HEXCEL CORP /DE/, 10-Q, 1994-08-16

HEXCEL CORP /DE/
10-Q, 1994-08-16
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SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549
----------------------------

FORM 10Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended July 3, 1994

/ / Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from __________to__________

Commission File Number 1-8472
-------------------------------

HEXCEL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 94-1109521
(State of Incorporation) (I.R.S. Employer Identification No.)

5794 W. Las Positas Boulevard
Pleasanton, California 94588-8781
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (510) 847-9500

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ____X____ No_________

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
of reorganization confirmed by a U.S. Bankruptcy Court.
Yes____X____ No_________ (Note: To date, no plan confirmed, no securities
distributed)

The number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

Class Outstanding at August 12, 1994
------------ ------------------------------
COMMON STOCK 7,309,827

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<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES

INDEX

PAGE
PART I. FINANCIAL INFORMATION

-- Condensed Consolidated Statements of
Operations--The Quarter and Year-to-Date 2
Ended July 3, 1994 and June 30, 1993

-- Condensed Consolidated Balance Sheets-- 3
July 3, 1994 and December 31, 1993

-- Condensed Consolidated Statements of
Cash Flows--The Year-to-Date
Ended July 3, 1994 and June 30, 1993 4

-- Notes to Condensed Consolidated
Financial Statements 5

-- Management Discussion and Analysis
of Financial Condition and Results of 12
Operations

PART II. OTHER INFORMATION 16

SIGNATURES 19

EXHIBIT INDEX 20

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)
-------------------------------------------------------
THE QUARTER ENDED THE YEAR-TO-DATE ENDED
------------------------ -------------------------
JULY 3, JUNE 30, JULY 3, JUNE 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1994 1993 1994 1993
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Net sales $ 93,392 $ 92,839 $ 178,805 $ 182,130
Cost of sales (76,337) (75,981) (147,396) (151,143)
- - ------------------------------------------------------------------------------------------------------------------------------
Gross margin 17,055 16,858 31,409 30,987
Other operating costs and expenses:
Marketing, general and administrative expenses (13,917) (16,570) (27,976) (33,417)
Other expenses (113) (1,173) (113) (639)
- - ------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 3,025 (885) 3,320 (3,069)
Interest expenses (2,287) (2,316) (4,838) (4,676)
Bankruptcy reorganization expenses (4,565) -- (6,909) --
- - ------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations before income taxes (3,827) (3,201) (8,427) (7,745)
Benefit (provision) for income taxes (595) 898 (1,019) 2,316
- - ------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (4,422) (2,303) (9,446) (5,429)

Discontinued operations:
Losses during phase-out period, net of benefit for
income taxes of $92 and $181 for the quarter
and year-to-date ended June 30, 1993, respectively -- (186) -- (364)
- - ------------------------------------------------------------------------------------------------------------------------------
Loss before cumulative effect of accounting change (4,422) (2,489) (9,446) (5,793)
Cumulative effect of change in accounting for income taxes -- -- -- 4,500
- - ------------------------------------------------------------------------------------------------------------------------------
Net loss $ (4,422) $ (2,489) $ (9,446) $ (1,293)
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share and equivalent share:
Primary and fully diluted:
Continuing operations $ (0.60) $ (0.31) $ (1.29) $ (0.74)
Discontinued operations -- (0.03) -- 0.05)
Cumulative effect of change in accounting for income taxes -- -- -- 0.61
- - ------------------------------------------------------------------------------------------------------------------------------
Net loss $ (0.60) $ (0.34) $ (1.29) $ (0.18)
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
Weighted average shares and equivalent shares 7,310 7,338 7,310 7,325
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.

2
<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

- - ------------------------------------------------------------------------------------------------------
UNAUDITED
--------------------------
JULY 3, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1994 1993
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C>

ASSETS

Current assets:
Cash and equivalents $ 923 $ 12,877
Accounts receivable 84,878 67,595
Inventories 55,850 47,284
Prepaid expenses 5,002 4,562
- - ------------------------------------------------------------------------------------------------------

Total current assets 146,653 132,318
- - ------------------------------------------------------------------------------------------------------

Property, plant and equipment 230,209 234,482
Less accumulated depreciation 120,734 119,814
- - ------------------------------------------------------------------------------------------------------

Net property, plant and equipment 109,475 114,668
- - ------------------------------------------------------------------------------------------------------

Investments and other assets 21,458 21,375
- - ------------------------------------------------------------------------------------------------------

Total assets $ 277,586 $ 268,361
- - ------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Notes payable and current maturities of long-term liabilities $ 14,889 $ 24,632
Accounts payable 22,892 12,816
Accrued liabilities 38,488 40,212
- - ------------------------------------------------------------------------------------------------------

Total current liabilities 76,269 77,660
- - ------------------------------------------------------------------------------------------------------

Long-term liabilities, less current maturities 64,971 50,016
Liabilities subject to disposition in bankruptcy reorganization 122,909 119,932
- - ------------------------------------------------------------------------------------------------------

Shareholders' equity:
Common stock, $0.01 par value, authorized 20,000 shares,
shares issued and outstanding of 7,310 in 1994 and 1993 73 73
Additional paid-in capital 62,562 62,562
Retained earnings (accumulated deficit) (52,190) (42,744)
Minimum pension obligation adjustment (646) (646)
Cumulative currency translation adjustment 3,638 1,508
- - ------------------------------------------------------------------------------------------------------

Total shareholders' equity 13,437 20,753
- - ------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 277,586 $ 268,361
- - ------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.

3
<PAGE>

Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows

- - ------------------------------------------------------------------------------------------------
UNAUDITED
--------------------------
JULY 3, JUNE 30,
THE YEAR-TO-DATE ENDED (IN THOUSANDS) 1994 1993
- - ------------------------------------------------------------------------------------------------
<S> <C> <C>
Loss from continuing operations $ (9,446) $ (5,429)
Reconciliation to net cash provided by continuing operations:
Depreciation and amortization 7,802 7,898
Working capital changes and other (10,066) (2,711)
- - ------------------------------------------------------------------------------------------------
Net cash used by continuing operations (11,710) (242)
Net cash used by discontinued operations -- (128)
- - ------------------------------------------------------------------------------------------------
Net cash used by operating activities (11,710) (370)
- - ------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (1,442) (3,589)
Proceeds from equipment sold 8 121
Proceeds from business sold -- 4,500
Investments in joint ventures -- (1,750)
- - ------------------------------------------------------------------------------------------------
Net cash used by investing activities (1,434) (718)
- - ------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments of long-term debt, including current maturities (1,518) (2,570)
Proceeds of short-term debt, net 3,311 10,082
Principal payments of capital lease obligations (212) (268)
Proceeds from issuance of common stock for employee and
shareholder stock plans -- 258
- - ------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,581 7,502
- - ------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and equivalents (391) (198)
- - ------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents (11,954) 6,216
Cash and equivalents at beginning of year 12,877 2,449
- - ------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 923 $ 8,665
- - ------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------

</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1 - BASIS OF ACCOUNTING

The accompanying condensed consolidated financial statements
have been prepared from the unaudited records of Hexcel
Corporation and subsidiaries (the "Company") in accordance with
generally accepted accounting principles, and, in the opinion of
management, include all adjustments necessary to present fairly
the balance sheet of the Company as of July 3, 1994, and the
results of operations for the quarters and year-to-date periods
ended July 3, 1994 and June 30, 1993, and the cash flows for the
year-to-date periods ended July 3, 1994 and June 30, 1993. The
condensed consolidated balance sheet of the Company as of
December 31, 1993 was derived from the audited 1993 consolidated
financial statements. The Company adopted 13-week fiscal
quarters for financial reporting purposes beginning in 1994.
Consequently, the second quarter of 1994 consists of the period
April 4, 1994 through July 3, 1994, and the 1994 year-to-date
period consists of the period from January 1, 1994 through July
3, 1994. Certain information and footnote disclosures normally
included in financial statements have been omitted pursuant to
rules and regulations of the Securities and Exchange Commission.
Certain prior quarter amounts in the condensed consolidated
financial statements have been reclassified to conform to the
1994 presentation. These condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the latest
Annual Report on Form 10-K. See Management Discussion and
Analysis of Financial Condition and Results of Operations
beginning on page 12.

On December 6, 1993, Hexcel Corporation (a Delaware
corporation, the "Parent Company" or "Parent") filed a voluntary
petition for relief under the provisions of Chapter 11 of the
federal bankruptcy laws (see Note 2). The accompanying condensed
consolidated financial statements do not purport to reflect or
provide for the potential consequences of the bankruptcy
proceedings of Hexcel Corporation. In particular, the condensed
consolidated financial statements do not purport to show (a) as
to assets, their realizable value on a liquidation basis or their
availability to satisfy liabilities; (b) as to prepetition
liabilities, the amounts that may be allowed for claims or
contingencies or the status and priority thereof; (c) as to
shareholder accounts, the effect of any changes that may be made
to the capitalization of Hexcel Corporation; or (d) as to
operations, the effect of any changes that may be made in its
business. The outcome of these matters is not presently
determinable. Accordingly, the condensed consolidated financial
statements do not include adjustments that might result from the
ultimate outcome of these uncertainties.

The accompanying condensed consolidated financial statements
have been prepared on a going concern basis, which contemplates
the realization of assets and the satisfaction of liabilities in
the normal course of business. Hexcel Corporation has been
operating as a debtor-in-possession since filing for bankruptcy
protection. While the Company believes it has adequate financing
to operate in bankruptcy for a reasonable period of time, its
ability to successfully continue operations is dependent upon,
among other things, confirmation of a plan of reorganization that
will enable Hexcel Corporation to emerge from bankruptcy
proceedings, obtaining adequate postconfirmation financing to
fund restructuring and working capital requirements, successfully
implementing the restructuring program, and generating sufficient
cash

<PAGE>

from operations and financing sources to meet obligations.
Management believes that the Company should be able to
restructure its existing debt and obtain adequate
postconfirmation financing in connection with the confirmation of
a plan of reorganization, but there is no assurance that such
restructuring or financing will occur. These factors among
others may indicate that the Company will be unable to continue
as a going concern for a reasonable period of time.

The accompanying condensed consolidated financial statements do
not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.

NOTE 2 - BANKRUPTCY REORGANIZATION

BANKRUPTCY PETITION
On December 6, 1993, Hexcel Corporation filed a voluntary
petition for relief under the provisions of Chapter 11 of the
federal bankruptcy laws in the United States Bankruptcy Court for
the Northern District of California (the "Bankruptcy Court").
Since that date, Hexcel Corporation has continued business
operations as debtor-in-possession under the supervision of the
Bankruptcy Court. Substantially all of the U.S. assets and
operations of the Company are directly owned and operated by the
Parent, and are subject to bankruptcy protection. The joint
ventures and European subsidiaries of Hexcel Corporation are not
included in the bankruptcy proceedings and, as such, are not
subject to the provisions of the federal bankruptcy laws or the
supervision of the Bankruptcy Court. However, the Parent Company
is generally unable to provide direct financial support outside
of the normal course of business to its joint ventures and
subsidiaries without Bankruptcy Court approval.

PLANS OF REORGANIZATION
Two proposed plans of reorganization have been filed with the
Bankruptcy Court, one by Hexcel and one by the official committee
appointed to represent equity security holders (the "Equity
Committee"). At a hearing scheduled for August 30, 1994, the
Bankruptcy Court will consider the adequacy of the respective
disclosure statements relating to each plan. The two plans
provide for, among other things, the sale of additional shares of
Hexcel Corporation common stock or convertible preferred stock
and common stock warrants. The sale of additional shares of
common stock or securities deemed to be common stock equivalents
would result in a dilution of existing equity interests. For
information relating to the two plans of reorganization, see
Part II., Item 1. "Legal Proceedings". For additional information
regarding the bankruptcy proceedings of Hexcel Corporation, refer
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.

6
<PAGE>

CONDENSED FINANCIAL INFORMATION
The following condensed financial information for Hexcel
Corporation, the debtor-in-possession, as of July 3, 1994 and
December 31, 1993 and for the quarter and year-to-date ended July
3, 1994, has been prepared using the equity method to account for
investments in subsidiaries:

CONDENSED BALANCE SHEETS FOR
THE PARENT COMPANY

- - ---------------------------------------------------------------
7/3/94 12/31/93
- - ---------------------------------------------------------------
<S> <C> <C>
Current assets $ 81,655 $ 70,449
Property, plant and equipment, net 74,758 80,389
Investments and other assets 53,778 56,386
- - ---------------------------------------------------------------
Total assets $ 210,191 $ 207,224
- - ---------------------------------------------------------------
Current liabilities $ 31,043 $ 22,938
Long-term notes payable and deferred 40,302 41,101
liabilities
Liabilities subject to disposition in 125,409 122,432
bankruptcy reorganization
Shareholders' equity 13,437 20,753
- - ---------------------------------------------------------------
Total liabilities and shareholders' equity $ 210,191 $ 207,224
===============================================================
</TABLE>

Liabilities subject to disposition in bankruptcy reorganization
includes a note payable for $2,500 to a European subsidiary.

CONDENSED OPERATING INFORMATION FOR
THE PARENT COMPANY

- - ---------------------------------------------------------------
THE PERIOD ENDED JULY 3, 1994
YEAR-TO-
QUARTER DATE
- - ---------------------------------------------------------------
<S> <C> <C>
Net sales $ 56,559 $ 108,161
Operating income (loss) 371 (857)
Net loss (4,422) (9,446)
- - ---------------------------------------------------------------

CONDENSED STATEMENT OF CASH FLOWS FOR THE PARENT COMPANY
- - ---------------------------------------------------------------
THE PERIOD ENDED JULY 3, 1994
YEAR-TO-
DATE
- - ----------------------------------------------------------------
<S> <C>
Net cash used by operating activities $ (13,433)
Net cash used by investing activities (777)
Net cash provided by financing activities 6,324
- - ----------------------------------------------------------------
Net decrease in cash and equivalents (7,886)
Cash and equivalents at beginning of period 7,886
- - ----------------------------------------------------------------
Cash and equivalents at end of period $ --
================================================================
</TABLE>

7
<PAGE>

NOTE 3 - INVENTORIES

Inventories at July 3, 1994 and December 31, 1993 were:
- - ---------------------------------------------------------------
7/3/94 12/31/93
- - ---------------------------------------------------------------
<S> <C> <C>
Raw materials $ 21,694 $ 14,717
Work in progress 15,074 11,570
Finished goods 18,015 20,056
Supplies 1,067 941
- - ---------------------------------------------------------------
Total inventories $ 55,850 $ 47,284
===============================================================
</TABLE>

During the fourth quarter of 1993, the Company changed to the
first-in, first-out ("FIFO") method of accounting for
substantially all inventories. Previously, domestic honeycomb
and fabric inventories were valued using the last-in, first-out
method and all other inventories were valued at the lower of
average cost or market. The change to the FIFO method conforms
substantially all inventories of the Company to the same
accounting method.

NOTE 4 - LIABILITIES SUBJECT TO DISPOSITION IN BANKRUPTCY
REORGANIZATION

Liabilities subject to disposition in bankruptcy reorganization
as of July 3, 1994 and December 31, 1993 were:

- - -----------------------------------------------------------------
7/3/94 12/31/93
- - -----------------------------------------------------------------
<S> <C> <C>
Accounts payable $22,256 $21,676
Accrued liabilities 9,057 9,057
U.S. revolving credit agreement 12,000 12,000
10.12% senior notes originally due 1998 30,000 30,000
7% convertible subordinated debentures 25,625 25,625
originally due 2011
Obligations under IDB variable rate demand
notes originally due through 2024 15,890 15,890
Various U.S. notes payable and capital lease 3,110 3,860
obligations
Accrued interest on prepetition debt 4,971 1,824
- - ---------------------------------------------------------------
Total liabilities subject to disposition in
bankruptcy reorganization $122,909 $119,932
===============================================================
</TABLE>

Liabilities subject to disposition in bankruptcy reorganization
reflects the Company's estimate of the aggregate prepetition
liabilities of Hexcel Corporation. Proofs of claim totaling more
than $6.7 billion have been filed against Hexcel Corporation, and
the Company is in the process of reviewing the nature and amounts
of these claims. Until the Company completes its review of all
submitted proofs of claim, and the Bankruptcy Court has
determined the aggregate amount of allowed claims, the recorded
liability is subject to revision. Furthermore, the recorded
liability does not include any amounts for claims that may arise
from the rejection of executory contracts, including leases, or
for bankruptcy reorganization expenses or other claims that may
arise as a result of the bankruptcy reorganization process.

Approximately $6.4 billion of the claims total is comprised of
192 environmental claims, most of which are duplicative. Most of
these environmental claims relate to "superfund" sites which

8
<PAGE>

have never been owned by Hexcel Corporation, and assert the
amount of the total clean-up costs for an entire site. Multiple
claims were filed by potentially responsible parties for various
sites. Another $0.2 billion in claims is based on various
disputed and unresolved legal and administrative matters. These
claims together with the environmental claims result in an
aggregate amount of proofs of claim which the Company believes
is highly inflated and which bears no relation to the estimate
of prepetition liabilities subject to bankruptcy disposition.

The industrial development bonds are guaranteed by irrevocable
bank letters of credit. The bondholders have the right to draw
upon the letters of credit, at which time the issuing bank would
then become an unsecured creditor of the Parent Company.

Under Chapter 11, the Parent Company is prohibited from paying
interest on most prepetition debt, absent a confirmed plan of
reorganization providing for such payments. However, the Parent
Company continues to record interest expense on all interest-
bearing obligations, and the resulting liabilities are included
in liabilities subject to disposition in bankruptcy
reorganization. In addition, when the Parent Company receives
Bankruptcy Court approval to pay or otherwise honor certain
prepetition obligations, those obligations are reclassified from
liabilities subject to disposition in bankruptcy reorganization
to the appropriate liability captions of the condensed
consolidated balance sheets.

The satisfaction of liabilities subject to disposition in
bankruptcy reorganization is subject to confirmation of a plan of
reorganization by the Bankruptcy Court. Such liabilities may be
settled for amounts other than those reflected in the condensed
consolidated financial statements.

NOTE 5 - INCOME TAXES

The Company adopted Statement of Financial Accounting Standards
No. 109 ("SFAS 109"), "Accounting for Income Taxes," effective
January 1, 1993. The cumulative effect of adopting SFAS 109 was
the recognition of $4,500 of income, which was recorded in the
first quarter of 1993. Also, the Company recorded tax benefits
of $898 and $2,316 during the second quarter and first half of
1993.

During late 1993, substantial uncertainty developed as to the
realization of the Company's deferred income tax assets.
Consequently, those assets were fully reserved as of December 31,
1993. In the second quarter and first half of 1994, the Company
continued to reserve for the deferred income tax assets generated
by the Company's pre-tax losses for these respective periods. As
a result of state income taxes and taxable income for certain
European entities, the Company recorded a provision for income
taxes of $595 for the second quarter, and $1,019 for the year-to-
date.

NOTE 6 - HEXCEL S.A.

On July 25, 1994, the Company announced the refinancing of
Hexcel S.A., the Company's wholly-owned Belgian subsidiary.
Hexcel S.A. successfully negotiated an extension of its existing
credit facilities, totaling over $18,000 (at current exchange
rates), through June 30, 1996.

<PAGE>
Accordingly, the total outstanding debt under these facilities
as of July 3, 1994 has been recorded as a long-term liability
in the condensed consolidated balance sheet.

In connection with the renewal of these credit facilities,
Hexcel Corporation agreed to contribute approximately $6,000 of
cash (at current exchange rates) to Hexcel S.A. Half of the
agreed cash contribution was made in July, and the other half is
scheduled to be made prior to September 30, 1994. All
intercompany transactions between Hexcel Corporation and Hexcel
S.A. are eliminated in the condensed consolidated financial
statements.

NOTE 7 - RESINS BUSINESS

The Company has concluded that there is little
interrelationship between its core business (honeycomb, advanced
composites and reinforcement fabrics) and its resins business.
Consequently, the Company has intensified its efforts to sell the
resins business. On June 22, 1994, the Bankruptcy Court approved
a procedure that will allow the Company to sell the resins
operations, provided that a sale on acceptable terms can be
arranged. This procedure entails reaching a detailed letter of
intent with a prospective buyer, completing a definitive
agreement and satisfying other preconditions, and conducting an
overbid process.

As of August 12, 1994, the Company has not agreed to a detailed
letter of intent with a prospective buyer. Furthermore, the
Company is committed to selling the resins business only if
acceptable sales terms can be arranged and are approved by the
Bankruptcy Court. If and when these conditions are satisfied,
the Company's resins operations would then qualify as a
discontinued business segment, as defined by generally accepted
accounting principles. At such time, the financial position,
results of operations and cash flows of the resins business would
be segregated from the Company's continuing operations and
reported as discontinued operations.

NOTE 8 - DIC-HEXCEL LIMITED

The Company owns a 50% interest in DIC-Hexcel Limited, a joint
venture with Dainippon Ink and Chemicals, Inc. (or "DIC"). The
joint venture was formed in 1990 for the production and sale of
Nomex honeycomb, advanced composites and decorative laminates for
the Japanese market. The joint venture owns and operates a
manufacturing facility in Komatsu, Japan which has begun to
manufacture decorative laminates for sale and is now performing
pre-qualification manufacturing trials of honeycomb and advanced
composites.

Due to the significant reduction in demand for commercial
aircraft and other adverse changes in the competitive
environment, the economic viability of this joint venture is now
in doubt. In addition, the cost of pre-qualification trials and
the attendant lack of revenues are resulting in negative cash
flows which are expected to continue for several years.
Consequently, the Company has entered into discussions with DIC
regarding the possibility of significantly reducing or even
eliminating the Company's participation in the venture.

Under the joint venture agreement, DIC agreed to guarantee all
bank debt incurred by this venture. In turn, the Company
provided an undertaking that in the event the venture went into
liquidation the Company would reimburse DIC for 50% of all
guaranteed bank loans, net of any

<PAGE>
proceeds from the sale of the venture's assets. As of August
12, 1994, the guaranteed bank debt of the venture totaled
approximately $19,500 (at current exchange rates).

The joint venture is not currently in liquidation, and no
decision has been made as to the Company's future participation
in this venture. Consequently, the Company has not recognized
any liability associated with the contingent guarantee of 50% of
the venture's outstanding bank debt. However, the venture will
need either to borrow further substantial sums or obtain cash
equity infusions from its investors to continue to fund its
operations in the coming years. If the venture fails to obtain
such funds, or if the Company elects or is required to reduce or
eliminate its participation in the venture, the Company may be
required to recognize a liability for some portion of the
venture's guaranteed bank debt up to 50%.

<PAGE>

Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

BANKRUPTCY

On December 6, 1993, Hexcel Corporation (a Delaware
corporation, the "Parent Company" or "Parent") filed a voluntary
petition for relief under the provisions of Chapter 11 of the
federal bankruptcy laws in the United States Bankruptcy Court for
the Northern District of California (the "Bankruptcy Court").
Since that date, Hexcel Corporation has continued business
operations as debtor-in-possession under the supervision of the
Bankruptcy Court. Substantially all of the U.S. assets and
operations of the Company are directly owned and operated by the
Parent, and are subject to bankruptcy protection. The joint
ventures and European subsidiaries of Hexcel Corporation are not
included in the bankruptcy proceedings and, as such, are not
subject to the provisions of the federal bankruptcy laws or the
supervision of the Bankruptcy Court. However, the Parent Company
is generally unable to provide direct financial support outside
of the normal course of business to its joint ventures and
subsidiaries without Bankruptcy Court approval.

Two different plans of reorganization have been filed with the
Bankruptcy Court, one by Hexcel and one by the official committee
appointed to represent equity security holders (the "Equity
Committee"). At a hearing scheduled for August 30, 1994, the
Bankruptcy Court will consider the adequacy of the respective
disclosure statements relating to each plan. For information
relating to these two plans, see Part II., Item 1. "Legal
Proceedings". For additional information regarding the
bankruptcy proceedings of Hexcel Corporation, refer to the notes
to the condensed consolidated financial statements included in
this Quarterly Report on Form 10-Q and to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.

RESULTS OF OPERATIONS

SECOND QUARTER
Net sales were $93.4 million for the second quarter of 1994,
essentially unchanged from net sales of $92.8 million for the
second quarter of 1993. The 1993 quarter included $3.8 million
of sales by the Company's Knytex business, which was transferred
to a joint venture with Owens-Corning Fiberglas in June of 1993.
Second quarter gross margins were also virtually unchanged at
18.3% of sales for 1994 and 18.2% of sales for 1993.

Operating income was $3.0 million for the 1994 quarter compared
with an operating loss of $0.9 million for the 1993 quarter. The
$3.9 million improvement reflects the positive impact of the
Company's ongoing restructuring program, as well as a decline in
other operating expenses. Second quarter marketing, general and
administrative expenses were reduced by $2.7 million, or 16.0%,
from 1993 to 1994. These savings are the result of a worldwide
reorganization of sales, marketing and administration, which
contributed to a 24% reduction in the Company's workforce since
the beginning of 1993.

Other expenses fell to $0.1 million in the second quarter of
1994 from $1.2 million in the same quarter of 1993. The 1993
total included $3.0 million of costs associated with the
terminated

12
<PAGE>

negotiations for the acquisition of the composite prepreg and
structural adhesives business of BASF Corporation, the securities
litigation filed in December of 1992 and the settlement of a
threatened proxy contest. These expenses were partly mitigated
by a $1.5 million gain from the sale of 50% of the Company's
Knytex business to a joint venture between the Company and
Owens-Corning Fiberglas. The Knytex joint venture began operations
on July 1, 1993.

The Company incurred $4.6 million of bankruptcy reorganization
expenses during the second quarter of 1994. The costs of
bankruptcy reorganization, which include professional fees, court
costs, and employee retention incentives, are expected to remain
significant for the duration of the year.

Second quarter interest expenses were $2.3 million for 1994 and
1993. The Company continues to record accrued interest on Hexcel
Corporation's prepetition indebtedness. The Company also
recorded a $0.6 million provision for income taxes for the 1994
quarter, compared with a $0.9 million tax benefit for the 1993
quarter. The 1994 provision is a result of taxable income for
certain European entities and state income taxes. The Company
fully reserved the deferred income tax assets generated by the
pre-tax losses incurred during 1994.

The net loss for the second quarter of 1994 was $4.4 million or
$0.60 per share, while the net loss for the same quarter of 1993
was $2.5 million or $0.34 per share. The 1993 loss includes a
loss from discontinued operations of $0.2 million or $0.03 per
share.

YEAR-TO-DATE
Net sales were $178.8 million for the first half of 1994
compared with $182.1 million for the first half of 1993. The
1993 total includes Knytex sales of $7.0 million. Gross margin
for the first half of 1994 improved slightly to 17.6% of sales,
from 17.0% for the first half of 1993. The modest improvement is
primarily attributable to increased sales of aerospace
composites.

Operating income rose by $6.4 million from the first half of
1993 to the first half of 1994. Most of the gain is attributable
to the significant reduction in marketing, general and
administrative expenses which began in the second half of 1993.
The Company also benefited from a $0.5 million decline in other
operating expenses. Other expenses for the first half of 1993
included the second quarter items noted above as well as a gain
of $1.5 million from the settlement of two insurance claims and a
$1.0 million reserve for the anticipated loss on the disposition
of the City of Industry, California property.

Bankruptcy reorganization expenses were $6.9 million for the
year-to-date ended July 3, 1994. Interest expenses were $4.8
million for the same period and $4.7 million for the first half
of 1993. The year-to-date income tax provision was $1.0 million
for 1994 versus a $2.3 million tax benefit for 1993. The 1994
first half provision is attributable to the same factors noted
above for the quarter.

The net loss for the first half of 1994 was $9.4 million or
$1.29 per share. The net loss for the same period of 1993 was
$1.3 million or $0.18 per share, including a loss from
discontinued operations of $0.4 million or $0.05 per share and a
gain for the cumulative effect of adopting a new accounting
standard for income taxes of $4.5 million or $0.61 per share.

<PAGE>

REVENUE TRENDS

The sales decline which began in the fourth quarter of 1992 was
halted in the second quarter of 1994. However, the Company does
not anticipate a sustained increase in revenues for the
foreseeable future, and further sales declines are possible. In
an effort to return to acceptable levels of profitability at
current sales levels, the Company has undertaken steps to improve
manufacturing processes and reduce production costs, particularly
in honeycomb. In addition, management is implementing measures
to improve customer service, sharpen the Company's market focus,
and pursue new opportunities for Hexcel materials and technology.
Recent product developments include new generations of carbon,
thermoplastic, and aluminum honeycomb with enhanced performance
characteristics, and new composites applications for aircraft
engines and power generators.

Sales of advanced composites were higher for the second quarter
and first half of 1994 than for the comparable periods of 1993,
as a result of increased sales to aerospace and recreation
markets in both the U.S. and Europe. These increases were
largely offset by reduced sales of honeycomb products to
commercial and military aerospace customers. Sales of
reinforcement fabrics improved slightly over the same time
periods, as European markets began to recover from the recent
recession.

The backlog of orders for aerospace materials as of July 3,
1994 was approximately 12% lower than the backlog as of December
31, 1993, due in large part to some sizable shipments of
aerospace composites during the second quarter of 1994. The
backlog of orders for non-aerospace materials rose approximately
32% during the first half of 1994, primarily as a result of
orders from recreational and electronics customers.

CAPITAL RESOURCES AND LIQUIDITY

Hexcel Corporation began borrowing under the debtor-in-
possession credit facility from The CIT Group / Business Credit,
Inc. in April 1994. As of August 9, 1994, outstanding borrowings
totaled $11.1 million and approximately $19.0 million of
additional credit was available. While the Company believes it
has adequate financing to operate in bankruptcy for a reasonable
period of time, its ability to successfully continue operations
is dependent upon, among other things, confirmation of a plan of
reorganization that will enable Hexcel Corporation to emerge from
bankruptcy proceedings, obtaining adequate postconfirmation
financing to fund restructuring and working capital requirements,
successfully implementing the restructuring program, and
generating sufficient cash from operations and financing sources
to meet obligations. Management believes that the Company should
be able to restructure its existing debt and obtain
postconfirmation financing in connection with the confirmation of
a plan of reorganization, but there is no assurance such
restructuring or financing will occur. (See Part II., Item 1.
"Legal Proceedings.") The debtor-in-possession credit facility
expires the earlier of December 1995 or upon the effective date
of a confirmed plan of reorganization, at which time all
outstanding borrowings become immediately due and payable.
Consequently, in connection with the reorganization of Hexcel
Corporation, the Company will need to secure long-term
postconfirmation financing to replace debtor-in-possession
financing.

14
<PAGE>

On July 25, 1994, the Company announced that Hexcel S.A., the
Company's wholly-owned Belgian subsidiary, had successfully
negotiated an extension of its existing credit facilities through
June 30, 1996. These facilities total over $18 million (at
current exchange rates). In connection with the renewal of these
credit facilities, Hexcel Corporation agreed to contribute
approximately $6 million of cash (at current exchange rates) to
Hexcel S.A. in the form of conditionally forgiven subordinated
debt. Hexcel Corporation has received Bankruptcy Court approval
to fund this contribution from cash on hand and by drawing upon
the debtor-in-possession credit line. Half of the agreed cash
contribution was made in July, and the other half will be made
prior to September 30, 1994.

Earnings before interest, taxes, depreciation and amortization
were $11.1 million for the first half of 1994. However, cash
payments for restructuring costs and bankruptcy reorganization
expenses, along with working capital changes, resulted in the net
use of $11.7 million of cash for operating activities. Operating
activities used $0.4 million of cash for the first half of 1993,
which benefited from the absence of bankruptcy costs as well as a
small reduction in working capital.

Working capital was $70.4 million at July 3, 1994, $54.7
million at December 31, 1993 and, excluding assets held for sale,
$52.8 million at June 30, 1993. During the first half of 1994,
accounts receivable increased by $17.3 million and inventories
rose by $8.6 million. The accounts receivable increase is
primarily attributable to higher sales for the second quarter of
1994 than for the fourth quarter of 1993. The rise in
inventories is due to the improvement in the backlog of orders
and to the creation of buffer stocks necessitated by the
relocation of honeycomb production from the Graham, Texas
facility. The increases in accounts receivable and inventories
were largely financed with a $12.0 million reduction in cash and
equivalents, a $10.1 million increase in accounts payable, and
$3.3 million of net short-term borrowings. As a result of the
extension of credit facilities at Hexcel S.A. through June 30,
1996, $15.9 million of debt was reclassified from short-term to
long-term as of July 3, 1994.

Capital expenditures were $1.4 million for the first half of
1994, compared with $3.6 million for the same period of 1993.
Capital spending is being held to minimal levels. Until Hexcel
Corporation emerges from bankruptcy proceedings and adequate long-
term financing is in place, the Company does not expect capital
expenditures to significantly increase above 1993 spending
levels.

Cash restructuring costs were $5.0 million for the first half
of 1994. Significant expenditures remain in 1994 and beyond.
Funding of these costs will come from the debtor-in-possession
revolving line of credit while the Parent Company remains in
bankruptcy proceedings. Funding after bankruptcy proceedings
will need to be provided as part of a reorganization plan
confirmed by the Bankruptcy Court. Both of the two proposed
plans of reorganization filed with the Bankruptcy Court
contemplate an infusion of additional equity capital and a
commitment of post-bankruptcy credit facilities. For information
relating to these two plans, see Part II., Item 1. "Legal
Proceedings".

<PAGE>

PART II. OTHER INFORMATION

HEXCEL CORPORATION AND SUBSIDIARIES

ITEM 1. LEGAL PROCEEDINGS

(i) On July 27, 1994, Hexcel Corporation filed its proposed plan
of reorganization and related disclosure statement with the
United States Bankruptcy Court for the Northern District of
California, Oakland Division. At a hearing scheduled for
August 30, 1994, the Bankruptcy Court will consider the
adequacy of the disclosure statement. Until such time that
the disclosure statement is approved by the Bankruptcy Court,
the solicitation of votes to accept or reject the plan is
prohibited. The following summary of the plan is qualified
in its entirety by the plan and the related disclosure
statement, which are included as Exhibit 2 to this Quarterly
Report on Form 10-Q.

Hexcel Corporation's proposed reorganization plan provides for
an infusion of up to $50 million in new equity financing,
including the proceeds of a shareholder rights offering ($17
to $25 million) and a cash investment by Mutual Series Fund,
Inc. ($23 to $25 million). Mutual Series Fund, Inc. will
also be the standby purchaser for the rights offering. The
eventual size of the new equity financing will depend on
whether the holders of Hexcel Corporation's subordinated
debentures vote to accept the proposed plan and thereby
receive new common stock in the reorganized Hexcel Corporation
in exchange for the subordinated debentures, or reject the
proposed plan and have their subordinated debentures
reinstated. The proposed plan also contemplates obtaining
$25 to $35 million in revolving credit facilities, for which
the Company has entered into discussions with prospective
lenders, to replace the debtor-in-possession credit line.

In summary, the proposed plan calls for prepetition claims
and interests to be treated as follows: (a) Administrative
expense claims, priority tax claims, other priority claims,
secured claims, and IDB claims are unimpaired, and will either
be paid in cash or reinstated; (b) Banque Nationale de Paris
claims arising from outstanding letters of credit are
impaired, and will be satisfied through a combination of cash
payments and reinstatement with modified terms; (c) General
unsecured claims are impaired, but will be paid in full in
cash on the distribution date of the plan; (d) Principal
Mutual Life Insurance Company claims arising from the 10.12%
senior notes originally due 1998 and an additional note are
impaired, and will be satisfied through a combination of
cash payments, new shares of Hexcel Corporation common stock,
and reinstatement of the 10.12% notes with modified terms;
(e) Environmental claims are impaired, and will be satisfied
if and when such claims are allowed, subject to the specific
terms of the plan; (f) Intercompany claims are

16
<PAGE>

impaired, and will be satisfied through reinstatement with
modified terms; (g) Subordinated debenture claims are impaired
if the claim holders vote to accept the proposed plan, in
which case these claims will be satisfied through new shares
of Hexcel Corporation common stock; subordinated debenture
claims are not impaired if the claim holders vote to reject
the proposed plan, in which case the subordinated debentures
will be reinstated; (h) Hexcel Corporation common stock
trading claims are impaired, and will be satisfied through
new shares of Hexcel Corporation common stock; (i) Hexcel
Corporation common stock interests are impaired, and will
receive new shares of Hexcel Corporation common stock and
rights to purchase additional shares under specified terms;
(j) Hexcel Corporation stock option interests are impaired,
and will receive no distributions under the proposed plan and
all outstanding options will be canceled. The holders of all
impaired claims and interests would be entitled to vote to
accept or reject the proposed plan, except for holders of
Hexcel Corporation stock option interests.

(ii) On July 26, 1994, the Equity Committee filed a proposed plan
of reorganization and related disclosure statement with the
United States Bankruptcy Court for the Northern District of
California, Oakland Division. At a hearing scheduled for
August 30, 1994, the Bankruptcy Court will consider the
adequacy of the related disclosure statement. Until such time
that the disclosure statement is approved by the Bankruptcy
Court, the solicitation of votes to accept or reject the plan
is prohibited. The following summary of the plan is qualified
in its entirety by the plan and related disclosure statement
filed by the Equity Committee with the Bankruptcy Court.

The Equity Committee has asked M.J. Whitman, L.P. to attempt
to obtain commitments for $50 million of equity financing to
fund the Equity Committee's proposed plan. These commitments,
if obtained, would backstop a rights offering to existing
holders of Hexcel Corporation common stock, which provides for
the sale of convertible preferred stock and common stock
warrants under specified terms. The proposed plan also
contemplates obtaining $35 million or more in revolving credit
facilities to replace the debtor-in-possession credit line.
The Equity Committee's proposed plan is dependent upon
obtaining these equity and exit financing commitments.

In summary, the proposed plan calls for prepetition claims and
interests to be treated as follows: (a) All claims are
putatively unimpaired, and will be satisfied through cash
payments, reinstatement, or reinstatement with modified terms;
(b) Hexcel Corporation common stock interests are impaired,
will retain the shares currently issued and outstanding, and
receive rights to purchase convertible preferred stock and
common stock warrants under specified terms; (c) Hexcel
Corporation stock option interests which have vested will be
reinstated, while stock option interests which have not vested
will be extinguished. Only the holders of Hexcel Corporation

<PAGE>

common stock interests would be entitled to vote to accept or
reject the proposed plan.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

(a) The Company is in default of certain financial and other
covenants and pursuant to certain cross-default provisions
under its financing agreements with its U.S. banks and certain
other lenders. These consist of substantially all U.S. debt
listed in Note 4 to the condensed consolidated financial
statements. Payment and enforcement of most of these
obligations is stayed by federal bankruptcy laws for the
duration of Hexcel Corporation's bankruptcy proceedings.

ITEM 5. OTHER INFORMATION

On August 12, 1994, the Company reported that in lieu of
holding its 1994 annual meeting of stockholders, it will add
three new directors designated by the Equity Committee. The
addition of the new directors, Fred Stanske, Marshall Geller
and David Glatstein, resolves litigation commenced in the
Bankruptcy Court by the Equity Committee to compel the 1994
annual meeting. The Company will hold its 1995 annual meeting
on schedule in May of next year unless otherwise set forth in
a confirmed plan of reorganization.

ITEM 6. EXHIBITS

(a) Exhibits:

2. Hexcel Corporation's Proposed Plan of Reorganization and
Related Disclosure Statement.

11. Statement Regarding Computation of Per Share Earnings.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, and in
the capacity indicated.

HEXCEL CORPORATION
(Registrant)

August 12, 1994 /s/ Wayne C. Pensky
------------------------------
(Date) Wayne C. Pensky, Controller
Chief Accounting Officer
Authorized Officer

<PAGE>

EXHIBIT INDEX

PAGE NO.

2. Hexcel Corporation's Proposed Plan of Reorganization
and Related Disclosure Statement
11. Statement Regarding Computation of Per Share
Earnings

<PAGE>

KRONISH, LIEB, WEINER & HELLMAN
ROBERT J. FEINSTEIN, ESQ.
CHET F. LIPTON, ESQ.
1114 Avenue of the Americas
New York, New York 10036
Telephone (212) 479-6000

- and -

GOLDBERG, STINNETT, MEYERS & DAVIS
A Professional Corporation
MERLE C. MEYERS, ESQ. #066849
44 Montgomery Street, Suite 2900
San Francisco, California 94104
Telephone: (415) 362-5045

Attorneys for Debtor in Possession

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

)
In re ) No. 93-48535 T
)
HEXCEL CORPORATION, a ) Chapter 11
Delaware corporation, )
)
Debtor. )
)
Tax Id. No. 94-1109521 )
___________________________________)

DEBTOR'S PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
(DATED JULY 27, 1994)
<PAGE>

DEBTOR'S PLAN OF REORGANIZATION

TABLE OF CONTENTS

PAGE NO.

