably expected to affect any Existing Stockholder’s rights and obligations under this Agreement, and shall give the Existing Stockholders

 

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Representative reasonable opportunity to provide information and participate in the applicable portion of such audit.

 

Section 6.02.                                    Consistency.  Except upon the written advice of an Advisory Firm, the Corporation and the Existing Stockholders Representative agree to report and cause to be reported for all purposes, including federal, state, local and foreign Tax purposes and financial reporting purposes, all Tax-related items (including without limitation the Tax Benefit Payment) in a manner consistent with that specified by the Corporation in any Schedule required to be provided by or on behalf of the Corporation or any Taxable Entity under this Agreement and agreed by the Existing Stockholders Representative. Any dispute concerning such advice shall be subject to the Reconciliation Procedures. In the event the Advisory Firm is replaced with another firm acceptable to the Corporation and the Existing Stockholders Representative pursuant to the definition of Advisory Firm, such replacement Advisory Firm shall be required to perform its services under this Agreement using procedures and methodologies consistent with those used by the previous Advisory Firm, unless otherwise required by law or the Corporation and the Existing Stockholders Representative agree to the use of other procedures and methodologies.

 

Section 6.03.                                    Cooperation.  Each of the Corporation and the Existing Stockholders (through the Existing Stockholders Representative) shall (a) furnish to the other party in a timely manner such information, documents and other materials as the other party may reasonably request for purposes of making or approving any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to the other party and its representatives to provide explanations of documents and materials and such other information as the requesting party or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter, and the requesting party shall reimburse the other party for any reasonable third-party costs and expenses incurred pursuant to this Section 6.03.

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.01.                                    Notices.

 

(a)                                 All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed duly given and received (a) on the date of delivery if delivered personally, or by facsimile upon confirmation of transmission by the sender’s fax machine if sent on a Business Day (or otherwise on the next Business Day) or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

If to the Corporation, to:

 

GrafTech International Ltd.
  982 Keynote Cir,

 

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Brooklyn Heights, OH 44131
 Attn: General Counsel
 Fax:

 

with a copy to (which shall not constitute notice):

 

Cleary Gottlieb Steen & Hamilton
 One Liberty Plaza
 New York, New York 10006
 Attn: Sandra L. Flow, Esq. and

Adam Fleisher, Esq.

Fax: (212) 225-3999

 

If to the Existing Stockholders Representative, to:

 

Brookfield Capital Partners IV GP, Ltd.

c/o Brookfield Asset Management LLC
 250 Vesey Street, 15th Floor
 New York, NY 10281
 Attn: General Counsel

 

with a copy to (which shall not constitute notice):
  
 Cleary Gottlieb Steen & Hamilton

One Liberty Plaza
 New York, New York 10006
 Attn: Sandra L. Flow, Esq. and

Adam Fleisher, Esq.

Fax: (212) 225-3999

 

Any party may change its address or fax number by giving the other party written notice of its new address or fax number in the manner set forth above.

 

(b)                                 Within 60 days of the request of any Existing Stockholder, the Corporation shall provide such Existing Stockholder its Ownership Percentage as of the date requested.

 

Section 7.02.                                    Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

Section 7.03.                                    Entire Agreement; Third Party Beneficiaries.  This Agreement constitutes the entire agreement and supersedes prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement

 

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shall be binding upon and inure solely to the benefit of each party hereto and its respective successors and permitted assigns. The parties to this Agreement agree that the Existing Stockholders are expressly made third party beneficiaries to this Agreement. Other than as provided in the preceding sentence, nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 7.04.                                    Governing Law.  This Agreement shall be governed by, and construed in accordance with, the law of the State of New York.

 

Section 7.05.                                    Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

 

Section 7.06.                                    Successors; Assignment; Amendments; Waivers.

 

(a)                                 Each Existing Stockholder may freely assign (in whole or in part) its rights under this Agreement without the prior written consent of the Corporation to any Person as long as such assignee has executed and delivered or, in connection with such assignment, executes and delivers, a joinder to this Agreement, in form and substance reasonably satisfactory to the Corporation, agreeing to be bound by all provisions of this Agreement and (B) such forms or other information as the Corporation may reasonably require for purposes of Section 7.10. If the Existing Stockholder Representative assigns all or a portion of its rights as an Existing Stockholder under this Agreement, such assignee shall, at the election of the Existing Stockholder Representative, also be assigned the rights and obligations of the Existing Stockholder Representative in its capacity as such; provided that the Existing Stockholder Representative may assign its rights and obligations in its capacity as such to an Affiliate at any time; provided, further, that any assignment of the rights and obligations of the Existing Stockholder Representative in its capacity as such shall not be effective unless the assignee has executed and delivered or, in connection with such assignment, executes and delivers (A) a joinder to this Agreement, in form and substance reasonably satisfactory to the Corporation, agreeing to be bound by all provisions of this Agreement and (B) such forms or other information as the Corporation may reasonably require for purposes of Section 7.10. For the avoidance of doubt, the rights and obligations of the Existing Stockholder Representative in its capacity as such may only be assigned in whole and not in part.