ARTICLE I. DEFINITION AND CONSTRUCTION OF TERMS . . . . . . . . . . 1 - 17

ARTICLE II. TREATMENT OF ADMINISTRATIVE EXPENSE
CLAIMS AND PRIORITY TAX CLAIMS . . . . . . . . . . . . . . . 17

2.1. Administrative Expense Claims . . . . . . . . . . . . . . . . . . . 17

2.2. Priority Tax Claims . . . . . . . . . . . . . . . . . . . . . . . . 18

ARTICLE III. CLASSIFICATION OF CLAIMS AND EQUITY
INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . 19

3.1. Class 1 (Other Priority Claims) . . . . . . . . . . . . . . . . . . 19

3.2. Class 2 (Secured Claims) . . . . . . . . . . . . . . . . . . . . . 19

3.2.1. Class 2A (Graham Industrial Mortgage Claims) . . . . . . . . . . . 20

3.2.2. Class 2B (Greater Pottsville Mortgage Claims) . . . . . . . . . . . 20

3.2.3. Class 2C (Pottsville PIDA (Schuylkill)
Mortgage Claims) . . . . . . . . . . . . . . . . . . . . . . . . . 20

3.3. Class 3 (IDRB Claims) . . . . . . . . . . . . . . . . . . . . . . . 20

3.3.1. Class 3A (California Pollution Control
Financing Authority) . . . . . . . . . . . . . . . . . . . . . . . 21

3.3.2. Class 3B (Industrial Development Authority
of the City of Casa Grande) . . . . . . . . . . . . . . . . . . . 21

3.3.3. Class 3C (Young County #1 Industrial
Development Corporation) . . . . . . . . . . . . . . . . . . . . . 21

3.3.4. Class 3D (Guadalupe-Blanco River Authority
Industrial Development Corporation) . . . . . . . . . . . . . . . 22

3.3.5. Class 3E (Port of Skagit County Industrial
Development Corporation) . . . . . . . . . . . . . . . . . . . . . 22

3.3.6. Class 3F (Industrial Development Authority
of the County of Los Angeles) . . . . . . . . . . . . . . . . . . . 22

-i-

<PAGE>

3.3.7. Class 3G (City of Lancaster) . . . . . . . . . . . . . . . . . . . 23

3.3.8. Class 3H (Economic Development Corporation
of the County of Ottawa) . . . . . . . . . . . . . . . . . . . . . 23

3.4. Class 4 (BNP Claims) . . . . . . . . . . . . . . . . . . . . . . . 23

3.5. Class 5 (General Unsecured Claims) . . . . . . . . . . . . . . . . 23

3.6. Class 6 (Principal Mutual Claims) . . . . . . . . . . . . . . . . 24

3.7. Class 7 (Environmental Claims) . . . . . . . . . . . . . . . . . . 24

3.7.1.1. Class 7A.1 (Helen Kramer Landfill in Gloucester,
New Jersey - Direct Claim) . . . . . . . . . . . . . . . . . . . . 24

3.7.1.2. Class 7A.2 (Helen Kramer Landfill in Gloucester,
New Jersey - Contribution Claims) . . . . . . . . . . . . . . . . . 24

3.7.2. Class 7B (A to Z Landfill in New Brunswick,
New Jersey) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

3.7.3. Class 7C (Chemical Control Superfund Site
in Elizabeth, New Jersey) . . . . . . . . . . . . . . . . . . . . . 25

3.7.4.1. Class 7D.1 (Jonas Sewell Transfer Station
- Direct Claim) . . . . . . . . . . . . . . . . . . . . . . . . . . 25

3.7.4.2. Class 7D.2 (Jonas Sewell Transfer Station
- Contribution Claims) . . . . . . . . . . . . . . . . . . . . . . 25

3.7.4.3. Class 7D.3 (Marvin Jonas, Inc. Waste Sites
- Contribution Claims) . . . . . . . . . . . . . . . . . . . . . . 25

3.7.5. Class 7E (Busby Valley Landfill in Voorhes,
New Jersey and GEMS Landfill in New Jersey) . . . . . . . . . . . . 25

3.7.6. Class 7F (Scientific Chemical Processing, Inc.
site in Newark, New Jersey) . . . . . . . . . . . . . . . . . . . . 26

3.7.7. Class 7G (Florence Recontouring Landfill in
Florence, New Jersey and PJP Landfill in
Jersey City, New Jersey) . . . . . . . . . . . . . . . . . . . . . 26

3.7.8. Class 7H (Fisher Calo Site in Kingsburg,
Indiana) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

3.7.9. Class 7I (Seymour, Indiana Superfund Site) . . . . . . . . . . . . 26

3.7.10.1. Class 7J.1 (San Gabriel Ground Water Basin
in California - Direct Claim) . . . . . . . . . . . . . . . . . . . 27

-ii-
<PAGE>

3.7.10.2 Class 7J.2 (San Gabriel Ground Water Basin
in California - Contribution Claim) . . . . . . . . . . . . . . . . 27

3.7.11.1. Class 7K.1 (Granville Solvents in Granville,
Ohio - Direct Claim) . . . . . . . . . . . . . . . . . . . . . . . 27

3.7.11.2. Class 7K.2 (Granville Solvents in Granville,
Ohio - Contribution Claims) . . . . . . . . . . . . . . . . . . . . 27

3.7.11.3. Class 7K.3 (Granville Solvents in Granville,
Ohio - Contribution Claim) . . . . . . . . . . . . . . . . . . . . 27

3.7.12. Class 7L (Organic Chemical Site in Grandville,
Michigan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

3.7.13. Class 7M (Debtor's Property outside Casa Grande,
Arizona) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

3.7.14. Class 7N (Kin Buc Superfund Site in Edison,
New Jersey) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

3.7.15. Class 7O (Scientific Chemical Processing Site
in Carlstadt, New Jersey) . . . . . . . . . . . . . . . . . . . . . 28

3.7.16.1. Class 7P.1 (Livermore, California Sites
- Direct Claims) . . . . . . . . . . . . . . . . . . . . . . . . . 29

3.7.16.2. Class 7P.2 (Livermore, California Sites
- F&P Properties, Inc.) . . . . . . . . . . . . . . . . . . . . . . 29

3.7.16.3. Class 7P.3 (Livermore, California Sites
- Smiths) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

3.7.17. Class 7Q (Fine Organics - Lodi, New Jersey) . . . . . . . . . . . . 30

3.7.18. Class 7R (Other Environmental Claims) . . . . . . . . . . . . . . . 30

3.8. Class 8 (Intercompany Claims) . . . . . . . . . . . . . . . . . . 30

3.8.1. Class 8A (Hexcel Lyon Claim) . . . . . . . . . . . . . . . . . . . 30

3.8.2. Class 8B (Other Intercompany Claims) . . . . . . . . . . . . . . . 30

3.9. Class 9 (Subordinated Debenture Claims) . . . . . . . . . . . . . 30

3.10. Class 10 (Section 510(b) Hexcel Common Stock
Trading Claims) . . . . . . . . . . . . . . . . . . . . . . . . . . 31

3.11. Class 11 (Common Stock) . . . . . . . . . . . . . . . . . . . . . 31

3.12. Class 12 (Hexcel Options) . . . . . . . . . . . . . . . . . . . . 31

ARTICLE IV. TREATMENT OF CLAIMS AND EQUITY INTERESTS . . . . . . . . . . . . 31

-iii-
<PAGE>

4.1. Class 1 -- Other Priority Claims . . . . . . . . . . . . . . . . . 31

4.2. Class 2 -- Secured Claims . . . . . . . . . . . . . . . . . . . . . 31

4.2.1. Class 2A -- Graham Industrial Mortgage Claims . . . . . . . . . . 31

4.2.2. Class 2B -- Greater Pottsville Mortgage Claims . . . . . . . . . . 32

4.2.3. Class 2C -- Pottsville PIDA (Schuylkill)
Mortgage Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 32

4.3. Class 3 -- IDRB Claims . . . . . . . . . . . . . . . . . . . . . . 33

4.3.1. Class 3A (California Pollution Control
Financing Authority) . . . . . . . . . . . . . . . . . . . . . . . 33

4.3.2. Class 3B (Industrial Development Authority
of the City of Casa Grande) . . . . . . . . . . . . . . . . . . . . 33

4.3.3. Class 3C (Young County #1 Industrial
Development Corporation) . . . . . . . . . . . . . . . . . . . . . 34

4.3.4. Class 3D (Guadalupe-Blanco River Authority
Industrial Development Corporation) . . . . . . . . . . . . . . . 34

4.3.5. Class 3E (Port of Skagit County Industrial
Development Corporation) . . . . . . . . . . . . . . . . . . . . . 34

4.3.6. Class 3F (Industrial Development Authority
of the County of Los Angeles) . . . . . . . . . . . . . . . . . . . 35

4.3.7. Class 3G (City of Lancaster) . . . . . . . . . . . . . . . . . . . 35

4.3.8. Class 3H (Economic Development Corporation
of the County of Ottawa) . . . . . . . . . . . . . . . . . . . . . 35

4.4. Class 4 -- BNP Claims . . . . . . . . . . . . . . . . . . . . . . 36

4.5. Class 5 -- General Unsecured Claims . . . . . . . . . . . . . . . . 40

4.6. Class 6 -- Principal Mutual Claims . . . . . . . . . . . . . . . . 41

4.7. Class 7 -- Environmental Claims . . . . . . . . . . . . . . . . . 43

4.8. Class 8 -- Intercompany Claims . . . . . . . . . . . . . . . . . . 46

4.8.1. Class 8A -- Hexcel Lyon Claim . . . . . . . . . . . . . . . . . . . 46

4.8.2. Class 8B -- Other Intercompany Claims . . . . . . . . . . . . . . . 47

4.9. Class 9 -- Subordinated Debenture Claims . . . . . . . . . . . . . 47

-iv-
<PAGE>

4.10. Class 10 -- Section 510(b) Hexcel Common
Stock Trading Claims . . . . . . . . . . . . . . . . . . . . . . . 48

4.11. Class 11 -- Common Stock . . . . . . . . . . . . . . . . . . . . . 48

4.12. Class 12 -- Hexcel Options . . . . . . . . . . . . . . . . . . . . 51

ARTICLE V. PROVISIONS OF EQUITY SECURITIES TO BE
ISSUED PURSUANT TO THE PLAN . . . . . . . . . . . . . . . . . . . . 51

5.1. Reorganized Hexcel Common Stock . . . . . . . . . . . . . . . . . . 51

5.2. Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

ARTICLE VI. MEANS OF IMPLEMENTATION, PROVISIONS
REGARDING VOTING AND DISTRIBUTIONS UNDER
THE PLAN AND TREATMENT OF DISPUTED,
CONTINGENT AND UNLIQUIDATED ADMINISTRATIVE
EXPENSE CLAIMS, CLAIMS AND EQUITY INTERESTS . . . . . . . . . . . 53

6.1. Voting of Claims and Interests . . . . . . . . . . . . . . . . . . 53

6.2. Method of Distributions Under the Plan . . . . . . . . . . . . . . 53

6.3. Distributions Relating to Disputed Claims . . . . . . . . . . . . . 56

6.4. Resolution of Disputed Administrative Expense
Claims and Disputed Claims . . . . . . . . . . . . . . . . . . . . 56

6.5. Cancellation and Surrender of Existing
Debt Securities and Agreements . . . . . . . . . . . . . . . . . . 57

6.6. Record Date for Distribution of Securities . . . . . . . . . . . . 58

6.7. Surrender of Existing Shares of
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

6.8. Cancellation and Surrender of
Subordinated Debentures
if Plan is Accepted by Class 9 . . . . . . . . . . . . . . . . . . 61

6.9. Delivery of Shares to the Standby Purchaser . . . . . . . . . . . . 63

6.10. Stock Subscription and Standby Purchase
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

ARTICLE VII. EXECUTORY CONTRACTS AND UNEXPIRED LEASES . . . . . . . . . . . 63

7.1. Assumption or Rejection of Executory
Contracts and Unexpired Leases . . . . . . . . . . . . . . . . . . 63

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7.2. Indemnification Obligations . . . . . . . . . . . . . . . . . . . . 66

7.3. Compensation and Benefit Programs . . . . . . . . . . . . . . . . . 66

7.4. Retiree Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 67

ARTICLE VIII. PROVISIONS REGARDING CORPORATE
GOVERNANCE OF THE REORGANIZED DEBTOR . . . . . . . . . . . . . . . 67

8.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

8.2. Meetings of Stockholders . . . . . . . . . . . . . . . . . . . . . 68

8.3. Directors and Officers of Reorganized Debtor . . . . . . . . . . . 68

8.4. Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . 68

8.5. Issuance of New Securities . . . . . . . . . . . . . . . . . . . . 68

8.6. Cancellation of Preferred Stock Rights . . . . . . . . . . . . . . 68

ARTICLE IX. EFFECT OF CONFIRMATION OF PLAN . . . . . . . . . . . . . . . . . 69

9.1. Revesting of Assets . . . . . . . . . . . . . . . . . . . . . . . . 69

9.2. Discharge of Debtor . . . . . . . . . . . . . . . . . . . . . . . . 70

9.3. Extinguishment of Causes of Action Under
the Avoiding Power Provisions . . . . . . . . . . . . . . . . . . . 71

ARTICLE X. EFFECTIVENESS OF THE PLAN . . . . . . . . . . . . . . . . . . . . 71

10.1. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . 71

10.2. Effect of Failure of Conditions . . . . . . . . . . . . . . . . . . 71

10.3. Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . 72

ARTICLE XI. RETENTION OF JURISDICTION . . . . . . . . . . . . . . . . . . . 73

ARTICLE XII. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . 74

12.1. Effectuating Documents and Further
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

12.2. Exemption from Transfer Taxes . . . . . . . . . . . . . . . . . . . 75

12.3. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

12.4. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

12.5. Amendment or Modification of the Plan;
Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

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12.6. Revocation or Withdrawal of the Plan . . . . . . . . . . . . . . . 77

12.7. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 77

12.8. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

12.9. Post-Effective Date Professional Fees . . . . . . . . . . . . . . . 78

12.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

12.11. Withholding and Reporting Requirements . . . . . . . . . . . . . . 79

12.12. Plan Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . 79

12.13. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

12.14. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

12.15. Filing of Additional Documents . . . . . . . . . . . . . . . . . . 80

EXHIBITS

Exhibit A - Rights Plan
Exhibit B - Stock Subscription and Standby Purchase
Agreement and Registration Rights Agreement
Exhibit C - Restated Certificate of Incorporation
Exhibit D - Restated Bylaws

SCHEDULES

Schedule 7.1(a) - Rejected Executory Contracts
Schedule 7.3 - Discontinued Employment, Severance,
Compensation and Benefit Plans, Policies, Practices and
Programs

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Hexcel Corporation, a Delaware corporation ("HEXCEL"), proposes the
following plan of reorganization pursuant to section 1121(a) of title 11 of the
United States Code:

ARTICLE I

DEFINITION AND CONSTRUCTION OF TERMS

DEFINITIONS. As used herein, the following terms have the respective
meanings specified below, unless the context otherwise requires:

1.1. ADMINISTRATIVE EXPENSE CLAIM means any Claim under Sections
503(b) and 507(a)(1) of the Bankruptcy Code, including, without limitation, any
actual and necessary expenses of preserving the estate of the Debtor, any actual
and necessary expenses of operating the business of the Debtor, all compensation
or reimbursement of expenses allowed by the Bankruptcy Court under Section 330
or 503 of the Bankruptcy Code, any fees or charges assessed against the estate
of the Debtor under section 1930 of chapter 123 of title 28 of the United States
Code, and all CIT Credit Claims.

1.2. ALLOWED means, with respect to a Claim or Equity Interest, any
Claim or Equity Interest proof of which was timely and properly filed or, if no
proof of claim or proof of interest was filed, which has been or hereafter is
listed by the Debtor on its Schedules as liquidated in amount and not disputed
or contingent, and, in either case and in the case of an Administrative Expense
Claim, an Administrative

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Expense Claim, Claim, or Equity Interest as to which no objection to the
allowance thereof has been interposed on or before the Distribution Date or such
other applicable period of limitation fixed by the Bankruptcy Code, the
Bankruptcy Rules, or the Bankruptcy Court, or as to which any objection has been
determined by a Final Order to the extent such objection is determined in favor
of the respective holder. "Allowed Administrative Expense Claim," "Allowed
Claim," or "Allowed Equity Interest" shall not include interest on such
Administrative Expense Claim, Claim or Equity Interest from and after the
Commencement Date.

1.3. AMENDED AND RESTATED BNP REIMBURSEMENT AGREEMENTS means the
amended and restated reimbursement agreements with respect to the BNP Letters of
Credit to be entered into with the holder of the Allowed Class 4 Claim
containing the terms described in Section 4.4 of the Plan.

1.4. AMENDED AND RESTATED PRINCIPAL MUTUAL 10.12 % NOTE shall mean
the amended and restated promissory note to be delivered to the holder of the
Allowed Class 6 Claims containing the terms described in Section 4.6 of the
Plan.

1.5. BALLOT means each of the voting forms to be distributed with the
Plan and the Disclosure Statement to holders of Claims or Equity Interests in
Classes that are impaired under the terms of the Plan and are entitled to vote
in connection with the solicitation of acceptances and rejections of the Plan.

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1.6. BANK REVOLVER CLAIMS means all Claims arising under or related
to that certain Credit Agreement dated April 29, 1991 between Hexcel Corporation
and the institutions named therein and Wells Fargo Bank, N.A., as Agent, as
amended, supplemented or modified.

1.7. BANKRUPTCY CODE means title 11 of the United States Code, as
amended from time to time, as applicable to the Chapter 11 Case.

1.8. BANKRUPTCY COURT means the United States District Court for the
Northern District of California, Oakland Division, having jurisdiction over the
Chapter 11 Case and, to the extent of any reference made pursuant to section 157
of title 28 of the United States Code, the unit of such District Court pursuant
to section 151 of title 28 of the United States Code.

1.9. BANKRUPTCY RULES means the Federal Rules of Bankruptcy
Procedure, as amended from time to time, as applicable to the Chapter 11 Case,
including the Local Rules of the Bankruptcy Court.

1.10. BNP means Banque Nationale de Paris.

1.11. BNP CLAIMS means all Claims of BNP against the Debtor arising
under or relating to the BNP Letters of Credit described in Sections 1.12 and
1.13 hereof, including all Claims of BNP under the BNP reimbursement agreements
described in Sections 1.14 and 1.15 and other documents, instruments and
agreements related to such letters of credit and reimbursement agreements.

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1.12. BNP LETTERS OF CREDIT means the seven letters of credit issued
by BNP for the account of the Debtor as credit support for the industrial
development revenue bonds issued in connection with the transactions which are
the subject of the IDRB Claims other than the Class 3H Claim described in
Section 3.3.8 hereof, as such letters of credit have been modified or extended
through the Effective Date.

1.13. BNP OTTAWA LETTER OF CREDIT means the letter of credit issued
by BNP for the account of the Debtor as credit support for the industrial
development revenue bonds issued in connection with the transactions which are
the subject of the Class 3H Claim described in Section 3.3.8 hereof, as such
letter of credit has been modified or extended through the Effective Date.

1.14. BNP REIMBURSEMENT AGREEMENTS means the seven reimbursement
agreements between BNP and the Debtor pursuant to which the Debtor agreed to
reimburse BNP for drawings under the BNP Letters of Credit.

1.15. BNP OTTAWA REIMBURSEMENT AGREEMENT means the reimbursement
agreement between BNP and the Debtor pursuant to which the Debtor agreed to
reimburse BNP for drawings under the BNP Ottawa Letter of Credit.

1.16. BUSINESS DAY means any day other than a Saturday, Sunday or
legal holiday in the State of California, on which commercial banks are open for
business in the City and County of San Francisco, California.

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1.17. BYLAWS means the Restated Bylaws of Hexcel in effect as of the
date hereof.

1.18. CASH means the legal tender of the United States of America.

1.19. CERTIFICATE OF INCORPORATION means the Restated Certificate of
Incorporation of Hexcel, as certified by the Secretary of State of the State of
Delaware as of the date hereof.

1.20. CHAPTER 11 CASE means the case under chapter 11 of the
Bankruptcy Code commenced by the Debtor, styled IN RE HEXCEL CORPORATION, Case
No. 93-48535 T (Chapter 11), currently pending in the Bankruptcy Court.

1.21. CIT means The CIT Group/Business Credit, Inc., a New York
corporation and a post-petition lender to the Debtor under the CIT Credit
Agreement.

1.22. CIT CREDIT AGREEMENT means the Debtor in Possession Credit
Agreement, dated as of December 8, 1993, by and between the Debtor and CIT, and
related documents, as amended and modified from time to time, and as approved by
orders of the Bankruptcy Court, pursuant to which CIT agreed to advance funds
and credit to the Debtor during the course of the Chapter 11 Case on a secured,
super-priority basis.

1.23. CIT CREDIT CLAIMS means all Claims of CIT arising under the CIT
Credit Agreement.

1.24. CLAIM means (a) any right to payment from the Debtor, whether or
not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured,

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unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (b)
any right to an equitable remedy for breach of performance if such breach gives
rise to a right to payment from the Debtor, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured, or unsecured.

1.25. CLASS means a category of holders of Claims or Equity Interests
as established by the terms of Article III of the Plan.

1.26. COMMENCEMENT DATE means December 6, 1993, the date on which the
Debtor commenced the Chapter 11 Case.

1.27. COMMON STOCK means the common stock of Hexcel, par value $.01
per share, issued and outstanding prior to the Effective Date, together with all
Preferred Stock Rights appurtenant thereto, including any restricted Common
Stock issued pursuant to the Stock Option Plan.

1.28. COMMON STOCK INTERESTS means all Equity Interests in Hexcel
represented by the shares of Common Stock of Hexcel together with all
appurtenant Preferred Stock Rights.

1.29. CONFIRMATION DATE means the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order.

1.30. CONFIRMATION ORDER means the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code.

1.31. CREDITORS' COMMITTEE means the statutory committee of unsecured
creditors appointed by the United

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States Trustee in the Chapter 11 Case pursuant to section 1102 of the Bankruptcy
Code on December 10, 1993, as such committee may be constituted from time to
time.

1.32. CURE means the distribution of Cash, or such other property as
may be agreed upon by the Debtor and the recipient thereof or ordered by the
Bankruptcy Court, as and to the extent required for the assumption of an
unexpired lease or executory contract pursuant to the provisions of Section
365(b) of the Bankruptcy Code.

1.33. DEBTOR means Hexcel Corporation, a Delaware corporation.

1.34. DEBTOR IN POSSESSION means the Debtor, as debtor in possession
in the Chapter 11 Case.

1.35. DISCLOSURE STATEMENT means the disclosure statement relating to
the Plan, as approved by the Bankruptcy Court pursuant to Section 1125 of the
Bankruptcy Code.

1.36. DISPUTED means, with respect to a Claim or Equity Interest, any
such Claim or Equity Interest proof of which was timely and properly filed and
which has been or hereafter is listed on the Schedules as unliquidated,
disputed, or contingent, or is not listed in the Schedules, and in any such case
or in the case of an Administrative Expense Claim, any such Administrative
Expense Claim, Claim or Equity Interest as to which the Debtor or any other
party in interest has interposed a timely objection or request for estimation in
accordance with the Bankruptcy Code and the Bankruptcy Rules, which objection or
request for estimation

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has not been withdrawn or determined by a Final Order, and any Claim as to which
a proof of claim was required to be filed by order of the Court but as to which
a proof of claim was not timely or properly filed.

1.37. DISTRIBUTION DATE means the date which is 60 days after the
Effective Date.

1.38. EFFECTIVE DATE means the date on which the conditions specified
in Section 10.1 of the Plan have been satisfied or waived.

1.39. ENVIRONMENTAL CLAIM means any Claim, notice of violation,
action, lien, demand, abatement or other order or direction (conditional or
otherwise) by any governmental body or any entity for personal injury (including
sickness, disease or death), tangible or intangible property damage, money
damages, damage to the environment, nuisance, pollution, contamination or other
adverse effects on the environment, or for fines, penalties or restrictions
resulting from or based upon (a) the existence, or the continuation of the
existence, or a Release (including, without limitation, sudden or non-sudden
accidental or non-accidental Releases) of, or exposure to, any Hazardous
Material or other substance, chemical, material, pollutant, contaminant, odor,
audible noise, or other Release in, into or onto the environment (including,
without limitation, the air, soil, surface water or groundwater) at, in, by,
from or related to the properties presently or formerly owned, leased or
operated by Hexcel or any activities conducted thereon; (b) the environmental

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aspects of the transportation, storage, treatment or disposal of Hazardous
Materials in connection with the operation of the properties presently or
formerly owned, leased or operated by Hexcel; or (c) the violation, or alleged
violation, of any Environmental Laws, orders or permits of or from any
governmental body relating to environmental matters connected with the
properties presently or formerly owned, leased or operated by Hexcel.

1.40. ENVIRONMENTAL LAWS means any federal, state, local or foreign
law (including common law), statute, code, ordinance, rule, regulation or other
requirement or guideline concerning the Releases into any part of the natural
environment, or activities that might result in damage to the natural
environment and with protecting or improving the quality of the natural
environment and protecting public and employee health and safety and includes,
but is not limited to, the Comprehensive Environmental Response, Compensation,
and Liability Act ("CERCLA") (42 U.S.C. Section 9601 ET SEQ.), the Hazardous
Material Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Clean Water
Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401
ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 ET
SEQ.) and the Occupational Safety and Health Act (29 U.S.C. Section 651 ET
SEQ.), as such laws have been amended and supplemented, and the regulations
promulgated pursuant

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thereto, and any and all treaties, conventions and environmental public and
employee health and safety statutes and regulations or analogous requirements of
non-United States jurisdictions in which Hexcel or any of its subsidiaries
conducts any business.

1.41. EPA means the Environmental Protection Agency.

1.42. EQUITY COMMITTEE means the statutory committee of equity
security holders appointed by the United States Trustee in the Chapter 11 Case
pursuant to Section 1102 of the Bankruptcy Code on December 21, 1993, as such
committee may be constituted from time to time.

1.43. EQUITY INTEREST or INTEREST means any equity interest in the
Debtor, and any option, warrant or other agreement requiring the issuance of any
such equity interest.

1.44. EXIT FINANCING FACILITY means a working capital credit facility
in an amount up to between $25 million and $35 million to be obtained by
Reorganized Hexcel to meet its ordinary working capital requirements.

1.45. FINAL ORDER means an order of the Bankruptcy Court as to which
the time to appeal, petition for CERTIORARI, or move for reargument or rehearing
has expired and as to which no appeal, petition for CERTIORARI, or other
proceedings for reargument or rehearing shall then be pending or as to which any
right to appeal, petition for CERTIORARI, reargue or rehear shall have been
waived in writing in form and substance satisfactory to the Debtor or
Reorganized Hexcel or, in the event that an appeal, writ of CERTIORARI,
reargument or

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rehearing thereof has been sought, such order of the Bankruptcy Court shall have
been determined by the highest court to which such order was appealed, or
CERTIORARI, reargument or rehearing shall have been denied and the time to take
any further appeal, petition for CERTIORARI or move for reargument or rehearing
shall have expired.

1.46. GENERAL UNSECURED CLAIMS means all Unsecured Claims against the
Debtor, other than Claims in Classes 2, 3, 4, 6, 7, 8, 9 and 10. Such Claims
include, without limitation, the Bank Revolver Claims, and all Claims in respect
of the rejection of leases and executory contracts, certain guarantee claims, as
well as all Claims of Hexcel's trade vendors and suppliers.

1.47. HAZARDOUS MATERIALS means any substance, material or waste which
is regulated by any local, state or federal governmental body in the
jurisdiction in which Hexcel or any subsidiary conducts business, including,
without limitation, any material or substance which is defined as a "hazardous
waste," "hazardous material," "hazardous substance," "extremely hazardous waste"
or "restricted hazardous waste," "subject waste," "contaminant," "toxic waste"
or "toxic substance" under any provision of any Environmental Law, including but
not limited to, petroleum products, asbestos and polychlorinated biphenyls.

1.48. HEXCEL LYON means Hexcel S.A., a French subsidiary of Debtor
having its operations in Lyons, France.

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1.49. HEXCEL LYON NOTE means the note issuable to Hexcel Lyon on the
Effective Date as described in Section 4.8 hereof.

1.50. HEXCEL OPTIONS means options to purchase Common Stock and all
other rights and awards granted prior to the Effective Date pursuant to the
Stock Option Plan, but does not include any restricted Common Stock awarded
thereunder (which shares shall be included in Class 11).

1.51. IDRB CLAIMS means all Claims arising under or relating to the
loan agreements specified in Section 3.3, and any of the documents, instruments
and agreements relating thereto, as amended, supplemented or modified, other
than the BNP Claims.

1.52. NJDEPE means the New Jersey Department of Environmental
Protection and Energy.

1.53. OTHER INTERCOMPANY CLAIM means any Claim against the Debtor by
any Subsidiary of the Debtor other than the Hexcel Lyon Claim.

1.54. OTHER PRIORITY CLAIM means any Claim, other than a Priority Tax
Claim, entitled to priority in right of payment under Section 507(a) of the
Bankruptcy Code.

1.55. PETITION means the voluntary petition filed with the Court to
commence the Chapter 11 Case on December 6, 1993.

1.56. PLAN means this chapter 11 plan of reorganization (including all
exhibits and schedules annexed

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hereto), either in its present form or as it may be altered, amended, or
modified from time to time.

1.57. PLAN SUPPLEMENT means the forms of documents specified in
Section 12.12 of the Plan.

1.58. POSTCONFIRMATION LIST means the United States Trustee, the
Debtor, the Debtor's attorneys, counsel for the Creditors' Committee and the
Equity Committee (until termination of the Committees' operations pursuant to
Section 12.4 of the Plan) and those parties who, subsequent to the Confirmation
Date, file with the Court and serve upon the Debtor and its attorneys written
requests for special notice as provided by the terms of the Plan, which
requests, in order to be effective, must include street addresses and telephone
and telecopy numbers for purposes of service; PROVIDED that parties may be
eliminated from such list from time to time by order of the Bankruptcy Court,
pursuant to motions of the Debtor on notice to the then-constituted
Postconfirmation List, upon a showing that such parties no longer hold material
Interests or Claims in the Chapter 11 Case.

1.59. PREFERRED STOCK RIGHTS means all rights to purchase shares (or
fractions of a share) of Series A Junior Participating Preferred Stock, no par
value, of Hexcel, which rights are the subject of the Rights Agreement, dated as
of August 14, 1986, between Hexcel and The Bank of California, N.A.

1.60. PRINCIPAL MUTUAL CLAIMS means all Claims arising under or
relating to (a) that certain Note Agreement

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dated as of October 1, 1988, between Hexcel and Principal Mutual Life Insurance
Company pursuant to which Principal Mutual Life Insurance Company purchased a
$30,000,000 face amount 10.12% Senior Note due October 1, 1998 (the "PRINCIPAL
MUTUAL 10.12% NOTE"), and any of the documents, instruments and agreements
relating thereto, as amended, supplemented or modified, and (b) that certain
Note Agreement dated as of December 9, 1977, between Hexcel and Principal Mutual
Life Insurance Company pursuant to which Principal Mutual Life Insurance Company
purchased a $8,000,000 face amount 8.75% Senior Note due June 1, 1997 (the
"PRINCIPAL MUTUAL 8.75% NOTE"), and any of the documents, instruments and
agreements relating thereto, as amended, supplemented or modified.

1.61. PRIORITY TAX CLAIM means a Claim of a governmental unit of a
kind specified in Sections 502(i) and 507(a)(7) of the Bankruptcy Code.

1.62. PRP means a "potentially responsible party" within the meaning
of the Environmental Laws.

1.63. REINSTATED or REINSTATEMENT means leaving a Claim unimpaired in
accordance with the provisions of Section 1124(2) of the Bankruptcy Code.

1.64. RELEASE means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the indoor or outdoor environment, or into or out of any property
owned, leased or operated by Hexcel or any subsidiary, including the

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movement of any Hazardous Material or other substance through or in the air,
soil, surface water, groundwater or property.

1.65. REORGANIZED DEBTOR or REORGANIZED HEXCEL means Hexcel, or any
successor thereto by merger, consolidation or otherwise, on and after the
Effective Date.

1.66. REORGANIZED HEXCEL COMMON STOCK means the common stock, par
value $.01 per share, of Reorganized Hexcel to be issued by Reorganized Hexcel
on and after the Effective Date.

1.67. RIGHTS means the rights to purchase Reorganized Hexcel Common
Stock to be issued under the Rights Plan pursuant to Section 4.11 of the Plan.

1.68. RIGHTS PLAN means the rights plan substantially in the form of
EXHIBIT A hereto, pursuant to which the Rights are to be issued.

1.69. SCHEDULES means the schedules of assets and liabilities and the
statement of financial affairs filed by the Debtor as required by Section 521 of
the Bankruptcy Code and Bankruptcy Rule 1007, and all amendments thereto.

1.70. SECTION 510(B) HEXCEL COMMON STOCK TRADING CLAIM means any Claim
(a) arising from rescission of a purchase or sale of shares of Common Stock, (b)
for damages arising from the purchase or sale of shares of Common Stock, or (c)
for reimbursement or contribution allowed under Section 502 of the Bankruptcy
Code on account of a Claim described in clauses (a) or (b) of this Section 1.70,
other than a Claim

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for reimbursement or contribution described in Section 7.2 of the Plan.

1.71. SECURED CLAIM means an Allowed Claim held by any entity to the
extent of the value, as set forth in the Plan or as determined by a Final Order
of the Bankruptcy Court pursuant to Section 506(a) of the Bankruptcy Code, of
any interest in property of the Debtor's estate securing such Allowed Claim.

1.72. STOCK SUBSCRIPTION AND STANDBY PURCHASE AGREEMENT means the
Stock Subscription and Standby Purchase Agreement substantially in the form of
EXHIBIT B hereto, pursuant to which the Standby Purchaser shall purchase certain
shares of Reorganized Hexcel Common Stock.

1.73. STANDBY PURCHASER means Mutual Series Fund Inc.

1.74. STOCK OPTION PLAN means the Hexcel Corporation 1988 Management
Stock Program, as amended.

1.75. SUBORDINATED DEBENTURE CLAIMS means all Claims arising under or
related to that certain Indenture dated as of August 1, 1986 between Hexcel and
The Bank of California, N.A., Trustee Re: 7% Convertible Subordinated Debentures
due 2011, the Subordinated Debentures, and any of the documents, instruments and
agreements relating thereto, as amended, supplemented or modified.

1.76. SUBORDINATED DEBENTURES means all debentures issued under or
pursuant to that certain Indenture dated as of August 1, 1986 between Hexcel and
The Bank of California,

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N.A., Trustee Re: 7% Convertible Subordinated Debentures due 2011.

1.77. SUBSIDIARY means any entity of which Hexcel owns directly or
indirectly all of the outstanding capital stock.

1.78. UNSECURED CLAIM means any Claim that is not a Secured Claim,
Administrative Expense Claim, Priority Tax Claim, or Other Priority Claim.

OTHER TERMS. Any term used herein that is not defined herein shall
have the meaning ascribed to that term, if any, in the Bankruptcy Code.

CONSTRUCTION OF CERTAIN TERMS.
(a) The words "herein," "hereof," "hereto," "hereunder," and others
of similar import refer to the Plan as a whole and not to any particular
section, subsection, or clause contained in the Plan.

(b) Wherever from the context it appears appropriate, each term
stated in either the singular or the plural shall include the singular and the
plural and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.

ARTICLE II

TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS

2.1. ADMINISTRATIVE EXPENSE CLAIMS. Except to the extent that the
holder of an Allowed Administrative Expense Claim agrees to a different
treatment, Reorganized Hexcel

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shall pay to each holder of an Allowed Administrative Expense Claim Cash in an
amount equal to such Allowed Administrative Expense Claim on the latest of the
Effective Date, the date such Administrative Expense Claim becomes an Allowed
Administrative Expense Claim and when it is due; PROVIDED, HOWEVER, that Allowed
Administrative Expense Claims other than Claims under Section 330 of the
Bankruptcy Code representing obligations incurred in the ordinary course of
business of or assumed by the Debtor in Possession shall be paid in full and
performed by the Reorganized Debtor in the ordinary course of business in
accordance with the terms and conditions of the particular transactions and any
agreements relating thereto.

2.2. PRIORITY TAX CLAIMS. Except to the extent that the holder of an
Allowed Priority Tax Claim agrees to a different treatment, Reorganized Hexcel
shall pay to each holder of an Allowed Priority Tax Claim, at the sole option of
Reorganized Hexcel, (a) Cash in an amount equal to such Allowed Priority Tax
Claim on the later of the Effective Date and the date such Priority Tax Claim
becomes an Allowed Priority Tax Claim, or (b) equal annual cash payments in
arrears in an aggregate amount equal to such Allowed Priority Tax Claim,
together with interest at a fixed annual rate equal to seven percent, over a
period through the sixth anniversary of the date of assessment of such Allowed
Priority Tax Claim, or upon such other terms determined by the Bankruptcy Court
to provide the holder of such Allowed Priority Tax Claim deferred

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cash payments having a value, as of the Effective Date, equal to such Allowed
Priority Tax Claim.

ARTICLE III

CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS

The following is a designation of the Classes of Claims and Equity
Interests in the Plan. Administrative Expense Claims and Priority Tax Claims
have not been classified and are excluded from the following Classes, in
accordance with the provisions of Section 1123(a)(1) of the Bankruptcy Code.
The treatment accorded Administrative Expense Claims and Priority Tax Claims is
set forth in Article II, above. Consistent with Section 1122 of the Bankruptcy
Code, a Claim or Equity Interest is classified by the Plan in a particular Class
only to the extent that the Claim or Equity Interest is within the description
of the Class and is classified in a different Class to the extent the Claim or
Equity Interest is within the description of that different Class.

3.1. CLASS 1 (OTHER PRIORITY CLAIMS) consists of all Other Priority
Claims against the Debtor.

3.2. CLASS 2 (SECURED CLAIMS) consists of all Secured Claims, each of
which shall be within a separate subclass (with each subclass to be deemed a
separate class for all purposes under applicable provisions of the Bankruptcy
Code), as follows:

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3.2.1 CLASS 2A (GRAHAM INDUSTRIAL MORTGAGE CLAIMS) consists of
all Claims against the Debtor under that certain Real Estate Lien Note, dated
February 1, 1992, from Debtor to Graham Industrial Association, Inc. in the
original principal amount of $150,000, and under the related deed of trust and
all other related documents, instruments and agreements.

3.2.2 CLASS 2B (GREATER POTTSVILLE MORTGAGE CLAIMS) consists of
all Claims against the Debtor under that certain Promissory Note, dated June 13,
1980, from Debtor to Greater Pottsville Industrial Development Corporation in
the original principal amount of $400,000, and under the related mortgage and
all other related documents, instruments and agreements.

3.2.3 CLASS 2C (POTTSVILLE PIDA (SCHUYLKILL) MORTGAGE CLAIMS)
consists of all Claims against the Debtor under that certain Note, dated May 11,
1988, from Schuylkill Economic Development Corporation to The Pennsylvania
Development Authority in the original principal amount of $498,220 and under the
related mortgage and all other related documents, instruments and agreements
(including, without limitation, the Consent, Subordination and Assumption
Agreement, dated March 15, 1988, between the Debtor and Schuylkill Economic
Development Corporation).

3.3. CLASS 3 (IDRB CLAIMS) consists of all IDRB Claims, each of which
shall be within a separate subclass (with each subclass to be deemed a separate
class for all

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purposes under applicable provisions of the Bankruptcy Code), as follows:

3.3.1 CLASS 3A (CALIFORNIA POLLUTION CONTROL FINANCING
AUTHORITY) consists of all Claims against the Debtor under that certain Loan
Agreement, dated as of April 1, 1988, between the Debtor and California
Pollution Control Financing Authority regarding $750,000 of Multi-Modal
Interchangeable Rate Pollution Control Revenue Refunding Bonds (Hexcel
Corporation Project), Series 1988 due March 1, 2008, and under all related
documents, instruments and agreements, other than the BNP Claims.

3.3.2 CLASS 3B (INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF
CASA GRANDE) consists of all Claims against the Debtor under that certain Loan
Agreement, dated as of March 1, 1988, between the Debtor and Industrial
Development Authority of the City of Casa Grande regarding $2,050,000 of Multi-
Modal Interchangeable Rate Industrial Development Revenue Refunding Bonds
(Hexcel Corporation Project), Series 1988 due September 1, 2007, and under all
related documents, instruments and agreements, other than the BNP Claims.

3.3.3 CLASS 3C (YOUNG COUNTY #1 INDUSTRIAL DEVELOPMENT
CORPORATION) consists of all Claims against the Debtor under that certain
Loan Agreement, dated as of April 1, 1988, between Debtor and Young County #1
Industrial Development Corporation regarding $800,000 of Multi-Modal
Interchangeable Rate Industrial Development Revenue Refunding

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Bonds (Hexcel Corporation Project), Series 1988 due March 1, 2008, and under all
related documents, instruments and agreements, other than the BNP Claims.

3.3.4 CLASS 3D (GUADALUPE-BLANCO RIVER AUTHORITY INDUSTRIAL
DEVELOPMENT CORPORATION) consists of all Claims against the Debtor under that
certain Loan Agreement, dated as of April 1, 1988, between Debtor and Guadalupe-
Blanco River Authority Industrial Development Corporation regarding $3,150,000
of Multi-Modal Interchangeable Rate Industrial Development Revenue Refunding
Bonds (Hexcel Corporation Project), Series 1988 due March 1, 2008, and under all
related documents, instruments and agreements, other than the BNP Claims.

3.3.5 CLASS 3E (PORT OF SKAGIT COUNTY INDUSTRIAL DEVELOPMENT
CORPORATION) consists of all Claims against the Debtor under that certain Loan
Agreement, dated as of December 1, 1989, between the Debtor and Port of Skagit
County Industrial Development Corporation regarding $3,000,000 of Variable Rate
Demand Revenue Bonds, 1989 (Hexcel Corporation Project), due December 1, 2024,
and under all related documents, instruments and agreements, other than the BNP
Claims.

3.3.6 CLASS 3F (INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY
OF LOS ANGELES) consists of all Claims against the Debtor under that certain
Loan Agreement, dated as of March 1, 1988, between the Debtor and Industrial

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Development Authority of the County of Los Angeles regarding $6,200,000 of
Multi-Modal Interchangeable Rate Industrial Development Revenue Refunding Bonds
(Hexcel Corporation Project), Series 1988 due September 1, 2007, and under all
related documents, instruments and agreements, other than the BNP Claims.

3.3.7 CLASS 3G (CITY OF LANCASTER) consists of all Claims
against the Debtor under that certain Loan Agreement, dated as of April 1, 1988,
between the Debtor and City of Lancaster regarding $1,000,000 of Multi-Modal
Interchangeable Rate Industrial Development Revenue Refunding Bonds (Hexcel
Corporation Project), Series 1988 due March 1, 2008, and under all related
documents, instruments and agreements, other than the BNP Claims.

3.3.8 CLASS 3H (ECONOMIC DEVELOPMENT CORPORATION OF THE COUNTY
OF OTTAWA) consists of all Claims against the Debtor under that certain Loan
Agreement, dated as of April 1, 1988 between Debtor and Economic Development
Corporation of the County of Ottawa regarding $4,150,000 of Multi-Modal
Interchangeable Rate Industrial Development Revenue Refunding Bonds (Hexcel
Corporation Project), Series 1988 due March 1, 2008, and under all related
documents, instruments and agreements, other than the BNP Claims.

3.4. CLASS 4 (BNP CLAIMS) consists of the BNP Claims.

3.5. CLASS 5 (GENERAL UNSECURED CLAIMS) consists of all General
Unsecured Claims.

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3.6. CLASS 6 (PRINCIPAL MUTUAL CLAIMS) consists of the Principal
Mutual Claims.

3.7. CLASS 7 (ENVIRONMENTAL CLAIMS) consists of all Environmental
Claims, which shall be within separate subclasses (with each subclass to be a
separate class for all purposes under applicable provisions of the Bankruptcy
Code), as follows:

3.7.1.1. CLASS 7A.1 (HELEN KRAMER LANDFILL IN GLOUCESTER, NEW
JERSEY - DIRECT CLAIM) consists of a Claim against the Debtor filed by the
NJDEPE for the clean-up and related costs and natural resource damage Claims
incurred and to be incurred at the Helen Kramer site, based on N.J.S.A. 58:10-
23.11 ET SEQ.

3.7.1.2. CLASS 7A.2 (HELEN KRAMER LANDFILL IN GLOUCESTER, NEW
JERSEY - CONTRIBUTION CLAIMS) consists of 47 Claims filed by PRPs of the Helen
Kramer site for contribution for the Debtor's alleged equitable share of the
common liability of all PRPs to the EPA and the NJDEPE for the $115,000,000
clean-up and related costs said to have been incurred and to be incurred by the
EPA and unstated amounts incurred and to be incurred by the NJDEPE (but included
in the NJDEPE Claim referred to in Class 7A.1).

3.7.2. CLASS 7B (A TO Z LANDFILL IN NEW BRUNSWICK, NEW JERSEY)
consists of so much of the Claim filed by NJDEPE as constitutes a Claim for
contribution to the A to Z Landfill.

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3.7.3. CLASS 7C (CHEMICAL CONTROL SUPERFUND SITE IN ELIZABETH,
NEW JERSEY) consists of so much of NJDEPE's Claim as constitutes a Claim for
contribution to the Chemical Control Superfund Site in Elizabeth, New Jersey.

3.7.4.1. CLASS 7D.1 (JONAS SEWELL TRANSFER STATION - DIRECT
CLAIM) consists of a surrogate claim filed by the Jonas Sewell Transfer Station
Respondents Group on behalf of the NJDEPE for all clean-up and related costs at
the Jonas Sewell Transfer Station, ongoing response costs, and natural resource
damage Claims incurred and to be incurred by the NJDEPE.

3.7.4.2. CLASS 7D.2 (JONAS SEWELL TRANSFER STATION -
CONTRIBUTION CLAIMS) consists of Claims filed by PRPs for contribution for the
Debtor's alleged equitable share of the common liability of all PRPs to the EPA
and the NJDEPE for the clean-up and related costs of the Jonas Sewell Transfer
Station.

3.7.4.3. CLASS 7D.3 (MARVIN JONAS, INC. WASTE SITES -
CONTRIBUTION CLAIMS) consists of Claims filed by PRPs for contribution for the
Debtor's alleged equitable share of the common liability of all PRPs to the EPA
and the NJDEPE for the clean-up and related costs of the sites used by Marvin
Jonas, Inc.

3.7.5. CLASS 7E (BUSBY VALLEY LANDFILL IN VOORHES, NEW JERSEY
AND GEMS LANDFILL IN NEW JERSEY) consists of Claims filed by PRPs for
contribution for the Debtor's alleged share of the common liability of all PRPs
to the EPA

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and the NJDEPE for the clean-up and related costs of the Busby Valley Landfill
and the GEMS Landfill sites.

3.7.6. CLASS 7F (SCIENTIFIC CHEMICAL PROCESSING, INC. SITE IN
NEWARK, NEW JERSEY) consists of Claims filed by PRPs for contribution for the
Debtor's alleged equitable share of the common liability of all PRPs to the EPA
and the NJDEPE for the clean-up and related costs of the Scientific Chemical
Processing, Inc. site in Newark, New Jersey.

3.7.7. CLASS 7G (FLORENCE RECONTOURING LANDFILL IN FLORENCE,
NEW JERSEY AND PJP LANDFILL IN JERSEY CITY, NEW JERSEY) consists of a Claim
filed by a PRP for contribution for the Debtor's alleged equitable share of the
common liability of all PRPs to the EPA and the NJDEPE for the clean-up and
related costs of the Florence Recontouring Landfill and the PJP Landfill sites.

3.7.8. CLASS 7H (FISHER CALO SITE IN KINGSBURG, INDIANA)
consists of a Claim filed by the Fisher Calo PRP group, of which the Debtor is a
member, seeking $120,000 in anticipated administrative costs over the
anticipated 30-year term of the remediation at the Fisher Calo site.

3.7.9. CLASS 7I (SEYMOUR, INDIANA SUPERFUND SITE) consists of
a Claim filed by the trust established for payments of costs at the Seymour
Indiana Superfund site for the Debtor's 1.72% share of future operation and
maintenance costs at this site.

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3.7.10.1. CLASS 7J.1 (SAN GABRIEL GROUND WATER BASIN IN
CALIFORNIA - DIRECT CLAIM) consists of a surrogate Claim filed by the Puente
Valley Steering Committee of PRPs on behalf of the EPA to recover $111,600 as
the Debtor's 2.68% share of a $4.2 million Remedial Investigation/Feasibility
Study ("RI/FS") and the clean-up and related costs to be incurred at the Puente
Valley Operable Unit of the San Gabriel Valley Superfund Site.

3.7.10.2. CLASS 7J.2 (SAN GABRIEL GROUND WATER BASIN IN
CALIFORNIA - CONTRIBUTION CLAIM) consists of Claims filed by 44 members of the
Puente Valley Steering Committee of PRPs for contribution for the Debtor's
alleged equitable share of the common liability of all PRPs to the EPA for
clean-up and related costs for the Puente Valley Operable Unit of the San
Gabriel Valley Superfund Site, including but not limited to the RI/FS.

3.7.11.1. CLASS 7K.1 (GRANVILLE SOLVENTS IN GRANVILLE, OHIO -
DIRECT CLAIM) consists of a claim filed by the State of Ohio in the amount of
$916,000 for the State's claimed cost of cleaning up the Granville Solvents
site, a duplicate surrogate Claim filed for the State, and a $20 million
surrogate Claim filed for the EPA.

3.7.11.2. CLASS 7K.2 (GRANVILLE SOLVENTS IN GRANVILLE, OHIO -
CONTRIBUTION CLAIMS) consists of a Claim filed jointly by Abrasive Technology
and 71 other PRPs seeking contribution for the Debtor's alleged equitable share
of the common liability of all PRPs for clean-up and related costs

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for the Granville, Ohio site, including $1 million to the State of Ohio and $3-
$20 million in anticipated responsive actions, and $258,910.23 already expended
by the PRP Group.

3.7.11.3. CLASS 7K.3 (GRANVILLE SOLVENTS IN GRANVILLE, OHIO -
CONTRIBUTION CLAIM) consists of a $15 million Claim filed by Union Tank Car for
contribution for the Debtor's alleged equitable share of the common liability of
all PRPs for clean-up and related costs of the Granville, Ohio site alleged in
Class 7K.2.

3.7.12. CLASS 7L (ORGANIC CHEMICAL SITE IN GRANDVILLE,
MICHIGAN) consists of Claims filed by 17 PRPs for contribution for the Debtor's
alleged equitable share of the common liability of all PRPs to the EPA and state
authorities for clean-up and related costs of the Grandville, Ohio site.

3.7.13. CLASS 7M (DEBTOR'S PROPERTY OUTSIDE CASA GRANDE,
ARIZONA) consists of Claims filed by the Arizona State Lands Department and the
Arizona Department of Environmental Quality seeking $323,000 in past costs and
future clean-up costs with respect to the Debtor's leased property located
outside Casa Grande, Arizona.

3.7.14. CLASS 7N (KIN BUC SUPERFUND SITE IN EDISON, NEW JERSEY)
consists of Claims filed by 10 PRPs for contribution for the Debtor's alleged
equitable share of the common liability of all PRPs to the EPA and the NJDEPE
for clean-up and related costs for the Kin Buc Superfund site.

3.7.15. CLASS 7O (SCIENTIFIC CHEMICAL PROCESSING SITE IN
CARLSTADT, NEW JERSEY) consists of Claims

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of approximately 113 PRPs for contribution for the Debtor's alleged equitable
share of the common liability of all PRPs to the EPA and the NJDEPE for clean-up
and related costs for the Carlstadt, New Jersey site.

3.7.16.1. CLASS 7P.1 (LIVERMORE, CALIFORNIA SITES - DIRECT
CLAIMS) consists of Claims filed by the California Regional Water Quality
Control Board ("RWQCB") in the amount of $2,342,000 for the remediation and
clean-up costs associated with two adjacent properties in Livermore, California.

3.7.16.2. CLASS 7P.2 (LIVERMORE, CALIFORNIA SITES - F & P
PROPERTIES, INC.) consists of a Claim filed by F&P Properties, Inc. ("F&P"), the
owner of the Livermore property adjacent to the Debtor's site, in the amount of
$1.29 million. The Claim asserts fraud, intentional interference, and
promissory estoppel, contends that the Debtor sold the property to F&P's
grantors, Donald and Suzanne Smith (the "Smiths"), in 1979, and is responsible
for various damages caused by deposits of Hazardous Materials on the property
prior to 1979.

3.7.16.3. CLASS 7P.3 (LIVERMORE, CALIFORNIA SITES - SMITHS)
consists of a Claim filed by the Smiths (purchasers of the F&P property from the
Debtor in 1979) in the amount of $5,000,000. The Smiths claim that the Debtor
breached a settlement agreement with the Smiths by failing to execute an agreed
draft settlement agreement in an action brought by F&P against the Debtor and
the Smiths.

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3.7.17. CLASS 7Q (LODI, NEW JERSEY) consists of all
Environmental Claims arising in connection with the Lodi, New Jersey property
formerly owned by the Debtor, including, without limitation: (a) the Claim filed
by Fine Organics seeking $10,727,000 in alleged actual damages (including the
purchase price of the property, consequential damages, and the alleged cost of
compliance with an Administrative Order on Consent), and treble damages under
N.J.S.A. 58:10-23.11, or $32,181,000, and (b) the Claim filed by Barclays Bank
Ltd. with respect to the $4,000,000 undrawn letter of credit securing the
Debtor's performance of the Administrative Order on Consent.

3.7.18. CLASS 7R (OTHER ENVIRONMENTAL CLAIMS) consists of all
Environmental Claims not specified in the foregoing provisions of this Section
3.7.

3.8. CLASS 8 (INTERCOMPANY CLAIMS) consists of two subclasses (with
each subclass to be deemed a separate class for all purposes under applicable
provisions of the Bankruptcy Code), as follows:

3.8.1. CLASS 8A (HEXCEL LYON CLAIM) consists of Claims of
Hexcel Lyon for an unpaid intercompany advance in the original principal amount
of $2,500,000 made by it to Hexcel.

3.8.2. CLASS 8B (OTHER INTERCOMPANY CLAIMS) consists of all
Other Intercompany Claims.

3.9. CLASS 9 (SUBORDINATED DEBENTURE CLAIMS) consists of the
Subordinated Debenture Claims.

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3.10. CLASS 10 (SECTION 510(b) HEXCEL COMMON STOCK TRADING CLAIMS)
consists of all Section 510(b) Hexcel Common Stock Trading Claims.

3.11. CLASS 11 (COMMON STOCK) consists of all shares of Common Stock,
including all Preferred Stock Rights appurtenant thereto.

3.12. CLASS 12 (HEXCEL OPTIONS) consists of all Hexcel Options.

ARTICLE IV

TREATMENT OF CLAIMS AND EQUITY INTERESTS

4.1. CLASS 1 -- OTHER PRIORITY CLAIMS.

(a) NONIMPAIRMENT. Class 1 is unimpaired by the Plan. Each holder
of a Claim in Class 1 is conclusively presumed to have accepted the Plan as
a holder of a Class 1 Claim and is not entitled to vote to accept or reject
the Plan.

(b) DISTRIBUTIONS. Reorganized Hexcel shall pay to each holder of
an Allowed Claim in Class 1 Cash in an amount equal to such Allowed Claim
on the later of the Effective Date and the date such Claim becomes an
Allowed Claim.

4.2. CLASS 2 - SECURED CLAIMS

4.2.1 CLASS 2A -- GRAHAM INDUSTRIAL MORTGAGE CLAIMS.

(a) NONIMPAIRMENT. Class 2A is unimpaired by the Plan. The
holder of a Claim in Class 2A is

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conclusively presumed to have accepted the Plan as a holder of a Class 2A Claim
and is not entitled to vote to accept or reject the Plan.

(b) DISTRIBUTIONS. On the Effective Date, the Graham Industrial
Mortgage Claims shall be Reinstated.

(c) RETENTION OF LIENS. The holder of the Graham Industrial
Mortgage Claims in Class 2A shall retain the liens securing such Secured
Claim as of the Effective Date.

4.2.2 CLASS 2B -- GREATER POTTSVILLE MORTGAGE CLAIMS.

(a) NONIMPAIRMENT. Class 2B is unimpaired by the Plan. The
holder of a Claim in Class 2B is conclusively presumed to have accepted the
Plan as a holder of a Class 2B Claim and is not entitled to vote to accept
or reject the Plan.

(b) DISTRIBUTIONS. On the Effective Date, the Greater
Pottsville Mortgage Claims shall be Reinstated.

(c) RETENTION OF LIENS. The holder of the Greater Pottsville
Mortgage Claims in Class 2B shall retain the liens securing such Secured
Claim as of the Effective Date.

4.2.3 CLASS 2C -- POTTSVILLE PIDA (SCHUYLKILL) MORTGAGE
CLAIMS.

(a) NONIMPAIRMENT. Class 2C is unimpaired by the Plan. The
holder of a Claim in Class 2C is conclusively presumed to have accepted the
Plan as a

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holder of a Class 2C Claim and is not entitled to vote to accept or reject
the Plan.

(b) DISTRIBUTIONS. On the Effective Date, the Pottsville PIDA
(Schuylkill) Mortgage Claims shall be Reinstated.

(c) RETENTION OF LIENS. The holder of the Pottsville PIDA
(Schuylkill) Mortgage Claims in Class 2C shall retain the liens securing
such Secured Claim as of the Effective Date.

4.3. CLASS 3 -- IDRB CLAIMS

4.3.1 CLASS 3A (CALIFORNIA POLLUTION CONTROL FINANCING
AUTHORITY).

(a) NONIMPAIRMENT. Class 3A is unimpaired by the Plan. The
holders of Claims in Class 3A are conclusively presumed to have accepted
the Plan as holders of Class 3A Claims and are not entitled to vote to
accept or reject the Plan.

(b) DISTRIBUTIONS. On the Effective Date, the Claims in Class
3A shall be Reinstated.

4.3.2 CLASS 3B (INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY
OF CASA GRANDE).

(a) NONIMPAIRMENT. Class 3B is unimpaired by the Plan. The
holders of Claims in Class 3B are conclusively presumed to have accepted
the Plan as holders of Class 3B Claims and are not entitled to vote to
accept or reject the Plan.

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(b) DISTRIBUTIONS. On the Effective Date, the Claims in Class
3B shall be Reinstated.

4.3.3 CLASS 3C (YOUNG COUNTY #1 INDUSTRIAL
DEVELOPMENT CORPORATION).

(a) NONIMPAIRMENT. Class 3C is unimpaired by the Plan. The
holders of Claims in Class 3C are conclusively presumed to have accepted
the Plan as holders of Class 3C Claims and are not entitled to vote to
accept or reject the Plan.

(b) DISTRIBUTIONS. On the Effective Date, the Claims in Class
3C shall be Reinstated.

4.3.4 CLASS 3D (GUADALUPE-BLANCO RIVER AUTHORITY INDUSTRIAL
DEVELOPMENT
CORPORATION).

(a) NONIMPAIRMENT. Class 3D is unimpaired by the Plan. The
holders of Claims in Class 3D are conclusively presumed to have accepted
the Plan as holders of Class 3D Claims and are not entitled to vote to
accept or reject the Plan.

(b) DISTRIBUTIONS. On the Effective Date, the Claims in Class
3D shall be Reinstated.

4.3.5 CLASS 3E (PORT OF SKAGIT COUNTY
INDUSTRIAL DEVELOPMENT CORPORATION).

(a) NONIMPAIRMENT. Class 3E is unimpaired by the Plan. The
holders of Claims in Class 3E are conclusively presumed to have accepted
the Plan as

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holders of Class 3E Claims and are not entitled to vote to accept or reject
the Plan.
(b) DISTRIBUTIONS. On the Effective Date, the Claims in Class
3E shall be Reinstated.

4.3.6 CLASS 3F (INDUSTRIAL DEVELOPMENT AUTHORITY OF THE
COUNTY OF LOS ANGELES).

(a) NONIMPAIRMENT. Class 3F is unimpaired by the Plan. The
holders of Claims in Class 3F are conclusively presumed to have accepted
the Plan as holders of Class 3F Claims and are not entitled to vote to
accept or reject the Plan.

(b) DISTRIBUTIONS. On the Effective Date, the Claims in Class
3F shall be Reinstated.

4.3.7 CLASS 3G (CITY OF LANCASTER).

(a) NONIMPAIRMENT. Class 3G is unimpaired by the Plan. The
holders of Claims in Class 3G are conclusively presumed to have accepted
the Plan as holders of Class 3G Claims and are not entitled to vote to
accept or reject the Plan.

(b) DISTRIBUTIONS. On the Effective Date, the Claims in Class
3G shall be Reinstated.

4.3.8 CLASS 3H (ECONOMIC DEVELOPMENT CORPORATION OF THE COUNTY
OF OTTAWA).

(a) NONIMPAIRMENT. Class 3H is unimpaired by the Plan. The
holders of Claims in Class 3H are conclusively presumed to have accepted
the Plan as

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holders of Class 3H Claims and are not entitled to vote to accept or reject
the Plan.
(b) DISTRIBUTIONS. On the Effective Date, the Claims in Class
3H shall be Reinstated.
4.4. CLASS 4 -- BNP CLAIMS.

(a) IMPAIRMENT AND VOTING. Class 4 is impaired by the Plan. The
holder of the Claims in Class 4 is entitled to vote to accept or reject the
Plan.

(b) DISTRIBUTIONS.

(i) On the Effective Date, the holder of the Claims in Class 4
shall receive the following:

(A) Cash in the amount of $181,931.54 for all pre-petition
unreimbursed drawings under the seven BNP Letters of Credit,
draw fees, letter of credit fees, attorneys' fees and fees and
expenses paid by BNP to the remarketing agent for the IDRB's;

(B) Cash in the amount of all post-petition (i) unreimbursed
drawings under the seven BNP Letters of Credit and unpaid
accrued interest thereon at the contract non-default rate; and
(ii) draw fees, letter of credit fees and expenses paid by BNP
to the remarketing agent for the IDRB's for which BNP is
entitled to reimbursement under the terms of the seven BNP
Reimbursement Agreements; and

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(C) Cash in the amount of $502,000 as payment of a one-time
reinstatement and extension fee for BNP's extension of the seven
BNP Letters of Credit and modification of the seven BNP
Reimbursement Agreements.

(ii) In addition, the following shall occur as of the Effective
Date:
(A) BNP will extend the expiration date of the seven BNP
Letters of Credit to October 1, 1998;

(B) BNP will waive all defaults under the seven BNP
Reimbursement Agreements through the Effective Date and in
connection with consummation of the Plan;

(C) The seven BNP Reimbursement Agreements will be amended and
restated pursuant to the Amended and Restated BNP Reimbursement
Agreements to (i) change the covenants so that consummation of
the Plan and the establishment of the Exit Financing Facility
obtained to satisfy the condition precedent described in Section
10.1 of the Plan will not cause or constitute a default
thereunder, (ii) increase the letter of credit commitment fees
to 200 basis points per annum, payable quarterly in advance,
effective on the Effective Date, (iii) increase the interest
rate on the

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Liquidity Reimbursement Obligations (as defined in the current
BNP Reimbursement Agreements) to Prime (as defined in the BNP
Reimbursement Agreements) plus 2% per annum and the interest rate
on all other obligations under the BNP Reimbursement Agreements
to Prime plus 3% per annum, and (iv) contain suchrepresentations,
warranties, conditions, covenants and other terms, including
restrictions on existing and additional indebtedness,
restrictions on existing and additional liens and encumbrances,
financial covenants, and default provisions, as BNP and the
Debtor may agree;

(D) Commencing 90 days after the Effective Date and every three
months thereafter until the expiration of the seven BNP Letters
of Credit, Reorganized Hexcel will deposit $600,000 in a sinking
fund in which BNP and/or the trustees for the IDRB's will hold a
first priority security interest to secure Reorganized Hexcel's
obligations under the Amended and Restated BNP Reimbursement
Agreements, subject to the right of Reorganized Hexcel to use
all or a portion of the sinking fund to reduce the available
amounts of the seven BNP Letters of Credit by

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the optional redemption of IDRB's in a like principal amount. All
net proceeds (including insurance proceeds and condemnation
awards) from the sale or other disposition (including
refinancing) of any plants, equipment or other property financed
or refinanced by the issuance of the IDRB's supported by the
seven BNP Letters of Credit will be applied to the reduction of
the available amounts of the seven BNP Letters of Credit by
optional redemption of the IDRB's or will be deposited into the
sinking fund. Such net proceeds may, at the option of
Reorganized Hexcel, be credited against the $600,000 quarterly
deposit referred to above; and

(E) Either (i) the BNP Ottawa Letter of Credit shall have been
cancelled and replaced by a substitute letter of credit provided
by the present owner of the facility which is the subject of the
IDRB's described in Section 3.3.8 hereof (the "Present Owner"),
(ii) BNP shall have been furnished by the Present Owner with a
standby letter of credit or other security reasonably
satisfactory to BNP to secure the Debtor's liability to BNP
under the BNP Ottawa Letter of Credit, or (iii) BNP will (1)
reinstate, but will not extend, the BNP

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Ottawa Letter of Credit, (2) waive all defaults under the BNP
Ottawa Reimbursement Agreement through the Effective Date and in
connection with consummation of the Plan, and (3) the BNP Ottawa
Reimbursement Agreement will be amended and restated to (x)
change the covenants so that consummation of the Plan and the
establishment of the Exit Financing Facility obtained to satisfy
the condition precedent described in Section 10.1 of the Plan
will not cause or constitute a default thereunder, and (y)
contain such representations, warranties, conditions, covenants
and other terms, including restrictions on existing and
additional indebtedness, restrictions on existing and additional
liens and encumbrances, financial covenants, and default
provisions (but not any increase in rates or fees), as BNP and
the Debtor may agree with respect to the Amended and Restated BNP
Reimbursement Agreements.

4.5. CLASS 5 -- GENERAL UNSECURED CLAIMS.

(a) IMPAIRMENT AND VOTING. Class 5 is impaired by the Plan. The
holders of the Allowed Claims in Class 5 are entitled to vote to accept or
reject the Plan.

(b) DISTRIBUTIONS. Reorganized Hexcel shall pay to each holder of
an Allowed Claim in Class 5 Cash in an

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amount equal to such Allowed Claim on the latest of the Distribution Date,
the date such Allowed Claim becomes an Allowed Claim and the date such
Allowed Claim becomes due.

4.6. CLASS 6 -- PRINCIPAL MUTUAL CLAIMS

(a) IMPAIRMENT AND VOTING. Class 6 is impaired by the Plan. The
holder of the Allowed Claims in Class 6 is entitled to vote to accept or
reject the Plan.

(b) DISTRIBUTIONS.
(i) On the Effective Date, the holder of the Allowed Claims in
Class 6 shall receive the following:

(a) Cash in the amount of the outstanding principal and the
unpaid accrued interest at the contract non-default rate through
the Effective Date on the Principal Mutual 8.75% Note;

(b) Cash in the amount of the unpaid accrued interest at the
contract non-default rate on the Principal Mutual 10.12% Note
through the last interest payment date falling on or prior to
the Effective Date;

(d) the Amended and Restated Principal Mutual 10.12% Note, the
principal terms of which are as follows:

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(1) AGGREGATE PRINCIPAL AMOUNT: $30,000,000.

(2) INTEREST RATE: 10.12% per annum, payable in arrears on
the first of each April and October commencing after the
Effective Date.

(3) MATURITY: October 1, 1998.

(4) PREPAYMENT: The Note Agreement governing the Principal
Mutual 10.12% Note will govern the Amended and Restated
Principal Mutual 10.12% Note and will be amended to permit
prepayment without any premium or penalty within one year
from the Effective Date and thereafter to permit prepayment
upon payment of a premium equal to the Make-Whole Premium
Amount (as defined in such Note Agreement), except that the
definition of the Make-Whole Premium Amount shall be amended
by replacing the term "Treasury Rate" with "150 basis points
above the Treasury Rate", whenever it appears, which will
have the effect of decreasing the Make-Whole Premium
Amounts.

(5) COVENANTS: Such amendments to the covenants as may be
agreed to by the holder of the Class 6 Claims, including

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but not limited to a change in the covenants so that
consummation of the Plan and the establishment of the Exit
Financing Facility will not cause or constitute a default
thereunder.

(6) WAIVER: A waiver of all past defaults through the
Effective Date and in connection with consummation of the
Plan.

4.7. CLASS 7 -- ENVIRONMENTAL CLAIMS.

(a) IMPAIRMENT AND VOTING. Class 7 is impaired by the Plan. Each
holder of an Environmental Claim in Class 7 is entitled to vote to accept
or reject the Plan if such Claim has been Allowed pursuant to Section 502
of the Bankruptcy Code or by a Final Order.

(b) DISTRIBUTIONS. Reorganized Hexcel shall distribute to each
holder of an Allowed Environmental Claim in Class 7 Cash in an amount
determined pursuant to the following provisions of this Section 4.7 on the
later of the Distribution Date or the date that such Environmental Claim
becomes an Allowed Environmental Claim.

(c) ALLOCATION. Holders of Allowed Environmental Claims shall be
entitled to receive distributions of an aggregate of not over $5,992,160
which amount is hereby allocated to the respective Subclasses of this Class
7 as

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follows (the "Subclass Environmental Distribution Amounts"):
(i) Subclasses 7A.1 and 7A.2 -- $50,000
(ii) Subclass 7B -- $1,000
(iii) Subclass 7C -- $1,000
(iv) Subclasses 7D.1, 7D.2 and 7D.3 -- $1,000
(v) Subclass 7E -- $1,000
(vi) Subclass 7F -- $1,000
(vii) Subclass 7G -- $1,000
(viii)Subclass 7H -- $35,000
(ix) Subclass 7I -- $20,000
(x) Subclasses 7J.1 and 7J.2 -- $101,160
(xi) Subclasses 7K.1, 7K.2 and 7K.3 -- $290,000
(xii) Subclass 7L -- $50,000
(xiii)Subclass 7M -- $200,000
(xix) Subclass 7N -- $150,000
(xv) Subclass 7O -- $250,000
(xvi) Subclass 7P.1 -- $550,000
(xvii) Subclasses 7P.2 and 7P.3 -- $290,000
(xviii) Subclass 7Q -- $4,000,000
(xix) Subclass 7R -- $0
(d) DISTRIBUTIONS OF SUBCLASS ENVIRONMENTAL DISTRIBUTION AMOUNT. On
the later of the Distribution Date and the date as and when an
Environmental Claim becomes an Allowed Environmental Claim (including as an
Allowed Environmental Claim any Environmental Claim that, by Final Order,
has been estimated pursuant to Section

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502(c) of the Bankruptcy Code expressly for the purpose of its allowance),
Reorganized Hexcel shall distribute to the holder of such Allowed
Environmental Claim Cash in an amount equal to such Allowed Environmental
Claim. Notwithstanding the foregoing, Reorganized Hexcel shall be obligated
to make such Cash distributions to holders of Allowed Environmental Claims
in any Subclass only to the extent that the Subclass Environmental
Distribution Amount allocated by Section 4.7(c) to such Subclass has not
been exhausted by previous payments pursuant hereto.

(e) CERTAIN DISALLOWED CLAIMS. In the event that (i) an
Environmental Claim has been previously disallowed pursuant to Section
502(e)(1)(B) of the Bankruptcy Code, (ii) such Environmental Claim is not
an Allowed Environmental Claim entitled to receive a distribution under
Section 4.7(d) hereof, (iii) such disallowed Environmental Claim ceases to
be contingent and unliquidated by reason of the making of payments to a
third party by the holder thereof, (iv) a determination shall have been
made of the amount of the Debtor's liability to the holder thereof with
respect to such Environmental Claim (the "Liability Amount"), and (v) a
Final Order shall have been entered determining that such a previously
disallowed Environmental Claim shall be Allowed, either by reason of
reconsideration of such Environmental Claim pursuant to Section 502(j) of
the Bankruptcy Code or otherwise ("Reconsidered Section 502(e)

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Claim"), then such Reconsidered Section 502(e) Claim shall be treated as part of
the Subclass that relates to the property that is the subject of such
Reconsidered Section 502(e) Claim and the holder thereof shall be entitled to
receive a distribution of Cash under, and subject to the limitations of, the
provisions of Section 4.7(d) of the Plan, in an amount equal to the lesser of
(i) the Liability Amount, or (ii) the Debtor's allocable equitable share of the
amount the holder of such Reconsidered Section 502(e) Claim was legally
obligated to pay to others (as determined by an order or other ruling of a court
or governmental agency or officer) on account of the Debtor's liability or
obligations.

4.8. CLASS 8 -- INTERCOMPANY CLAIMS.

4.8.1 CLASS 8A -- HEXCEL LYON CLAIM

(a) IMPAIRMENT AND VOTING. Class 8A is impaired by the Plan. The
holder of the Hexcel Lyon Claim in Class 8 is entitled to vote to accept or
reject the Plan.

(b) DISTRIBUTIONS.
On the Effective Date, the holder of the Hexcel Lyon Claim shall
receive the Hexcel Lyon Note in the principal amount of the Allowed Hexcel
Lyon Claim which will be due on demand at any time after payment in full of
the Amended and Restated Principal Mutual 10.12% Note and will bear
interest payable semi-annually in arrears at the rate of 6.9% per annum.

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4.8.2 CLASS 8B -- OTHER INTERCOMPANY CLAIMS

(a) IMPAIRMENT AND VOTING. Class 8B is impaired by the Plan. Each
holder of an Allowed Claim in Class 8B is entitled to vote to accept or
reject the Plan.

(b) DISTRIBUTIONS.

Each holder of an Allowed Other Intercompany Claim shall receive
Cash in an amount equal to such holder's Allowed Other Intercompany Claim
30 days after payment in full of the Amended and Restated Principal Mutual
10.12% Note, with accrued interest at the rate of 6.9% per annum.

4.9. CLASS 9 -- SUBORDINATED DEBENTURE CLAIMS.

(a) IMPAIRMENT AND VOTING. Class 9 may be impaired by the Plan.
Each holder of an Allowed Claim in Class 9 is entitled to vote to accept or
reject the Plan.

(b) DISTRIBUTIONS IF THE PLAN IS ACCEPTED BY CLASS 9. If the Plan
is accepted by Class 9, each holder of record of an Allowed Subordinated
Debenture Claim as of the Effective Date shall be entitled, upon surrender
of such holder's Subordinated Debentures as provided herein, to receive its
ratable share of 9,703,050 shares of Reorganized Hexcel Common Stock. The
consideration distributed to holders of Allowed Subordinated Debenture
Claims will be allocated first to the portion of such Claims representing

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Claims for the payment of principal and then to the portion
of such Claims representing Claims for the payment of accrued interest up
to the Commencement Date.

(c) DISTRIBUTIONS IF THE PLAN IS REJECTED BY CLASS 9. If the Plan
is rejected by Class 9, all Allowed Subordinated Debenture Claims shall be
Reinstated and, under such circumstances, Class 9 will not be impaired by
the Plan.

4.10. CLASS 10 -- SECTION 510(b) HEXCEL

COMMON STOCK TRADING CLAIMS

(a) IMPAIRMENT AND VOTING. Class 10 is impaired by the Plan. Each
holder of an Allowed Claim in Class 10 is entitled to vote to accept or
reject the Plan.

(b) DISTRIBUTIONS. Each holder of an Allowed Claim in Class 10
shall receive its ratable share of 100,000 shares of Reorganized Hexcel
Common Stock; PROVIDED, HOWEVER, that no distributions under this Section
4.10(b) shall be made until all of the Allowed Claims in Class 10 and the
holders thereof have been determined.

4.11. CLASS 11 -- COMMON STOCK.

(a) IMPAIRMENT AND VOTING. Class 11 is impaired by the Plan. Each
holder of Common Stock in Class 11 is entitled to vote to accept or reject
the Plan.

(b) DISTRIBUTIONS IF THE PLAN IS ACCEPTED BY CLASS 9. If the Plan
is accepted by Class 9, on the Effective Date, each holder of
record of Common Stock as of the

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Effective Date will be entitled (i) upon surrender of such holder's
certificates of Common Stock, to receive one share of Reorganized Hexcel
Common Stock for each two shares of Common Stock, and (ii) to receive
Rights entitling such holder to purchase additional shares of Reorganized
Hexcel Common Stock pursuant to the Rights Plan at an exercise price of
$2.00 per share, payable in Cash. For each share of Common Stock held of
record on the Effective Date, such holder shall receive 1.1628 Rights.
Fractional shares of Reorganized Hexcel Common Stock and fractional Rights
shall be treated in accordance with Section 6.2(f) hereof. Each Right will
entitle the holder to purchase one share of Reorganized Hexcel Common Stock
in accordance with the Rights Plan. The Rights will expire 30 days after
the Effective Date. Certificates representing the Rights will be
distributed on the Effective Date or as soon thereafter as is practicable.
The Reorganized Hexcel Common Stock issuable on exercise of any Rights will
be issued as soon as is practicable following the expiration date for the
exercise of those Rights.

(c) DISTRIBUTIONS IF THE PLAN IS REJECTED BY CLASS 9. If the Plan
is rejected by Class 9, on the Effective Date, each holder of record of
Common Stock as of the Effective Date will be entitled (i) upon surrender
of such holder's certificates of Common Stock, to receive one share of
Reorganized Hexcel Common Stock for each two

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shares of Common Stock, and (ii) to receive Rights entitling such holder to
purchase additional shares of Reorganized Hexcel Common Stock pursuant to
the Rights Plan at an exercise price of $2.00 per share, payable in Cash.
For each share of Common Stock held of record on the Effective Date, such
holder shall receive 1.71 Rights. Fractional shares of Reorganized Hexcel
Common Stock and fractional Rights shall be treated in accordance with
Section 6.2(f) hereof. Each Right will entitle the holder to purchase one
share of Reorganized Hexcel Common Stock in accordance with the Rights
Plan. The Rights will expire 30 days after the Effective Date.
Certificates representing the Rights will be distributed on the Effective
Date or as soon thereafter as is practicable. The Reorganized Hexcel
Common Stock issuable on exercise of any Rights will be issued as soon as
is practicable following the expiration date for the exercise of those
Rights.

(d) RESTRICTED STOCK. All restrictions applicable to outstanding
restricted Common Stock issued pursuant to the Stock Option Plan shall
apply to the Reorganized Hexcel Common Stock distributed with respect
thereto pursuant to Sections 4.11(b) or (c) hereof, but shall not apply to
any Rights issued with respect thereto or Reorganized Hexcel Common Stock
issued upon the exercise of such Rights.

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(e) CANCELLATION OF EQUITY INTERESTS. As of the Effective Date, all
Equity Interests, including all Common Stock and all Preferred Stock Rights
appurtenant thereto, will be cancelled and extinguished.

4.12. CLASS 12 -- HEXCEL OPTIONS.

Class 12 is impaired by the Plan. Holders of Hexcel Options in Class
12 shall not receive any distributions under the Plan, and all Hexcel
Options will be deemed cancelled and extinguished and the Stock Option Plan
shall be cancelled and terminated, except that restrictions applicable to
outstanding restricted Common Stock shall remain in effect and shall apply
to the Reorganized Hexcel Common Stock issued with respect thereto.
Holders of Class 12 Allowed Hexcel Options are deemed to have rejected the
Plan under Section 1126(g) of the Bankruptcy Code, and are not entitled to
vote on the Plan.

ARTICLE V

PROVISIONS OF EQUITY SECURITIES
TO BE ISSUED PURSUANT TO THE PLAN

5.1. REORGANIZED HEXCEL COMMON STOCK.
(a) The principal terms of the Reorganized Hexcel Common Stock shall
be as follows:

(1) AUTHORIZATION: 70,000,000 shares.

(2) PAR VALUE: $.01 per share.

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(3) VOTING: One vote per share, with no cumulative rights.

(4) PREEMPTIVE RIGHTS: None.

(5) REGISTRATION: None.

5.2. RIGHTS. The principal terms of the Rights are as follows:

(a) AUTHORIZATION:

(1) IF THE PLAN IS ACCEPTED BY CLASS 9. Approximately
8,500,000 Rights (the actual number may vary due to rounding as
contemplated by the Plan and the Rights Plan), each exercisable to
purchase one share of Reorganized Hexcel Common Stock.

(2) IF THE PLAN IS REJECTED BY CLASS 9. Approximately
12,500,000 Rights (the actual number may vary due to rounding as
contemplated by the Plan and the Rights Plan), each exercisable to
purchase one share of Reorganized Hexcel Common Stock.

(b) SUBSCRIPTION PRICE: $2.00 per share payable in Cash.

(d) EXPIRATION: The Rights will expire 30 days after the Effective
Date.

(e) TRANSFERABILITY: The Rights will be transferable subject to
compliance with applicable federal and state securities laws.

(f) REGISTRATION: None.

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(g) OVERSUBSCRIPTION RIGHTS: None.

ARTICLE VI

MEANS OF IMPLEMENTATION, PROVISIONS REGARDING
VOTING AND DISTRIBUTIONS UNDER THE PLAN AND
TREATMENT OF DISPUTED, CONTINGENT, AND UNLIQUIDATED
ADMINISTRATIVE EXPENSE CLAIMS, CLAIMS AND EQUITY INTERESTS

6.1. VOTING OF CLAIMS AND INTERESTS. Each holder of Claims and
Interests in an impaired Class shall be entitled to vote separately to accept or
reject the Plan as provided in the order entered by the Bankruptcy Court
establishing certain procedures with respect to the solicitation and tabulation
of votes to accept or reject the Plan (a copy of which is annexed to the
Disclosure Statement as Exhibit B). For purposes of calculating the number of
Allowed Claims in a Class of Claims held by holders of Allowed Claims in such
Class that have voted to accept or reject the Plan under Section 1126(c) of the
Bankruptcy Code, all Allowed Claims in such Class held by one entity or any
affiliate thereof (as defined in the Securities Act of 1933 and the rules and
regulations promulgated thereunder) shall be aggregated and treated as one
Allowed Claim in such Class.

6.2. METHOD OF DISTRIBUTIONS UNDER THE PLAN.

(a) IN GENERAL. All distributions under the Plan shall be made by
Reorganized Hexcel. All distributions under the Plan to the holders of Allowed
Claims shall be made to the holder of each such Claim as set forth in the Claims
Register maintained by the Bankruptcy Court and Poorman-Douglas Corporation, as
the outside claims agent for the Bankruptcy

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Court, or, with respect to Claims governed by an indenture, to the indenture
trustee on behalf of the holder of each such Claim. All distributions to
holders of Common Stock shall be made to the transfer agent for Common Stock,
except that all Rights shall be distributed directly to holders of record of
Common Stock as of the Effective Date.

(b) DISTRIBUTIONS OF CASH. Any payment of Cash made by Reorganized
Hexcel pursuant to the Plan shall be made by check drawn on a domestic bank.

(c) TIMING OF DISTRIBUTIONS. Any payment or distribution required
to be made under the Plan on a day other than a Business Day shall be due on the
next succeeding Business Day.

(d) HART-SCOTT-RODINO COMPLIANCE. Any shares of Reorganized Hexcel
Common Stock to be distributed under the Plan to any entity required to file a
Premerger Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended, shall not be distributed until the
notification and waiting periods applicable under such Act to such entity shall
have expired or been terminated.

(e) MINIMUM DISTRIBUTIONS. No payment of Cash less than one hundred
dollars shall be made by Reorganized Hexcel to any holder of a Claim unless a
request therefor is made in writing to Reorganized Hexcel.

(f) FRACTIONAL SHARES AND RIGHTS. No fractional shares of
Reorganized Hexcel Common Stock or fractional Rights shall be distributed. The
number of shares of Reorganized

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Hexcel Common Stock and Rights to be distributed shall be rounded to the nearest
whole share or Right, with .50 shares or Rights rounded up to the next highest
share or Right.

(g) UNCLAIMED DISTRIBUTIONS.

(i) Any Cash or other distributions pursuant to the Plan,
including any interest, shares of Reorganized Hexcel Common Stock,
dividends or other amounts earned thereon, that are unclaimed for a period
of one year after distribution thereof shall be forfeited and revested in
Reorganized Hexcel.

(ii) Any distribution made on behalf of a holder of a Class 9
Claim to the indenture trustee for the Subordinated Debentures pursuant to
the Plan, including any Cash, shares of Reorganized Hexcel Common Stock,
dividends or other amounts earned thereon, that are unclaimed by the holder
of a Subordinated Debenture Claim for a period of one year after
distribution thereof shall be forfeited and returned to and revested in
Reorganized Hexcel.

(iii) Any distribution of Reorganized Hexcel Common Stock made
on behalf of a holder of a Class 11 Common Stock Interest to the transfer
agent for Common Stock pursuant to the Plan, including any dividends or
other amounts thereon that are unclaimed by the holder of Common Stock for
a period of one year after distribution thereof shall be forfeited,
returned to and revested in Reorganized Hexcel.

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6.3. DISTRIBUTIONS RELATING TO DISPUTED CLAIMS. Cash and shares of
Reorganized Hexcel Common Stock shall be distributed by Reorganized Hexcel to a
holder of a Disputed Administrative Expense Claim or Disputed Claim when, and to
the extent that, such Disputed Administrative Expense Claim or Disputed Claim
becomes an Allowed Administrative Expense Claim or Allowed Claim pursuant to a
Final Order. Such distribution shall be made in accordance with the Plan to the
holder of such Claim based upon the amount of such Disputed Administrative
Expense Claim or Disputed Claim that becomes an Allowed Administrative Expense
Claim or Allowed Claim, as the case may be.

6.4. RESOLUTION OF DISPUTED ADMINISTRATIVE EXPENSE CLAIMS AND
DISPUTED CLAIMS. Unless otherwise ordered by the Bankruptcy Court after notice
and a hearing, the Debtor shall have the exclusive right (except as to (i)
Claims of the Debtor's officers, directors and employees and (ii) applications
for allowances of compensation and reimbursement of expenses under Sections 330
and 503 of the Bankruptcy Code) to make and file objections to Administrative
Expense Claims and Claims. Except for objections to Claims filed pursuant to
Section 7.1(e) of the Plan or any other Claims not filed prior to Confirmation
Date, objections must be served upon the holder of the Administrative Expense
Claim or Claim to which the objection is made and the Debtor as soon as
practicable, but in no event later than the Distribution Date.

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6.5. CANCELLATION AND SURRENDER OF EXISTING DEBT SECURITIES AND
AGREEMENTS.

(a) On the Effective Date, except as otherwise provided herein, all
promissory notes and other instruments evidencing any Claim in Class 5, and the
Principal Mutual 8.75% Note and the Principal Mutual 10.12% Note in Class 6,
shall be deemed canceled without further act or action under any applicable
agreement, law, regulation, order, or rule, and the obligations of the Debtor
under any indentures and any other documents, instruments and agreements
governing such Claims shall be discharged.

(b) Each holder of a promissory note, or other instrument evidencing
a Claim in Class 5, the Principal Mutual 8.75% Note or the Principal Mutual
10.12% Note in Class 6 shall surrender such promissory note or instrument to the
Reorganized Debtor. No distribution of property hereunder shall be made to or
on behalf of any such holders unless and until such promissory note or
instrument is received by the Reorganized Debtor or the unavailability of such
note or instrument is established to the reasonable satisfaction of the
Reorganized Debtor. The Reorganized Debtor may require any entity delivering an
affidavit of loss and indemnity to furnish a bond in form and substance
(including, without limitation, with respect to amount) reasonably satisfactory
to the Reorganized Debtor. Any holder that fails within one year after the date
of entry of the Confirmation Order (i) to surrender or cause to be surrendered
such promissory note or

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instrument, (ii) to execute and deliver an affidavit of loss
and indemnity reasonably satisfactory to the Reorganized Debtor, or (iii) if
requested, to furnish a bond reasonably satisfactory to the Reorganized Debtor
upon request, shall be deemed to have forfeited all rights, Claims, and
interests and shall not participate in any distribution hereunder.

6.6. RECORD DATE FOR DISTRIBUTION OF SECURITIES.

(a) After the close of business on the Effective Date, the transfer
ledgers for the Common Stock and, if the Plan is accepted by Class 9, the
transfer ledgers for the Subordinated Debentures shall be closed, there shall be
no registrations or other changes in the record holders of any such securities
on the books of Reorganized Hexcel (or any indenture trustee, transfer agent or
registrar it may have employed in connection therewith), and Reorganized Hexcel,
any indenture trustee and any transfer agent shall have no obligation to
recognize any transfer of such securities occurring thereafter, but shall be
entitled instead to recognize and deal with, for all purposes under the Plan,
only those holders reflected on the transfer ledgers as of the close of business
on the Effective Date.

(b) With respect to the Common Stock and, if the Plan is accepted by
Class 9, also with respect to the Subordinated Debentures, until the holders of
record as of the close of business on the Effective Date or their lawful
successors or assigns surrender, pursuant to Sections 6.7 and

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6.8 of the Plan, the certificates which had previously evidenced the Common
Stock or Subordinated Debentures, they shall have no rights (and the
certificates shall evidence no rights) except the right to surrender such
certificates pursuant to such Sections and to receive in exchange therefor
the distributions to which such holders are entitled pursuant to the provisions
of Article IV of the Plan, except that holders of record of Common Stock as of
the Effective Date will have the right to receive the Rights distributable to
them before they surrender their certificates.

6.7. SURRENDER OF EXISTING SHARES
OF COMMON STOCK.

On the Effective Date, Reorganized Hexcel shall distribute to the
transfer agent on behalf of holders of Common Stock certificates evidencing the
shares of Reorganized Hexcel Common Stock distributable to such holders pursuant
to the Plan and on the Effective Date, or as soon thereafter as is practicable,
shall deliver to the holders of record of Common Stock on the Effective Date
certificates representing the Rights distributable to them pursuant to the Plan.
It shall be a condition to the making of distributions of Reorganized Hexcel
Common Stock (but not the Rights) to any holder of Common Stock that such holder
shall have surrendered to the transfer agent for Common Stock the certificates
representing the Common Stock so held of record by such holder and in respect of
which such distributions are to be made, or, in the event of the destruction,
loss, mutilation or theft, at

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the transfer agent's or Reorganized Hexcel's option, an affidavit of such holder
in accordance with Article 8 of the Uniform Commercial Code and/or, if requested
in Reorganized Hexcel's reasonable judgment, a surety bond, the amount and form
of which shall be satisfactory to Reorganized Hexcel and the transfer agent,
from a surety company satisfactory to Reorganized Hexcel and the transfer agent.
As soon as practicable after such surrender or such delivery of such affidavit
and such furnishing of a bond as provided herein, the transfer agent shall
distribute to each holder of an Allowed Common Stock Interest its appropriate
distribution of Reorganized Hexcel Common Stock to be distributed hereunder. Any
holder of Common Stock that fails to surrender its certificates or deliver an
affidavit as provided herein within five years from and after the Effective Date
shall be deemed to have forfeited all rights and claims and shall not
participate in any distribution on account of Common Stock (other than receiving
Rights as provided herein). Upon the expiration of such five-year period, all
shares of Reorganized Hexcel Common Stock held for distribution by the transfer
agent for holders of Common Stock shall be returned to Reorganized Hexcel by the
transfer agent and shall be taken into the treasury of Reorganized Hexcel.

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6.8. CANCELLATION AND SURRENDER OF SUBORDINATED DEBENTURES IF THE
PLAN IS ACCEPTED BY CLASS 9.

(a) If the Plan is accepted by Class 9, then the indenture relating
to the Subordinated Debentures and the Subordinated Debentures shall be
terminated and cancelled as of the Effective Date without further act or action
under the applicable indenture or any applicable law, regulation, order, or
rule; PROVIDED, HOWEVER, that (i) the indenture relating to the Subordinated
Debentures shall continue to govern the course of conduct and the relationships
among the indenture trustee under such indenture and the holders of Subordinated
Debentures, including, without limitation, the means and methods of distributing
Reorganized Hexcel Common Stock pursuant to the Plan, and (ii) nothing in the
Plan shall affect any rights and/or liens as contained in the indenture relating
to the Subordinated Debentures between the holders of the Subordinated
Debentures and the indenture trustee. Notwithstanding the foregoing proviso,
the Debtor and Reorganized Hexcel shall have no further liability under the
indenture relating to the Subordinated Debentures from and after the Effective
Date.