 

(b)                                 The transferee and transferor of any Transfer permitted under this Section 7.06 shall ensure that the Corporation is provided with a copy (which may be by PDF) of the fully executed instrument of Transfer, which instrument must clearly identify the name of the transferor and transferee and the Ownership Percentage being transferred, within five (5) days of the effective date of such Transfer.  Any Transfer, or attempted Transfer in violation of this

 

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Agreement, including any failure of a purported transferee to enter into a joinder to this Agreement or to provide any forms or other information to the extent required hereunder, shall be null and void, and shall not bind or be recognized by the Corporation or the Existing Stockholders Representative.  The Corporation shall be entitled to treat the record owner of any rights under this Agreement as the absolute owner thereof and shall incur no liability for payments made in good faith to such owner until such time as a written assignment of such rights is permitted pursuant to the terms and conditions of this Section 7.06 and has been recorded on the books of the Corporation.

 

(c)                                  No provision of this Agreement may be amended unless such amendment is approved in writing by the Corporation and the Existing Stockholders (through the Existing Stockholders Representative), whereupon all Existing Stockholders shall be bound. No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective (it being understood that the Existing Stockholders Representative shall be permitted to waive provisions of this Agreement on behalf of all Existing Stockholders).

 

(d)                                 All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. The Corporation shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

 

Section 7.07.                                    Titles and Subtitles.  The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

Section 7.08.                                    Resolution of Disputes.

 

(a)                                 Any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) shall be finally settled by arbitration conducted by a single arbitrator in New York in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the dispute fail to agree on the selection of an arbitrator within thirty calendar days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

 

(b)                                 Notwithstanding the provisions of paragraph (a), the Corporation may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration

 

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hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each Existing Stockholder (through the Existing Stockholders Representative) (i) expressly consents to the application of paragraph (c) of this Section 7.08 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints the Corporation as its agent for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise the Existing Stockholders Representative of any such service of process, shall be deemed in every respect effective service of process upon such Existing Stockholder in any such action or proceeding.

 

(c)                                  (i)                                     EACH EXISTING STOCKHOLDER (THROUGH THE EXISTING STOCKHOLDERS REPRESENTATIVE) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH (B) OF THIS Section 7.08, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the fora designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another.

 

(ii)                                  The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in paragraph (c)(i) of this Section 7.08 and such parties agree not to plead or claim the same.

 

Section 7.09.                                    Reconciliation.

 

(a)                                 In General. In the event that the Corporation and the Existing Stockholders Representative are unable to resolve a disagreement with respect to the matters governed by Section 2.03, Section 4.02 and Section 6.02 within the relevant period designated in this Agreement (or the amount of an Early Termination Payment in the case of a breach to which Section 4.01(c) applies) (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner in a nationally recognized accounting firm or a law firm (other than the Advisory Firm), and the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with the Corporation or the Existing Stockholders Representative or other actual or potential conflict of interest. If the parties are unable to agree on an Expert within fifteen (15) days of receipt by respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise. The Expert shall resolve any matter relating to the Early Termination Schedule or an amendment thereto within thirty (30) calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within fifteen (15) calendar days or as soon thereafter as is reasonably

 

18

 

practicable, in each case after the matter has been submitted to the Expert for resolution. Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement is due or any Tax Return reflecting the subject of a disagreement is due, such payment shall be made on the date prescribed by this Agreement and such Tax Return may be filed as prepared by the Corporation or the relevant Taxable Entity, subject to adjustment or amendment upon resolution. The costs and expenses related to the engagement of such Expert or amending any Tax Return shall be borne by the Corporation, except as provided in the next sentence. Each of the Corporation and the Existing Stockholders shall bear their own costs and expenses of such proceeding. Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.09 shall be decided by the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.09 shall be binding on the Corporation and the Existing Stockholders and may be entered and enforced in any court having jurisdiction.