(b) If the Plan is accepted by Class 9, then on the Effective Date,
Reorganized Hexcel shall distribute to the indenture trustee for the
Subordinated Debentures certificates evidencing the shares of Reorganized Hexcel
Common Stock distributable to the holders of Subordinated Debentures pursuant to
the Plan. It shall be a condition to the making

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of distributions to any holder of Subordinated Debentures that such holder shall
have surrendered to the indenture trustee such holder's Subordinated Debentures
or, in the event that any such Subordinated Debentures are lost, stolen,
mutilated or destroyed, evidence satisfactory to the indenture trustee and
Reorganized Hexcel of the loss, theft, mutilation or destruction of such
Subordinated Debentures or, at the indenture trustee's or Reorganized Hexcel's
option, an affidavit of such holder in accordance with Article 8 of the Uniform
Commercial Code, and/or, if requested in the indenture trustee's or Reorganized
Hexcel's reasonable judgment, a surety bond, the amount and form of which shall
be satisfactory to Reorganized Hexcel and the indenture trustee. As soon as
practicable after such surrender or such delivery of such affidavit and such
furnishing of a bond as provided herein, the indenture trustee shall distribute
to each holder of an Allowed Subordinated Debenture Claim its appropriate
distribution of Reorganized Hexcel Common Stock to be distributed hereunder.
Promptly upon the surrender of such instruments, the indenture trustee shall
cancel the Subordinated Debentures and deliver them to Reorganized Hexcel. Any
holder of Subordinated Debentures who fails to surrender its Subordinated
Debentures or deliver an affidavit as provided herein within five years after
the Effective Date shall be deemed to have forfeited all rights and claims with
respect to such Subordinated Debentures and shall not participate in any
distribution on account of the Subordinated

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Debentures hereunder. Upon the expiration of such five-year period, all shares
of Reorganized Hexcel Common Stock held for distribution by the indenture
trustee for the Subordinated Debentures shall be returned to Reorganized Hexcel
by such indenture trustee and shall be taken into the treasury of Reorganized
Hexcel.

6.9. DELIVERY OF SHARES TO THE STANDBY PURCHASER. At each of the
first and second closings under the Stock Subscription and Standby Purchase
Agreement, the Reorganized Hexcel Common Stock to be acquired by the Standby
Purchaser shall be delivered directly to the Standby Purchaser, rather than to
the transfer agent.

6.10. STOCK SUBSCRIPTION AND STANDBY PURCHASE AGREEMENT. Hexcel and
Reorganized Hexcel, as the case may be, shall perform their obligations under
the Stock Subscription and Standby Purchase Agreement in accordance with its
terms, including, without limitation, issuing all shares of Reorganized Hexcel
Common Stock to the Standby Purchaser as provided therein and making all
payments required therein.

ARTICLE VII

EXECUTORY CONTRACTS AND UNEXPIRED LEASES

7.1. ASSUMPTION OR REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES.

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(a) EXECUTORY CONTRACTS. Except as otherwise provided herein, as of
the Effective Date, all executory contracts (other than unexpired leases) that
exist between the Debtor and any person shall be deemed assumed as of the
Effective Date, including without limitation all indemnification obligations
described in Section 7.2 hereof and all benefit obligations described in
Sections 7.3 and 7.4 hereof, except for any executory contract (i) which has
been rejected pursuant to an order of the Bankruptcy Court entered on or prior
to the Confirmation Date, (ii) set forth in SCHEDULE 7.1(a) hereto to be filed
on or prior to seven days prior to the hearing on confirmation of the Plan, or
(iii) as to which a motion for approval of the rejection of such contract has
been filed and served on or prior to the Confirmation Date. The executory
contracts set forth in Schedules 7.1(a) and 7.3 hereto shall be deemed rejected
as of the Effective Date.

(b) UNEXPIRED LEASES. Except as otherwise provided herein, as of
the Effective Date, all unexpired leases that exist between the Debtor and any
person shall be deemed assumed as of the Effective Date, except for any
unexpired lease (i) which has been rejected pursuant to an order of the
Bankruptcy Court entered on or prior to the Confirmation Date or by operation of
law, or (ii) as to which a motion for approval of the rejection of such lease
has been filed and served on or prior to the Confirmation Date.

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(c) APPROVAL OF ASSUMPTION OR REJECTION OF LEASES AND CONTRACTS.
Entry of the Confirmation Order shall constitute (i) the approval, pursuant to
Section 365(a) of the Bankruptcy Code, of the assumption of the executory
contracts and unexpired leases assumed pursuant to Section 7.1(a) and (b)
hereof, (ii) the extension of time pursuant to Section 365(d)(4) of the
Bankruptcy Code within which Hexcel may assume or reject the executory contracts
and unexpired leases specified in Section 7.1(a) and (b) hereof through the date
of entry of an order approving the assumption or rejection of such contracts and
leases, and (iii) the approval, pursuant to Section 365(a) of the Bankruptcy
Code, of the rejection of the executory contracts set forth in Schedules 7.1(a)
and 7.3 hereto.

(d) CURE OF DEFAULTS. On the Effective Date, Reorganized Hexcel
shall Cure any and all defaults under any executory contract or unexpired lease
assumed pursuant to the Plan in accordance with Section 365(b)(1) of the
Bankruptcy Code.

(e) BAR DATE FOR FILING PROOFS OF CLAIM RELATING TO EXECUTORY
CONTRACTS AND UNEXPIRED LEASES REJECTED PURSUANT TO THE PLAN. Unless the
Bankruptcy Court fixes a different time period pursuant to an order approving
the rejection of a contract or lease, Claims arising out of the rejection of an
executory contract or unexpired lease pursuant to this Section 7.1 must be filed
with the Bankruptcy Court no later than thirty days after notice of entry of an
order approving the

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rejection of such contract or lease. Any Claims not filed within such time will
be forever barred from assertion against the Debtor, its estate, Reorganized
Hexcel, and its property and will not receive any distributions under the Plan.
Unless otherwise ordered by the Bankruptcy Court, all Claims arising from the
rejection of executory contracts and unexpired leases shall be treated as Class
5 Claims under the Plan.

7.2. INDEMNIFICATION OBLIGATIONS. For purposes of the Plan, the
obligations of the Debtor to indemnify, reimburse or limit the liability of its
present and any former directors, officers or employees that were directors,
officers or employees, respectively, on or after the Commencement Date against
any obligations pursuant to the Certificate of Incorporation, the Bylaws,
applicable state law or specific agreement, or any combination of the foregoing,
shall survive confirmation of the Plan, remain unaffected thereby, and not be
discharged irrespective of whether indemnification, reimbursement or limitation
is owed in connection with an event occurring before, on, or after the
Commencement Date.

7.3. COMPENSATION AND BENEFIT PROGRAMS. Except as set forth in
SCHEDULE 7.3 hereof to be filed on or prior to seven days prior to the hearing
on confirmation of the Plan, all employment and severance practices and
policies, and all compensation and benefit plans, policies, and programs of the
Debtor applicable to its directors, officers or employees,

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including, without limitation, all savings plans, retirement plans, health care
plans, severance benefit plans, incentive plans, workers' compensation programs
and life, disability and other insurance plans are treated as executory
contracts under the Plan and are hereby assumed pursuant to Section 365(a) of
the Bankruptcy Code, subject to any and all modification and termination rights
of the Debtor contained therein.

7.4. RETIREE BENEFITS. Payments, if any, due to any person for the
purpose of providing or reimbursing payments for retired employees and their
spouses and dependents for medical, surgical, or hospital care benefits, or
benefits in the event of sickness, accident, disability, or death under any
plan, fund, or program (through the purchase of insurance or otherwise),
maintained or established in whole or in part by the Debtor prior to the
Commencement Date, shall be continued for the duration of the period the Debtor
has obligated itself to provide such benefits, subject to any and all
modification and termination rights of the Debtor contained therein.

ARTICLE VIII

PROVISIONS REGARDING CORPORATE
GOVERNANCE OF THE REORGANIZED DEBTOR

8.1. GENERAL. On the Effective Date, the management, control and
operation of the Reorganized Debtor shall become the general responsibility of
the Board of

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Directors of the Reorganized Debtor, who shall thereafter have the
responsibility for the management, control and operation of the Reorganized
Debtor.

8.2. MEETINGS OF STOCKHOLDERS. The first annual meeting of the
stockholders of Reorganized Hexcel shall be held on a date in May of 1995
selected by the Board of Directors of Reorganized Hexcel in accordance with the
certificate of incorporation and bylaws of Reorganized Hexcel.

8.3. DIRECTORS AND OFFICERS OF REORGANIZED DEBTOR.

(a) BOARD OF DIRECTORS. The initial Board of Directors of
Reorganized Hexcel shall consist of nine individuals whose names shall be
disclosed prior to the hearing to consider confirmation of the Plan.

(b) OFFICERS. The officers of Reorganized Hexcel immediately prior
to the Effective Date shall serve as the initial officers of Reorganized Hexcel
on and after the Effective Date in accordance with any employment agreement with
Reorganized Hexcel and applicable nonbankruptcy law.

8.4. CERTIFICATE OF INCORPORATION AND BYLAWS. Effective as of the
Effective Date, the Certificate of Incorporation and Bylaws shall be amended and
restated in substantially the form annexed hereto as EXHIBITS C and D,
respectively.

8.5. ISSUANCE OF NEW SECURITIES. The issuance of

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the following equity securities by Reorganized Hexcel is hereby authorized
without further act or action under applicable law, regulation, order, or rule:

(a) approximately 35,087,720 shares of Reorganized Hexcel Common
Stock if the Plan is accepted by Class 9, or approximately 30,384,671 shares of
Reorganized Hexcel Common Stock if the Plan is rejected by Class 9, which shall
be issued and distributed pursuant to the Plan, the Stock Subscription and
Standby Purchase Agreement and the exercise of Rights distributed pursuant to
the Plan; and

(b) approximately 8,500,000 Rights if the Plan is accepted by Class 9
and approximately 12,500,000 Rights if the Plan is rejected by Class 9.

8.6. CANCELLATION OF PREFERRED STOCK RIGHTS. On the Effective Date,
the Rights Agreement, dated as of August 14, 1986, between Hexcel and The Bank
of California, which provides for the issuance of the Preferred Stock Rights,
shall be terminated and cancelled without any further action by Reorganized
Hexcel.

ARTICLE IX

EFFECT OF CONFIRMATION OF PLAN

9.1. REVESTING OF ASSETS.

(a) The property of the estate of the Debtor shall revest in the
Reorganized Debtor on the Effective Date.

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(b) From and after the Effective Date, the Reorganized Debtor may
operate its business, and may use, acquire, and dispose of its property free of
any restrictions of the Bankruptcy Code.

(c) As of the Effective Date, all property of the Debtor shall be
free and clear of all Claims and interests of holders of Claims and Equity
Interests, except as provided in the Plan.

(d) Any rights or causes of action accruing to the Debtor and Debtor
in Possession shall remain assets of the estate of the Reorganized Debtor.

9.2. DISCHARGE OF DEBTOR. The rights afforded herein and the
treatment of all Claims and Equity Interests herein shall be in exchange for and
in complete satisfaction, discharge, and release of all Claims and Equity
Interests of any nature whatsoever, including any interest accrued on such
Claims from and after the Commencement Date, against the Debtor and the Debtor
in Possession, or any of its assets or properties. Except as otherwise provided
herein, (a) on the Effective Date, all such Claims against, and Equity Interests
in, the Debtor shall be satisfied, discharged, and released in full and (b) all
persons shall be precluded from asserting against the Reorganized Debtor, its
successors, or its assets or properties any other or further Claims or Equity
Interests based upon any act or omission, transaction, or other activity

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of any kind or nature that occurred prior to the Confirmation Date.

9.3. EXTINGUISHMENT OF CAUSES OF ACTION UNDER THE AVOIDING POWER
PROVISIONS. On the Effective Date, all rights, claims, causes of action,
avoiding powers, suits and proceedings arising under Sections 544, 545, 547,
548, 549 and 553 of the Bankruptcy Code shall be extinguished whether or not
then pending.

ARTICLE X

EFFECTIVENESS OF THE PLAN

10.1. CONDITIONS PRECEDENT. The Plan shall not become effective
unless and until (i) Reorganized Hexcel shall have credit availability under the
Exit Financing Facility to provide Reorganized Hexcel with working capital
sufficient to meet its ordinary and peak working capital requirements, as
determined by Hexcel, (ii) the first closing under the Stock Subscription and
Standby Purchase Agreement shall have occurred, and (iii) the Reorganized Hexcel
Common Stock to be issued pursuant to the Plan, including the shares to be
issued pursuant to the Stock Subscription and Standby Purchase Agreement, shall
have been approved for listing on the New York Stock Exchange.

10.2. EFFECT OF FAILURE OF CONDITIONS. In the event that any of the
conditions specified in Section 10.1 of the

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Plan has not been satisfied or waived (in the manner provided in Section 10.3
below) on or before sixty days after the Confirmation Date, the Debtor may, upon
notification submitted by the Debtor to the Bankruptcy Court and counsel for the
Creditors' Committee and the Equity Committee, terminate the Plan, in which
event (a) the Confirmation Order shall be vacated, (b) no distributions under
the Plan shall be made, (c) the Debtor and all holders of Claims and Equity
Interests shall be restored to the STATUS QUO ANTE as of the day immediately
preceding the Confirmation Date as though the Confirmation Date never occurred,
and (d) all the Debtor's obligations with respect to the Claims and Equity
Interests shall remain unchanged and nothing contained herein shall be deemed to
constitute a waiver or release of any claims by or against the Debtor or any
other person or to prejudice in any manner the rights of the Debtor or any
person in any further proceedings involving the Debtor.

10.3. WAIVER OF CONDITIONS. The Debtor, subject to the consent of the
Creditors' Committee (which consent shall not be unreasonably withheld), may
waive conditions to effectiveness of the Plan set forth in Section 10.1 of the
Plan.

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ARTICLE XI

RETENTION OF JURISDICTION

The Bankruptcy Court shall have exclusive jurisdiction of all matters
arising out of, and related to, the Chapter 11 Case and the Plan pursuant to,
and for the purposes of, Sections 105(a) and 1142 of the Bankruptcy Code and
for, among other things, the following purposes:

(a) To hear and determine pending applications for the
assumption or rejection of executory contracts or unexpired leases, if
any are pending, and the allowance of Claims resulting therefrom;

(b) To determine any and all pending adversary proceedings,
applications, and contested matters;

(d) To enter and implement such orders as may be appropriate in
the event the Confirmation Order is for any reason stayed, revoked,
modified, or vacated;

(e) To issue such orders in aid of execution of the Plan, to
the extent authorized by Section 1142 of the Bankruptcy Code;

(f) To consider any modifications of the Plan, to cure any
defect or omission, or reconcile any inconsistency in any order of the
Bankruptcy

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Court, including, without limitation, the Confirmation Order;

(g) To hear and determine all applications for compensation and
reimbursement of expenses of professionals under Sections 330, 331,
and 503(b) of the Bankruptcy Code;

(h) To hear and determine disputes arising in connection with
the interpretation, implementation, or enforcement of the Plan;

(i) To recover all assets of the Debtor and property of the
estate, wherever located;

(j) To hear and determine matters concerning state, local, and
federal taxes in accordance with Sections 346, 505, and 1146 of the
Bankruptcy Code;

(k) To hear any other matter not inconsistent with the
Bankruptcy Code; and

(l) To enter a final decree closing the Chapter 11 Case.

ARTICLE XII

MISCELLANEOUS PROVISIONS

12.1. EFFECTUATING DOCUMENTS AND FURTHER TRANSACTIONS. Each of the
Chairman, Vice Chairman, President, Vice President - Finance, Chief Financial
Officer, Secretary and the Treasurer of the Debtor and the Reorganized Debtor is
authorized in accordance with their authority under the

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resolutions of the Board of Directors of the Debtor or Reorganized Debtor, as
the case may be, to execute, deliver, file, or record such contracts,
instruments, releases, indentures and other agreements or documents and take
such actions as may be necessary or appropriate to effectuate and further
evidence the terms and conditions of the Plan and any notes or securities issued
pursuant to the Plan.

12.2. EXEMPTION FROM TRANSFER TAXES. Pursuant to Section 1146(c) of
the Bankruptcy Code, the issuance, transfer or exchange of notes or equity
securities under the Plan, the creation of any mortgage, deed of trust or other
security interest, the making or assignment of any lease or sublease, or the
making or delivery of any deed or other instrument of transfer under, in
furtherance of, or in connection with the Plan, including any deeds, bills of
sale or assignments executed in connection with any of the transactions
contemplated under the Plan shall not be subject to any stamp, real estate
transfer, mortgage recording or other similar tax.

12.3. EXCULPATION. Neither the Reorganized Debtor, nor the Standby
Purchaser, nor the Creditors' Committee nor the Equity Committee nor any of
their respective members, officers, directors, employees, attorneys, advisors or
agents shall have or incur any liability to any holder of a Claim or Equity
Interest for any act or omission in connection with, or arising out of, the
pursuit of confirmation of the Plan, the

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consummation of the Plan or the administration of the Plan or the property to be
distributed under the Plan except for willful misconduct or gross negligence,
and, in all respects, the Reorganized Debtor, the Creditors' Committee, the
Equity Committee, the Standby Purchaser and each of their respective members,
officers, directors, employees, advisors and agents shall be entitled to rely
upon the advice of counsel with respect to their duties and responsibilities
under the Plan.

12.4. COMMITTEES. The appointments of the Creditors' Committee and
the Equity Committee shall terminate on the Effective Date, except as to
applications under Sections 330 and 503 of the Bankruptcy Code and such
Committees' objections to claims of the Debtor's officers, directors and
employees, as to which the Committees' appointments will terminate immediately
after the date of the hearings to consider applications for final allowances of
compensation and reimbursement of expenses or such Claims objections.

12.5. AMENDMENT OR MODIFICATION OF THE PLAN; SEVERABILITY.

(a) The Debtor may alter, amend, or modify the treatment of any
Claim provided for under the Plan; PROVIDED, HOWEVER, that the holder of such
Claim agrees or consents to any such alteration, amendment or modification; and
PROVIDED, FURTHER, that such alteration, amendment or modification will

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not materially improve the treatment of any Claim from that provided for under
the Plan.

(b) In the event that the Bankruptcy Court determines, prior to the
Confirmation Date, that any provision in the Plan is invalid, void or
unenforceable, such provision shall be invalid, void or unenforceable with
respect to the holder or holders of such Claims or Equity Interests as to which
the provision is determined to be invalid, void or unenforceable. The
invalidity, voidness or unenforceability of any such provision shall in no way
limit or affect the enforceability and operative effect of any other provision
of the Plan.

12.6. REVOCATION OR WITHDRAWAL OF THE PLAN.

(a) The Debtor reserves the right to revoke or withdraw the Plan
prior to the Confirmation Date.

(b) If the Debtor revokes or withdraws the Plan prior to the
Confirmation Date, then the Plan shall be deemed null and void. In such event,
nothing contained herein shall be deemed to constitute a waiver or release of
any claims by or against the Debtor or any other person or to prejudice in any
manner the rights of the Debtor or any person in any further proceedings
involving the Debtor.

12.7. BINDING EFFECT. The Plan shall be binding upon and inure to the
benefit of the Debtor, the holders of Claims and Equity Interests, and their
respective successors and assigns.

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12.8. NOTICES. Any notice required or permitted to be provided under
the Plan shall be in writing and served by either (a) certified mail, return
receipt requested, postage prepaid, (b) hand delivery, or (c) reputable
overnight delivery service, freight prepaid, to be addressed as follows:

HEXCEL CORPORATION
5794 W. Las Positas Boulevard
Pleasanton, California 94588
Attn: Rodney P. Jenks, Jr., Esq.

with copies to:

KRONISH, LIEB, WEINER & HELLMAN
1114 Avenue of the Americas
New York, New York 10036-7798
Attn: Robert J. Feinstein, Esq.

- and -

GOLDBERG, STINNETT, MEYERS & DAVIS
A Professional Corporation
44 Montgomery Street, Suite 2900
San Francisco, California 94104
Attn: Merle C. Meyers, Esq.

12.9. POST-EFFECTIVE DATE PROFESSIONAL FEES. The Reorganized Debtor
may retain and compensate professionals, and reimburse such professionals'
expenses, for services rendered on or after the Effective Date without the
necessity of approval by the Bankruptcy Court pursuant to the provisions of
Sections 327 ET SEQ. of the Bankruptcy Code.

12.10. GOVERNING LAW. Except to the extent the Bankruptcy Code or
Bankruptcy Rules are applicable, the rights and obligations arising under the
Plan shall be governed by, and construed and enforced in accordance with, the
laws of the

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State of California, without giving effect to the principles of conflicts of law
thereof.

12.11. WITHHOLDING AND REPORTING REQUIREMENTS. In connection with
the Plan and all instruments issued in connection therewith and distributions
thereunder, the Debtor or the Reorganized Debtor, as the case may be, shall
comply with all withholding and reporting requirements imposed by any federal,
state, local, or foreign taxing authority and all distributions hereunder shall
be subject to any such withholding and reporting requirements.

12.12. PLAN SUPPLEMENT. Forms of the documents relating to the
Amended and Restated Principal Mutual 10.12% Note, the Amended and Restated BNP
Reimbursement Agreements and other documents shall be contained in the Plan
Supplement and filed with the Clerk of the Bankruptcy Court at least ten days
prior to the last day on which holders of Claims and Equity Interests may vote
to accept or reject the Plan. Upon its filing with the Court, the Plan
Supplement may be inspected in the office of the Clerk of the Bankruptcy Court
during normal court hours. Holders of Claims or Equity Interests may obtain a
copy of the Plan Supplement upon written request in accordance with applicable
provisions of the Disclosure Statement.

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12.13. HEADINGS. Headings are used in the Plan for convenience and
reference only, and shall not constitute a part of the Plan for any other
purpose.

12.14. EXHIBITS. All Exhibits to the Plan, including the Plan
Supplement, are incorporated into and are a part of the Plan as if set forth in
full herein.

12.15. FILING OF ADDITIONAL DOCUMENTS. On or before substantial
consummation of the Plan, the Debtor shall file with the Bankruptcy Court such
agreements and other documents as may be necessary or appropriate to effectuate
and further evidence the terms and conditions of the Plan.

Dated: July 27, 1994

HEXCEL CORPORATION,
a Delaware corporation

By: /s/ Robert D. Krumme
---------------------------------
Name: Robert D. Krumme
Title: Vice Chairman

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Exhibit A

<PAGE>

EXHIBIT A TO HEXCEL DEBTOR'S PLAN

TRANSFERABLE RIGHTS PLAN

Except as otherwise provided herein, capitalized terms used in this
Rights Plan have the meanings assigned to them in the Debtor's Plan of
Reorganization under Chapter 11 of the Bankruptcy Code filed by Hexcel
Corporation (the "Debtor's Plan").

THE RIGHTS

Pursuant to Debtor's Plan, on the Effective Date or as soon
thereafter as practicable Hexcel shall distribute transferable Rights, at no
cost, to the record holders ("HOLDERS") of Common Stock, par value $.01 per
share, of Hexcel (the "COMMON STOCK") outstanding as of the Effective Date
(the "RECORD DATE"). The Holders are the holders of the allowed Interests in
Class 11 of Debtor's Plan. Hexcel will distribute [ * ] Rights for each
share of Common Stock held on the Record Date. The Rights will be evidenced by
transferable subscription certificates (the "SUBSCRIPTION CERTIFICATES").
Each Right represents the right to purchase one share of Reorganized Hexcel
Common Stock (as defined in Debtor's Plan) at the Subscription Price (as defined
below) on the terms described herein.

No fractional Rights or cash in lieu thereof will be issued or paid.
The number of Rights to be issued and distributed to each Holder will be rounded
upward or downward to the nearest whole Right, with 0.50 Right being rounded
upward. No Subscription Certificate may be divided in such a way as to permit
the holder to receive a greater number of Rights than the number to which such
Subscription Certificate entitles its holder, except that a depositary, bank,
trust company, or securities broker or dealer holding shares of Common Stock
(which represent interests in Class 11 of the Debtor's Plan) on the Record Date
for more than one beneficial owner may, upon proper showing to
___________________ (the "SUBSCRIPTION AGENT"), exchange its Subscription
Certificate to obtain a Subscription Certificate for the number of Rights to
which all such beneficial owners in the aggregate would have been entitled had
each been a Holder on the Record Date. Hexcel reserves the right to refuse to
issue any such Subscription Certificate if such issuance would be inconsistent
with the principle that each beneficial owner's holdings will be rounded to the
nearest whole Right.

Because the number of Rights distributed to each Holder will be
rounded to the nearest whole number, beneficial owners of Common Stock who are
also the record holders of such shares will receive more Rights under certain
circumstances than beneficial owners of Common Stock who are not the record
holder of their shares and who do not obtain (or cause the record owner of their
shares of Common Stock to obtain) a separate Subscription Certificate with
respect to the shares beneficially owned by them, including shares held in an
investment advisory or similar account. To the extent that record holders of
Common Stock or beneficial owners of Common Stock who

<PAGE>

obtain a separate Subscription Certificate receive more Rights, they will be
able to subscribe for more shares pursuant to the Subscription Privilege (as
hereinafter defined).

SUBSCRIPTION PRICE

The subscription price shall be equal to $2.00 in cash per share of
Reorganized Hexcel Common Stock subscribed for pursuant to the Subscription
Privilege (the "SUBSCRIPTION PRICE").

EXPIRATION DATE

The Rights will expire at 5:00 P.M., New York City time, on the
date that occurs 30 days after the Effective Date (such date, the "EXPIRATION
DATE"). After the Expiration Date, unexercised Rights will be null and void.
Hexcel will not be obligated to honor any purported exercise of Rights received
by the Subscription Agent after the Expiration Date, regardless of when the
documents relating to such exercise were sent, except pursuant to the Guaranteed
Delivery Procedures described below.

SUBSCRIPTION PRIVILEGES

SUBSCRIPTION PRIVILEGE. Each Right will entitle the holder
thereof to receive, upon payment of the Subscription Price, one share of
Reorganized Hexcel Common Stock (the "SUBSCRIPTION PRIVILEGE"). Certificates
representing shares of Reorganized Hexcel Common Stock purchased pursuant to the
Subscription Privilege will be delivered to subscribers as soon as practicable
after the related Rights have been validly exercised.

EXERCISE OF RIGHTS

Rights may be exercised by delivering to the Subscription Agent on
or prior to 5:00 P.M., New York City time, on the Expiration Date, the
properly completed and executed Subscription Certificate evidencing such Rights,
with any required signatures guaranteed, together with payment in full of the
Subscription Price for each share of Reorganized Hexcel Common Stock subscribed
for pursuant to the Subscription Privilege. Such payment in full must be by
(a) check or bank draft drawn upon a U.S. bank or postal, telegraphic or express
money order payable to ___________________, as Subscription Agent, or (b) wire
transfer of funds to the account maintained by the Subscription Agent for such
purpose at [NAME OF SUBSCRIPTION AGENT'S BANK] designated in the Subscription
Certificates. The Subscription Price will be deemed to have been received by
the Subscription Agent only upon (i) clearance of any uncertified check, (ii)

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receipt by the Subscription Agent of any certified check or bank draft drawn
upon a U.S. bank or of any postal, telegraphic or express money order or (iii)
receipt of good funds in the Subscription Agent's account designated in the
Subscription Certificates. If paying by uncertified personal check, please note
that the funds paid thereby may take at least five business days to clear.
ACCORDINGLY, HOLDERS OF RIGHTS WHO WISH TO PAY THE SUBSCRIPTION PRICE BY MEANS
OF UNCERTIFIED PERSONAL CHECK ARE URGED TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE
OF THE EXPIRATION DATE TO ENSURE THAT SUCH PAYMENT IS RECEIVED AND CLEARS BY
SUCH DATE AND ARE URGED TO CONSIDER PAYMENT BY MEANS OF CERTIFIED OR CASHIER'S
CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.

The permitted methods of delivery and the address to which
Subscription Certificates and payment of the Subscription Price should be
delivered are set forth in the Instructions as to the Use of Hexcel Subscription
Certificates (the "INSTRUCTIONS") which will be delivered with the
Subscription Certificates.

If a Rights holder wishes to exercise Rights, but time will not
permit such holder to cause the Subscription Certificate or Subscription
Certificates evidencing such Rights to reach the Subscription Agent on or prior
to the Expiration Date, such rights may nevertheless be exercised if all of the
following conditions (the "GUARANTEED DELIVERY PROCEDURES") are met:

(i) such holder has caused payment in full of the Subscription
Price for each share of Reorganized Hexcel Common Stock being
subscribed for pursuant to the Subscription Privilege to be received
(in the manner set forth above) by the Subscription Agent on or
prior to the Expiration Date;

(ii) the Subscription Agent receives, on or prior to the
Expiration Date, a guarantee notice (a "NOTICE OF GUARANTEED
DELIVERY"), substantially in the form provided with the
Instructions, from a member of a registered national securities
exchange or a member of the National Association of Securities
Dealers, Inc. (the "NASD"), or from a commercial bank or trust
company having an office or correspondent in the United States
(each, an "ELIGIBLE INSTITUTION"), stating the name of the
exercising Rights holder, the number of Rights represented by the
Subscription Certificate or Subscription Certificates held by such
exercising Rights holder, the number of shares of Reorganized Hexcel
Common Stock being subscribed for pursuant to the Subscription
Privilege, and guaranteeing the delivery to the Subscription Agent
of any Subscription Certificate evidencing such Rights within five
business days following the date of the Notice of Guaranteed
Delivery; and

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(iii) the properly completed Subscription Certificate
evidencing the Rights being exercised, with any required signature
guarantees, is received by the Subscription Agent within five
business days following the date of the Notice of Guaranteed
Delivery relating thereto. The Notice of Guaranteed Delivery may be
delivered to the Subscription Agent as set forth in the
Instructions., or may be transmitted to the Subscription Agent by
telegram or facsimile transmission (telecopy no. ( ) - ).

Unless a Subscription Certificate (i) provides that the shares of
Reorganized Hexcel Common Stock to be issued pursuant to the exercise of Rights
represented thereby are to be delivered to the holder of such Rights or (ii) is
submitted for the account of an Eligible Institution, signatures on such
Subscription Certificate must be guaranteed by an Eligible Institution.

Holders who hold shares of Common Stock for the account of others,
such as brokers, trustees or depositaries for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of such
Right should complete Subscription Certificates and submit them to the
Subscription Agent with the proper payment. In addition, beneficial owners of
Common Stock or Rights held through such a holder should contact the holder and
request the holder to effect transactions in accordance with the beneficial
owner's instructions.

The Instructions accompanying the Subscription Certificates should
be read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES
TO HEXCEL CORPORATION.

THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF
THE SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND
RISK OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED
PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, RIGHTS HOLDERS
ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR
CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.

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<PAGE>

All questions concerning the timeliness, validity, form and
eligibility of any exercise of Rights will be determined by Hexcel, whose
determinations will be final and binding. Hexcel in its sole discretion may
waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported exercise
of any Right. Subscriptions will not be deemed to have been received or
accepted until all irregularities have been waived or cured within such time as
Hexcel determines in its sole discretion. Neither Hexcel nor the Subscription
Agent will be under any duty to give notification of any defect or irregularity
in connection with the submission of Subscription Certificates or incur any
liability for failure to give such notification.

Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Rights Plan, the
Instructions or the Notice of Guaranteed Delivery should be directed to Hexcel's
Bankruptcy Administration Department, ( ) - .

NO REVOCATION

ONCE A HOLDER OF RIGHTS HAS EXERCISED THE SUBSCRIPTION PRIVILEGE,
SUCH EXERCISE MAY NOT BE REVOKED.

METHOD OF TRANSFERRING RIGHTS

Rights may be purchased or sold through usual investment channels,
including banks and brokers. The Rights may be traded on the New York Stock
Exchange or the over-the-counter market.

Subject to compliance with applicable securities laws, the Rights
evidenced by a single Subscription Certificate may be transferred in whole by
endorsing the Subscription Certificate for transfer in accordance with the
accompanying instructions. A portion of the Rights evidenced by a single
Subscription Certificate (but not fractional Rights) may be transferred by
delivering to the Subscription Agent a Subscription Certificate properly
endorsed for transfer, with instructions to register such portion of the Rights
evidenced thereby in the name of the transferee (and to issue a new Subscription
Certificate to the transferee evidencing such transferred Rights). In such
event, a new Subscription Certificate evidencing the balance of the Rights will
be issued to the Rights holder or, if the Rights holder so instructs, to an
additional transferee.

Holders wishing to transfer all or a portion of their Rights (but
not fractional Rights) should allow a sufficient amount of time prior to the
Expiration Date for (i) the transfer instructions to be received and processed
by the Subscription Agent, (ii) a new Subscription Certificate to be issued and
transmitted to the transferee or

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<PAGE>

transferees with respect to transferred Rights, and to the Rights holder with
respect to retained Rights, if any, and (iii) the Rights evidenced by such new
Subscription Certificates to be exercised or sold by the recipients thereof.
Neither Hexcel nor the Subscription Agent shall have any liability to a
transferee or transferor of Rights if Subscription Certificates are not received
in time for exercise prior to the Expiration Date.

Except for the fees charged by the Subscription Agent (which will be
paid by Hexcel), all commissions, fees and other expenses (including brokerage
commissions and transfer taxes) incurred in connection with the purchase, sale
or exercise of Rights will be for the account of the Rights holder, and none of
such commissions, fees or expenses will be paid by Hexcel or the Subscription
Agent.

Hexcel anticipates that the Rights will be eligible for transfer
through, and that the exercise of the Subscription Privilege may be effected
through, the facilities of The Depository Trust Company ("DTC"; Rights
exercised through DTC are referred to as "DTC EXERCISED RIGHTS").

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<PAGE>

EXHIBIT B

<PAGE>

STOCK SUBSCRIPTION AND STANDBY PURCHASE AGREEMENT

BETWEEN

HEXCEL CORPORATION

AND

MUTUAL SERIES FUND INC.

Dated as of July 27, 1994

<PAGE>

TABLE OF CONTENTS

PAGE

ARTICLE I

SALE OF SHARES; PURCHASE PRICE..................... 2
1.1 Sale of Shares.................................................. 2
1.2 Purchase Price; Payment......................................... 2
1.3 Closing......................................................... 3

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF HEXCEL................ 4
2.1 Organization and Good Standing.................................. 4
2.2 Authorization of Agreement...................................... 4
2.3 Authorization and Validity of Shares............................ 5
2.4 Capitalization.................................................. 5
2.5 Financial Statements............................................ 6
2.6 No Undisclosed Liabilities...................................... 6
2.7 Absence of Certain Developments................................. 7
2.8 SEC Documents................................................... 7
2.9 Taxes........................................................... 8
2.10 Title to Assets................................................ 9
2.11 Intellectual Property.......................................... 9
2.12 Material Contracts............................................. 10
2.13 Employee Benefits.............................................. 10
2.14 Litigation..................................................... 12
2.15 Environmental Matters.......................................... 12
2.16 Disclosure Statement........................................... 13

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PURCHASER.............. 14
3.1 Organization and Good Standing.................................. 14
3.2 Authorization of Agreement...................................... 14
3.3 Consents of Third Parties....................................... 14
3.4 Investment Intention............................................ 15
3.5 Financial Advisors.............................................. 15
3.6 SEC Documents................................................... 15

ARTICLE IV

FURTHER AGREEMENTS OF THE PARTIES................... 16
4.1 Access to Information........................................... 16
4.2 Filings with Governmental Bodies; Certain Negotiations.......... 16
4.3 Updating of Information......................................... 17
4.4 Periodic Financial Statements................................... 17

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ARTICLE V

PAGE

BANKRUPTCY MATTERS........................... 18
5.1 Motion by Hexcel................................................ 18
5.2 Plan and Disclosure Statement; Disclosure Statement Order....... 18
5.3 Confirmation Order.............................................. 18
5.4 Certain Bankruptcy Undertakings by Hexcel....................... 19

ARTICLE VI

TERMINATION; BREAK-UP FEE....................... 19
6.1 Termination..................................................... 19
6.2 No Solicitation; Break-up Fee................................... 22
6.3 Effect of Termination........................................... 24
6.4 Expense Reimbursement........................................... 24

ARTICLE VII

CONDITIONS TO CLOSING......................... 25
7.1 Conditions Precedent to Obligations of Purchaser................ 25
7.2 Conditions Precedent to Obligations of Hexcel to First Closing.. 28
7.3 Conditions Precedent to Obligations of Purchaser to
Second Closing.................................................. 30
7.4 Conditions Precedent to Obligations of Hexcel to Second Closing. 30

ARTICLE VIII

DOCUMENTS TO BE DELIVERED AT THE CLOSINGS............... 31
8.2 Documents to Be Delivered by Purchaser at the First Closing..... 32
8.3 Documents to Be Delivered by Hexcel at the Second Closing....... 33
8.4 Documents to Be Delivered by Purchaser at the Second Closing.... 34
8.5 Resignation of Designee......................................... 35

ARTICLE IX

INDEMNIFICATION AND RELATED MATTERS.................. 35
9.1 Indemnification................................................. 35
9.2 Liquidated Damages.............................................. 36
9.3 Financial Advisors.............................................. 36

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<PAGE>

ARTICLE X

PAGE

MISCELLANEOUS............................. 36
10.1 Survival of Representations and Warranties..................... 36
10.2 Certain Definitions............................................ 37
10.3 Further Assurances............................................. 45
10.4 Restrictive Legend............................................. 45
10.5 Entire Agreement; Amendments and Waivers....................... 45
10.6 Governing Law.................................................. 46
10.7 Table of Contents and Headings................................. 46
10.8 Notices........................................................ 46
10.9 Knowledge...................................................... 47
10.10 Severability.................................................. 47
10.11 Binding Effect; Assignment.................................... 47
10.12 No Third Party Beneficiary.................................... 48
10.13 Amendments to Plan and Disclosure Statement................... 48

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<PAGE>

EXHIBITS

Exhibit I - Opinion of Hexcel's Counsel For First Closing
Exhibit II - Opinion of Purchaser's Counsel For First Closing
Exhibit III - Opinion of Hexcel's Counsel For Second Closing
Exhibit IV - Opinion of Purchaser's Counsel For Second Closing
Exhibit V - Registration Rights Agreement
Exhibit VI - Terms of Employment for John J. Lee
Exhibit VII - Officers with Contingency Employment Agreements

SCHEDULES

Schedule 2.9(a) - Tax Filings
Schedule 2.9(b) - Tax Payments
Schedule 2.9(c) - Payment and Withholding of Value Added Taxes
Schedule 2.9(f)(ii) - Change in Accounting Method
Schedule 2.13(a) - Employee Benefit Plans
Schedule 2.13(b) - Multiple Employer Plan
Schedule 2.13(e) - Amendments to Employee Benefit Plans
Schedule 2.14 - Litigation

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<PAGE>

STOCK SUBSCRIPTION AND STANDBY PURCHASE AGREEMENT

This STOCK SUBSCRIPTION AND STANDBY PURCHASE AGREEMENT, dated as of
July 27, 1994 (this "Agreement"), is between Hexcel Corporation, a Delaware
corporation, in its capacities as debtor and debtor in possession (together with
its successors and assigns, "Hexcel"), and Mutual Series Fund Inc., a Maryland
corporation ("Purchaser"). Capitalized terms used in this Agreement are defined
in Section 10.2 or as indicated therein. All section references herein are to
sections of this Agreement unless otherwise indicated.

W I T N E S S E T H :

WHEREAS, Hexcel is a debtor and debtor in possession under chapter
11 of title 11 of the United States Code, as amended (the "Bankruptcy Code"),
having filed a voluntary petition for relief (filed as Case No. 93-48535 T and
entitled IN RE HEXCEL CORPORATION) (the "Case") on December 6, 1993 in the
United States Bankruptcy Court for the Northern District of California (the
"Bankruptcy Court"); and

WHEREAS, Hexcel intends to file the Plan in the Bankruptcy Court on
July 27, 1994; and

WHEREAS, pursuant to the Plan, Hexcel will, INTER ALIA, issue to
the holders of shares of Old Common Stock transferrable rights to subscribe for
and purchase (the "Rights Offering") an aggregate number of shares of New Common
Stock (the "Offered Shares") (rounded to the nearest whole share for each
holder) as equals, if Class 9 under the Plan accepts the Plan in accordance with
the provisions of section 1126 of the Bankruptcy Code, approximately 24.225% of
the Fully Diluted New Shares at an aggregate purchase price of approximately
$17,000,000 and, if Class 9 under the Plan does not accept the Plan in
accordance with the provisions of section 1126 of the Bankruptcy Code,
approximately 41.13917% of the Fully Diluted New Shares at an aggregate Purchase
Price of approximately $25,000,000; and

WHEREAS, in connection with, and as part of, the Rights Offering,
Purchaser is entering into this Agreement (a) to participate as the standby
purchaser for the Offered Shares not purchased through the Rights Offering (the

<PAGE>

"Unpurchased Shares"), and (b) to purchase certain additional shares of New
Common Stock, on the terms and subject to the conditions set forth in this
Agreement;

NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements hereinafter
contained, and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

SALE OF SHARES; PURCHASE PRICE

1.1 SALE OF SHARES. On the terms and subject to the conditions
set forth in this Agreement, Purchaser hereby subscribes for and agrees to
purchase, and Hexcel agrees to issue, sell and deliver to Purchaser, (a) if
Class 9 under the Plan accepts the Plan in accordance with section 1126 of the
Bankruptcy Code, (i) on the First Closing Date, that number of shares of New
Common Stock (rounded to the nearest whole share) as equals 32.775% of the
number of Fully Diluted New Shares (the "Initial Shares") at an aggregate
purchase price of $23,000,000 (the "Purchase Price"), and (ii) on the Second
Closing Date, the Unpurchased Shares at an aggregate purchase price equal to the
difference between $17,000,000 and the aggregate purchase price for the shares
of New Common Stock purchased in the Rights Offering (the "Standby Purchase
Price") and (b) if Class 9 under the Plan does not accept the Plan in accordance
with section 1126 of the Bankruptcy Code (i) on the First Closing Date, that
number of shares of New Common Stock (rounded to the nearest whole share) as
equals 41.13917% of the number of Fully Diluted New Shares (also the "Initial
Shares") at an aggregate purchase price of $25,000,000 (also the "Purchase
Price") and (ii) on the Second Closing Date, the Unpurchased Shares at an
aggregate purchase price equal to the difference between $25,000,000 and the
aggregate purchase price for the shares of New Common Stock purchased in the
Rights Offering (also the "Standby Purchase Price").

1.2 PURCHASE PRICE; PAYMENT. On the terms and subject to the
conditions set forth in this Agreement, (a)at the First Closing, Purchaser shall
pay to Hexcel, in consideration for receiving from Hexcel at the First Closing
certificates representing the Initial Shares, the Purchase

2
<PAGE>

Price by delivery of immediately available funds to a single bank account which
Hexcel shall designate in writing to Purchaser not less than five business days
prior to the First Closing Date, and (b) at the Second Closing, Purchaser shall
pay to Hexcel, in consideration for receiving from Hexcel at the Second Closing
certificates representing the Unpurchased Shares, the Standby Purchase Price by
delivery of immediately available funds to a single bank account which Hexcel
shall designate in writing to Purchaser not less than five business days prior
to the Second Closing Date.

1.3 CLOSING.

(a) The closing of the sale and purchase of the Initial
Shares (the "First Closing") shall take place at 10:00 a.m. at the offices of
Weil, Gotshal & Manges in New York, New York (or at such other place as the
parties may designate in writing) no later than the fifth business day following
the date on which each of the conditions specified in Sections 7.1(u) and 7.2(f)
has been fulfilled, subject to satisfaction of the other conditions specified in
Sections 7.1 and 7.2 (or waiver by the party entitled to waive that condition).
The date on which the First Closing is held is referred to in this Agreement as
the "First Closing Date". At the First Closing, the parties shall execute and
deliver the documents referred to in Sections 8.1 and 8.2.

(b) The closing of the sale and purchase of the Unpurchased
Shares provided above (the "Second Closing") shall take place at 10:00 a.m. at
the offices of Weil, Gotshal & Manges in New York, New York (or at such other
place as the parties may designate in writing) no later than the tenth business
day following the date on which each of the conditions specified in Sections
7.3(a) and 7.4(a) has been fulfilled, subject to satisfaction of the other
conditions specified in Sections 7.3 and 7.4 (or waiver by the party entitled to
waive that condition). The date on which the Second Closing is held is referred
to in this Agreement as the "Second Closing Date". At the Second Closing, the
parties shall execute and deliver the documents referred to in Sections 8.3
and 8.4.

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<PAGE>

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF HEXCEL

Hexcel hereby represents and warrants to Purchaser that:

2.1 ORGANIZATION AND GOOD STANDING. Hexcel is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now conducted and as it
is proposed to be conducted.

2.2 AUTHORIZATION OF AGREEMENT.

(a) Subject to requisite Bankruptcy Court approval, (i)
Hexcel has all requisite corporate power and authority to execute and deliver
this Agreement and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby, and to perform fully its
obligations hereunder and thereunder, (ii) the execution, delivery and
performance by Hexcel of this Agreement and the Registration Rights Agreement
and the consummation by Hexcel of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Hexcel and (iii) this Agreement has been, and the Registration Rights
Agreement will be at or prior to the First Closing, duly executed and delivered
by Hexcel and (assuming the due authorization, execution and delivery by
Purchaser) this Agreement constitutes, and the Registration Rights Agreement
when so executed and delivered will constitute, legal, valid and binding
obligations of Hexcel, enforceable against Hexcel in accordance with their
respective terms.

(b) The execution and delivery by Hexcel of this Agreement
does not and, on the First Closing Date, the execution and delivery of the
Registration Rights Agreement and the consummation of the transactions
contemplated hereby or thereby by Hexcel will not (i) conflict with or result in
a breach or violation of any of the terms of the certificate of incorporation or
by-laws or other corporate governance documents of Hexcel or any of its Material
Subsidiaries as then in effect, (ii) require any consent, approval, waiver,
permit, order or authorization of, or registration, declaration, notification or
filing with, any federal, state, local or foreign governmental, judicial or
regulatory authority other than (A) as required by the Bankruptcy Code, the

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<PAGE>

Federal Rules of Bankruptcy Procedure from time to time promulgated in
connection therewith (the "Bankruptcy Rules") and the orders of the Bankruptcy
Court, (B) the requirements of the HSR Act, (C) the requirements of the
Exchange Act, and (D) as may be required under ISRA and ECRA to the extent
Hexcel owns property in New Jersey, (iii) result in a breach of, constitute a
default under, give rise to any right of termination, amendment, cancellation
or acceleration of any obligation under, or result in the creation of any Lien
under, any Contract or other obligation to which Hexcel or any of the Material
Subsidiaries is a party or by which any of their respective assets may be bound,
other than with respect to those Contracts that will no longer be in effect
upon consummation of the Plan and other than for rights of termination under
certain non-material leases and Hexcel's director's and officer's liability
policy, or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Hexcel or any of its Material Subsidiaries or any of
their respective assets.

2.3 AUTHORIZATION AND VALIDITY OF SHARES. On the First Closing
Date, the Initial Shares will have been duly authorized, and when issued and
delivered as provided in this Agreement will be validly issued and outstanding,
fully paid and nonassessable and free of any preemptive rights.

2.4 CAPITALIZATION. On the First Closing Date, the authorized
capital stock of Hexcel will be 60,000,000 shares of New Common Stock and
1,500,000 shares of preferred stock, no shares of either of which classes will
be issued or reserved for issuance except (i) to Purchaser pursuant to this
Agreement, (ii) to holders of claims in Classes 6, 9, 10 and 11 pursuant to the
Plan, (iii) up to 7% of Fully Diluted New Shares to employees pursuant to
Hexcel's New Long Term Incentive Plan and/or John Lee's new employment
agreement, as disclosed in the Disclosure Statement and (iv) to management
pursuant to an investment disclosed in the Disclosure Statement. Other than as
disclosed in the Disclosure Statement, on the First Closing Date, there will be
no option, warrant, call, right, commitment or other agreement of any character
to which Hexcel is a party requiring, and there will be no securities of Hexcel
outstanding on the First Closing Date which upon conversion or exchange would
require, the issuance, sale or transfer of any shares of capital stock or other
equity securities of Hexcel or other securities convertible into, exchangeable
for or evidencing the right to subscribe for or purchase shares of capital stock
or other equity securities of Hexcel

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<PAGE>

other than, if Class 9 under the Plan does not accept the Plan in accordance
with section 1126 of the Bankruptcy Code, pursuant to the conversion rights of
Hexcel's Subordinated Debentures (as defined in the Plan). Neither Hexcel nor
any of the Subsidiaries will be, on the First Closing Date, a party to any
voting trust or other voting agreement (other than in connection with director's
qualifying shares) with respect to any of its capital stock or to any agreement
relating to the redemption or repurchase of any shares of the capital stock of
Hexcel or any Subsidiary (other than in connection with director's qualifying
shares) or any registration rights agreement (other than the Registration Rights
Agreement).

2.5 FINANCIAL STATEMENTS. Hexcel has delivered to Purchaser a
copy of the (a) audited consolidated balance sheets of Hexcel and the
Subsidiaries as at December 31, 1993 and December 31, 1992 and the related
audited consolidated statements of income and of cash flows for the years then
ended and (b) unaudited consolidated balance sheet of Hexcel and the
Subsidiaries as at April 3, 1994 and the related consolidated statements of
income and cash flows for the period then ended (such audited and unaudited
statements, including the related notes and schedules thereto, are referred to
herein as the "Financial Statements"). Each of the Financial Statements is
complete and correct in all material respects, has been prepared in accordance
with generally accepted accounting principles and presents fairly the
consolidated financial position, results of operations and cash flows of Hexcel
and the Subsidiaries as at the dates and for the periods indicated.

The unaudited consolidated balance sheet of Hexcel and the
Subsidiaries as at April 3, 1994 and as set forth in Hexcel's Quarterly Report
on Form 10-Q for the fiscal quarter ended April 3, 1994 is referred to as the
"Balance Sheet" and April 3, 1994 is referred to as the "Balance Sheet Date".

2.6 NO UNDISCLOSED LIABILITIES. Hexcel and the Subsidiaries have
no known obligation or liability of any kind (whether accrued, absolute,
contingent or otherwise, whether arising under Law or by contract or tort, and
whether due or to become due) other than those (a) fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto, (b)
described in the other Disclosure Documents, (c) set forth or disclosed in the
Claims Register, or (d) which in the aggregate, if

6
<PAGE>

liquidated and matured, could not reasonably result in a Material Adverse
Change.

2.7 ABSENCE OF CERTAIN DEVELOPMENTS.

(a) Since the Balance Sheet Date, neither Hexcel nor either
Material Subsidiary has awarded or paid any bonuses, entered into, or otherwise
has become liable for any payment pursuant to, any employment, deferred
compensation, severance or similar agreement (or amended any such agreement), or
increased the compensation payable or to become payable by it to any of Hexcel's
existing executive officers in excess of $100,000 per officer per annum, except
(i) as disclosed in the Disclosure Statement, (ii) pursuant to the agreement
referred to in Section 7.1(d) and (iii) the extension of John J. Lee's existing
employment agreement beyond the current employment term thereof on the terms
described on Exhibit VI or pursuant to the extension of John J. Lee's existing
contract on other terms acceptable to Purchaser.

(b) No decision has been taken by Hexcel to change
materially the direction of Hexcel's business from that disclosed in the
Disclosure Statement.

2.8 SEC DOCUMENTS. Hexcel has filed all required reports,
schedules, forms, statements and other documents with the Securities and
Exchange Commission ("SEC") since January 1, 1994 (the "SEC Documents"). As of
their respective dates, the SEC Documents were complete and correct in all
material respects and complied in all material respects with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
SEC Documents. Except to the extent that information contained in any SEC
Document has been revised or superseded by a later-filed SEC Document, none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading at the date such SEC Documents were filed with the
SEC. The financial statements of Hexcel included in the SEC Documents comply as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have

7
<PAGE>

been prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of Hexcel and
its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows (or changes in financial position
prior to the approval of FASB 95) for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).

2.9 TAXES.

(a) Except as disclosed on Schedule 2.9(a) hereto, Hexcel
and each of the Subsidiaries, or the affiliated, combined or unitary group of
which Hexcel and any of the Subsidiaries are or were a member, as the case may
be (collectively, the "Tax Affiliates"), have timely filed (taking into account
extensions of time to file) with the appropriate Governmental Bodies all Tax
Returns required to be filed by or with respect to them, their operations and
assets, other than those which the failure to file could not in the aggregate
reasonably result in a Material Adverse Change.

(b) Except as disclosed on Schedule 2.9(b) hereto, Hexcel,
each of the Subsidiaries and each of the Tax Affiliates has timely paid or
reserved on the Balance Sheet all Taxes that were reported as being due and
payable on Tax Returns filed with respect to all prior taxable periods.

(c) Except as disclosed on Schedule 2.9(c) hereto, Hexcel and
each of the Subsidiaries (or a Tax Affiliate on behalf of Hexcel or such
Subsidiary) have complied with all applicable Laws relating to the payment and
withholding of Taxes and have timely withheld from employee wages and paid over
to the proper Governmental Bodies all amounts required to be so withheld and
paid over for all periods under all applicable Laws, except for such
non-compliances which in the aggregate could not reasonably result in a Material
Adverse Change.

(d) Neither Hexcel nor any of the Subsidiaries is a party to,
bound by or subject to any obligation under any tax sharing or similar agreement
with any Tax Affiliate which has not been delivered to Purchaser.

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<PAGE>

(e) None of Hexcel, any of the Subsidiaries or any of the Tax
Affiliates on behalf of Hexcel or any of the Subsidiaries has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by Hexcel or any of the
Subsidiaries.

(f) None of Hexcel, any of the Subsidiaries or any of the Tax
Affiliates on behalf of Hexcel or any of the Subsidiaries has (i) agreed to or
is required to make any adjustment pursuant to Section 481(a) of the Code by
reason of a change in accounting method initiated by Hexcel or any of the
Subsidiaries, or (ii) except as disclosed on Schedule 2.9(f)(ii) hereto,
knowledge that the IRS has proposed any such adjustment or change in accounting
method, in either case the effect of which could reasonably result in a Material
Adverse Change.

(g) There is no contract, agreement, plan or arrangement
covering any person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by Hexcel or any of the
Subsidiaries by reason of Section 280G of the Code.

2.10 TITLE TO ASSETS. Except as disclosed in the Disclosure
Statement, each of Hexcel and the Material Subsidiaries has good title, free and
clear of all Liens, to all of the assets purported to be owned by it, subject
only to Permitted Exceptions and Permitted Liens; since the Balance Sheet Date,
neither Hexcel nor either of the Material Subsidiaries has disposed of any
assets other than in the ordinary course of business or assets the actual or
proposed disposition of which is either disclosed in the Disclosure Statement or
could not in the aggregate reasonably result in a Material Adverse Change.

2.11 INTELLECTUAL PROPERTY.

(a) Hexcel and the Material Subsidiaries possess all
material Intellectual Property, know-how, formulae and other proprietary and
trade rights necessary for the conduct of their respective businesses as now
conducted, other than as could not in the aggregate reasonably result in a
Material Adverse Change.

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<PAGE>

(b) There have been no claims made, and none of Hexcel or
either of the Material Subsidiaries has received any notice or otherwise knows,
that the use by Hexcel or any Subsidiary of any of the patents, trademarks,
trade names, service marks, brand marks, brand names, Software, industrial
designs and copyrights used by Hexcel or any Subsidiary, or any registration
thereof or pending application therefor, or license or other Contract relating
thereto (collectively, the "Intellectual Property") conflicts with, infringes
upon, violates or interferes with or constitutes an appropriation of any right,
title, interest or goodwill, including, without limitation, any intellectual
property right, patent, trademark, trade name, service mark, brand mark, brand
name, computer program, database, industrial design, copyright or any pending
application therefor of any other Person, other than those that in the aggregate
could not reasonably result in a Material Adverse Change.

2.12 MATERIAL CONTRACTS. On the First Closing Date, except as
disclosed in the Disclosure Statement, each of Hexcel's Contracts will be legal,
valid and enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), other than Contracts which in the aggregate if
not legal, valid and enforceable could not reasonably result in a Material
Adverse Change. Except as disclosed in the Disclosure Statement and other than
defaults that in the aggregate could not reasonably result in a Material Adverse
Change assuming consummation of the Plan, (i) there is no default under any
Contract either by Hexcel or a Material Subsidiary or, to the knowledge of
Hexcel and the Material Subsidiaries, by any other party thereto, and (ii) no
event has occurred that with the lapse of time or the giving of notice or both
would constitute a default thereunder.

2.13 EMPLOYEE BENEFITS.

(a) Schedule 2.13(a) hereto sets forth a complete and
correct list of all "employee benefit plans", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
other pension plans or employee benefit arrangements or payroll practices
(including, without limitation, severance pay,

10
<PAGE>

vacation pay, company awards, salary continuation for disability, sick leave,
deferred compensation, bonus or other incentive compensation, stock purchase
arrangements or policies) maintained by Hexcel or any Subsidiary or to which
Hexcel or any Subsidiary contributes or is obligated to contribute with respect
to employees of Hexcel or any Subsidiary other than any with respect to
employees of foreign Subsidiaries ("Employee Benefit Plans"), and identifies
which Employee Benefit Plans are (i) subject to Section 4063 and 4064 of ERISA
("Multiple Employer Plans"), (ii) multiemployer plans (as defined in Section
4001(a) of ERISA) ("Multiemployer Plans"), or (iii) welfare plans providing
continuing benefits after the termination of employment (other than as required
by Section 4980B of the Code and at the former employee's own expense).

(b) Except as disclosed in the Disclosure Statement or in
Schedule 2.13(b) hereto, none of Hexcel, any of the Subsidiaries or any trade or
business (whether or not incorporated) which is under common control or treated
as a single employer with Hexcel ("ERISA Affiliate") would have any withdrawal
or other liability (contingent or otherwise) under Section 4201, 4063 or 4064 of
ERISA to any Multiple Employer Plan or Multiemployer Plan if they ceased
contributions to and withdrew from such plans.

(c) Except as disclosed in the Disclosure Statement, nothing
has occurred with respect to the operation of any Employee Benefit Plan intended
to qualify under Section 401 of the Code ("Qualified Plan") which could cause
the loss of such qualification or the imposition of any liability, penalty or
tax under ERISA or the Code which liability, penalty or tax could reasonably
result in a Material Adverse Change.

(d) Except as disclosed in the Disclosure Statement, the
benefit liabilities, as defined in Section 4001(a)(16) of ERISA, of each of the
Employee Benefit Plans subject to Title IV of ERISA using the actuarial
assumptions that would be used by the Pension Benefit Guaranty Corporation (the
"PBGC") in the event it terminated each such plan do not exceed the fair market
value of the assets of each such plan.

(e) All amendments and actions required to bring each of the
Employee Benefit Plans into conformity in all material respects with all of the
applicable provisions of ERISA and other applicable Laws have been made or taken

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<PAGE>

except to the extent that such amendments or actions are not required by law to
be made or taken until a date after the First Closing Date or are disclosed on
Schedule 2.13(e).

2.14 LITIGATION. Except as disclosed in the Disclosure Statement
or in Schedule 2.14 hereto, there are no (i) pending or, to the knowledge of
Hexcel and the Material Subsidiaries, threatened Legal Proceedings against or
affecting Hexcel or any of the Material Subsidiaries or any properties or assets
of Hexcel or any of the Material Subsidiaries, at law or in equity, other than
claims reflected in the Claims Register, Legal Proceedings in the Case by
parties in interest in respect of corporate governance matters and other Legal
Proceedings that in the aggregate could not reasonably result in a Material
Adverse Change or (ii) outstanding Orders of any Governmental Body against,
affecting or naming Hexcel or any of the Material Subsidiaries or directly
affecting any of their properties or assets, other than those that in the
aggregate could not reasonably result in a Material Adverse Change. Hexcel has
disclosed to Purchaser all pending Legal Proceedings that if adversely
determined could reasonably result in a Material Adverse Change.

2.15 ENVIRONMENTAL MATTERS. Except as disclosed in the
Disclosure Statement or the Plan:

(a) The operations of Hexcel and the Subsidiaries have been
and are in compliance with all Environmental Laws, other than for such
non-compliances that in the aggregate could not reasonably result in a Material
Adverse Change.

(b) Hexcel and the Subsidiaries have all Environmental
Permits necessary for their operations other than those that in the aggregate
could not reasonably result in a Material Adverse Change. Hexcel and the
Subsidiaries are in compliance with all Environmental Permits other than those
instances of non-compliance that in the aggregate could not reasonably result in
a Material Adverse Change. None of Hexcel or any Subsidiary has received any
notice from any source, or has otherwise obtained knowledge, to the effect that
there is lacking any material Environmental Permit required in connection with
the current use or operation of any Facility, not disclosed to Purchaser.

12
<PAGE>

operations, are subject to any outstanding Order, Contract or, to the knowledge
of Hexcel or any of the Subsidiaries, federal, state or local investigation
respecting (i) any Remedial Action or (ii) any Environmental Claim, except for
such that in the aggregate could not reasonably result in a Material Adverse
Change.

(d) Hexcel and the Subsidiaries are not subject to any
pending, or, to the knowledge of Hexcel or any of the Subsidiaries, threatened,
Legal Proceeding alleging the violation of any Environmental Law or
Environmental Permit, not disclosed to Purchaser.

(e) Neither Hexcel nor any Subsidiary has caused or
permitted any Hazardous Materials to remain or be disposed of, either on or
under real property legally or beneficially owned or operated by Hexcel or any
Subsidiary or on any real property not permitted to accept, store or dispose of
such Hazardous Materials, other than in compliance with all applicable
Environmental Laws and for such instances of non-compliance that in the
aggregate could not reasonably result in a Material Adverse Change.

(f) Hexcel and the Subsidiaries have no contingent
liabilities with respect to any Release of Hazardous Materials at any Facility
or in connection with the off-site shipment of such Hazardous Materials other
than those that in the aggregate could not reasonably result in a Material
Adverse Change; none of the operations of Hexcel or any Subsidiary involve the
transportation, treatment, storage or disposal of hazardous waste or subject
waste, as defined under 40 C.F.R. Parts 260-270 (in effect as of the date of
this Agreement); and there is not now on or in any property of Hexcel or any
Subsidiary (1) any leaking underground storage tanks, surface tanks, dikes or
impoundments, (2) any friable asbestos-containing materials, or (3) any
polychlorinated biphenyls.

(g) No environmentally related audits, studies, reports,
analyses or results of investigations that have been performed with respect to
currently or previously owned, leased or operated Facilities have revealed any
actual or potential losses under Environmental Laws in excess of $250,000 at any
such Facility.

2.16 DISCLOSURE STATEMENT. The Disclosure Statement does not
contain any untrue statement of a material fact or omit to state a material fact
necessary to

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<PAGE>

make the statements contained therein, in light of the circumstances under which
they were made, not misleading. Hexcel does not know of any facts (other than
facts of a general economic or political nature) which have caused or in the
future are reasonably likely to cause a Material Adverse Change which have not
been set forth in the Disclosure Statement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Hexcel that:

3.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maryland.

3.2 AUTHORIZATION OF AGREEMENT. Purchaser has all requisite
corporate power and authority to execute and deliver this Agreement and the
Registration Rights Agreement, and to perform fully its obligations hereunder
and thereunder. The execution, delivery and performance by Purchaser of this
Agreement and the Registration Rights Agreement and the consummation by the
Purchaser of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Purchaser. This
Agreement has been, and the Registration Rights Agreement will be at or prior to
the First Closing, duly executed and delivered by Purchaser and (assuming the
due authorization, execution and delivery by Hexcel) this Agreement constitutes,
and the Registration Rights Agreement when so executed and delivered will
constitute, legal, valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).

3.3 CONSENTS OF THIRD PARTIES. Neither the execution and
delivery by Purchaser of this Agreement or the Registration Rights Agreement,
nor the compliance by Pur-

14
<PAGE>

chaser with any of the provisions hereof or thereof will (a) conflict with, or
result in the breach of any of the terms of the certificate of incorporation or
by-laws or other corporate governance documents of Purchaser, (b) conflict with,
violate, result in the breach of, or constitute a default under any Contract or
Order to which Purchaser is a party or by which Purchaser or its properties or
assets are bound or (c) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Purchaser or any of its respective assets.
No consent, waiver, approval, Order, Permit or authorization of, or declaration
or filing with, or notification to, any Person or Governmental Body is required
on the part of Purchaser in connection with the execution and delivery of this
Agreement or the Registration Rights Agreement or the compliance by Purchaser
with any of the provisions hereof or thereof, except for compliance with the
applicable requirements of the HSR Act and assuming that Hexcel obtains those
approvals and makes those filings disclosed in Section 2.2(b).

3.4 INVESTMENT INTENTION. Purchaser acknowledges that the New
Common Stock to be acquired by Purchaser has not been registered for sale under
any federal or state securities laws and that such shares are being offered and
sold to Purchaser pursuant to the exemption from registration provided for in
Section 4(2) of the Securities Act. Purchaser is an "accredited investor"
within the meaning of Regulation D under the Securities Act. Any shares of New
Common Stock acquired by Purchaser pursuant to this Agreement will be taken by
Purchaser solely for its own account for the purpose of investment and not with
a view to the public distribution thereof.

3.5 FINANCIAL ADVISORS. No Person has acted directly or
indirectly as a broker, finder or financial advisor for Purchaser in connection
with the negotiations relating to or the transactions contemplated by this
Agreement.

3.6 SEC DOCUMENTS. Purchaser is a no-load, diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. Purchaser has filed all required reports, schedules, forms,
statements and other documents with the SEC since January 1, 1994 (the
"Purchaser SEC Documents"). As of their respective dates, the Purchaser SEC
Documents were complete and correct in all material respects and complied in all
material respects with the requirements of

15
<PAGE>

the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Purchaser SEC
Documents, and except to the extent that information contained in any Purchaser
SEC Document has been revised or superseded by a later-filed Purchaser SEC
Document, none of the Purchaser SEC Documents contained any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading at the date such
Purchaser SEC Documents were filed with the SEC.

ARTICLE IV

FURTHER AGREEMENTS OF THE PARTIES

From and after the date hereof and until the First Closing Date:

4.1 ACCESS TO INFORMATION. Hexcel shall (and shall cause its
Subsidiaries and officers, directors, employees, auditors and agents to) afford
the officers, employees, representatives, and agents of Purchaser (the
"Purchaser Representatives") reasonable access at all reasonable times to its
officers, employees, agents, properties, offices, plants and other facilities,
books and records, and shall furnish such Purchaser Representatives with all
financial, operating and other data and information as may be reasonably
requested, as long as such Purchaser Representative is a party to a
confidentiality agreement with Hexcel, or is bound by a confidentiality
agreement with Hexcel binding upon Purchaser.

4.2 FILINGS WITH GOVERNMENTAL BODIES; CERTAIN NEGOTIATIONS.

(a) As promptly as practicable after the execution of this
Agreement, each party shall, in cooperation with the other, file or cause to be
filed all reports, notifications and other information that may be required
under the HSR Act, and shall furnish or cause to be furnished to the other all
such information in its possession as may be reasonably necessary for the
completion of the reports, notifications or submissions to be filed by the
other. Each party hereto agrees to use its best efforts to comply in a full and
timely manner with any request from a

16
<PAGE>

Governmental Body for additional information. Hexcel shall bear all filing fees
required to be paid in connection with compliance with the HSR Act.

(b) The parties hereto shall negotiate in good faith with
any Governmental Body with respect to any threatened or actual Legal Proceeding
or any requested relief with respect to the HSR Act.

4.3 UPDATING OF INFORMATION. Hexcel shall promptly deliver to
Purchaser any information, including any notices received from third parties,
concerning events subsequent to the date of this Agreement which is necessary to
supplement the information contained in or made a part of the representations
and warranties contained herein, including the schedules hereto, or delivered by
Hexcel pursuant to any of the covenants contained herein, in order that the
information contained herein or so delivered be complete and accurate in all
material respects, it being understood and agreed that the delivery of such
information shall not in any manner constitute a waiver by Purchaser of any of
the terms hereof, including without limitation any of the conditions precedent
to the First Closing, and it being further understood that Hexcel may satisfy
its obligations under this Section 4.3 by delivery of an amendment to the
Disclosure Statement.

4.4 PERIODIC FINANCIAL STATEMENTS. Hexcel shall furnish, or
cause to be furnished, to Purchaser (a) within 30 days after the end of each
month or 45 days after the end of each of its first three fiscal quarters of
each year, between the date hereof and the First Closing Date, an unaudited
consolidated balance sheet of Hexcel and the Subsidiaries as at the end of such
month or quarter and the related unaudited consolidated income statement and
statement of changes in financial position for the month or quarter then ended,
which financial statements shall be prepared in accordance with the books and
records of Hexcel, fairly present the financial position of Hexcel and the
Subsidiaries as of the dates indicated, and with respect to any such quarterly
statements be prepared in the manner and according to the principles used in
preparing the unaudited Financial Statements and (b) within five business days
after filing with the SEC, copies of all documents filed with the SEC.

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<PAGE>

ARTICLE V

BANKRUPTCY MATTERS

5.1 MOTION BY HEXCEL. As expeditiously as possible after the
execution and delivery of this Agreement but in no event later than August 1,
1994, Hexcel shall file with the Bankruptcy Court a motion (the "Approval
Motion") requesting the entry of an order (the "Approval Order") of the
Bankruptcy Court in form and substance satisfactory to Purchaser and its counsel
(a) approving and authorizing the performance by Hexcel of its obligations under
Articles IV, V and VI of this Agreement and (b) establishing a requirement that
any proposal on substantially the same terms contemplated hereby be of a value
at least $2,500,000 over the sum of the Purchase Price and the Standby Purchase
Price (assuming no Offered Shares are purchased in the Rights Offering) in order
for any such proposal to be subject to acceptance by Hexcel, and that any
subsequent such proposal be at least $100,000 over the prior proposal.

5.2 PLAN AND DISCLOSURE STATEMENT; DISCLOSURE STATEMENT ORDER.

(a) Not later than July 28, 1994 (the "Submission Date"),
Hexcel shall file with the Bankruptcy Court the Plan and the Disclosure
Statement, together with any pleadings required or desirable in connection
therewith (as reasonably determined by Hexcel and Purchaser).

(b) Hexcel shall use its best efforts to obtain prompt entry
of an order, in form and substance reasonably satisfactory to Purchaser,
approving the Disclosure Statement, as amended or modified with the approval of
Purchaser (the "Disclosure Statement Order") under Section 1125 of the
Bankruptcy Code.

5.3 CONFIRMATION ORDER. Upon entry of the Disclosure Statement
Order by the Bankruptcy Court, Hexcel shall use its best efforts to obtain the
prompt entry by the Bankruptcy Court of an order, in form and substance
reasonably satisfactory to Purchaser and its counsel (the "Confirmation Order"),
confirming the Plan, as amended or modified with the approval of Purchaser,
pursuant to Section 1129 of the Bankruptcy Code, and authorizing the
transactions provided for in this Agreement, which best efforts shall include
promptly soliciting requisite creditor and shareholder acceptances of the Plan.

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<PAGE>

5.4 CERTAIN BANKRUPTCY UNDERTAKINGS BY HEXCEL.

(a) Subject to Section 6.2(a) and 6.2(b), Hexcel shall use
its best efforts to effect the transactions provided for in this Agreement and
to confirm and consummate the Plan expeditiously.

(b) Hexcel shall not amend or modify the Disclosure
Statement or the Plan without first consulting with Purchaser and shall not
amend or modify the Plan without obtaining Purchaser's approval of any such
amendment or modification, which approval shall not be unreasonably withheld or
delayed.

(c) If the Bankruptcy Court determines or states that it
will not enter an order confirming the Plan because any provision of the Plan
violates any provision of the Bankruptcy Code or otherwise, then Hexcel promptly
shall consult with Purchaser and, at the request of Purchaser, shall modify the
Plan (including the deletion of any such provision) in a manner reasonably
acceptable to each of Purchaser and Hexcel so as to render the Plan confirmable
under the Bankruptcy Code.

(d) Hexcel shall provide to Purchaser actual notice of any
hearing on the Approval Order, the Disclosure Statement Order, the Confirmation
Order or any other matter before the Bankruptcy Court that may materially affect
the consummation of the transactions provided for in this Agreement. Hexcel
shall promptly provide to Purchaser such copies of motions, orders, briefs,
hearing transcripts, reports and other pleadings and documents filed in the
Bankruptcy Court or in related court proceedings as Purchaser may reasonably
request and all notices given pursuant to the Plan.

ARTICLE VI

TERMINATION; BREAK-UP FEE

6.1 TERMINATION. Notwithstanding anything herein to the contrary
but subject to Section 6.3, this Agreement may be terminated and the
transactions contemplated hereby and by the Registration Rights Agreement
abandoned at any time prior to the First Closing:

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<PAGE>

(a) by mutual written consent of Hexcel and Purchaser;

(b) by the party not in breach in the event of a material
breach of this Agreement by the other party which material breach is not cured
within ten days after written notice thereof;

(c) by Purchaser if (i) the Bankruptcy Court has not
determined by August 30, 1994 that the relief requested in the Approval Motion
should be granted subject only to the entry of an appropriate order (ii) the
Approval Order has not been entered by the Bankruptcy Court on or prior to
September 15, 1994 or (iii) after entry of the Approval Order, the Approval
Order is reversed, revoked, voided, modified (in any manner that could in the
reasonable judgment of Purchaser materially and adversely affect Purchaser's
rights hereunder) or stayed by an order of a court of competent jurisdiction;

(d) by Purchaser if (i) the Disclosure Statement Order has
not been entered by the Bankruptcy Court on or prior to October 15, 1994 or (ii)
after entry of the Disclosure Statement Order, the Disclosure Statement Order is
reversed, revoked, voided, modified (in any manner that could in the reasonable
judgment of Purchaser materially and adversely affect Purchaser's rights
hereunder) or stayed by an order of a court of competent jurisdiction;

(e) by Purchaser if (i) the Confirmation Order is not
entered by the Bankruptcy Court on or prior to December 15, 1994 or (ii) after
entry of the Confirmation Order, the Confirmation Order is reversed, revoked,
voided, modified (in any manner that could in the reasonable judgment of
Purchaser materially and adversely affect Purchaser's rights hereunder) or
stayed by an order of a court of competent jurisdiction;

(f) by Hexcel if (i) the Confirmation Order is not entered
by the Bankruptcy Court on or prior to December 15, 1994 or (ii) after entry of
the Confirmation Order, the Confirmation Order is reversed, revoked, voided,
modified (in any manner that could in the reasonable judgment of Hexcel
materially and adversely affect Hexcel's rights hereunder) or stayed by an order
of a court of competent jurisdiction; PROVIDED, HOWEVER, that Hexcel may not
terminate this Agreement pursuant to this paragraph (f)

20
<PAGE>

if Hexcel has failed to comply in all material respects with its obligations in
Article V hereof;

(g) by Hexcel or Purchaser in the event that Hexcel has
advised Purchaser in writing that any condition in Section 7.1 to Purchaser's
obligation to consummate the First Closing is not capable of being satisfied,
which notice shall identify each such condition and the reasons for such
non-satisfaction; PROVIDED, HOWEVER, that Hexcel's right to terminate this
Agreement pursuant to this paragraph (g) shall be conditioned on Purchaser's
failure to waive such condition within seven business days following the date on
which Purchaser receives such notice from Hexcel;

(h) by Purchaser or Hexcel if the First Closing Date has not
occurred by the thirtieth day following the date on which the Confirmation Order
is entered by the Bankruptcy Court; PROVIDED, HOWEVER, that, at Purchaser's
election (such election to be made in a writing delivered to Hexcel not later
than five days prior to such date) if Purchaser is not in material breach of
this Agreement, such date may be extended up to another 30 days;

(i) by Purchaser or Hexcel in the event that Hexcel enters
into an agreement with any Person with respect to any Acquisition Transaction or
an Acquisition Transaction is otherwise consummated;

(j) by Purchaser or Hexcel in the event that Hexcel
sponsors, supports, endorses, recommends, proposes or seeks confirmation of any
plan of reorganization in the Case other than the plan of reorganization
provided for in this Agreement;

(k) by Purchaser or Hexcel in the event that the Bankruptcy
Court enters an order confirming any plan of reorganization in the Case based
upon or relating to any Acquisition Transaction or upon Hexcel's motion enters
any order otherwise authorizing an Acquisition Transaction; and

(l) by Purchaser in the event that the Creditors' Committee
in the Case fails to support the Plan and this Agreement by August 19, 1994 or
thereafter withdraws its support thereof.

The right of termination by Purchaser set forth in Section 6.1(c),
(d) and (e), by Hexcel in Section 6.1(f) and by Hexcel or Purchaser in
Section 6.1(g) must be exercised

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<PAGE>

within 15 days following the first date on which such right of termination
arises.

6.2 NO SOLICITATION; BREAK-UP FEE.

(a) During the period from the date of this Agreement to the
earlier of the First Closing Date or the termination of this Agreement, Hexcel
shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize any officer, director or employee of or any investment banker,
attorney or other advisor or representative of Hexcel or any of its Subsidiaries
to (i) solicit or initiate the submission of any offer or proposal for an
Acquisition Transaction or (ii) engage in negotiations regarding an offer or
proposal received by Hexcel for a potential Acquisition Transaction unless the
Board of Directors or appropriate committee thereof believes in good faith in
the exercise of its fiduciary duties that such offer or proposal has a
reasonable possibility of resulting in an Acquisition Transaction more favorable
to Hexcel than the transaction contemplated hereby; PROVIDED, HOWEVER, that
prior to the entry of the Confirmation Order, Hexcel may, in response to an
unsolicited request therefor, furnish information with respect to Hexcel to any
Person and engage in follow-up due diligence sessions, except that confidential
information about Hexcel may be furnished only if the Person to whom it is to be
given is party to a customary confidentiality agreement (as determined by
Hexcel's counsel) and PROVIDED, FURTHER, that any negotiations by Hexcel
that comply with the foregoing clause (ii) shall not constitute a breach of the
foregoing clause (i). For the purposes of this Agreement, "Acquisition
Transaction" means (i) any business combination involving Hexcel or either
Material Subsidiary, including without limitation (A) the disposition of any
business currently conducted by Hexcel or either Material Subsidiary and which
represents sales in excess of 10% of Hexcel's consolidated sales as reported in
the December 31, 1993 financial statements or (B) the sale of assets of Hexcel
and/or the Subsidiaries for $40,000,000 or more in a single transaction or
series of related transactions, excluding in the case of (A) and (B)
transactions and proposed transactions disclosed in the Disclosure Statement or
(ii) any sale or issuance of a more than 5% equity interest in Hexcel or either
Material Subsidiary other than the issuance by Hexcel of equity (A) in exchange
for existing indebtedness of Hexcel and/or (B) to holders of Old Common Stock
PRO RATA; PROVIDED, HOWEVER, that the term

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<PAGE>

Acquisition Transaction does not include any transaction or proposed transaction
disclosed in the Disclosure Statement.

(b) In the event that Hexcel receives a proposal with
respect to an Acquisition Transaction that, in the exercise of its fiduciary
obligations (as determined in good faith by the Board of Directors or
appropriate committee thereof after consultation with counsel), the Board of
Directors or appropriate committee thereof determines to be more favorable to
Hexcel, the Board of Directors or appropriate committee thereof may withdraw its
approval or recommendation of this Agreement, approve or recommend any such
other proposal, enter into an agreement with respect to such other proposal or
terminate this Agreement, and in each case shall provide Purchaser with
immediate notice thereof. Any termination of this Agreement pursuant to this
paragraph (b) shall be subject to Section 6.3.

(c) Whether or not the First Closing is consummated, Hexcel
acknowledges and agrees that Purchaser has made a substantial investment of
management time and incurred substantial out-of-pocket expenses in connection
with the negotiation and execution of this Agreement and the Registration Rights
Agreement and the effort to consummate the transactions contemplated hereby and
thereby. If the First Closing is not consummated and a "Break-up Fee Event" (as
defined below) shall have occurred, Hexcel shall immediately pay to Purchaser a
fee (the "Break-up Fee") equal to the excess of $1,250,000 over all amounts
theretofore paid to Purchaser pursuant to Section 6.4. In the event that Hexcel
pays Purchaser the Break-up Fee, Hexcel shall not be required to make any
additional payment pursuant to Section 6.4. As used herein, a "Break-up Fee
Event" shall be a termination of this Agreement (i) by Hexcel or Purchaser
pursuant to Section 6.1(i), 6.1(j) or 6.1(k), (ii) by Hexcel pursuant to Section
6.2(b), or (iii) by Hexcel pursuant to Section 6.1(f), 6.1(h) or 6.1(g) but only
in the case of this clause (iii) if thereafter, during the pendency of the Case
an Acquisition Transaction is consummated other than one that is materially less
favorable to Hexcel or the Hexcel creditors in Class 5 under the Plan;
PROVIDED, HOWEVER, that no Break-up Fee shall be payable if Purchaser is in
material breach of this Agreement at the date of any such termination.

(d) Upon the occurrence of a Break-up Fee Event, Purchaser
shall provide written notice to Hexcel of

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<PAGE>

Purchaser's entitlement to the Break-up Fee and Hexcel shall be liable for the
payment of the Break-up Fee and shall immediately pay to Purchaser the Break-up
Fee by wire transfer of immediately available funds to an account or accounts
designated by Purchaser. Until Hexcel's obligation to pay the Break-up Fee is
fully and indefeasibly discharged, Purchaser's claim for the Break-up Fee shall
be treated as an allowed administrative claim in the Case pursuant to Section
503(b) of the Bankruptcy Code entitled to priority under Section 507(a)(1) of
the Bankruptcy Code.

6.3 EFFECT OF TERMINATION. If this Agreement is terminated and
the transactions contemplated hereby are not consummated as provided above, this
Agreement shall become void and be of no further force and effect and no party
shall have any further liability to the other party thereunder as a result of
such termination, except that any payment obligations arising under Section 6.2
by reason of such termination or under Section 6.4 in respect of expenses
incurred through the date of such termination or under Section 9.2 (and the
provisions of this Section 6.3 and of Sections 6.2, 6.4 and 9.2) shall survive
the termination of this Agreement.

6.4 EXPENSE REIMBURSEMENT.

(a) Hexcel shall reimburse Purchaser for all of Purchaser's
out-of-pocket costs and expenses (including the reasonable fees and expenses of
Purchaser's counsel, accountants, investment bankers and other professional
persons), payable at the First Closing and thereafter as incurred or on the
termination of this Agreement, (i) in connection with the negotiation,
documentation and implementation of this Agreement and the Registration Rights
Agreement and the transactions contemplated hereby and thereby, including,
without limitation, the out-of-pocket costs and expenses of Purchaser in
connection with its due diligence investigation of Hexcel's business or (ii)
relating to or resulting from or arising out of any claim, action or proceedings
commenced or asserted in the Case; PROVIDED, HOWEVER, that if the First
Closing does not occur such reimbursement shall be limited to $500,000 in the
aggregate.

(b) Any claim for reimbursement under this Section 6.4 shall
be paid by Hexcel within ten days after receipt by Hexcel of an invoice from
Purchaser therefor (subject to Section 6.4(a) as to when such may first be

24
<PAGE>

payable) and, pending payment, such claims shall be treated as allowed
administrative expenses in the Case under Section 503(b) of the Bankruptcy Code
entitled to priority under Section 507(a)(1) of the Bankruptcy Code.

ARTICLE VII

CONDITIONS TO CLOSING

7.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER TO FIRST
CLOSING. The obligation of Purchaser to consummate the First Closing is
subject to the fulfillment, on the First Closing Date, of each of the following
conditions (any or all of which may be waived by Purchaser in whole or in part
to the extent permitted by applicable Law without the need for an order of the
Bankruptcy Court):

(a) all representations and warranties of Hexcel to
Purchaser contained herein shall be true and correct in all material respects
(other than those which already have a materiality standard included therein,
which representations and warranties shall be true and correct in all respects)
when made and at and as of the First Closing Date with the same effect as though
those representations and warranties had been made again at and as of that time;

(b) Hexcel shall not be in material breach of this
Agreement;

(c) all requisite notifications, filings and applications
under and pursuant to any and all applicable public, governmental and regulatory
acts and laws covering matters of antitrust, acquisition and investment,
including the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), to be submitted or given by Hexcel, shall have been submitted
or waived and all applicable waiting periods under all such acts and laws shall
have expired;

(d) Hexcel shall have entered into an employment agreement
with John J. Lee on terms reasonably satisfactory to Purchaser and on terms not
less favorable to Hexcel than those summarized on Exhibit VI hereto, and Hexcel
shall have caused the contingency employment agreements with those officers
named on Exhibit VII to have been terminated or rejected (it being understood
that officers who agree to terminate such agreements will receive

25
<PAGE>

agreements providing for one year's severance pay and participation in Hexcel's
retention bonus plan);

(e) Hexcel shall have duly executed and delivered the
Registration Rights Agreement;

(f) the five individuals selected by Purchaser shall have
been appointed to the Board of Directors to serve in the classes designated by
Purchaser, at least one of whom shall be a member of Class I, and the four other
directors, if not on the Board of Directors at the date hereof, and the classes
in which they serve shall be reasonably satisfactory to Purchaser;

(g) Hexcel shall have obtained exit financing as set forth in
the Disclosure Statement, which will provide for a facility of, if Class 9 under
the Plan accepts the Plan in accordance with the provisions of section 1126 of
the Bankruptcy Code, $35,000,000 and, if Class 9 under the Plan does not accept
the Plan in accordance with the provisions of section 1126 of the Bankruptcy
Code, $25,000,000 (subject in either case to availability restrictions), on
commercially reasonable terms reasonably satisfactory to Purchaser and which
will provide Hexcel with working capital sufficient to meet its anticipated
requirements as reflected in Hexcel's updated projected financial information
referred to in Section 7.1(t) below;

(h) the Bankruptcy Court shall have entered all orders
required to be entered pursuant to this Agreement, including, without
limitation, the Approval Order, the Disclosure Statement Order and the
Confirmation Order (all such orders to be reasonably satisfactory in form and
substance to Purchaser) and each of such orders shall have become Final Orders
and shall be in full force and effect;

(i) Hexcel shall have either (A) obtained a purchase order
from The Northrop Grumman Corporation substantially in accordance with that
contemplated by the Disclosure Statement and shall have obtained all approvals
required to be obtained by Hexcel for such purchase order to be enforceable
against The Northrop Grumman Corporation or (B) entered into another agreement
with The Northrop Grumman Corporation which results in comparable economic value
for Hexcel, as reasonably determined by Purchaser;

(j) Hexcel shall have entered into, and obtained all
necessary approvals in connection with, the

26
<PAGE>

Belgian financing as approved by the Bankruptcy Court on June 8, 1994;

(k) the 1986 Rights Agreement and rights to purchase shares
of capital stock of Hexcel pursuant to the 1986 Rights Agreement shall have been
cancelled pursuant to the Plan;

(l) Hexcel's disclosure statement as approved by the
Bankruptcy Court and Hexcel's plan of reorganization as confirmed by the
Bankruptcy Court shall each be in form and substance reasonably satisfactory to
Purchaser and its counsel and shall provide for, and be consistent with, this
Agreement;

(m) Purchaser shall have been furnished with a certificate
(dated the First Closing Date and in form and substance reasonably satisfactory
to Purchaser) executed by the chief executive officer and chief financial
officer of Hexcel certifying as to the fulfillment of the conditions specified
in Sections 7.1(a), 7.1(b), 7.1(c), 7.1(f), 7.1(h) as to the Confirmation Order
being a Final Order, 7.1(i), 7.1(j), 7.1(k), 7.1(o), 7.1(q) as to Hexcel,
7.1(r), 7.1(s) and 7.1(u);

(n) the Standard & Poor's 500 Index shall not have declined
more than 15% from June 17, 1994;

(o) no Legal Proceedings shall have been instituted against
Hexcel or any Subsidiary since the date of this Agreement which could reasonably
result in a Material Adverse Change;

(p) no Legal Proceedings shall have been instituted or
threatened or claim or demand made against Purchaser seeking to restrain or
prohibit or to obtain substantial damages with respect to the consummation of
the transactions contemplated by this Agreement which in the reasonable judgment
of Purchaser could have a material adverse effect on Purchaser;

(q) there shall not be in effect any Order by a Governmental
Body of competent jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated by this Agreement and all
approvals of Governmental Bodies, including with respect to ISRA and ECRA,
required to be

27
<PAGE>

obtained in connection with the First Closing shall have been obtained and
remain in full force and effect;

(r) there shall be no annual meeting of Hexcel or special
meeting to elect directors of Hexcel scheduled for a date after the First
Closing Date which shall have a record date prior to the First Closing Date;

(s) there shall have occurred no material adverse change in
the business, properties, results of operations, prospects or condition
(financial or otherwise) of Hexcel and the Subsidiaries taken as a whole since
the latest date as of which historical information in respect thereof is given
in the Disclosure Statement;

(t) Hexcel shall have delivered to Purchaser updated
projected financial information in the same form as the projected financial
information attached as Exhibit E to the Disclosure Statement, which delivery
shall be made and the projected financial information shall be as of a date not
earlier than five days nor later than two days prior to the First Closing Date;

(u) all conditions under the Plan to the Effective Date other
than the occurrence of the First Closing shall be satisfied; and

(v) Purchaser shall have been furnished with an opinion of
Kronish, Lieb, Weiner & Hellman, counsel to Hexcel, in substantially the form of
Exhibit I hereto.