 

(b)                                 Income Projections for Early Termination Payments.  Notwithstanding the provisions of Section 7.09(a), solely with respect to disagreements regarding the computation of an Early Termination Payment or Divestiture Acceleration Payment that relates to the taxable income projections described in clause (i) of the definition of “Valuation Assumptions,” the Corporation and the Existing Stockholders (through the Existing Stockholders Representative) shall each submit the Reconciliation Dispute for determination to an Expert in the area of valuation services. Based on the income projections of such Experts, if the higher of the resulting computations for the Early Termination Payment or Divestiture Acceleration Payment does not exceed 110% of the lower computation, then the Early Termination Payment or Divestiture Acceleration Payment shall be the average of such two amounts. If the higher of the resulting computations for the Early Termination Payment or Divestiture Acceleration Payment is more than 110% of the lower computation, then the two Experts shall, within 20 days from such determination, select a third Expert and shall notify the Corporation and the Existing Stockholders Representative of such selection. If the Early Termination Payment or Divestiture Acceleration Payment computed by the third Expert is equal to the average of the first two Early Termination Payment or Divestiture Acceleration Payment computations, then the Early Termination Payment or Divestiture Acceleration Payment shall be such average. If the third Early Termination Payment or Divestiture Acceleration Payment computation is higher than the average of the first two computations, then the Early Termination Payment or the Divestiture Acceleration Payment shall be the average of such third computation and the higher of the first two computations; provided that if such average exceeds 110% of the higher of the first two computations, then the Early Termination Payment or Divestiture Acceleration Payment shall be 110% of the higher of the first two computations. If the third Early Termination Payment or Divestiture Acceleration Payment computation is lower than the average of the first two computations, then the Early Termination Payment or Divestiture Acceleration Payment shall be the average of such third computation and the lower of the first two computations; provided that if such average is less than 90% of the lower of the first two computations, then the Early Termination Payment or Divestiture Acceleration Payment shall be 90% of the lower of the first two computations.

 

Section 7.10.                                    Withholding.  The Corporation shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as the Corporation reasonably believes it is required to deduct and withhold as a result of the execution of this

 

19

 

Agreement or with respect to the making of such payment, in each case, under the Code, or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by the Corporation, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Existing Stockholders. The Corporation shall provide evidence of such payment to the Existing Stockholders (through the Existing Stockholders Representative) to the extent that such evidence is available.

 

Section 7.11.                                    Affiliated Corporations; Admission of the Corporation into a Consolidated Group; Transfers of Corporate Assets.

 

(a)                                 If the Corporation is or becomes a member of an affiliated or consolidated group of corporations that files a consolidated income tax return pursuant to Sections 1501 et seq. of the Code (other than if the Corporation becomes a member of such a group as a result of Change of Control, in which case the provisions of Article IV shall control), then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole and (ii) Tax Benefit Payments shall be computed with reference to the consolidated taxable income of the group as a whole.

 

(b)                                 If any Person the income of which is included in the income of the Corporation’s affiliated or consolidated group transfers one or more assets to a corporation or any Person treated as such for Tax purposes with which such entity does not file a consolidated tax return pursuant to Section 1501 et seq. of the Code, for purposes of calculating the amount of any Tax Benefit Payment (e.g., calculating the gross income of the Corporation’s affiliated or consolidated group and determining the Realized Tax Benefit) due hereunder, such Person shall be treated as having disposed of such asset in a fully taxable transaction on the date of such contribution.  The consideration deemed to be received by such entity shall be determined as if such transfer occurred on an arm’s-length basis with an unrelated third party.

 

Section 7.12.                                    Confidentiality.

 

(a)                                 Each Existing Stockholder (through the Existing Stockholders Representative) and each of its assignees acknowledges and agrees that the information of the Corporation is confidential and, except in the course of performing any duties as necessary for the Corporation and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, shall keep and retain in the strictest confidence and not disclose to any Person all confidential matters of the Corporation or the Existing Stockholders acquired pursuant to this Agreement. This Section 7.12 shall not apply to (i) any information that has been made publicly available by the Corporation or any of its Affiliates (including in connection with the description of this Agreement in the Registration Statement and the filing of this Agreement as an exhibit thereto), becomes public knowledge (except as a result of an act of any Existing Stockholder in violation of this Agreement) or is generally known to the business community; and (ii) the disclosure of information to the extent necessary for any Existing Stockholder to prepare and file its Tax returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to such returns. Notwithstanding anything to the contrary herein, each Existing Stockholder (and each employee, representative or other agent of such Existing Stockholder) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of (x) the

 

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Corporation and (y) any of its transactions, and all materials of any kind (including opinions or other tax analyses) that are provided to such Existing Stockholder relating to such tax treatment and tax structure.

 

(b)                                 If the Existing Stockholders Representative or any of its assignees commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.12, the Corporation shall have the right and remedy to have the provisions of this Section 7.12 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Corporation or any of its Subsidiaries and the accounts and funds managed by the Corporation and that money damages alone shall not provide an adequate remedy to such Persons. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.

 

Section 7.13.                                    Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

Section 7.14.                                    Appointment of Existing Stockholders Representative.