7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF HEXCEL TO FIRST
CLOSING. The obligations of Hexcel to consummate the First Closing are subject
to the fulfillment, on the First Closing Date, of each of the following
conditions (any or all of which may be waived by Hexcel in whole or in part to
the extent permitted by applicable Law without the need for an order of the
Bankruptcy Court):

(a) all representations and warranties of Purchaser to
Hexcel contained herein shall be true and correct in all material respects
(other than those which already have a materiality standard included therein,
which representations and warranties shall be true and correct in all respects)
when made and at and as of the First Closing Date with the same effect as though
those representations and warranties had been made again at and as of that time;

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<PAGE>

(b) Purchaser shall have performed and complied in all
material respects with all obligations and covenants required by this Agreement
to be performed or complied with by Purchaser on or prior to the First Closing
Date;

(c) all requisite notifications, filings and applications
under and pursuant to any and all applicable public, governmental and regulatory
acts and laws covering matters of antitrust, acquisition and investment,
including the HSR Act, to be submitted by Purchaser shall have been submitted or
waived and all applicable waiting periods under all such acts and laws shall
have expired;

(d) there shall not be in effect any Order by a Governmental
Body of competent jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated by this Agreement and all
approvals of Governmental Bodies, including with respect to ISRA and ECRA,
required to be obtained in connection with the First Closing shall have been
obtained and remain in full force and effect;

(e) Purchaser shall have duly executed and delivered the
Registration Rights Agreement;

(f) all conditions under the Plan to the Effective Date
other than the occurrence of the First Closing shall be satisfied;

(g) Hexcel shall have been furnished with a certificate
(dated the First Closing Date and in form and substance reasonably satisfactory
to Hexcel) executed by a duly authorized officer of Purchaser certifying as to
the fulfillment of the conditions specified in Sections 7.2(a), 7.2(b), 7.2(c)
and 7.2(d) as to Purchaser;

(h) the Confirmation Order shall be reasonably satisfactory
in form and substance to Hexcel, shall have become a Final Order and shall be in
full force and effect; and

(i) Hexcel shall have been furnished with opinions of E. N.
Cohernour, Esq., general counsel to Purchaser, and Weil, Gotshal & Manges,
special counsel to Purchaser, in substantially the form of Exhibit II hereto,
together with an opinion of Skadden, Arps, Slate, Meagher and Flom, in form and
substance reasonably satisfactory to

29
<PAGE>

Hexcel, as to compliance with the Investment Company Act of 1940, as amended
(the "Act").

7.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER TO SECOND
CLOSING. The obligations of Purchaser to consummate the Second Closing are
subject to the fulfillment, on the Second Closing Date, of each of the following
conditions (any or all of which may be waived by Purchaser in whole or in part
to the extent permitted by applicable Law without the need for an order of the
Bankruptcy Court):

(a) the Rights Offering shall have terminated;

(b) the conditions set forth in Section 7.1(a), but only as
to Sections 2.1, 2.2 and 2.3, shall remain satisfied on the Second Closing Date
(but the reference in Section 2.3 to the First Closing Date shall be deemed to
refer to the Second Closing Date and the reference therein to Initial Shares
shall be deemed to refer to the Unpurchased Shares) and Purchaser shall have
received a certificate from Hexcel to such effect;

(d) Purchaser shall have been furnished with an opinion of
Kronish, Lieb, Weiner & Hellman, counsel to Hexcel, in substantially the form of
Exhibit III hereto;

(e) there shall not be in effect any Order by a Governmental
Body of competent jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated by this Agreement and all
approvals of Governmental Bodies, including with respect to ISRA and ECRA,
required to be obtained in connection with the Second Closing shall have been
obtained and remain in full force and effect; and

(f) Hexcel shall have complied with its agreements in
Section 8.3.

7.4 CONDITIONS PRECEDENT TO OBLIGATIONS OF HEXCEL TO SECOND
CLOSING. The obligations of Hexcel to consummate the Second Closing are
subject to the fulfillment, on the Second Closing Date, of each of the following
conditions (any or all of which may be waived by Hexcel in whole or in

30
<PAGE>

part to the extent permitted by applicable Law without the need for an order of
the Bankruptcy Court):

(a) the Rights Offering shall have terminated;

(b) the conditions set forth in Section 7.2(a) but only as
to Sections 3.1, 3.2, 3.3 and 3.4 shall remain satisfied as of the Second
Closing Date and Hexcel shall have received a certificate from Purchaser to such
effect;

(c) Hexcel shall have been furnished with opinions of E. N.
Cohernour, Esq., general counsel to Purchaser, and Weil, Gotshal & Manges,
special counsel to Purchaser, in substantially the form of Exhibit II hereto,
together with an opinion of Skadden, Arps, Slate, Meagher and Flom, in form and
substance reasonably satisfactory to Hexcel as to compliance with the Act;

(d) there shall not be in effect any Order by a Governmental
Body of competent jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated by this Agreement and all
approvals of Governmental Bodies, including with respect to ISRA and ECRA,
required to be obtained in connection with the Second Closing shall have been
obtained and remain in full force and effect; and

(e) Purchaser shall have complied with its agreements in
Section 8.4.

ARTICLE VIII

DOCUMENTS TO BE DELIVERED AT THE CLOSINGS

8.1 DOCUMENTS TO BE DELIVERED BY HEXCEL AT THE FIRST CLOSING. At
the First Closing, Hexcel shall deliver, or cause to be delivered, to Purchaser
the following:

(a) certificates representing the Initial Shares, registered
in the name of Purchaser or its nominee;

(b) a copy of the employment agreement referred to in
Section 7.1(d);

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<PAGE>

(d) the opinion referred to in Section 7.1(v);

(e) a duly executed counterpart of the Registration Rights
Agreement;

(f) a copy of the Confirmation Order certified by the Clerk
of the Bankruptcy Court within five business days of the First Closing Date;

(g) a certificate of good standing with respect to Hexcel
issued by the Secretary of State of Delaware and a copy certified by the
Secretary of State of Delaware of the certificate of incorporation of Hexcel and
comparable evidence (which may be an opinion of local counsel) for each of the
Material Subsidiaries, each dated within ten days of the First Closing Date; and
a copy, certified by the secretary or assistant secretary of Hexcel as being a
true and complete copy as of the First Closing Date, of the certificate of
incorporation and by-laws of Hexcel;

(h) a copy of the resolutions of the Board of Directors
authorizing the execution, delivery and performance of this Agreement, and a
certificate of its secretary, dated the First Closing Date, that such
resolutions were duly adopted by the Board of Directors and are in full force
and effect and attesting to the true signatures and to the incumbency of the
officers of Hexcel executing this Agreement, the Registration Rights Agreement
or any other document or agreement in connection therewith;

(i) the updated projected financial information referred to
in Section 7.1(t); and

(j) such other documents as Purchaser shall reasonably
request.

8.2 DOCUMENTS TO BE DELIVERED BY PURCHASER AT THE FIRST CLOSING.
At the First Closing, Purchaser shall deliver, or cause to be delivered, to
Hexcel the following:

(a) evidence of the wire transfer of the Purchase Price for
the Initial Shares;

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<PAGE>

(b) the certificate referred to in Section 7.2(g);

(d) a duly executed counterpart of the Registration Rights
Agreement;

(e) a certificate of good standing with respect to Purchaser
issued by the Secretary of State of Maryland, dated within ten days of the First
Closing Date; a copy, certified by the secretary or assistant secretary as being
a true and complete copy as of the First Closing Date, of the certificate of
incorporation and by-laws of Purchaser; and a copy certified as of a recent date
by the Secretary of State of Maryland of the certificate of incorporation of
Purchaser; and

(f) a copy of the resolutions of the board of directors of
Purchaser authorizing the execution, delivery and performance of this Agreement,
and a certificate of its secretary, dated the First Closing Date, that such
resolutions were duly adopted and are in full force and effect and attesting to
the true signatures and to the incumbency of the officers of Purchaser executing
this Agreement and the Registration Rights Agreement.

8.3 DOCUMENTS TO BE DELIVERED BY HEXCEL AT THE SECOND CLOSING.
At the Second Closing, Hexcel shall deliver, or cause to be delivered, to
Purchaser the following:

(a) certificates representing the Unpurchased Shares,
registered in the name of Purchaser or its nominee;

(b) the certificate referred to in Section 7.3(b);

(d) a certificate of good standing with respect to Hexcel
issued by the Secretary of State of Delaware, dated within ten days of the
Second Closing Date; and a copy, certified by the secretary or assistant
secretary of Hexcel as being a true and complete copy as of

33
<PAGE>

the Second Closing Date, of the certificate of incorporation and by-laws of
Hexcel;

(e) a copy of the resolutions of the Board of Directors
authorizing the execution, delivery and performance of this Agreement, and a
certificate of its secretary, dated the Second Closing Date, that such
resolutions were duly adopted by the Board of Directors and are in full force
and effect; and

(f) such other documents as Purchaser shall reasonably
request.

8.4 DOCUMENTS TO BE DELIVERED BY PURCHASER AT THE SECOND CLOSING.
At the Second Closing, Purchaser shall deliver, or cause to be delivered, to
Hexcel the following:

(a) evidence of the wire transfer of the Standby Purchase
Price for the Unpurchased Shares;

(b) the certificate referred to in Section 7.4(b);

(d) a certificate of good standing with respect to Purchaser
issued by the Secretary of State of Maryland, dated within ten days of the
Second Closing Date; and a copy, certified by the secretary or assistant
secretary as being a true and complete copy as of the Second Closing Date, of
the certificate of incorporation and by-laws of Purchaser; and

(e) a copy of the resolutions of the board of directors of
Purchaser authorizing the execution, delivery and performance of this Agreement,
and a certificate of its secretary, dated the Second Closing Date, that such
resolutions were duly adopted and are in full force and effect.

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<PAGE>

8.5 RESIGNATION OF DESIGNEE. In the event that either (i) at the
Second Closing the amount paid by Purchaser for the Unpurchased Shares shall be
less than (a) $7,000,000, if Class 9 under the Plan accepts the Plan in
accordance with the provisions of section 1126 of the Bankruptcy Code or (b)
$5,000,000, if Class 9 under the Plan does not accept the Plan in accordance
with the provisions of section 1126 of the Bankruptcy Code, or (ii) the Second
Closing shall not have occurred for any reason within 45 days after the First
Closing Date, then not later than the date of the first of such events to occur
Purchaser shall deliver to Hexcel a duly executed and effective resignation
letter from a designee appointed as a Class I member of the Board of Directors
stating that such designee resigns as a director of the Board of Directors
effective as of a date no later than the date of delivery of such letter to
Hexcel.

ARTICLE IX

INDEMNIFICATION AND RELATED MATTERS

9.1 INDEMNIFICATION.

(a) From and after the First Closing, Hexcel hereby agrees
to indemnify and hold Purchaser and its directors, officers, employees,
affiliates, agents, successors and assigns (collectively, the "Purchaser
Indemnified Parties") harmless from and against any and all losses, liabilities,
obligations, damages, deficiencies, costs and expenses ("Losses") based upon,
attributable to or resulting from any misrepresentation, breach of warranty or
non-fulfillment of any agreement on the part of Hexcel under this Agreement or
the Registration Rights Agreement.

(b) From and after the First Closing, Purchaser hereby
agrees to indemnify and hold Hexcel and its directors, officers, employees,
affiliates, agents, successors and assigns (collectively, the "Hexcel
Indemnified Parties") harmless from and against any and all Losses based upon,
attributable to or resulting from any misrepresentation, breach of warranty or
non-fulfillment of any agreement on the part of Purchaser under this Agreement
or the Registration Rights Agreement.

(c) An indemnifying party shall be liable for Losses arising
under Sections 9.1(a) and 9.1(b) only to the extent that the aggregate amount
thereof exceeds

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<PAGE>

$400,000 and written notice of a claim therefor is given within 18 months
following the First Closing Date specifying the specific representation,
warranty or covenant which was breached, the specific nature of such breach and
the amount of the Losses for which such indemnification is sought.

(d) In no event shall a party be liable for (i)
consequential, exemplary or punitive damages or (ii) damages resulting from a
failure of a representation or warranty of such party to be true and correct in
all material respects if the other party is advised of such failure prior to the
First Closing, such failure was not known at the time such representation or
warranty was made and the other party, after being advised of such failure,
nevertheless proceeds to consummate the transactions contemplated by this
Agreement. Nothing herein shall relieve Hexcel of its obligations under Article
VI hereof.

9.2 LIQUIDATED DAMAGES. In the event of a material breach by
Purchaser of this Agreement and the termination of this Agreement by Hexcel
pursuant to Section 6.1(b) by reason thereof, the parties agree that Hexcel's
damages are not readily susceptible of quantification or calculation and that,
accordingly, Purchaser shall pay to Hexcel, as liquidated damages and not as a
penalty, the sum of $1,250,000 and Purchaser shall not be entitled to any
reimbursement under Section 6.4 for any of its expenses. The foregoing shall
constitute Hexcel's sole and exclusive remedy for such breach by Purchaser,
other than Hexcel's right to terminate this Agreement as provided herein.

9.3 FINANCIAL ADVISORS. Hexcel agrees to pay and discharge any
compensation payable to any broker, finder or financial advisor, who acted
directly or indirectly for Hexcel or any Subsidiary in connection with this
Agreement or the transactions described herein.

ARTICLE X

MISCELLANEOUS

10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in this Agreement shall survive the
First Closing for a period of 18 months, regardless of any investigation made by
the parties hereto. From and after the First Closing, a party's exclusive
remedy for breach of any representation or

36
<PAGE>

warranty or other provision of this Agreement shall be as set forth in Article
IX hereof.

10.2 CERTAIN DEFINITIONS. As used herein the following terms
have the respective meaning indicated (such meaning to be equally applicable to
the singular and plural terms).

"ACQUISITION TRANSACTION" is defined in Section 6.2(a).

"ACT" is defined in Section 7.2(i).

"AGREEMENT" is defined in the opening paragraph of this Stock
Subscription and Standby Purchase Agreement.

"APPROVAL MOTION" is defined in Section 5.1.

"APPROVAL ORDER" is defined in Section 5.1.

"BALANCE SHEET" is defined in Section 2.5.

"BALANCE SHEET DATE" is defined in Section 2.5.

"BANKRUPTCY CODE" is defined in the first recital.

"BANKRUPTCY COURT" is defined in the first recital.

"BANKRUPTCY RULES" is defined in Section 2.2(b).

"BOARD OF DIRECTORS" means the board of directors of Hexcel.

"BREAK-UP FEE" is defined in Section 6.2(c).

"BREAK-UP FEE EVENT" is defined in Section 6.2(c).

"CASE" is defined in the first recital.

"CLAIMS REGISTER" means the claims register maintained for the
Case pursuant to Bankruptcy Rule 5003.

"CODE" means the Internal Revenue Code of 1986, as amended.

"CONFIRMATION ORDER" is defined in Section 5.3.

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<PAGE>

"CONTRACT" means any contract, agreement, indenture, note, bond,
loan, instrument, lease, conditional sale contract, mortgage, license,
franchise, insurance policy, commitment or other arrangement or agreement,
whether written or oral.

"CREDITORS' COMMITTEE" has the meaning specified in the Plan.

"DISCLOSURE DOCUMENTS" means the Disclosure Statement, the Plan,
and Hexcel's First Amended Schedules of Assets and Liabilities as filed with the
Bankruptcy Court pursuant to Bankruptcy Rule 1007 as amended through the date
hereof.

"DISCLOSURE STATEMENT" means Hexcel's disclosure statement, dated
July 27, 1994, including all schedules and exhibits thereto, a copy of which has
been delivered to Purchaser prior to the execution of this Agreement.

"DISCLOSURE STATEMENT ORDER" is defined in Section 5.2.

"ECRA" means the New Jersey Environmental Clean-Up Responsibility
Act.

"EFFECTIVE DATE" has the meaning specified in the Plan.

"EMPLOYEE BENEFIT PLAN" is defined in Section 2.13(a).

"ENVIRONMENTAL CLAIM" means any notice of violation, action,
claim, Lien, demand, abatement or other Order or direction (conditional or
otherwise) by any Governmental Body or any Person for personal injury (including
sickness, disease or death), tangible or intangible property damage, damage to
the environment, nuisance, pollution, contamination or other adverse effects on
the environment, or for fines, penalties or restrictions resulting from or based
upon (a) the existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden accidental or
non-accidental Releases) of, or exposure to, any Hazardous Material or other
substance, chemical, material, pollutant, contaminant, odor, audible noise, or
other Release in, into or onto the environment (including, without limitation,
the air, soil, surface water or groundwater) at, in, by, from or related to the
Facili-

38
<PAGE>

ties or any activities conducted thereon; (b) the environmental aspects of the
transportation, storage, treatment or disposal of Hazardous Materials in
connection with the operation of the Facilities; or (c) the violation, or
alleged violation, of any Environmental Laws, Orders or Permits of or from any
Governmental Body relating to environmental matters connected with the
Facilities.

"ENVIRONMENTAL LAW" means any Law concerning Releases into any
part of the natural environment, or activities that might result in damage to
the natural environment, or any Law that is concerned in whole or in part with
the natural environment and with protecting or improving the quality of the
natural environment and protecting public and employee health and safety and
includes, but is not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section 9601 ET SEQ.), the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the
Clean Water Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act (42 U.S.C.
ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.),
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 ET
SEQ.) and the Occupational Safety and Health Act (29 U.S.C. Section 651 ET SEQ.)
("OSHA"), as such laws have been amended or supplemented, and the regulations
promulgated pursuant thereto, and any and all analogous state or local statutes,
and the regulations promulgated pursuant thereto, and any and all treaties,
conventions and environmental public and employee health and safety statutes and
regulations or analogous requirements of non-United States jurisdictions in
which Hexcel or any of its Subsidiaries conducts any business.

"ENVIRONMENTAL PERMIT" means any Permit, approval, authorization,
license, variance, registration, or permission required under any applicable
Environmental Laws and all supporting documents associated therewith.

"ERISA" is defined in Section 2.13(a).

"ERISA AFFILIATE" is defined in Section 2.13(b).

"EXCHANGE ACT" is defined in Section 2.8.

"FACILITIES" means real property owned, leased or operated by
Hexcel or any of the Subsidiaries.

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<PAGE>

"FASB 95" means statement of Financial Accounting Standard No. 95
promulgated by the Financial Accounting Standards Board.

"FINAL ORDER" has the meaning specified in the Plan.

"FINANCIAL STATEMENT" is defined in Section 2.5.

"FIRST CLOSING" is defined in Section 1.3.

"FIRST CLOSING DATE" is defined in Section 1.3.

"FULLY DILUTED NEW SHARES" means, without duplication, the Initial
Shares, the Offered Shares and all shares of New Common Stock issuable under
Sections 4.6, 4.9, 4.10 and 4.11 of the Plan.

"GOVERNMENTAL BODY" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).

"HAZARDOUS MATERIALS" means any substance, material or waste which
is regulated by any local, state or federal Governmental Body in the
jurisdiction in which Hexcel or any Subsidiary conducts business, including,
without limitation, any material or substance which is defined as a "hazardous
waste," "hazardous material," "hazardous substance," "extremely hazardous waste"
or "restricted hazardous waste," "subject waste," "contaminant," "toxic waste"
or "toxic substance" under any provision of Environmental Law, including but not
limited to, petroleum products, asbestos and polychlorinated biphenyls.

"HEXCEL" is defined in the opening paragraph of this Agreement.

"HEXCEL INDEMNIFIED PARTIES" is defined in Section 9.1(b).

"HSR ACT" is defined in Section 7.1(c).

"INITIAL SHARES" is defined in Section 1.1.

"INTELLECTUAL PROPERTY" is defined in Section 2.11.

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<PAGE>

"ISRA" means the New Jersey Industrial Site Recovery Act.

"LAW" means any federal, state, local or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement or
guideline, including environmental, ERISA and laws with respect to any and all
Taxes.

"LEGAL PROCEEDING" means any judicial, administrative or arbitral
actions, suits, proceedings (public or private), claims or governmental
proceedings.

"LIEN" means any lien, pledge, hypothecation, levy, mortgage, deed
of trust, security interest, claim, lease, charge, option, right of first
refusal, easement, or other real estate declaration, covenant, condition,
restriction or servitude, transfer or voting restriction under any shareholder
or similar agreement, encumbrance or any other restriction or limitation
whatsoever.

"LOSSES" is defined in Section 9.1(a).

"MATERIAL ADVERSE CHANGE" means any material adverse change in the
business, properties, results of operations, prospects or condition (financial
or otherwise) of Hexcel and its Subsidiaries taken as a whole.

"MATERIAL SUBSIDIARIES" means Hexcel S.A. (a Belgian corporation)
and Hexcel S.A. (a French corporation).

"MULTIEMPLOYER PLAN" is defined in Section 2.13(a).

"MULTIPLE EMPLOYER PLAN" is defined in Section 2.13(a).

"NEW COMMON STOCK" means shares of common stock, par value $.01
per share, of reorganized Hexcel.

"1986 RIGHTS AGREEMENT" means the Rights Agreement, dated August
14, 1986, between Hexcel and The Bank of California.

"OFFERED SHARES" is defined in the third recital.

41
<PAGE>

"OLD COMMON STOCK" means currently issued and outstanding shares
of common stock, par value $.01 per share, of Hexcel.

"ORDER" means any order, injunction, judgment, decree, ruling,
writ, assessment or arbitration award.

"PBGC" is defined in Section 2.13(d).

"PERMITS" means any approval, authorization, consent, license,
permit or certificate of or by any Governmental Body.

"PERMITTED EXCEPTIONS" means (a) statutory liens for current
taxes, assessments or other governmental charges not yet delinquent or the
amount or validity of which is being contested in good faith by appropriate
proceedings, provided an appropriate reserve is established therefor; (b)
mechanics', carriers', workers', repairers' and similar Liens arising or
incurred in the ordinary course of business that are not material to the
business, operations and financial condition of the property so encumbered or
Hexcel and the Subsidiaries taken as a whole; (c) zoning, entitlement and other
land use and environmental regulations by Governmental Bodies, provided that
such regulations have not been violated; and (d) such other imperfections in
title, charges, easements, restrictions and encumbrances that in the aggregate
could not reasonably result in a Material Adverse Change.

"PERMITTED LIENS" means (a) those Liens disclosed in the
Disclosure Statement; (b) Liens in favor of CIT Group/Business Credit, Inc.
securing Hexcel's debtor-in-possession financing; (c) Liens securing the
financing contemplated by Section 7.1(g); (d) capital leases; (e) Liens which in
the aggregate are not material to Hexcel and its Subsidiaries taken as a whole;
(f) those Liens related to the Belgian financing referred to Section 7.1(j); (g)
pledges or deposits securing obligations under workers' compensation,
unemployment insurance, social security or public liability laws or similar
legislation; (h) pledges or deposits securing utility payments, bids, tenders,
contracts (other than contracts for the payment of borrowed money) or leases to
which Hexcel or any of its Subsidiaries is a party as lessee, made in the
ordinary course of business; (i) deposits securing public or statutory
obligations of Hexcel or any of its Subsidiaries; (j) deposits securing or in
lieu of surety, appeal or customs bond or proceedings to which

42
<PAGE>

Hexcel or any of its Subsidiaries is a party; (k) Liens arising by statute; (l)
Liens securing indebtedness reflected in the Disclosure Statement; (m) Liens
arising from or in connection with any leases of real or personal property; (n)
any agreement regarding the voting of stock owned by Hexcel in American Body
Armor; (o) any voting or other restrictions applicable to joint venture
interests owned by Hexcel or its Material Subsidiaries; and (p) Liens on
inventory purchased by Hexcel under consignment arrangements.

"PERSON" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.

"PLAN" means Hexcel's plan of reorganization, dated July 27, 1994,
a copy of which has been delivered to Purchaser prior to the execution of this
Agreement.

"PURCHASE PRICE" is defined in Section 1.1.

"PURCHASER" is defined in the opening paragraph of this Agreement.

"PURCHASER INDEMNIFIED PARTIES" is defined in Section 9.1(a).

"PURCHASER REPRESENTATIVES" is defined in Section 4.1.

"PURCHASER SEC DOCUMENTS" is defined in Section 3.6.

"QUALIFIED PLAN" is defined in Section 2.13(c).

"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement in substantially the form of Exhibit V hereto.

"RELEASE" means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the indoor or outdoor environment, or into or out of any property
owned, operated or leased by Hexcel or any Subsidiary, including the movement of
any Hazardous Material or other substance through or in the air, soil, surface
water, groundwater, or property.

43
<PAGE>

"REMEDIAL ACTION" means all actions, including, without
limitation, any capital expenditures, required or voluntarily undertaken to (a)
clean up, remove, treat, or in any other way address any Hazardous Material or
other substance in the indoor or outdoor environment; (b) prevent the Release or
threat of Release, or minimize the further Release of any Hazardous Material or
other substance so it does not migrate or endanger or threaten to endanger
public health or welfare of the indoor or outdoor environment; (c) perform
pre-remedial studies and investigations or post-remedial monitoring and care; or
(d) bring any Facility into compliance with all Environmental Laws and
Environmental Permits.

"RIGHTS OFFERING" is defined in the third recital.

"SEC" is defined in Section 2.8.

"SEC DOCUMENTS" is defined in Section 2.8.

"SECOND CLOSING" is defined in Section 1.3(b).

"SECOND CLOSING DATE" is defined in Section 1.3(b).

"SECURITIES ACT" is defined in Section 2.8.

"SOFTWARE" means any electronic data processing system,
information system, computer software program, program specification chart,
procedure, source code, input data, routine, database, report layout, format,
record file layout, diagram, functional specification, narrative description,
flow chart or other related material.

"STANDBY PURCHASE PRICE" is defined in Section 1.1.

"SUBMISSION DATE" is defined in Section 5.2(a).

"SUBSIDIARY" means any Person of which a majority of the
outstanding voting securities are owned directly or indirectly by Hexcel.

"TAX AFFILIATES" is defined in Section 2.9(a).

"TAXES" means all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross receipts,
capital, sales, use, ad

44
<PAGE>

valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, together with any
interest and any penalties, fines, additions to tax or additional amounts
imposed by any taxing authority (domestic or foreign) and shall include any
transferee liability in respect of Taxes.

"TAX RETURN" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.

"UNPURCHASED SHARES" is defined in the fourth recital.

10.3 FURTHER ASSURANCES. Hexcel and Purchaser each agrees to
execute and deliver such other documents or agreements as may be necessary or
desirable for the implementation of this Agreement and the consummation of the
transactions contemplated hereby.

10.4 RESTRICTIVE LEGEND; RESALES. All certificates representing
shares issued pursuant to this Agreement shall have stamped, printed or typed
thereon a legend substantially in the following form:

"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION OR AN EXEMPTION THEREFROM."

Purchaser agrees that it will not sell or otherwise dispose of any of such
shares except in compliance with applicable law. Purchaser shall be entitled to
have such legend removed as provided in the Registration Rights Agreement.

10.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement
(including the schedules and exhibits hereto), together with the related
confidentiality agreement to which Purchaser is subject, represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference

45
<PAGE>

to this Agreement signed by the parties hereto. No action taken pursuant to
this Agreement, including, without limitation, any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranty, covenant or agreement
contained herein. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach. No
failure on the part of any party to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.

10.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to the principles of conflict of laws thereunder, except to the extent
inconsistent with the Bankruptcy Code.

10.7 TABLE OF CONTENTS AND HEADINGS. The table of contents and
section headings of this Agreement are for reference purposes only and are to be
given no effect in the construction or interpretation of this Agreement.

10.8 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally, telecopied or mailed by certified mail, return receipt requested, to
the parties at the following addresses (or to such other address as a party may
have specified by notice given to the other party pursuant to this provision):

If to Hexcel, to:

Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94588
Attention: Rodney Jenks, Esq.
Facsimile: (510) 734-8611

46
<PAGE>

With a copy to:

Kronish, Lieb, Weiner & Hellman
1114 Avenue of the Americas
New York, New York 10036
Attention: Chet F. Lipton, Esq.
Facsimile: (212) 479-6275

If to Purchaser, to:

Mutual Series Fund, Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Attention: Peter Langerman
Facsimile: (201) 912-0147

With a copy to:

Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Ronald F. Daitz, Esq.
Facsimile: (212) 310-8007

All notices are effective upon receipt or upon refusal if properly delivered.

10.9 KNOWLEDGE. The phrase "best knowledge", the word
"knowledge" and similar qualifications used herein with respect to a Person,
means the knowledge of the executive officers of such Person after due
investigation.

10.10 SEVERABILITY. If any provision of this Agreement is
invalid or unenforceable, the balance of this Agreement shall remain in effect.

10.11 BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Nothing in this Agreement shall create or be
deemed to create any third party beneficiary rights in any Person or entity not
a party to this Agreement. No assignment of this Agreement or of any rights or
obligations hereunder may be made by either Hexcel or Purchaser (by operation of
law or otherwise) without the prior written consent of the other party hereto
and any attempted assignment without the required consent shall be void. Upon
any such permitted assignment, the references in this

47
<PAGE>

Agreement to Purchaser shall also apply to any such assignee unless the context
otherwise requires.

10.12 NO THIRD PARTY BENEFICIARY. It is understood and agreed
between the parties hereto that this Agreement and the representations,
warranties and covenants made herein are made expressly and solely for the
benefit of the other party hereto (or their respective successors or permitted
assigns), and that no other Person shall be entitled or be deemed to be a
third-party beneficiary of any party's rights under this Agreement.

10.13 AMENDMENTS TO PLAN AND DISCLOSURE STATEMENT. Amendments to
the Plan or the Disclosure Statement shall not be deemed to modify the parties'
obligations hereunder, Hexcel's representations or warranties contained in this
Agreement or any of the conditions contained herein to Purchaser's obligation to
consummate the First Closing or the Second Closing, unless expressly agreed to
by Purchaser in writing in the particular case.

48
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first written above.

HEXCEL CORPORATION

By: /s/ Robert D. Krumme
-----------------------------
Robert D. Krumme
Vice Chairman

MUTUAL SERIES FUND INC.

By: /s/ Peter A. Langerman
-----------------------------
Peter A. Langerman
Executive Vice President

<PAGE>

EXHIBIT I

[LETTERHEAD OF KRONISH, LIEB, WEINER & HELLMAN]

_________ __, 1994

Mutual Series Fund Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078

Gentlemen:

We have acted as special counsel to Hexcel Corporation, a Delaware
corporation ("Hexcel"), in connection with the negotiation, execution and
delivery of, and the consummation of the transactions contemplated by, the Stock
Subscription and Standby Purchase Agreement, dated as of July 26, 1994 (the
"Agreement"), between Hexcel and Mutual Series Fund Inc., a Maryland corporation
("Purchaser"), with respect to the purchase of shares of common stock of Hexcel
by Purchaser. Terms defined in the Agreement and not otherwise defined herein
have the meanings assigned to them in the Agreement.

In so acting, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Agreement and such corporate
records, agreements, documents and other instruments, and such certificates or
comparable documents of public officials and of officers and representatives of
Hexcel, and have made such inquiries of such officers and representatives as we
have deemed relevant and necessary as a basis for the opinions hereinafter set
forth.

This opinion is being rendered to Purchaser pursuant to Section
8.1(d) of the Agreement in connection with the sale of shares of New Common
Stock by Hexcel to Purchaser at the First Closing.

<PAGE>

Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:

1. Hexcel is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.

2. The Confirmation Order dated ___________, 199__ has been
entered by the Bankruptcy Court and is in full force and effect, and has not
been reversed, vacated, modified or amended in any respect, the time to appeal
the Confirmation Order has expired and, based upon our examination of the
attached docket of the Bankruptcy Court and the docket of the United States
District Court for the Northern District of California, no appeal has been
sought and no stay has been entered with respect to the Confirmation Order and,
to the best of our knowledge, no stay has been requested with respect to the
Confirmation Order.

3. The authorized capital stock of Hexcel consists of 70,000,000
shares of New Common Stock and 1,500,000 shares of preferred stock, no shares of
either of which classes will be issued or reserved for issuance except (i) to
Purchaser pursuant to the Agreement, (ii) to holders of claims in Classes 6, 9,
10 and 11 pursuant to the Plan, (iii) up to 7% of Fully Diluted New Shares to
employees pursuant to Hexcel's New Long Term Incentive Plan and/or John Lee's
new employment agreement as disclosed in the Disclosure Statement and (iv) to
management pursuant to an investment disclosed in the Disclosure Statement.
Other than as disclosed in the Disclosure Statement, to our knowledge, there are
no options, warrants, calls, rights, commitments or other agreements of any
character to which Hexcel is a party requiring, and there are no securities of
Hexcel outstanding on the First Closing Date which upon conversion or exchange
would require, the issuance, sale or transfer of any shares of capital stock or
other equity securities of Hexcel or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase shares of
capital stock or other equity securities of Hexcel other than, if Class 9 under
the Plan does not accept the Plan in accordance with section 1126 of the
Bankruptcy Code, pursuant to the conversion rights of Hexcel's Subordinated
Debentures (as defined in the Plan). To our knowledge, neither Hexcel nor any
of the Subsidiaries is a party ot any voting trust or other voting agreement
(other than in connection with director's qualifying shares) with respect to any
of its capital stock or to any agreement relating to the redemption or
repurchase of any shares of the capital stock of Hexcel or any Subsidiary (other
than in connection with director's qualifying shares) or any registration rights
agreement (other than the Registration Rights Agreement).

2
<PAGE>

4. The shares of New Common Stock to be issued to Purchaser at
the First Closing (the "Initial Shares") have been duly authorized and, when
issued as contemplated by the Agreement, will be validly issued, fully paid and
nonassessable and free of any preemptive rights arising by statute or under
Hexcel's certificate of incorporation.

5. Upon transfer and delivery of the Initial Shares to the
Purchaser and payment therefor to Hexcel in accordance with the terms of the
Agreement, the Purchaser will acquire good title to the Initial Shares, free and
clear of any and all liens, pledges, charges or claims of any kind whatsoever
other than those that may arise as a consequence of action taken by the
Purchaser.

6. Hexcel has all requisite corporate power and authority to
execute and deliver the Agreement and the Registration Rights Agreement, and to
perform fully its obligations thereunder. The execution, delivery and
performance by Hexcel of the Agreement and the Registration Rights Agreement and
the consummation by Hexcel of the transactions contemplated thereby have been
duly authorized by all necessary corporate action on the part of Hexcel. Each
of the Agreement and the Registration Rights Agreement has been duly executed
and delivered by Hexcel and (assuming the due authorization, execution and
delivery by the Purchaser) each of the Agreement and the Registration Rights
Agreement constitutes legal, valid and binding obligations of Hexcel,
enforceable against Hexcel in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies, generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity), and except to the extent that rights to
indemnification or contribution thereunder may be limited by federal or state
securities laws or public policy relating thereto.

7. The execution and delivery of the Agreement and the
Registration Rights Agreement, the consummation of the transactions contemplated
thereby and compliance by Hexcel with any of the provisions thereof will not
conflict with, constitute a default under or violate (i) any of the terms,
conditions or provisions of the certificate of incorporation or by-laws of
Hexcel, or (ii) any New York, Delaware corporate or federal law or regulation
(other than federal and state securities or blue sky laws, as to which we
express no opinion in this paragraph), or (iii) any judgment, writ, injunction,
decree, order or ruling of any court or governmental authority binding on Hexcel
of which we are aware.

3
<PAGE>

8. The issuance of the Initial Shares to the Purchaser on the First
Closing Date is exempt from the registration requirements of the Securities Act
of 1933, as amended.

9. No consent, approval, waiver, license or authorization or
other action by or filing with any New York, Delaware corporate or federal
governmental authority is required in connection with the execution and delivery
by Hexcel of the Agreement or the Registration Rights Agreement or the
consummation by Hexcel of the transactions contemplated by the Agreement, except
(i) the requirements of the HSR Act and (ii) those which have already been
obtained, taken or made.

The opinions herein are limited to the laws of the State of New
York, the corporate laws of the State of Delaware and the federal laws of the
United States, and we express no opinion as to the effect on the matters covered
by this opinion of the laws of any other jurisdiction.

This opinion is rendered solely for your benefit in connection with
the transactions described above. This opinion may not be used or relied upon
by any other person and may not be disclosed, quoted, filed with a governmental
agency or otherwise referred to without our prior written consent.

Very truly yours,

4
<PAGE>

The foregoing opinion of Kronish, Lieb, Weiner & Hellman will be accompanied by
an opinion of Rodney P. Jenks, Esq., general counsel to Hexcel to the effect
that the execution and delivery of the Agreement and the Registration Rights
Agreement, the consummation of the transactions contemplated thereby and
compliance by Hexcel with any of the provisions thereof will not conflict with,
constitute a default under or violate any of the terms, conditions or provisions
of any material document, agreement or other instrument to which Hexcel is a
party or by which it is bound known to him.

5
<PAGE>

EXHIBIT II

[Letterhead of General Counsel to Mutual Series Fund Inc.]

___________, 1994

Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94588

Gentlemen:

I am the Secretary and General Counsel of Mutual Series Fund Inc., a
Maryland corporation (the "Company") and have acted as counsel for the Company
in connection with the preparation, authorization, execution and delivery of,
and the consummation of the transactions contemplated by (i) the Stock
Subscription and Standby Purchase Agreement, dated as of July 26, 1994 (the
"Agreement"), between Hexcel Corporation ("Hexcel") and the Company with respect
to the purchase of shares of common stock of Hexcel by the Company and (ii) the
Registration Rights Agreement, dated as of ____, __ 1994 (the "Registration
Rights Agreement"), between Hexcel and the Company. Terms defined in the
Agreement and not otherwise defined herein are used herein with the meanings as
so defined.

In so acting, I have examined originals or copies, certified or
otherwise identified to my satisfaction, of the Agreement and the Registration
Rights Agreement and such corporate records, agreements, documents and other
instruments, and such certificates or comparable documents of public officials
and of officers and representatives of the Company, and have made such inquiries
of such officers and representatives as I have deemed relevant and necessary as
a basis for the opinions hereinafter set forth.

Based on the foregoing, and subject to the qualifications stated
herein, I am of the opinion that:

1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland.

2. The Company has all requisite corporate power and authority to
execute and deliver the Agreement and the Registration Rights Agreement, and to
perform fully its obligations thereunder. The execution, delivery and
performance by the Company of the Agreement and the Registration Rights
Agreement and the consummation by the

<PAGE>

Company of the transactions contemplated thereby have been duly authorized by
all necessary corporate action on the part of the Company. Each of the
Agreement and the Registration Rights Agreement has been duly executed and
delivered by the Company.

3. The execution and delivery of the Agreement and the
Registration Rights Agreement, the consummation of the transactions contemplated
thereby and compliance by the Company with any of the provisions thereof will
not conflict with, constitute a default under or violate (i) any of the terms,
conditions or provisions of the certificate of incorporation or by-laws of the
Company, (ii) any of the terms, conditions or provisions of any document,
agreement or other instrument to which the Company is a party or by which it is
bound of which I am aware, (iii) any Maryland law or regulation (other than
state securities or blue sky laws, as to which I express no opinion), or (iv)
any judgment, writ, injunction, decree, order or ruling of any court or
governmental authority binding on the Company of which I am aware.

4. No consent, approval, waiver, license or authorization or
other action by or filing with any Maryland governmental authority is required
in connection with the execution and delivery by the Company of the Agreement
and the Registration Rights Agreement or the consummation by the Company of the
transactions contemplated thereby.

5. All requisite notifications, filings and applications under
and pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") have been submitted or waived and all applicable waiting
periods under the HSR Act have expired.

The opinions herein are limited to the laws of the State of Maryland
and the HSR Act, and I express no opinion as to the effect on the matters
covered by this opinion of the laws of any other jurisdiction.

Very truly yours,

2
<PAGE>

[Weil, Gotshal & Manges letterhead]

__________, 1994

Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94588

Gentlemen:

We have acted as counsel to Mutual Series Fund Inc., a Maryland
corporation (the "Company") in connection with the preparation, authorization,
execution and delivery of, and the consummation of the transactions contemplated
by (i) the Stock Subscription and Standby Purchase Agreement, dated as of July
26, 1994 (the "Agreement"), between Hexcel Corporation ("Hexcel") and the
Company with respect to the purchase of shares of common stock of Hexcel by the
Company and (ii) the Registration Rights Agreement, dated as of ____ __, 1994
(the "Registration Rights Agreement"), between Hexcel and the Company. Terms
defined in the Agreement and not otherwise defined herein are used herein with
the meanings as so defined.

In so acting, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Agreement and the Registration
Rights Agreement and such corporate records, agreements, documents and other
instruments, and such certificates or comparable documents of public officials
and of officers and representatives of the Company, and have made such inquiries
of such officers and representatives as we have deemed relevant and necessary as
a basis for the opinions hereinafter set forth.

In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of documents submitted to us as certified or
photostatic copies and the authenticity of the originals of such latter
documents. As to all questions of fact material to this opinion that have not
been independently established, we have relied upon certificates or comparable
documents of officers and representatives of the Company and upon the
representations and warranties of the Company contained in the Agreement. We
have also assumed (i) the due incorporation and valid existence of the Company,
(ii) that the Company has all requisite power and authority to enter into and
perform the Agreement and the Registration Rights Agreement and (iii) the due
authorization, execution

<PAGE>

and delivery of the Agreement and the Registration Rights Agreement by the
Company and Hexcel.

We have further assumed that the performance by the Company of the
Agreement and the Registration Rights Agreement will not violate the Investment
Company Act of 1940, as amended (the "Act") and the regulations promulgated
by the SEC thereunder, and understand that you are receiving an opinion of
Skadden, Arps, Slate, Meagher and Flom, special regulatory counsel to the
Company to such effect.

Based on the forgoing and subject to the qualifications set forth
herein, we are of the opinion that:

1. Each of the Agreement and the Registration Rights Agreement
constitutes legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except to the
extent that rights to indemnification and contribution thereunder may be limited
by federal or state securities laws or public policy relating thereto.

2. No consent, approval, waiver, license or authorization or
other action by or filing with any federal or New York governmental authority is
required in connection with the execution and delivery by the Company of the
Agreement and the Registration Rights Agreement or the consummation by the
Company of the transactions contemplated thereby, except for filings under the
HSR Act, filings under the Exchange Act which have been made, those required to
be obtained by Hexcel and any required by the Act.

The opinions herein are limited to the federal law of the United
States (other than the Act) and the law of the State of New York and we express
no opinion as to the effect on the matters covered by this opinion of the laws
of any other jurisdiction.

<PAGE>

Very truly yours,

<PAGE>

EXHIBIT III

[LETTERHEAD OF KRONISH, LIEB, WEINER & HELLMAN]

_________ __, 1994

Mutual Series Fund Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078

Gentlemen:

This opinion is being rendered to Purchaser pursuant to Section
8.1(d) of the Agreement in connection with the sale of shares of New Common
Stock by Hexcel to Purchaser at the Second Closing.

<PAGE>

Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:

2. The Confirmation Order dated ___________, 199__ has been
entered by the Bankruptcy Court and is in full force and effect, and has not
been reversed, vacated, modified or amended in any respect, the time to appeal
the Confirmation Order has expired and no appeal has been sought and, based upon
our examination of the attached docket of the Bankruptcy Court and the docket of
the United States District Court for the Northern District of California, no
stay has been entered with respect to the Confirmation Order and, to the best of
our knowledge, no stay has been requested with respect to the Confirmation
Order.

3. The authorized capital stock of Hexcel consists of 70,000,000
shares of New Common Stock and 1,500,000 shares of preferred stock, no shares of
either of which classes will be issued or reserved for issuance except (i) to
Purchaser pursuant to the Agreement, (ii) to holders of claims in Classes 6, 9,
10 and 11 pursuant to the Plan, (iii) up to 7% of Fully Diluted New Shares to
employees pursuant to Hexcel's New Long Term Incentive Plan and/or John Lee's
new employment agreement as disclosed in the Disclosure Statement and (iv) to
management pursuant to an investment disclosed in the Disclosure Statement.
Other than as disclosed in the Disclosure Statement, to our knowledge, there are
no options, warrants, calls, rights, commitments or other agreements of any
character to which Hexcel is a party requiring, and there are no securities of
Hexcel outstanding on the First Closing Date which upon conversion or exchange
would require, the issuance, sale or transfer of any shares of capital stock or
other equity securities of Hexcel or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase shares of
capital stock or other equity securities of Hexcel other than, if Class 9 under
the Plan does not accept the Plan in accordance with section 1126 of the
Bankruptcy Code, pursuant to the conversion rights of Hexcel's Subordinated
Debentures (as defined in the Plan). To our knowledge, neither Hexcel nor any
of the Subsidiaries is a party to any voting trust or other voting agreement
(other than in connection with director's qualifying shares) with respect to any
of its capital stock or to any agreement relating to the redemption or
repurchase of any shares of the capital stock of Hexcel or any Subsidiary (other
than in connection with director's qualifying shares) or any registration rights
agreement (other than the Registration Rights Agreement).

2
<PAGE>

4. The shares of New Common Stock to be issued to Purchaser at
the Second Closing (the "Additional Shares") have been duly authorized and, when
issued as contemplated by the Agreement, will be validly issued, fully paid and
nonassessable and free of any preemptive rights arising by statute or under
Hexcel's certificate of incorporation.

5. Upon transfer and delivery of the Additional Shares to the
Purchaser and payment therefor to Hexcel in accordance with the terms of the
Agreement, the Purchaser will acquire good title to the Additional Shares, free
and clear of any and all liens, pledges, charges or claims of any kind
whatsoever other than those that may arise as a consequence of action taken by
the Purchaser.

6. The issuance of the Additional Shares to the Purchaser on the
Second Closing Date is exempt from the registration requirements of the
Securities Act of 1933, as amended.

7. No consent, approval, waiver, license or authorization or
other action by or filing with any New York, Delaware corporate or federal
governmental authority is required in connection with the issuance by Hexcel to
the Purchaser of the Additional Shares on the Second Closing Date, except (i)
the requirements of the HSR Act and (ii) those which have already been obtained,
taken or made.

Very truly yours,

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<PAGE>

EXHIBIT IV

[Letterhead of General Counsel to Mutual Series Fund Inc.]

______________, 1994

Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94588

Gentlemen:

Based on the foregoing, and subject to the qualifications stated
herein, I am of the opinion that:

1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland.

<PAGE>

Very truly yours,

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<PAGE>

[Weil, Gotshal & Manges letterhead]

________________, 1994

Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94588

Gentlemen:

<PAGE>

and delivery of the Agreement and the Registration Rights Agreement by the
Company and Hexcel.

We have further assumed that the performance by the Company of the
Agreement and the Registration Rights Agreement will not violate the Investment
Company Act of 1940, as amended (the "Act") and the regulations promulgated by
the SEC thereunder, and understand that you are receiving an opinion of Skadden,
Arps, Slate, Meagher and Flom, special regulatory counsel to the Company to such
effect.

Based on the forgoing and subject to the qualifications set forth
herein, we are of the opinion that:

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<PAGE>

Very truly yours,

3
<PAGE>

EXHIBIT V

- - -------------------------------------------------------------------------------

REGISTRATION RIGHTS AGREEMENT

DATED AS OF _______ __, 1994

BETWEEN

HEXCEL CORPORATION

AND

MUTUAL SERIES FUND INC.
- - -------------------------------------------------------------------------------

<PAGE>

TABLE OF CONTENTS

PAGE

ARTICLE I

DEFINITIONS.............................. 1
Section 1.1. Definitions............................................ 1

ARTICLE II

REGISTRATION RIGHTS.......................... 3
Section 2.1. Registration upon Request.............................. 3
Section 2.2. Piggyback Registration................................. 4
Section 2.3. Registration Procedures................................ 7
Section 2.4. Preparation; Reasonable Investigation.................. 16
Section 2.5. Indemnification........................................ 16
Section 2.6. Contribution........................................... 20
Section 2.7. Nominees of Beneficial Owners.......................... 21
Section 2.8. Restrictions on Sale of Securities by the
Company and Others................................... 22

ARTICLE III

OTHER TRANSFERS............................ 22
Section 3.1. Removal of Restrictive Legends......................... 22

ARTICLE IV

MISCELLANEOUS............................. 23
Section 4.1. Effectiveness.......................................... 23
Section 4.2. Submission to Jurisdiction; Consent to
Service of Process................................... 23
Section 4.3. Specific Enforcement; Other Remedies................... 23
Section 4.4. Severability........................................... 24
Section 4.5. Notices................................................ 24
Section 4.6. Entire Agreement....................................... 25
Section 4.7. Amendments............................................. 25
Section 4.8. Descriptive Headings; References....................... 25
Section 4.9. Governing Law.......................................... 25
section 4.10 Successors and Assigns................................. 25

i
<PAGE>

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT dated as of ____ __, 1994 (the
"Agreement") between HEXCEL CORPORATION, a Delaware corporation (the "Company"),
and MUTUAL SERIES FUND INC., a Maryland corporation ("Mutual").

W I T N E S S E T H:

WHEREAS, the Company and Mutual have entered into a Stock
Subscription and Standby Purchase Agreement dated July __, 1994 (the
"Subscription Agreement"), pursuant to which, upon the terms and subject to the
conditions set forth therein, the Company issued and sold, and Mutual has
subscribed for and purchased, shares of the Company's common stock; and

WHEREAS, to induce Mutual to enter into the Subscription Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement;

NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements herein contained, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. DEFINITIONS. (a) Unless otherwise defined herein,
capitalized terms used herein have the meanings set forth in the Subscription
Agreement.

(b) "Registration Expenses" means all out-of-pocket expenses
incident to the Company's performance of, or compliance with, Article II hereof,
including, without limitation, all registration and filing fees (including
filing fees with respect to the SEC and the National Association of Securities
Dealers, Inc.), all fees and expenses of qualifying under or complying with
securities or "blue sky" laws in United States jurisdictions (including fees and
disbursements of underwriters' counsel in

<PAGE>

connection with "blue sky" qualifications, including any memorandum or survey
with respect thereto) and determination of the Registrable Securities
eligibility for investment under the laws of the jurisdictions designated by the
managing underwriter or underwriters, all listing fees, all printing expenses,
all messenger, telephone and delivery expenses, all registrars' and transfer
agents' fees, the fees and disbursements of counsel for the Company, of its
independent public accountants, including the expenses of any audits and/or
'cold comfort' letters required by or incident to such performance and
compliance, and of other Persons retained by the Company and any fees and
disbursements of underwriters customarily paid by issuers of securities but
excluding (x) fees and disbursements of separate counsel to any seller of
Registrable Securities, and (y) discounts, commissions or fees of underwriters,
selling brokers, dealer managers, sales agents or similar securities industry
professionals relating to the distribution of Registrable Securities and
applicable transfer taxes, if any, which shall be borne by the sellers of the
Registrable Securities being registered in all cases.

(c) "Registrable Securities" means (i) any and all shares of New
Common Stock ("Shares") received by Mutual on the First Closing Date and the
Second Closing Date and (ii) any other securities issued or issuable with
respect to any Shares by way of a stock dividend or stock split or in connection
with a combination, exchange, reorganization, recapitalization or
reclassification of the Company's securities or pursuant to a merger,
consolidation or other similar business combination involving the Company. As
to any particular Registrable Securities, such securities shall cease to
constitute Registrable Securities when (i) a registration statement with respect
to the sale of such securities shall have been declared effective under the
Securities Act and such securities shall have been disposed of in accordance
with a method of disposition contemplated by the registration statement, (ii)
such securities shall have been sold in satisfaction of all applicable
conditions to the resale provisions of Rule 144 under the Securities Act (or any
successor provision thereto), (iii) such securities shall have been transferred,
new certificates evidencing such securities without legends restricting further
transfer shall have been delivered by the Company, and subsequent public
distribution of such securities shall neither require registration under the
Securities Act nor qualification (or any similar filing) under any state

2
<PAGE>

securities or "blue sky" law then in effect, or (iv) such securities shall have
ceased to be outstanding.

ARTICLE II

REGISTRATION RIGHTS

Section 2.1. REGISTRATION UPON REQUEST. (a)Subject to the
provisions of this Section 2.1, at any time during the period commencing on the
First Closing Date and ending on the earlier of (x) the fifth anniversary of the
Second Closing Date and (y) the first date on which there are no Registrable
Securities (the "Demand Registration Period"), upon the written request of
Mutual requesting that the Company effect the registration under the Securities
Act of Registrable Securities representing (i) the greater of (A) at least 20%
of the then outstanding Registrable Securities or (B) at least 10% of the
Registrable Securities outstanding on the Second Closing Date or (ii) all of the
Registrable Securities then held by Mutual, and specifying the intended method
or methods of disposition of such Registrable Securities, the Company shall use
its best efforts to effect the registration of such Registrable Securities under
the Securities Act, as soon as possible, for the disposition (in accordance with
such intended method or methods) of the Registrable Securities so to be
registered (any such registration is hereinafter referred to as a "Demand
Registration").

(b) The Company shall be required to effect only three Demand
Registrations; PROVIDED, HOWEVER, that in the event Mutual acquires shares
of New Common Stock on the Second Closing Date for an aggregate purchase price
of at least (i) $7,000,000, if Class 9 under the Plan accepts the Plan in
accordance with the provisions of section 1126 of the Bankruptcy Code or (ii)
$5,000,000, if Class 9 under the Plan does not accept the Plan in accordance
with the provisions of section 1126 of the Bankruptcy Code, the Company shall be
required to effect an additional two Demand Registrations.

(c) The Company shall not be deemed to have effected a Demand
Registration pursuant to this Section 2.1 unless the registration statement in
respect thereof is declared effective under the Securities Act; PROVIDED,
HOWEVER, that a Demand Registration shall be deemed to have

3
<PAGE>

been effected by the Company if the registration does not become effective after
the Company has filed a registration statement with respect thereto solely due
to the refusal of Mutual to proceed.

(d) If the Company shall have previously effected a Demand
Registration pursuant to this Section 2.1, or if any Registrable Securities of
Mutual are registered in a Piggyback Registration (as hereinafter defined)
pursuant to Section 2.2 hereof, the Company shall not be required to effect a
subsequent Demand Registration until a period of at least 180 days shall have
elapsed from the effective date of the registration statement used in connection
with such previous registration statement.

(e) The Company shall pay all Registration Expenses in connection
with the registration of Registrable Securities pursuant to this Section 2.1.

Section 2.2. PIGGYBACK REGISTRATION. (a) If the Company at any
time prior to the expiration of the Demand Registration Period proposes to
register or, upon receipt of Mutual's request for a Demand Registration the
Company desires to register, any of its equity securities under the Securities
Act (other than a registration on Form S-4 or S-8 or the equivalent thereof) to
be offered for cash or cash equivalents in a managed public offering, it shall
each such time give prompt written notice to each holder of Registrable
Securities who has agreed to be bound by this Agreement, as provided in Section
4.10, of its intention to do so, describing such securities and specifying the
form and manner and the other relevant facts involved in such proposed
registration (including, without limitation, the identity of the managing
underwriter and whether such offering will be pursuant to a "best efforts" or
"firm commitment" underwriting). Upon the written request of any such holder
delivered to the Company within 20 days after such notice shall have been given
to such holder (which request shall specify the Registrable Securities intended
to be disposed of by such holder and the intended method of disposition
thereof), the Company shall use its best efforts to effect the registration
under the Securities Act, as expeditiously as is reasonable, of all Registrable
Securities that the Company has been so requested to register by such holder (in
accordance with the intended methods of distribution thereof as aforesaid) (such
registration being hereafter referred to as a "Piggyback Registration");
PROVIDED, HOWEVER, that:

4
<PAGE>

(i) (A) if, at any time after giving such written
notice of its intention to register any of such securities and prior to
the effective date of the registration statement filed in connection with
such Piggyback Registration, the Company shall determine for any reason
not to register or to delay the registration of such securities, the
Company may, at its election, give written notice of such determination to
each holder of Registrable Securities requesting inclusion of Registrable
Securities in such registration, and (x) in the case of a determination
not to register, the Company shall be relieved of its obligation to
register any Registrable Securities in connection with such Piggyback
Registration (but not from its obligation to pay the Registration Expenses
in connection therewith to the extent provided in Section 2.2(b)), without
prejudice, however, to the right of Mutual to request that such
registration be effected as a Demand Registration under and pursuant to
all of the terms and conditions of Section 2.1, and (y) in the case of a
determination to delay registering, the Company shall be permitted to
delay registering any Registrable Securities, for the same period as the
delay in registering such other securities, or (B) in the event that the
registration statement has been declared effective and the Company
determines that a Disadvantageous Condition (as hereinafter defined)
exists, upon the delivery of written notice to each such holder, the
Company shall, subject to discontinuance of sales of all other securities
covered by such registration statement, be entitled to suspend the
effectiveness of such statement or, without suspending such effectiveness,
to request that each such holder forthwith discontinue the disposition of
such Registrable Securities and each such holder agrees that it will
discontinue the disposition of such Registrable Securities pursuant to
such registration statement and thereupon the Company shall be relieved of
its obligation under this Section 2.2 with respect to such registration
(but not from its obligation to pay the Registration Expenses in
connection therewith to the extent provided in Section 2.2(b)), without
prejudice, however, to the rights of Mutual to request that such
registration be effected as a Demand Registration under and pursuant to
all of the terms and conditions of Section 2.1;

5
<PAGE>

(ii) if the managing underwriter of such proposed
Piggyback Registration offering shall advise the Company in writing that,
in the judgment of such managing underwriter, the inclusion in any
registration statement pursuant to this Section 2.2 of some or all of the
Registrable Securities sought to be registered by Persons other than the
Company creates a substantial risk that the proceeds or price per unit the
Company or Persons other than the Company will derive from such
registration will be reduced and/or that the number of securities to be
registered (including those sought to be registered at the instance of the
Company and any other party entitled to participate in such registration)
is too large a number to be reasonably sold, or the managing underwriter
of such underwritten offering shall inform the Company in writing of its
opinion that the number of securities requested to be included in such
registration would materially affect its ability to effect such offering
(such opinion to state the reasons therefor and the approximate number of
securities which may be included in such offering without such effect),
the Company will include in such registration to the extent of the number
which the Company is so advised can be sold in such offering the number of
securities sought to be registered by each seller (which term shall
include the Company and Mutual and any other holder of securities included
in such registration) (A) FIRST, the securities the Company proposes to
sell, (B) SECOND, the Registrable Securities held by Mutual requested to
be included in such registration, (C) THIRD, the Registrable Securities
held by other holders of Registrable Securities requested to be included
in such registration, PRO RATA, based on the respective holdings of
Registrable Securities requested to be included in such registration by
such other holders (D) FOURTH the securities proposed to be sold by any
other holder;

(iii) if the managing underwriter of such proposed
Piggyback Registration offering shall advise the Company in writing that,
in the judgment of such managing underwriter, the inclusion of any
Registrable Securities in such offering of a type, class or series, as the
case may be, different from that of the securities originally intended to
be included in such offering would adversely affect the success of the
offering of such securities originally intended to be

6
<PAGE>

so included, then the Company shall promptly advise Mutual thereof and may
require, by written notice to Mutual accompanying such advice, that such
different Registrable Securities be excluded from such offering to the
extent the inclusion thereof could adversely affect such offering; and

(iv) the Company shall not be obligated to effect any
registration of Registrable Securities under this Section 2.2 that is
incidental to the registration of any of its securities in connection with
any merger, acquisition, exchange offer, dividend reinvestment plan or
stock option or other employee or non-employee director benefit plan or
consultant benefit plan (regardless of whether or not on Form S-4 or S-8).

(b) The Company shall pay all Registration Expenses in connection
with the registration of Registrable Securities pursuant to this Section 2.2.

Section 2.3. REGISTRATION PROCEDURES. (a) If and whenever the
Company is required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Sections 2.1 and
2.2, the Company shall, subject to the limitations otherwise provided in this
agreement, as expeditiously as is reasonable:

(i) prepare and file with the SEC on any appropriate
form a registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to become
effective; PROVIDED, HOWEVER, that before filing a registration
statement or prospectus or any amendments or supplements thereto,
including documents incorporated by reference after the initial filing of
any registration statement, the Company will furnish to counsel selected
by Mutual and the underwriters copies of all such documents proposed to be
filed sufficiently in advance of filing to provide them with a reasonable
opportunity to review such documents and comment thereon;

(ii) prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective

7
<PAGE>

and to comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities and other securities covered
by such registration statement until the earlier of (A) such time as all
such Registrable Securities and other securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement and (B) (x) in
the case of any Demand Registrations and Piggyback Registrations, the
expiration of 90 days from the date such registration statement first
becomes effective (unless the Registrable Securities registered thereunder
have been sold or disposed of prior to the expiration of such 90-day
period) (exclusive of any period during which Mutual was prohibited from
disposition of Registrable Securities by reason of the occurrence of any
event described in Sections 2.3(e)(iv), (v) or (vii) (to the extent that
the occurrence of any such events shall have interfered with the
distribution) or any period during which the prospectus included therein
shall not meet the requirements of Section 10 of the Securities Act);

(iii) furnish to each seller and to any underwriter of
such Registrable Securities such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each
preliminary prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents, as such seller or underwriter may reasonably request in order
to facilitate the sale or disposition of such Registrable Securities;

(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or "blue sky" laws of such
jurisdictions in the United States as each seller or any underwriter shall
reasonably request, and do any and all other acts and things that may be
necessary to enable such seller or any underwriter to consummate the
disposition in such jurisdictions of its Registrable Securities covered by
such registration statement, except that the

8
<PAGE>

Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it is not
so qualified, or subject itself to taxation in respect of doing business
in any such jurisdiction, or to consent to general service of process in
any such jurisdiction;

(v) cause such Registrable Securities covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities in the United States as may be
necessary to enable each seller or any underwriter to consummate the
disposition of such Registrable Securities;

(vi) furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller and the underwriters of (1)
an opinion of counsel for the Company, dated the date of the closing under
the underwriting agreement, and (2) a "cold comfort" letter signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, covering
substantially the same matters with respect to such registration statement
(and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuers'
counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities;

(vii) promptly notify each seller of Registrable
Securities, their counsel and the managing underwriters, if any, and (if
requested by any such Person) confirm such notice in writing, (A) when a
prospectus or any prospectus supplement or post-effective amendment
relating to such registration statement has been filed and, with respect
to a registration statement referred to in Section 2.1 or 2.2 or any
post-effective amendment, when the same has become effective, (B) of any
request by the SEC for amendments or supplements to a registration
statement referred to in Section 2.1 or 2.2 or related prospectus or for
additional information, (C) of the issuance by the SEC of any stop order
suspending the effectiveness of a registration statement referred to in
Section 2.1 or 2.2 or the initiation of any proceedings for that purpose,
(D) if at any time the representations and

9
<PAGE>

warranties of the Company contained in agreements contemplated by Section
2.3(c) cease to be true and correct and (E) of the receipt by the Company
of any notification with respect to the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose;

(viii) in the event of the issuance of a stop order
suspending the effectiveness of a registration statement referred to in
Section 2.1 or 2.2 or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction, make reasonable
efforts to obtain the withdrawal of such stop order or the lifting of such
suspension as soon as reasonably practicable;

(ix) immediately notify each seller of Registrable
Securities covered by such registration statement, their counsel and the
managing underwriters at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement (or deemed to be included in such registration statement if the
registration statement, at the time it is declared effective, omits
certain information pursuant to Rule 430A of the Securities Act), as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing or if it is necessary to amend or supplement such prospectus
to comply with law, and at the request of any such seller and any
underwriter prepare and furnish to such seller and the underwriters a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing and
shall otherwise comply in all material respects with law and so that such
prospectus, as amended or supplemented, shall comply with law;

10
<PAGE>

(x) comply with all applicable rules and regulations
of the SEC, and make available to its security holders, as soon as
reasonably practicable, but not later than 50 days after the close of the
period covered thereby (105 days in the case when the period covered
corresponds to a fiscal year of the Company), earnings statements of the
Company (satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 as promulgated thereunder), covering a period of 12 months
beginning after the effective date of the registration statement (but
beginning not later than the first day of the Company's fiscal quarter
next following such effective date);

(xi) use its best efforts to cause all Registrable
Securities covered by such registration statement as are of the same class
as a class then listed on such exchange to be listed on a national
securities exchange or approved for trading in the National Market System
if such Registrable Securities are not already so listed or so approved
and on each securities exchange on which similar securities issued by the
Company are then listed, if the listing of such Registrable Securities is
then permitted under the rules of such exchange;

(xii) provide a transfer agent and registrar for all
such Registrable Securities covered by such registration statement not
later than the effective date of such registration statement;

(xiii) issue to any underwriter to which any seller may
sell such Registrable Securities in connection with any such registration
(and to any direct or indirect transferee of any such underwriter)
certificates representing such Registrable Securities without the legends
described in Section 10.4 of the Subscription Agreement.

Upon the Company's request, each seller of Registrable Securities as
to which any registration is being effected shall promptly furnish the Company
with such information regarding such seller and the distribution of such
securities as the Company may reasonably request in writing and as shall be
required by law or by the SEC in connection therewith.

11
<PAGE>

Mutual shall have the right to require the insertion of language in
the registration statement covering such Registrable Securities as Mutual
desires to sell, in form and substance satisfactory to Mutual, to the effect
that the holding by Mutual of such securities is not to be construed as a
recommendation by Mutual of the investment quality of the Company's securities
covered thereby, or in the event that such reference to Mutual by name or
otherwise is not required by the Securities Act or any similar Federal statute
then in force or by any regulations thereunder, or by the SEC or any "blue sky"
laws, or any regulations thereunder, for any jurisdiction in which such
securities are offered, the deletion of the reference to Mutual.

(b) In the event that, (A) the Board of Directors of the Company,
or an appropriate committee thereof, determines, in its good faith judgment,
that the registration of Registrable Securities pursuant to Section 2.1 (x)
would interfere in a material respect with any pending or anticipated material
merger, acquisition or divestiture involving the Company or either Material
Subsidiary or (y) would materially and adversely impact any material financing
activity or (B) if 66-2/3% of the directors present at a duly convened meeting
of the Board of Directors at which a quorum is present determines that, in its
good faith judgment, the registration of Registrable Securities would require
the disclosure of material information which the Company has a bona fide and
significant business purpose for preserving as confidential, or (C) if financial
statements required to be included or incorporated in the registration statement
have not been prepared or are not otherwise available at the time (each event
referred to in clause (A), (B) or (C) of this Section 2.3(b) being a
"Disadvantageous Condition"), then, notwithstanding any other provision of this
Article II, upon the giving of a written notice (a "Delay Notice") to such
effect to each such seller, the Company (1) in the event that the registration
statement has been filed, but has not yet been declared effective, shall be
entitled to cause such registration statement to be withdrawn and shall be
entitled not to file a substitute registration statement, or (2) in the event
that the registration statement has been declared effective, shall be entitled
to suspend the effectiveness of such statement or, without suspending such
effectiveness, to request that the sellers of Registrable Securities forthwith
discontinue the disposition of such Registrable Securities or (3) in the event
no registration statement has yet been filed, shall be entitled not to file any
such registration

12
<PAGE>

statement, until, in the case of each of (1), (2) and (3) above, the earlier of
(the "Resumption Date") (i) the expiration of a 90-day period from the date the
Delay Notice was given or (ii) the date on which (w) the Company next files with
the SEC a report or makes any other public disclosure of the information
referred to in clause (B) of this Section 2.4(b) or otherwise determines that
there is no bona fide business purpose for keeping such information
confidential, (x) the Board of Directors determines that the Disadvantageous
Condition referred to in clause (A) of this Section 2.3(b) no longer exists, or
(y) the financial statements referred to in clause (C) of this Section 2.4(b)
have been prepared or are otherwise available. Promptly following the
Resumption Date, the Company shall deliver a notice (a "Resumption Notice") to
each seller of Registrable Securities to be included in such registration
statement stating that such public disclosure or determination has been made or
such financial statements have been prepared or are available, as the case may
be. If a registration statement was withdrawn or was not filed, the Company
shall use its best efforts to effect the registration under the Securities Act,
as soon as possible after the date the Resumption Notice was given, of the
Registrable Securities included or to be included in such registration
statement, unless Mutual by written notice (the "Discontinuance Notice") to the
Company requests that the Company not effect such registration. If a
registration statement was declared effective and either (i) the period between
the Delay Notice and the Resumption Date exceeds 60 days, or (ii) Mutual
determines in good faith that there has been an adverse change in market
conditions for the Registrable Securities between the Delay Notice and the
Resumption Date, then Mutual may, by delivery of a Discontinuance Notice,
request the Company to withdraw such registration statement and such
registration statement shall not be deemed to have been effected by the Company
for the purposes of Section 2.1 hereof. If a registration statement was
declared effective and is not withdrawn pursuant to a Discontinuance Notice or
otherwise, the Company shall furnish, as promptly as reasonably practicable
after the date the Resumption Notice was given, to each seller of such
Registrable Securities such number of copies of the prospectus included in such
registration statement (including any amendments or supplements thereto), which
prospectus (as amended or supplemented) shall be in conformity with the
requirements of the Securities Act, as such seller may reasonably request in
order to facilitate the sale or disposition of such Registrable Securities.

13
<PAGE>

(c) If requested by the underwriters for any offering of
Registrable Securities pursuant to a registration requested under Section 2.1 or
2.2, the Company shall enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such representations
and warranties by the Company and such other terms and conditions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and contribution to
the effect and to the extent provided in Section 2.5 and the provision of
opinions of counsel and accountants' letters to the effect and to the extent
provided in Section 2.3(a)(vi) and, in the case of a registration under Section
2.1 or 2.2, to be reasonably satisfactory in form, to the extent then customary
in registration right agreements, and substance to Mutual. In the case of a
registration under Section 2.1 or 2.2 the sellers shall be a party to any such
underwriting agreement and the representations and warranties by, and other
agreements on the part of, the Company to and for the benefit of the
underwriters also shall be made to and for the benefit of the sellers.

(d) In the event of any underwritten offering under a registration
pursuant to Section 2.1 or 2.2, Mutual agrees, if so required by the managing
underwriters and to the extent timely notified in writing by the Company or by
the managing underwriter or underwriters, not to effect any public sale or
distribution (including any sale pursuant to Rule 144 under the Securities Act)
of Registrable Securities or securities convertible into, or exchangeable or
exercisable for, any Registrable Securities (other than as part of such
offering) within seven days prior to the effective date of the registration
statement with respect to such offering and 150 days after the effective date of
such registration statement.

(e) Each seller of Registrable Securities will:

(i) execute a power of attorney appointing one or more
attorneys designated by the sellers of the majority of the Registrable
Securities included in the registration statement, which attorney shall be
authorized, on customary terms, to execute any agreement (including in an
underwritten offering an underwriting agreement in customary form) on
behalf of each such seller and to otherwise act for such seller

14
<PAGE>

in connection with the offering of Registrable Securities;

(ii) enter into any agreement (including in an
underwritten offering an underwriting agreement in customary form, it
being understood that, if in the Company's reasonable judgement
representations and warranties by such sellers are necessary, such
agreement may contain such representations and warranties by such sellers
as are customarily contained in underwriting agreements with respect to
secondary distributions) with the Company, the other sellers of
Registrable Securities and the underwriters;

(iii) execute and complete all questionnaires and other
documents required by such power of attorney or such agreement to be
executed by such seller;

(iv) upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 2.3(a)(ix),
forthwith discontinue disposition of the Registrable Securities pursuant
to the registration statement covering such Registrable Securities until
each such seller's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 2.3(a)(ix) and, if so directed by the
Company, each such seller shall deliver to the Company all copies, other
than permanent file copies then in each such seller's possession, of the
prospectus then covering such Registrable Securities current at the time
of receipt of such notice, and, in the event no registration statement has
yet been filed, all drafts of the prospectus covering such Registrable
Securities. In the event the Company shall give any such notice, the
periods mentioned in Section 2.3(a)(ii)(B) shall be extended by the number
of days during the period from and including the date of the giving of
such notice to and including the date when each seller of any Registrable
Securities covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by Section
2.3(a)(ix);

(v) upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 2.3(a)(vii)(C),
forthwith discontinue disposition of the Registrable Securities

15
<PAGE>

pursuant to the registration statement covering such Registrable
Securities until the stop order suspending the effectiveness of a
registration statement referred to in Section 2.1 or 2.2 has been
withdrawn and, if so directed by the Company, deliver to the Company all
copies, other than permanent file copies then in each such seller's
possession, of the prospectus then covering such Registrable Securities
current at the time of receipt of such notice;

(vi) upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 2.3(a)(vii)(E),
forthwith discontinue disposition of the Registrable Securities pursuant
to the registration statement covering such Registrable Securities in the
jurisdiction in which qualification of the Registrable Securities for sale
in any jurisdiction has been suspended, until the lifting of such
suspension; and

(vii) upon receipt of a Delay Notice with respect to
sales of Registrable Securities pursuant to a registration statement that
has become effective, discontinue disposition of such Registrable
Securities until such seller receives a Resumption Notice, or a new
registration statement with respect thereto has become effective.

Section 2.4. PREPARATION; REASONABLE INVESTIGATION. In
connection with the preparation and filing of each registration statement
registering Registrable Securities under the Securities Act, the Company shall
give Mutual and its underwriters, if any, and their respective counsel and
accountants, subject to being bound by a customary confidentiality agreement,
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the SEC, and each
amendment thereof or supplement thereto and include therein material, furnished
to the Company in writing, which in the judgment of Mutual, subject to the
consent of the Company (which shall not be unreasonably withheld), should be
included, and shall give Mutual and its counsel and accountants such access to
its books and records and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have issued
a report on its financial statements as shall be necessary, in the reasonable
opinion of Mutual and such underwriters or their respective counsel,

16
<PAGE>

to conduct a reasonable investigation within the meaning of the Securities Act.

Section 2.5. INDEMNIFICATION. (a) In the event of any
registration of any securities of the Company under the Securities Act pursuant
to Section 2.1 or 2.2, the Company shall, and it hereby does, indemnify and hold
harmless, to the extent permitted by law, the seller of any Registrable
Securities covered by such registration statement, its directors, officers or
general and limited partners, Affiliates (as so defined in the Securities Act)
or agents (and directors, officers and agents thereof), each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, as follows:

(i) against any and all loss, liability, claim, damage
or expense whatsoever, joint or several, as incurred, arising out of or
based upon an untrue statement or alleged untrue statement of a material
fact contained in any registration statement under which such securities
are registered (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
an untrue statement or alleged untrue statement of a material fact
contained in any preliminary, final or summary prospectus (or any
amendment or supplement thereto), including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage
and expense whatsoever, joint or several, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission,
if such settlement is effected with the

17
<PAGE>

written consent of the Company, which consent shall not be unreasonably
withheld or delayed; and

(iii) against any and all expense, as incurred
(including reasonable fees and disbursements of counsel), joint or
several, reasonably incurred by them in connection with investigating,
preparing or defending against any litigation, or investigation or
proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any such
expense is not paid under Section 2.5(a)(i) or Section 2.5(a)(ii);

PROVIDED, HOWEVER, that this indemnity does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by such underwriter or seller of Registrable Securities expressly for
use in the preparation of any registration statement (or any amendment thereto)
or any preliminary prospectus or prospectus (or any amendment or supplement
thereto); and PROVIDED, FURTHER, that the Company shall not be liable to (i)
any Person who participates as an underwriter in the offering or sale of
Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act or (ii) any seller of
Registrable Securities, under the indemnity agreement in this Section 2.5(a),
with respect to any preliminary prospectus or the final prospectus as amended or
supplemented, as the case may be, to the extent that any such loss, claim,
damage or liability of such underwriter or controlling Person, or seller of
Registrable Securities, results from the fact that such underwriter or such
seller sold Registrable Securities to a Person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the final
prospectus or of the final prospectus as then amended or supplemented, whichever
is most recent, if the Company has previously furnished copies thereof to such
underwriter or seller. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, general or limited partner, underwriter or controlling person
and shall survive the transfer of such securities by such seller.

18
<PAGE>

(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed pursuant to Section
2.1 or 2.2, that the Company shall have received an undertaking reasonably
satisfactory to it from each prospective seller of such Registrable Securities
and any underwriter of such Registrable Securities to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section
2.5(a)) the Company and its directors, officers and controlling persons, and all
other prospective sellers and their respective directors, officers, general and
limited partners, managing directors, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement, if such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such seller or underwriter specifically stating that
it is for use in the preparation of such registration statement, preliminary,
final or summary prospectus or amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company, any prospective seller, or any underwriter, as the case
may be, or any of their respective directors, officers, controlling Persons,
general or limited partners or managing directors and shall survive the transfer
of such securities by such seller or underwriter. In no event shall the
liability of any seller of Registrable Securities hereunder be greater in amount
than the dollar amount of the gross proceeds received by such seller upon the
sale of the Registrable Securities giving rise to such indemnification
obligation.

(c) Promptly after receipt by an indemnified party of notice of
the commencement of any action or proceeding (including any governmental
investigation) involving a claim within the scope of Section 2.5(a) or (b), such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action or proceeding; PROVIDED, HOWEVER, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of any liability which it may have under this Section 2.5
except to the extent it has been prejudiced in a material respect or from any
liability it may have otherwise than on account of this indemnity agreement. In
case any such action is brought against any

19
<PAGE>

indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent it may select by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying party in connection with the defense of such action,
(ii) the indemnifying party shall not have employed counsel to take charge of
the defense of such action within a reasonable time after notice of commencement
of the action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to the indemnifying party (in which case
the indemnifying party shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying party. Anything in
this Section 2.5 to the contrary notwithstanding, the indemnifying party shall
not be liable for any settlement of any claim or action effected without its
written consent; PROVIDED, HOWEVER, that such consent was not unreasonably
withheld.

(d) The Company and each seller of Registrable Securities shall
provide for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority other than the Securities Act.

Section 2.6. CONTRIBUTION. To provide for just and equitable
contribution in circumstances under which the indemnity contemplated by Section
2.5 is for any reason unavailable to, or insufficient to hold harmless, an
indemnified party although applicable in accordance with its terms, the Company,
the sellers of Registrable Securities and any underwriters shall contribute to
the aggregate losses, liabilities, claims, damages and expenses, of the nature
contemplated by such indemnity agreement, incurred by

20
<PAGE>

the Company, any seller of Registrable Securities and one or more of the
underwriters, except to the extent that contribution is not permitted under
Section 11(f) of the Securities Act. In determining the amount of contribution
to which the respective parties shall be entitled, there shall be considered the
relative benefits received by each party from the offering of the Registrable
Securities (taking into account the portion of the proceeds of the offering
realized by each), the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission and any other
equitable considerations appropriate under the circumstances. The Company and
each seller of Registrable Securities shall agree with each other and the
underwriters of the Registrable Securities, if requested by such underwriters,
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation (even if the underwriters were
treated as one entity for such purpose) or for the underwriters' portion of such
contribution to exceed the percentage that the underwriting discount bears to
the offering price of the Registrable Securities. Notwithstanding the
foregoing, the liability of any seller of Registrable Securities for
contribution shall not be greater in amount than the difference between the
dollar amount of the gross proceeds received by such seller upon the sale of the
Registrable Securities giving rise to such contribution obligation and all
amounts previously contributed by such seller with respect to such losses,
liabilities, claims, damages and expenses. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding. For purposes of this Section 2.6 each person, if any, who controls
an underwriter within the meaning of Section 15 of the Securities Act shall have
the same rights to contribution as such underwriter, and each director and each
officer of the Company who signed the registration statement, and each person,
if any, who controls the Company or a seller of Registrable Securities within
the meaning of Section 15 of the Securities Act shall have the same rights to
contribution as the Company or a seller of Registrable Securities, as the case
may be.

Section 2.7. NOMINEES OF BENEFICIAL OWNERS. In the event that
any Registrable Securities are held by a

21
<PAGE>

nominee for the beneficial owner thereof, the beneficial owner thereof may, at
its election, be treated as the seller for purposes of any request or other
action by a seller pursuant to this Agreement. If the beneficial owner of any
Registrable Securities so elects to be treated as the seller, the Company may
require assurances reasonably satisfactory to it of such owner's beneficial
ownership of such Registrable Securities.

Section 2.8. RESTRICTIONS ON SALE OF SECURITIES BY THE COMPANY AND
OTHERS. The Company agrees not to effect any public or private offer, sale or
distribution of any class or series of its capital stock or of any of its debt
securities, including a sale pursuant to Regulation D under the Securities Act,
during the 10-day period prior to, and during the 90-day period beginning on the
effectiveness of any Registration Statement filed under Section 2.1 hereof to
the extent timely notified in writing by Mutual or by the managing underwriter
or underwriters (except as part of such registration, if permitted, or pursuant
to registrations on Forms S-4 or S-8 or any successor form to such forms, any
employee stock option plan, stock ownership plan, stock bonus plan, stock
compensation plan or dividend reinvestment plan of the Company in effect at the
date of execution of any underwriting agreement with respect to such
underwritten registration, and except that the Company may issue any capital
stock issuable upon the conversion of securities or the exercise of warrants
outstanding at the date of such underwriting agreement).

ARTICLE III

OTHER TRANSFERS

Section 3.1. REMOVAL OF RESTRICTIVE LEGENDS. The Company agrees
to take such action as any seller of a Registrable Security may reasonably
request, all to the extent required from time to time to enable such seller of a
Registrable Security to sell such security without registration under the
Securities Act within the limitations of the exemptions provided by Rule 144 or
any similar rule or regulation adopted by the SEC, including, without
limitation, issuing certificates representing such Registrable Securities
without the legends described in Section 10.4 of the Subscription Agreement.

22
<PAGE>

ARTICLE IV

MISCELLANEOUS

Section 4.1. EFFECTIVENESS. This Agreement shall become
effective upon execution by each of the parties hereto.

Section 4.2. SUBMISSION TO JURISDICTION; CONSENT TO SERVICE OF
PROCESS.

(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
State of New York over any dispute arising out of or relating to this Agreement
or any of the transactions contemplated hereby and each party hereby irrevocably
agrees that all claims in respect of such dispute or any suit, action or
proceeding related thereto may be heard and determined in such courts. The
parties hereby irrevocably waive, to the fullest extent permitted by applicable
law, any objection which they may now or hereafter have to the laying of venue
of any such dispute brought in such court or any defense of inconvenient forum
for the maintenance of such dispute. Each of the parties hereto agrees that a
judgment in any such dispute may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.

(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section 4.5
hereto.

Section 4.3. SPECIFIC ENFORCEMENT; OTHER REMEDIES.

(a) Each party hereto acknowledges and agrees that this Agreement
is an integral part of the transactions contemplated in the Subscription
Agreement and that the other party hereto would be irreparably damaged in the
event that any of the provisions of this Agreement were not performed by such
party hereto in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that either party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically its terms and provisions in any court of the United States
or of

23
<PAGE>

any state or territory within the United States having jurisdiction over such
party; but such nonperformance or breach shall not entitle the non-breaching
party to terminate this Agreement. This remedy is in addition to any other
remedy to which each party may be entitled at law or equity.

(b) The parties further agree to waive any requirement for the
securing or posting of any bond in connection with the obtaining of any such
injunctive or equitable relief.

Section 4.4. SEVERABILITY. If any term, provisions covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.

Section 4.5. NOTICES. All notices and other communications under
this Agreement shall be in writing and shall be deemed given when delivered
personally, telecopied or three days after being mailed by registered mail,
return receipt requested, to the parties at the following addresses (or to such
other address as a party may have specified by notice given to the other party
pursuant to this provision):

If to Hexcel, to:

Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94578
Attention: Rodney P. Jenks, Esq.
Facsimile: (510) 734-8611

With a copy to:

Kronish, Lieb, Weiner & Hellman
1114 Avenue of the Americas
New York, New York 10036
Attention: Chet F. Lipton, Esq.
Facsimile: (212) 479-6275

24
<PAGE>

If to Mutual, to:

Mutual Series Fund, Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Attention: Peter Langerman
Facsimile: (201) 912-0147

With a copy to:

Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Ronald F. Daitz, Esq.
Facsimile: (212) 310-8007

All notices are effective upon receipt or upon refusal if properly delivered.

The names and addresses may be changed by written notice to each person listed
above.

Section 4.6. ENTIRE AGREEMENT. This Agreement contains the
entire understanding of the parties with respect to the transactions
contemplated hereby. This agreement supersedes all prior agreements and
understandings among any of the parties hereto with respect to its subject
matter.

Section 4.7. AMENDMENTS. This Agreement may be amended only by
written agreement of the Company and Mutual.

Section 4.8. DESCRIPTIVE HEADINGS; REFERENCES. The descriptive
headings are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. References herein to any
Section are to such Section contained in this Agreement.

Section 4.9. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the law of the State of New York without giving
effect to the principles of conflict of laws thereunder.

Section 4.10. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the successors
and assigns of each party, PROVIDED, HOWEVER, that the Company may not
assign its obligations hereunder. Subsequent holders of

25
<PAGE>

Registrable Securities shall be entitled to the benefits of Section 2.2 to the
extent provided therein and, at such time as Mutual does not beneficially own
any Registrable Securities, the holders of a majority of Registrable Securities
shall be entitled to exercise and to have the benefit of Mutual's rights under
this Agreement PROVIDED that, in each case, each such subsequent holder agrees
to be bound by the terms hereof and provides a copy of such agreement to the
Company. Notwithstanding anything to the contrary in this Agreement, the
Company shall have no obligation to furnish information or provide notices to
any seller of Registrable Securities (other than Mutual) unless the Company
shall have received a copy of such agreement from such seller.

26
<PAGE>

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

HEXCEL CORPORATION

By:___________________________
Name:
Title:

MUTUAL SERIES FUND, INC.

By:___________________________
Name:
Title:

27
<PAGE>

EXHIBIT VI

Summary of Terms of John Lee's Proposed Interim Employment Agreement with Hexcel
for the Period from September 1, 1994 through the Effective Date of the Plan of
Reorganization

1. TITLE. Lee will be the Chairman of the Board of Directors
and the Chief Executive Officer.

2. DUTIES. Lee will have the same duties as under his existing
employment agreement.

3. COMPENSATION. Base salary of $400,000 per year.

4. BENEFITS. Lee will be entitled to all insurance and other
benefits and perquisites generally available to senior executives of Hexcel and
will be entitled to participate in all retirement and other benefit plans
generally available to all senior executives and other employees of Hexcel,
including an executive deferred compensation agreement of the type described in
the Disclosure Statement.

5. REIMBURSEMENT. Lee will be entitled to reimbursement for
reasonable expenses incurred in the performance of his duties.

6. INDEMNIFICATION. Lee will be entitled to be indemnified by
Hexcel to the fullest extent permitted by law.

7. OFFICE. Hexcel will provide Lee with suitable executive
office space in the greater New York metropolitan area.

<PAGE>

Summary of Terms of John Lee's Proposed Employment Agreement with Hexcel upon
Confirmation of Plan of Reorganization

1. TITLE. Lee will be the Chairman of the Board of Directors
and the Chief Executive Officer. Upon Lee's hiring a new chief executive
officer approved by the Board, Lee will continue only as Chairman of the Board
of Directors and his base salary will be adjusted by mutual agreement of Lee and
Hexcel at that time.

2. TERM. Three years, with automatic renewal for additional
one-year terms unless either Hexcel or Lee notifies the other at least 90 days
prior to expiration of the term that the agreement will not be renewed.

3. DUTIES. Lee will be responsible for strategic planning,
including major corporate finance decisions and major corporate transactions;
reorganization of the corporation and the senior management; and recruiting and
hiring a new chief executive officer. Prior to the time that the new chief
executive officer is in place, Lee will also serve as and have the duties of the
chief executive officer of Hexcel. Lee's service to Hexcel will constitute his
principal business activity, although Lee will expressly be permitted to have
other business activities.

4. COMPENSATION. (i) Base salary of $400,000 per year; (ii)
annual bonus based on Lee's participation in the new incentive bonus plan.

5. OPTIONS. No later than December 31, 1994, Hexcel will award
Lee stock options to purchase up to 2% of Hexcel's issued and outstanding stock
(based on the shares outstanding upon consummation of the Plan) at an exercise
price per share equal to the exercise price for the Rights distributed to
existing stockholders of Hexcel pursuant to the Plan. These options will be
exercisable for a period of five years from the date of grant. One-third of the
options will vest on each of the first, second and third anniversaries of the
date of grant.

6. BENEFITS. Lee will be entitled to all insurance and other
benefits and perquisites generally available to senior executives of Hexcel and
will be entitled to participate in all retirement and other benefit plans
generally available to all senior executives and other employees of Hexcel,
including an executive deferred

<PAGE>

compensation agreement. For purposes of the computation of Lee's retirement
benefits under his executive deferred compensation agreement, in addition to
the salary and bonuses Lee will earn from Hexcel after the execution of his
agreement, Lee will be deemed to have been an executive employee of Hexcel for
15 years at an annual compensation equal to his 1995 salary and bonus from
Hexcel.

7. REIMBURSEMENT. Lee will be entitled to reimbursement for
reasonable expenses incurred in the performance of his duties.

8. INDEMNIFICATION. Lee will be entitled to be indemnified by
Hexcel to the fullest extent permitted by law.

9. SEVERANCE. If Lee's employment with Hexcel is terminated by
Hexcel without cause, or if Lee terminates his employment for cause, Lee will be
entitled to severance equal to the greater of (i) the amount which would have
been payable under his agreement if his employment had continued until the end
of the term of the agreement (including a reasonable estimate of his annual
bonus) or (ii) the product of two times the sum of his annual base salary plus
the highest bonus earned by Lee in any year during the term of the agreement.
In addition, all of Lee's stock options will immediately vest and become
exercisable for a period of not less than one year and/or the remainder of the
original three-year term (if longer), and Lee will be entitled to be paid the
amount of any non-vested benefits under the Salaried Employees Retirement
Program which are forfeited as a result of his termination.