 

(a)                                 Appointment.  Without further action of any of the Corporation, the Existing Stockholders Representative or any Existing Stockholder, and as partial consideration of the benefits conferred by this Agreement, the Existing Stockholders Representative is hereby irrevocably constituted and appointed, with full power of substitution, to act in the name, place and stead of each Existing Stockholder with respect to the taking by the Existing Stockholders Representative of any and all actions and the making of any decisions required or permitted to be taken by the Existing Stockholders Representative under this Agreement (and any potential agreement with the Corporation to terminate this Agreement earlier than such time as is provided in Section 4.01 provided that (for the avoidance of doubt, except in the case of a termination covered by Section 4.01(f)) any payment made by the Corporation upon such an early termination shall be paid to each Existing Stockholder based on such Existing Stockholder’s Ownership Percentage). The power of attorney granted herein is coupled with an interest and is irrevocable and may be delegated by the Existing Stockholders Representative. No bond shall be required of the Existing Stockholders Representative, and the Existing Stockholders Representative shall receive no compensation for its services.

 

(b)                                 Expenses.  If at any time the Existing Stockholders Representative shall incur out of pocket expenses in connection with exercise of its duties hereunder, upon written notice to the Corporation from the Existing Stockholders Representative of documented costs and expenses (including fees and disbursements of counsel and accountants) incurred by the Existing Stockholders Representative in connection with the performance of its rights or obligations under this Agreement and the taking of any and all actions in connection therewith, the Corporation shall reduce any future payments (if any) due to the Existing Stockholders hereunder pro rata (based on their respective Ownership Percentages in the Corporation) by the amount of such expenses which it shall instead remit directly to the Existing Stockholders Representative. In connection with the performance of its rights and obligations under this Agreement and the taking of any and all actions in connection therewith, the Existing

 

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Stockholders Representative shall not be required to expend any of its own funds (though, for the avoidance of doubt, it may do so at any time and from time to time in its sole discretion).

 

(c)                                  Limitation on Liability.  The Existing Stockholders Representative shall not be liable to any Existing Stockholder for any act of the Existing Stockholders Representative arising out of or in connection with the acceptance or administration of its duties under this Agreement, except to the extent any liability, loss, damage, penalty, fine, cost or expense is actually incurred by such Existing Stockholder as a proximate result of the gross negligence, bad faith or willful misconduct of the Existing Stockholders Representative (it being understood that any act done or omitted pursuant to the advice of legal counsel shall be conclusive evidence of such good faith and reasonable judgment). The Existing Stockholders Representative shall not be liable for, and shall be indemnified by the Existing Stockholders (on a several but not joint basis) for, any liability, loss, damage, penalty or fine incurred by the Existing Stockholders Representative (and any cost or expense incurred by the Existing Stockholders Representative in connection therewith and herewith and not previously reimbursed pursuant to subsection (b) above) arising out of or in connection with the acceptance or administration of its duties under this Agreement, except to the extent that any such liability, loss, damage, penalty, fine, cost or expense is the proximate result of the gross negligence, bad faith or willful misconduct of the Existing Stockholders Representative (it being understood that any act done or omitted pursuant to the advice of legal counsel shall be conclusive evidence of such good faith and reasonable judgment); provided, however, in no event shall any Existing Stockholder be obligated to indemnify the Existing Stockholders Representative hereunder for any liability, loss, damage, penalty, fine, cost or expense to the extent (and only to the extent) that the aggregate amount of all liabilities, losses, damages, penalties, fines, costs and expenses indemnified by such Existing Stockholder hereunder is or would be in excess of the aggregate payments under this Agreement actually remitted to such Existing Stockholder. Each Existing Stockholder’s receipt of any and all benefits to which such Existing Stockholder is entitled under this Agreement, if any, is conditioned upon and subject to such Existing Stockholder’s acceptance of all obligations, including the obligations of this Section 7.14(c), applicable to such Existing Stockholder under this Agreement.

 

(d)                                 Actions of the Existing Stockholders Representative. Any decision, act, consent or instruction of the Existing Stockholders Representative shall constitute a decision of all Existing Stockholders and shall be final, binding and conclusive upon each Existing Stockholder, and the Corporation may rely upon any decision, act, consent or instruction of the Existing Stockholders Representative as being the decision, act, consent or instruction of each Existing Stockholder. The Corporation is hereby relieved from any liability to any Person for any acts done by the Corporation in accordance with any such decision, act, consent or instruction of the Existing Stockholders Representative.

 

[Signatures pages follow]

 

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IN WITNESS WHEREOF, the Corporation and the Existing Stockholders Representative have duly executed this Agreement as of the date first written above.

 

	
 
    	
GRAFTECH INTERNATIONAL   LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
BROOKFIELD CAPITAL   PARTNERS IV GP, LTD.., as Existing Stockholders Representative
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

[Signature page to Tax Receivable Agreement]

 

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