In addition, if Hexcel notifies Lee that it will not renew his
employment for any of the one-year renewal periods, Lee will be entitled to
severance pay equal to the product of two times the sum of his annual base
salary.

Lee's right to severance payments will not be subject to any duty on
his part to mitigate damages and will not be reduced by any amount of
compensation which Lee may earn from any other sources.

10. OFFICE. Hexcel will provide Lee with suitable executive
office space in the greater New York metropolitan area.

<PAGE>

11. RESTRICTIVE COVENANT AND CONFIDENTIALITY. Lee will be
subject to a customary two-year non-compete provision after termination of his
employment and a customary confidentiality provision.

12. PRIOR AGREEMENT. Lee's claims against Hexcel under his
existing employment agreement will be resolved to his satisfaction.

13. INTERIM AGREEMENT. Hexcel will enter into an interim
employment agreement with Lee covering the period from September 1, 1994 to the
effectiveness of the Plan on terms satisfactory to Lee.

<PAGE>

EXHIBIT VII

OFFICERS WITH CONTINGENCY EMPLOYMENT AGREEMENTS

Thomas J. Lahey
Donald J. O'Mara
Gary L. Sandercock
William K. Woodrow
Robert Penezie
David Schmidt

<PAGE>

SCHEDULE 2.9(A)

The Company did not file New York State and New York City franchise
and General Corporation Tax returns for the periods 1983-1993, and those
jurisdictions assert that returns should have been filed. See Schedule 2.14.

Hexcel S.A. (Belgium) did not file information pertaining to
payments on its intercompany debt, and the Belgian tax authorities assert that
information should have been filed. See Schedule 2.14

Hexcel S.A. (Belgium) has a longstanding VAT dispute regarding
exports to Hexcel's German subsidiary. Among other things, Hexcel S.A.
(Belgium) did not file certain VAT forms, which the Belgian tax authorities
assert should have been filed. The dispute has been inactive for some time, but
it is not resolved. The amount in question is about $250,000.

<PAGE>
SCHEDULE 2.9(B)

The Company has not paid the following taxes that were reported as
due on tax returns filed since the Company's bankruptcy filing: (1) Delaware,
franchise tax ($33,327.31); (2) Arizona Department of Environmental Quality, tax
on underground storage tanks ($3,073.80); and (3) California State Board of
Equalization, environmental fee ($831.25) and tax on underground storage tanks
($244.00).

In addition, the Company has not paid deferred installments of
Washington state sales and use tax relating to the construction of its
Burlington facility. The amount deferred is $126,440 and the amount delinquent
is $12,500.

Hexcel, S.A. (Belgium) has a longstanding dispute regarding VAT on
exports to the German affiliate. The dispute has been inactive for some time,
but it is not resolved. The amount in question is about $250,000.

<PAGE>
SCHEDULE 2.9(C)

Hexcel S.A. has a longstanding dispute regarding VAT on exports to
the German affiliate. The dispute has been inactive for some time, but is not
resolved. The amount in question is about $250,000.

<PAGE>
SCHEDULE 2.9(F)(II)

The IRS proposes to change the Company's method of inventory
identification from the LIFO method to FIFO and to change the method of
accounting for inventory balances from the "practical capacity" method to an
acceptable method.

<PAGE>
SCHEDULE 2.13(A)

Listing of Domestic Employee Benefits; Hexcel Corporation
July 7, 1994

A. Medical Insurance:

1. Metropolitan indemnity plan: health, dental & drug
2. Health maintenance organizations
3. Blue Cross/Blue Shield of Pennsylvania
4. Retiree medical plan*
5. International medical insurance
6. COBRA coverage
7. Management health examination program

B. Life Insurance:

1. Term Life Insurance; basic (company paid) and supplemental
2. Accidental death & dismemberment; basic and supplemental
3. Business travel accident
4. Self-insured death benefit ($5,000)
5. Term life insurance; long-term disabled

C. Sick Leave and Disability Benefits:

1. Sick leave
2. Short-term disability
3. Long-term disability
4. Workers compensation

D. Time Off Benefits

1. Holidays
2. Vacations
3. Paid time off: jury duty, miliary duty, and funeral leave
4. Leaves of absence
5. Reduction in workforce policy (severance pay)*

E. Spending Accounts:

1. Dependent day care spending account
2. Health care spending account

* Welfare plan providing continuing benefits after termination of
employment

<PAGE>

F. Retirement and Savings Plan

1. Hourly Employees Savings Plan
2. Hourly Employees Pension Plan**
3. Salaried Employees Retirement Savings Plan
4. Executive Deferred Compensation Agreements
5. Directors Retirement Plan

G. Incentive Plans:

1. 1994 sales incentive plan
2. Nonfinancial recognition award
3. Retention bonus - domestic exempt employees
4. Salaried Employees Benefit Sharing Plan
5. Safety awards
6. Frequent Flyer incentive program

H. Other Benefits:

1. Tuition Reimbursement
2. Employee assistance program
3. Service awards

** Multiple Employer Plan

<PAGE>
SCHEDULE 2.13(B)

Listing of Multiple Employer Plans

1. Hexcel Corporation Hourly Employees Pension Plan

<PAGE>
SCHEDULE 2.13(E)

This schedule provides the necessary disclosure if the First Closing Date occurs
after the date required by law for amending the following plans (December 31,
1994):
1. Hourly Employees Pension Plan
2. Hourly Employees Retirement Savings Plan
3. Salaried Employees Retirement Program

<PAGE>
SCHEDULE 2.14
LITIGATION AND CLAIMS
ARELLANO, SAMUEL v. HEXCEL CORPORATION
BELT, WILLIAM D., ET AL. v. LOCKHEED, HEXCEL, ET AL.
BROWN, SALLIE D., ET AL. v. LOCKHEED, HEXCEL, ET AL.
BURTON v. A.P. GREEN INDUSTRIES, INC., ET AL.
DILLARD, JANE, ET AL. v. LOCKHEED, HEXCEL, ET AL.
FOSTER, LINDELL v. HEXCEL SA AND HEXCEL CORPORATION
GOUDREAU, RICHARD v. HEXCEL CORPORATION
HALL, DALE, ET AL. v. ABEX CORPORATION, HEXCEL, ET AL.
JONES, ET AL. v. LOCKHEED, HEXCEL CORPORATION, ET AL.
KOWALSKI, MARLENE, ET AL. v. ABEX CORPORATION, HEXCEL
MERRIT v. ARMSTRONG WORLD INDUSTRIES, INC. ET AL.
MUCIA v. HEXCEL, FINE ORGANICS, ET AL.
O'BRIEN v. A.P. GREEN INDUSTRIES, INC., ET AL.
O'CONNER, MICHAEL F., ET AL. v. LOCKHEED, HEXCEL, ET AL.
OROZCO, ET AL. v. LOCKHEED, HEXCEL, ET AL.
SMITH v. F&P PROPERTIES, HEXCEL, ET AL.
THIOKOL CORPORATION v. ORMOND, INC., ET AL.
THOMPSON, JOSEPH, ET AL. v. ABEX CORPORATION, HEXCEL
TORRES, EDWARD LUIS v. LOCKHEED, HEXCEL, ET AL.
WHITE, GAIL A., ET AL. v. LOCKHEED, HEXCEL, ET AL.
Miscellaneous employment related cases and claims against the Material
Subsidiaries
Claims against Hexcel S.A. (the Belgium subsidiary) in connection with the sale
of allegedly defective panels for use in train cars

<PAGE>
The IRS is examining the Company's 1989 and 1990 federal income tax
returns. Various inventory adjustments, including a change from the LIFO method
of inventory identification to FIFO and change from the "practical capacity"
method of calculating inventory balances to an acceptable method, could result
in a deficiency for 1989 of about $3.2 million. The examination of the 1990 tax
year is expected to produce a refund of about $3.2 million. After taking into
account interest on deficiencies and estimated state tax liabilities, which
include a California depreciation adjustment which could be as much as $200,000,
the net liability to the Corporation could be $1,000,000.

The Company is now undergoing an audit by New York State to
determine how much of the Company's income should be allocated to New York State
and subjected to New York's franchise tax during the 1983 through 1993 years.
The State is seeking $335,000-350,000 of tax, penalties and interest, but the
Company hopes to reduce this number before the audit is closed. Among other
unresolved issues are the sourcing of receipts for goods shipped F.O.B. an
out-of-state factory and consolidated in New York for transshipment. Also in
issue are various goods shipped to non-New York locations but billed to New York
addresses. There will be some exposure to New York City taxes as a consequence
of the activity to which the New York State audit relates, but the

<PAGE>
company expects the New York City exposure to be substantially lower than the
New York State exposure because most of the activity in question took place
outside New York City.

The City of Chandler, Arizona, has filed a claim in the Bankruptcy
Court for $625,613 of use taxes that are alleged to be owing on materials and
supplies purchased for the Chandler plant other than those consumed in the
manufacturing process. The Company believes that this claim is grossly
exaggerated. The Company expects to settle the claim for a lower amount.

The Company is about to complete an Ohio sales and use tax audit.
It is estimated that this audit will result in sales and use tax liability of
approximately $7,000 (including penalties and interest).

The Company recently learned that Pennsylvania plans to commence a
franchise tax and sales and use tax audit in December 1994.

Hexcel S.A. (Belgium) borrowed $5.6 million from the Company and did
not withhold at the treaty rate (15%) on interest payments made to the Company.
The Belgian tax authorities have asserted a tax deficiency of about 10-11
million Belgian francs (about $300,000).

Hexcel S.A. (Belgium) has a longstanding dispute regarding VAT on
exports to the German affiliate. The

<PAGE>

dispute has been inactive for some time, but it is not resolved. The amount in
question is about $250,000.

The French subsidiary, Hexcel S.A. (France), is undergoing a social
security tax audit. Thus far, the company has agreed to a tax deficiency of
90,000 French francs (about $15,000).
<PAGE>

EXHIBIT C

<PAGE>

EXHIBIT C
RESTATED
CERTIFICATE OF INCORPORATION
OF
HEXCEL CORPORATION
(FORMERLY HEXCEL MERGER CORPORATION)

HEXCEL CORPORATION, a corporation organized and existing by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:

FIRST: Hexcel Corporation was originally incorporated in the State
of Delaware as HEXCEL MERGER CORPORATION on March 2, 1983. On May 2, 1983, an
Agreement of Merger was filed with the State of Delaware, whereby Hexcel
Corporation, a California corporation, was merged with and into Hexcel Merger
Corporation, and the name of Hexcel Merger Corporation was changed to Hexcel
Corporation.

SECOND: This Restated Certificate of Incorporation of Hexcel
Corporation attached hereto as Appendix A is made and filed pursuant to an order
of the United States Bankruptcy Court, Northern District of California, dated
____________, 1994 in IN RE HEXCEL CORPORATION Case No. 93-48535-T under title
11 of the United States Code, a copy of which is attached hereto.

THIRD: Among the changes from the previous Certificate of
Incorporation are the following:

1) The minimum number of authorized directors has been
lowered from eight to seven and the initial number of
directors has been set at nine.

2) The proportion of shares required to change

<PAGE>

the number of directors within the authorized range has
been lowered from 75% to a majority of the voting power
of the Corporation.

3) Section 6.5, which required a demand by a stockholder in
order to vote for directors by a written ballot, has
been deleted.

4) Section 8, which required a supermajority vote for
certain business combinations and other transactions,
has been deleted.

5) Section 9.1 (restated as Section 8.1), which required
the affirmative vote of 75% of the voting power of the
Corporation to adopt, amend, or repeal certain By-laws,
has been amended to lower the proportion of shares
required to effectuate such actions to a majority of the
voting power of the Corporation.

6) Section 9.2 (restated as Section 8.2), which required
the affirmative vote of 75% of the voting power of the
Corporation to adopt, amend or repeal certain provisions
of the Certificate of Incorporation and to adopt any
cumulative voting provisions, has been amended to lower
the proportion of shares required to effectuate such
actions to a majority of the voting power of the
Corporation.

7) The Series A Junior Participating Preferred,

<PAGE>

previously authorized pursuant to a Board of
Director's resolution, is no longer authorized.

FOURTH: As a result of the filing of this Certificate, the total
number of shares which the Company is authorized to issue shall be changed in
accordance with the attached plan of reorganization from 20,450,000, consisting
of 450,000 shares of Preferred Stock without par value and 20,000,000 shares of
Common Stock with par value of $.01 per share, into 71,500,000 authorized
shares, consisting of 1,500,000 shares of Preferred Stock without par value and
70,000,000 shares of Common Stock with par value of $.01 per share.

IN WITNESS WHEREOF, Hexcel Corporation has caused this Restated
Certificate of Incorporation to be signed by John J. Lee, its Chairman of the
Board of Directors, and attested by Rodney P. Jenks, Jr., its Secretary, this
____ day of __________, 1994.

HEXCEL CORPORATION, a Delaware
corporation

By______________________________
John J. Lee
Chairman of the Board of Directors
ATTEST:

___________________________________
Rodney P. Jenks, Jr., Secretary

<PAGE>

APPENDIX A

RESTATED
CERTIFICATE OF INCORPORATION
OF
HEXCEL CORPORATION

1. NAME. The name of this Corporation is

HEXCEL CORPORATION.

2. REGISTERED AGENT. The address in the State of Delaware of
the registered office of the Corporation is Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle, and the name of
its registered agent at that address is The Corporation Trust Company.

3. PURPOSE. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.

4. CAPITALIZATION. The total number of shares which the
Corporation is authorized to issue is 71,500,000, consisting of 1,500,000
shares of Preferred Stock without par value (hereinafter in this Certificate
called the "Preferred Stock"), and 70,000,000 shares of Common Stock with par
value of $.01 per share (hereinafter in this Certificate called the "Common
Stock"). The rights, preferences, privileges and restrictions granted to or
imposed on the Preferred Stock and the Common Stock, and the holders thereof,
are set forth in Sections 5 through 8 hereof, inclusive.

5. PREFERRED STOCK. The Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is hereby authorized
to determine or alter the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series of Preferred Stock,
including without limiting the generality of the preceding clause, the authority
to fix or alter the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preference of said shares. The
Board of Directors is further authorized to determine or alter the number of
shares of Preferred Stock constituting any such series and the designation
thereof, and to increase or decrease the number of any series subsequent to the
issue of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of

1
<PAGE>

any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.

6. DIRECTORS.

6.1 NUMBER OF DIRECTORS. Except as provided in any certificate
filed pursuant to Section 151(g) of the General Corporation Law of Delaware
designating the number of shares of Preferred Stock to be issued and the rights,
preferences, privileges and restrictions granted to and imposed on the holders
of such designated Preferred Stock, as permitted by Section 5 hereof, the
authorized number of directors of the Corporation shall be not less than seven
(7) nor more than fifteen (15). The initial number of directors is fixed at
nine (9). The exact number of directors within such range may be changed from
time to time by an amendment to the By-Laws duly adopted by the Board of
Directors or by the holders of a majority of the voting power of the
Corporation.

6.2 CLASSIFIED BOARD.

(a) Except as provided in Subsection 6.2(b) hereof, the Board of
Directors shall be and is divided into three classes, Class I, Class II and
Class III, as nearly equal in number of directors as possible, with the term of
office of the directors of one class expiring each year. Each director shall
serve for a term ending on the date of the third annual meeting following the
annual meeting at which such director was elected; provided, however, that the
directors first elected to Class I shall serve for a term ending on the date of
the annual meeting next following the end of the calendar year 1994, the
directors first elected to Class II shall serve for a term ending on the date of
the second annual meeting next following the end of the calendar year 1994, and
the directors first elected to Class III shall serve for a term ending on the
date of the third annual meeting next following the end of the calendar year
1994. In the event of any change in the authorized number of directors, the
Board of Directors shall apportion any newly created directorships to, or reduce
the number of directorships in, such class or classes as shall, so far as
possible, equalize the number of directors in each class. If, consistent with
the rule that the three classes shall be as nearly equal in number of directors
as possible, any newly created directorship may be allocated to one of two or
more classes, the Board of Directors shall allocate it to the available class
whose term of office is due to expire at the latest date following such
allocation. Notwithstanding any of the foregoing, each director shall serve for
a term continuing until the annual meeting of the stockholders at which the term
of the class to which he was elected expires and until his successor is elected
and qualified or until his earlier death, resignation or removal.

2
<PAGE>

(b) Notwithstanding any of the provisions of the foregoing
Subsection 6.2(a) or any other provision of this Section 6, whenever the holder
of any one or more classes or series of Preferred Stock issued by the
Corporation shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies, removal and other features of such directorships
shall be governed by the terms of this Certificate of Incorporation applicable
thereto, and by the terms of any certificate filed pursuant to Section 151(g) of
the General Corporation Law of Delaware designating the number of shares of
Preferred Stock to be issued and the rights, preferences, privileges and
restrictions granted to and imposed on the holder of such designated Preferred
Stock, as permitted by Section 5 hereof, and such directors so elected shall not
be divided into classes pursuant to Section 6.2(a) unless expressly provided by
such terms.

6.3 REMOVAL OF DIRECTORS. Except as provided in Subsection
6.2(b) hereof, a director may be removed from office at any time, but only for
cause, and only by the affirmative vote of the holders of a majority of shares
entitled to vote at an election of directors. No reduction in the number of
directors shall have the effect of removing any director prior to the expiration
of his term.

6.4 VACANCIES. Except as provided in Subsection 6.2(b) hereof,
any vacancies in the Board of Directors for any reason, and any newly created
directorships resulting from any increase in the number of directors, may be
filled only by the Board of Directors, acting by a majority of the directors
then in office, although less than a quorum; and any directors so chosen shall
hold office until the next election of the class for which such directors shall
have been chosen, and until their successors shall be elected and qualified.

6.5 MANAGEMENT BY DIRECTORS. The following provisions are
inserted for the management of the business and the conduct of the affairs of
the Corporation, and for further definition, limitation and regulation of the
powers of the Corporation and of its directors and stockholders:

(a) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.

(b) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the
statutes of Delaware, this Certificate of Incorporation, and any By-Laws duly
adopted by the stockholders, provided, however, that no By-Laws hereafter
adopted or amended by the stockholders shall invalidate any prior act of

3
<PAGE>

the directors which would have been valid if such By-Laws had not been adopted
or amended.

7. ACTION BY STOCKHOLDERS; SPECIAL MEETINGS; VOTING. All
action required or permitted to be taken by the Corporation's stockholders must
be effected at a duly called annual or special meeting (and may not be effected
by written consent in lieu thereof). Special meetings of the stockholders of
the Corporation for any purpose or purposes may be called at any time by the
Board of Directors, the Chairman of the Board of Directors, the President, or by
a committee of the Board of Directors which has been duly designated by the
Board of Directors and whose powers and authority, as provided in a resolution
of the Board of Directors or in the By-Laws of the Corporation, include the
power to call such meetings, but such special meetings may not be called by any
other person or persons; provided, however, that if and to the extent that any
special meeting of stockholders may be called by any other person or persons
specified in any provisions of the Certificate of Incorporation or any amendment
thereto or in any certificate filed under Section 151(g) of the Delaware General
Corporation Law (or its successor statute as in effect from time to time
hereafter) then such special meeting may also be called by such person or
persons in the manner, at the times and for the purposes so specified. Except
as provided in this Certificate of Incorporation or as otherwise provided in the
By-laws or by law, a stockholder shall be entitled to one vote for each share
held of record on the record date fixed for the determination of the
stockholders entitled to vote at a meeting or, if no such date is fixed, the
date determined in accordance with law. If any share is entitled to more or
less than one vote on any matter, all references herein to a majority or other
proportion of shares shall refer to a majority or other proportion of the voting
power of shares entitled to vote on such matter.

8. AMENDMENT OF CERTIFICATE AND BY-LAWS.

8.1 BY-LAWS. New By-Laws of the Corporation may be adopted or
the By-Laws of the Corporation may be amended or repealed by a vote of either a
majority of the directors of the Corporation or the holders of a majority of the
voting power of the Corporation; PROVIDED, HOWEVER, that any By-Laws
concerning the election or removal of directors, the range of the number of
directors and the method of fixing such range and the exact number of directors
within such range, the classification of the Board of Directors, the filling of
vacancies on the Board of Directors, the prohibition of action by the
stockholders without a meeting, the calling of special meetings of the
stockholders, and the method of adopting, amending or repealing of By-Laws may
not be amended, adopted or repealed, nor shall any other By-Law be amended,
adopted or repealed which will have the effect of modifying or permitting the
circumvention of such By-Laws unless such adoption, amendment or repeal is
approved by the affirmative vote of the holders of a

4
<PAGE>

majority of the voting power of the Corporation.

8.2 CERTIFICATE. The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereinafter prescribed by statute, and all
rights conferred to stockholders herein are granted subject to this reservation.
Notwithstanding the foregoing, the provisions set forth in Section 6.1, Section
6.2, Section 6.3, Section 6.4, Section 7, and this Section 8 may not be repealed
or amended in any respect, nor may any cumulative voting provision be adopted,
nor may any other provision be amended, adopted or repealed which would have the
effect of modifying or permitting the circumvention of such provisions, unless
such repeal, amendment or adoption is approved by the affirmative vote of the
holders of a majority of the voting power of the Corporation.

9. DIRECTORS' LIABILITY; INDEMNIFICATION.

9.1 ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS. A director of
the Corporation shall not be personally liable to the Corporation or its
stockholders, including for monetary damages for breach of fiduciary duty as a
director, to the fullest extent authorized by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended (but, with
respect to any acts or omissions of such director occurring prior to such
amendment, only to the extent that such amendment further limits or eliminates
the liability of directors than said law permitted the Corporation to provide
prior to such amendment). Notwithstanding the foregoing, a director's liability
is not limited with respect to any of the following actions unless permitted by
an amendment hereafter of either the General Corporation Law of the State of
Delaware or this provision: (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware
(regarding unlawful dividends or redemptions) or (iv) for any transaction from
which the director derived an improper personal benefit. No amendment to or
repeal of any portion or all of these provisions shall have any effect to expand
the liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment.

9.2 INDEMNIFICATION AND INSURANCE.

(a) RIGHT TO INDEMNIFICATION OF DIRECTORS AND OFFICERS. Each
person who was or is made a party or is threatened to be made a party to or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal

5
<PAGE>

representative,

(1) is or was a director or officer of the Corporation, or

(2) is or was a director or officer of the Corporation and is
or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans,

whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended (but, with respect to any acts or omissions occurring prior to such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise taxes or penalties under
the Employee Retirement Income Security Act of 1974, as amended, and amounts
paid or to be paid in settlement) actually and reasonably incurred or suffered
by such person in connection therewith and such indemnification shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and administrators;
PROVIDED, HOWEVER, that, except as provided in Subsection 9.2(c) hereof, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Section 9.2 and
the elimination of certain liability provided in Section 9.1 are intended to
create contractual obligations of the Corporation which cannot be modified
except with respect to actions, suits or proceedings accruing subsequent to any
modification. This right to indemnification shall include the right to be paid
by the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; PROVIDED, HOWEVER, that, if the General
Corporation Law of the State of Delaware requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a proceeding
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined

6
<PAGE>

that such director or officer is not entitled to be indemnified under this
Section 9.2 or otherwise.

(b) RIGHT TO INDEMNIFICATION OF OTHER EMPLOYEES AND AGENTS. The
Corporation shall provide indemnification, with the same scope and effect as the
indemnification of directors and officers provided in Subsection 9.2(a), to
other employees and agents of the Corporation or to a person who is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, PROVIDED, HOWEVER, that such indemnification shall only be made
upon a determination (in accordance with the General Corporation Law of the
State of Delaware) that the employee or agent has met the standard of conduct
which makes such indemnification permissible under such Law and, if the Company
so requires, only upon delivery of an undertaking, by or on behalf of such
employee or agent, to repay all amounts so advanced if it shall ultimately be
determined that such employee or agent is not entitled to be indemnified under
this Section 9.2 or otherwise.

(c) RIGHT OF CLAIMANT TO BRING SUIT. If a claim for
indemnification under either Subsection 9.2(a) or 9.2(b) is not paid in full by
the Corporation within thirty days after a written claim has been received by
the Corporation, the director, officer, employee or agent so entitled may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall also be
entitled to be paid the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim
under Section 9.2(a) for advancement of expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the General
Corporation Law of the State of Delaware for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the General Corporation Law of the
State of Delaware, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action for advancement of expenses under Subsection 9.2(a) or create a
presumption that such claimant has not met the applicable standard of conduct.

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(d) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section 9.2 shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of this Certificate of Incorporation, By-Law, agreement, vote of
stockholders or disinterested directors or otherwise.

(e) INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or other corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.

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EXHIBIT D
---------
<PAGE>

HEXCEL CORPORATION

RESTATED BY-LAWS

AS OF , 1994

INDEX

- - ------------------------------------------------------------------------------
SECTION SUBJECT PAGE
- - ------------------------------------------------------------------------------

OFFICES

1. Principal Office...................................................1
2. Other Offices......................................................1

STOCKHOLDERS

3. Place of Meetings..................................................1
4. Annual Meetings....................................................1
5. Special Meetings...................................................2
6. Adjourned Meetings and Notice Thereof..............................2
7. Voting ............................................................3
8. Quorum.............................................................3
9. Action Without Meeting.............................................3
10. Proxies............................................................3
11. List of Stockholders...............................................4
11.1. Business of Annual Meetings........................................4

DIRECTORS

12. Powers.............................................................5
13. Number of Directors................................................6
14. Election, Term of Office and Vacancies.............................6
15. Removal............................................................7
16. Resignation........................................................8
17. Compensation.......................................................8
18. Committees.........................................................8
19. Time and Place of Meetings and Telephone Meetings..................8
20. Call...............................................................8
21. Notice.............................................................9
22. Meeting Without Regular Call and Notice............................9
23. Action Without Meeting.............................................9
24. Quorum and Required Vote...........................................9
25. Committee Meetings................................................10
26. Interested Directors..............................................10
27. Honorary Advisors to the Board....................................11

<PAGE>

28. Employee Compensation Measures....................................11

OFFICERS

29. Titles and Relation to Board of Directors.........................11
30. Election, Term of Office and Vacancies............................11
31. Resignation.......................................................12
32. Salaries..........................................................12
33. Chairman of the Board.............................................12
34. Chief Executive Officer...........................................12
35. President and Vice Presidents.....................................12
36. Secretary.........................................................13
(a) Record of Corporate Proceedings..............................13
(b) Record of Shares.............................................13
(c) Notices......................................................13
(d) Additional Powers and Duties.................................13
37. Treasurer.........................................................13
38. Other Officers....................................................13

39. Certificates......................................................14
40. Transfers of Shares of Capital Stock..............................14
41. Registered Shareholders...........................................14
42. Lost or Destroyed Certificates....................................14
43. Record Date and Closing of Stock Books............................14
44. Transfer Agents and Registrars....................................15

AMENDMENTS

45. Adoption of Amendments............................................15
46. Record of Amendments..............................................15

CORPORATE SEAL

47. Form of Seal......................................................15

MISCELLANEOUS

48. Checks, Drafts, Etc...............................................16
49. Contracts, Etc.; How Executed.....................................16
50. Representation of Shares of Other Corporations....................16
51. Inspection of By-Laws.............................................16
52. Dividends.........................................................16
53. Fiscal Year.......................................................17
54. Construction and Definitions......................................17

<PAGE>

RESTATED
BY-LAWS OF HEXCEL CORPORATION
(FORMERLY HEXCEL MERGER CORPORATION)
A DELAWARE CORPORATION
AS OF , 1994

OFFICES

1. PRINCIPAL OFFICE. The principal office for the transaction of the
business of the Corporation is hereby fixed and located at 5794 W. Las Positas
Boulevard, Pleasanton, California. The Board of Directors is hereby granted full
power and authority to change the place of said principal office.

2. OTHER OFFICES. The registered office in the State of Delaware is
hereby fixed and located at the Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware. The Board of Directors is hereby granted full power and
authority to change the place of said registered office within the State of
Delaware. Branch or subordinate offices may at any time be established by the
Board of Directors at any place or places where the Corporation is qualified to
do business.

STOCKHOLDERS

3. PLACE OF MEETINGS. Stockholders' meetings shall be held at the
principal office for the transaction of the business of this Corporation, or at
such other place, whether within or without the State of Delaware, as the Board
of Directors shall, by resolution, appoint.

4. ANNUAL MEETINGS. The annual meetings of stockholders shall be held
on such date and at such time as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting. At such meetings
directors shall be elected, reports of the affairs of the Corporation shall be
considered, and any other business may be transacted which is within the powers
of the stockholders.

Written notice of each annual meeting shall be mailed to each
stockholder entitled to vote, addressed to such stockholder at his address
appearing on the books of the Corporation or given by him to the Corporation for
the purpose of notice. If a stockholder gives no address, notice shall be deemed
to have been given if sent by mail or other means of written communication
addressed to the place where the principal executive office of the Corporation
is situated, or if published at least once in some newspaper of general
circulation in the county in which said office is located. All such notices
shall be mailed, postage prepaid, to each stockholder entitled thereto not less
than ten (10) days nor more

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than sixty (60) days before each annual meeting. Such notices shall specify the
place, the day, and the hour of such meeting, the names of the nominees for
election as directors if directors are to be elected at the meeting, and those
matters which the Board of Directors intends to present for action by the
stockholders, and shall state such other matters, if any, as may be expressly
required by statute.

5. SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose or purposes, may be called at any time by the Board of Directors, the
Chairman of the Board, the President, or by a committee of the Board of
Directors which has been duly designated by the Board of Directors and whose
powers and authority, as provided in a resolution of the Board of Directors or
in the By-Laws of the Corporation, include the power to call such meetings, but
such special meetings may not be called by any other person or persons;
provided, however, that if and to the extent that any special meeting of
stockholders may be called by any other person or persons specified in any
provisions of the Certificate of Incorporation or any amendment thereto, or any
certificate filed under Section 151(g) of the Delaware General Corporation Law
designating the number of shares of Preferred Stock to be issued and the rights,
preferences, privileges and restrictions granted to and imposed on the holders
of such designated Preferred Stock, as permitted by Section 5 of the Certificate
of Incorporation, then such special meeting may also be called by the person or
persons in the manner, at the times and for the purposes so specified. Except
in special cases where other express provision is made by statute, notice of
such special meeting shall be given in the same manner as for an annual meeting
of stockholders. Said notice shall specify the general nature of the business
to be transacted at the meeting. No business shall be transacted at a special
meeting except as stated in the notice sent to stockholders, unless by the
unanimous consent of all stockholders represented at the meeting, either in
person or by proxy. Upon written request to the Chairman of the Board, the
President or the Secretary by any person (but not the Board of Directors)
entitled to call a special meeting of stockholders, the person receiving such
request shall cause a notice to be given to the stockholders entitled to vote
that a meeting will be held at a time requested by the person calling the
meeting not less than thirty (30) nor more than sixty (60) days after the
receipt of the request.

6. ADJOURNED MEETINGS AND NOTICE THEREOF. Any stockholders' meeting,
annual or special, whether or not a quorum is present, may be adjourned from
time to time by the vote of a majority of the shares, the holders of which are
either present in person or represented by proxy thereat, but in the absence of
a quorum no other business may be transacted at such meeting.

Notice of an adjourned meeting need not be given if (a) the meeting
is adjourned for thirty (30) days or less, (b) the time

2
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and place of the adjourned meeting are announced at the meeting at which the
adjournment is taken, and (c) no new record date is fixed for the adjourned
meeting. Otherwise, notice of the adjourned meeting shall be given as in the
case of an original meeting.

7. VOTING. Except as otherwise provided by law, the Certificate of
Incorporation or these By-laws, a stockholder shall be entitled to one vote for
each share held of record on the record date fixed for the determination of the
stockholders entitled to vote at a meeting or, if no such date is fixed, the
date determined in accordance with law. If any share is entitled to more or
less than one vote on any matter, all references herein to a majority or other
proportion of shares shall refer to a majority or other proportion of the voting
power of shares entitled to vote on such matter.

8. QUORUM. A majority of the shares entitled to vote, represented in
person or by proxy, constitutes a quorum for the transaction of business. No
business may be transacted at a meeting in the absence of a quorum other than
the adjournment of such meeting, except that if a quorum is present at the
commencement of a meeting, business may be transacted until the meeting is
adjourned even though the withdrawal of stockholders results in less than a
quorum. If a quorum is present at a meeting, the affirmative vote of a majority
of the shares represented at the meeting and entitled to vote on any matter
shall be the act of the stockholders unless the vote of a larger number is
required by law, the Certificate of Incorporation or these By-Laws. If a quorum
is present at the commencement of a meeting but the withdrawal of stockholders
results in less than a quorum, the affirmative vote of the majority of shares
required to constitute a quorum shall be the act of the stockholders unless the
vote of a larger number is required by law, the Certificate of Incorporation or
these By-Laws. Any meeting of stockholders, whether or not a quorum is present,
may be adjourned by the vote of a majority of the shares represented at the
meeting.

9. ACTION WITHOUT MEETING. All action required or permitted to be
taken by the Corporation's stockholders must be effected at a duly called annual
or special meeting (and may not be effected by written consent in lieu thereof).

10. PROXIES. A stockholder may be represented at any meeting of
stockholders by a written proxy signed by the person entitled to vote or by such
person's duly authorized attorney-in-fact. A proxy must bear a date within three
(3) years prior to the meeting, unless the proxy specifies a different length of
time. A revocable proxy is revoked by a writing delivered to the Secretary of
the Corporation stating that the proxy is revoked or by a subsequent proxy
executed by, or by attendance at the meeting and voting in person by, the person
executing the proxy.

3
<PAGE>

11. LIST OF STOCKHOLDERS. The Secretary of the Corporation shall
prepare and make, at least ten (10) days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.

11.1. BUSINESS OF ANNUAL MEETINGS. Except to the extent, if any,
specifically provided to the contrary in the Certificate of Incorporation or
these By-Laws, to be properly brought before the annual meeting, all business
must be either (a) specified in the notice of annual meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the annual meeting by or at the direction of the Board
of Directors, or (c) otherwise properly brought before the annual meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before any annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation (i)
not later than 120 calendar days in advance of the date which is one year after
the date of the Company's proxy statement released to stockholders in connection
with the previous year's annual meeting of stockholders, or (ii) by such other
date as is required by Rule 14a-8(a)(3)(i) under the Securities Exchange Act of
1934 (or any successor rule) in order for the matter covered by such notice to
included in the Company's proxy statement. A stockholder's notice to the
Secretary shall set forth with respect to each matter the stockholder proposes
to bring before the annual meeting (w) a brief description of the business
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (x) the name and record address of the
stockholder proposing such business, (y) the class and number of shares of the
Corporation that are beneficially owned by the stockholder, and (z) any material
interest of the stockholder in such business.

The Chairman of the annual meeting shall, if the facts warrant,
determine and declare to the meeting that the business was not properly brought
before the meeting in accordance with the provisions of this Section 11.1, and
any such business not properly brought before the meeting shall not be
transacted.

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<PAGE>

DIRECTORS

12. POWERS. Subject to limitations of the Certificate of
Incorporation, of the By-Laws, and of the General Corporation Law of Delaware as
to action to be authorized or approved by the stockholders, and subject to the
duties of directors as prescribed by the By-Laws, all corporate powers shall be
exercised by or under the ultimate direction of, and the business and affairs of
the Corporation shall be managed by, the Board of Directors. Without prejudice
to such general powers, but subject to the same limitations, it is hereby
expressly declared that the directors shall have the following powers:

(a) To select and remove all of the officers, and other agents and
employees of the Corporation, prescribe such powers and duties for them as may
not be inconsistent with law, with the Certificate of Incorporation or the
By-Laws, fix their compensation and require from them security for faithful
service.

(b) To conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefor not inconsistent
with law, or with the Certificate of Incorporation, or the By-Laws, as they may
deem best.

(c) To change the principal office for the transaction of the
business of the Corporation from one location to another as provided in Section
1 hereof; to fix and locate from time to time one or more branch or subordinate
offices of the Corporation as provided in Section 2 hereof; to designate any
place for the holding of any stockholders' meeting or meetings; and to prescribe
the forms of certificates of stock, and to alter the form of such certificates
from time to time, as in their judgment they may deem best, provided such
certificates shall at all times comply with the provisions of law.

(d) To authorize the issuance of shares of capital stock of the
Corporation from time to time, upon such terms as may be lawful.

(e) To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations, or other evidences of debt and securities therefor.

13. NUMBER OF DIRECTORS.

(a) Except as provided in Subsection 6.1 of the Certificate of
Incorporation and in any certificate filed pursuant to Section 151(g) of the
General Corporation Law of Delaware designating the number of shares of
Preferred Stock to be issued and the rights, preferences, privileges and
restrictions granted to

5
<PAGE>

or imposed on the holders of such designated Preferred Stock, as permitted by
Section 5 of the Certificate of Incorporation, the authorized number of
directors of this Corporation shall be not less than seven (7) nor more than
fifteen (15). The exact number of directors shall be fixed from time to time by
an amendment to Subsection (b) of this Section duly adopted by the Board of
Directors or by the holders of a majority of the shares of the Corporation.

(b) Subsection (a) of this Section provides for an indefinite number
of directors and requires this Subsection, from time to time, to specify the
exact number. Pursuant thereto it is hereby specified that this Corporation
shall have nine (9) directors.

14. ELECTION, TERM OF OFFICE AND VACANCIES.

(a) Except as provided in Subsections 6.2(a) and 6.2(b) of the
Certificate of Incorporation and in Subsection 14(b) below, the Board of
Directors shall be and is divided into three classes, Class I, Class II and
Class III, as nearly equal in number of directors as possible, with the term of
office of the directors of one class expiring each year. Each director shall
serve for a term ending on the date of the third annual meeting following the
annual meeting at which such director was elected; provided, however, that the
directors first elected to Class I shall serve for a term ending on the date of
the annual meeting next following the end of the calendar year 1994, the
directors first elected to Class II shall serve for a term ending on the date of
the second annual meeting next following the end of the calendar year 1994, and
the directors first elected to Class III shall serve for a term ending on the
date of the third annual meeting next following the end of the calendar year
1994. In the event of any change in the authorized number of directors, the
Board of Directors shall apportion any newly created directorships to, or reduce
the number of directorships in, such class or classes as shall, so far as
possible, equalize the number of directors in each class. If, consistent with
the rule that the three classes shall be as nearly equal in number of directors
as possible, any newly created directorship may be allocated to one of two or
more classes, the Board of Directors shall allocate it to the available class
whose term of office is due to expire at the latest date following such
allocation. Notwithstanding any of the foregoing, each director shall serve for
a term continuing until the annual meeting of the stockholders at which the term
of the class to which he was elected expires and until his successor is elected
and qualified or until his earlier death, resignation or removal.

Except as provided in the Certificate of Incorporation and in
Subsection 14(b) hereof, any vacancies in the Board of Directors for any reason,
and any newly created directorships resulting from any increase in the number of
directors, may be

6
<PAGE>

filled by the Board of Directors, acting by a majority of the directors then in
office, although less than a quorum; and any directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen, and until their successors shall be elected and qualified.

(b) Notwithstanding any provisions of Subsection 6.2(a) or any other
provision of Section 6 of the Certificate of Incorporation or the provisions of
Sections 13, 14 and 15 hereof, whenever the holders of any one or more classes
or series of Preferred Stock issued by the Corporation shall have the right,
voting separately by class or series, to elect directors at any annual or
special meeting of stockholders, the election, term of office, filling of
vacancies, removal and other features of such directorships shall be governed by
the terms of the Certificate of Incorporation applicable thereto, and by the
terms of any certificate filed pursuant to Section 151(g) of the General
Corporation Law of Delaware designating the number of shares of Preferred Stock
to be issued and the rights, preferences, privileges and restrictions granted to
and imposed on the holders of such designated Preferred Stock, as permitted by
Section 5 of the Certificate of Incorporation, and such directors so elected
shall not be divided into classes pursuant to Section 6.2(a) of the Certificate
of Incorporation or Section 14(a) hereof unless expressly provided by such
terms.

15. REMOVAL. Except as provided in the Certificate of Incorporation
and in Subsection 14(b) hereof, a director may be removed from office at any
time, but only for cause, and only by the affirmative vote of the holders of a
majority of shares entitled to vote at an election of directors. No reduction
in the number of directors shall have the effect of removing any director prior
to the expiration of his term.

16. RESIGNATION. Any director may resign by giving written notice to
the Chairman of the Board, the President, the Secretary or the Board of
Directors. Such resignation shall be effective when given unless the notice
specifies a later time. The resignation shall be effective regardless of whether
it is accepted by the Corporation.

17. COMPENSATION. If the Board of Directors so resolves, the
directors, including the Chairman of the Board, shall receive compensation and
expenses of attendance for meetings of the Board of Directors and of committees
of the Board. Nothing herein shall preclude any director from serving the
Corporation in another capacity and receiving compensation for such service.

18. COMMITTEES. The Board of Directors may, by resolution adopted by a
majority of the authorized number of directors, designate one or more
committees, each consisting of two or more directors, to serve at the pleasure
of the Board. In the absence

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<PAGE>

or disqualification of any member of a committee of the Board, the other members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board to act in the place of such absent or disqualified member. The Board may
designate one or more directors as alternate members of a committee who may
replace any absent member at any meeting of the committee. To the extent
permitted by resolution of the Board of Directors, a committee may exercise all
of the authority of the Board to the extent permitted by Section 141(c) of the
General Corporation Law of Delaware.

19. TIME AND PLACE OF MEETINGS AND TELEPHONE MEETINGS. Immediately
following each annual meeting of stockholders, the Board of Directors shall hold
a regular meeting for the purposes of organizing the Board, election of officers
and the transaction of other business. The Board may establish by resolution
the times, if any, other regular meetings of the Board shall be held. All
meetings of directors shall be held at the principal executive office of the
Corporation or at such other place as shall be designated in the notice for the
meeting or in a resolution of the Board of Directors, whether within or without
the State of Delaware. Directors may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all
directors participating in such meeting can hear each other.

20. CALL. Meetings of the Board of Directors, whether regular or
special, may be called by the Chairman of the Board, any Chief Executive
Officer, the President, the Secretary, or any two directors.

21. NOTICE. Regular meetings of the Board of Directors may be held
without notice if the time of such meetings has been fixed by the Board.
Special meetings shall be held upon four days' notice by mail or 24 hours notice
delivered personally or by telephone, telegraph or confirmed facsimile, and
regular meetings shall be held upon similar notice if notice is required for
such meetings. Neither a notice nor a waiver of notice need specify the purpose
of any regular or special meeting. Notice sent by mail or telegram shall be
addressed to a director at his business or home address as shown upon the
records of the Corporation, or at such other address as the director specifies
in writing delivered to the Corporation, or if such an address is not so shown
on such records and no written instructions have been received from the
director, at the place in which meetings of directors are regularly held. Such
mailing, telegraphing, delivery or transmittal, as above provided, shall be due,
legal and personal notice to such director. If a meeting is adjourned for more
than 24 hours, notice of the adjourned meeting shall be given prior to the time
of such meeting to the directors who were not present at the time of the
adjournment.

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22. MEETING WITHOUT REGULAR CALL AND NOTICE. The transactions of any
meeting of the Board of Directors, however called and noticed or wherever held,
are as valid as though had at a meeting duly held after regular call and notice
if a quorum is present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes of the meeting. For such purposes, a
director shall not be considered present at a meeting if, although in attendance
at the meeting, the director protests the lack of notice prior to the meeting or
at its commencement.

23. ACTION WITHOUT MEETING. Any action required or permitted to be
taken by the Board of Directors may be taken without a meeting, if all of the
members of the Board individually or collectively consent in writing to such
action.

24. QUORUM AND REQUIRED VOTE. A majority of the directors then in
office shall constitute a quorum for the transaction of business, provided that
unless the authorized number of directors is one, the number constituting a
quorum shall not be less than the greater of one-third of the authorized number
of directors or two directors. Except as otherwise provided by the Certificate
of Incorporation or these By-Laws, every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present is the act of the Board. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority of the
required quorum for such meeting. A majority of the directors present at a
meeting, whether or not a quorum is present, may adjourn the meeting to another
time and place.

25. COMMITTEE MEETINGS. The principles set forth in Sections 19
through 24 of these By-Laws shall apply to committees of the Board of Directors
and to actions by such committees.

26. INTERESTED DIRECTORS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors or committee thereof which authorizes
the contract or transaction, or solely because his or their votes are counted
for such purpose if (a) the material facts as to his or their relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors,

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even though the disinterested directors may be less than a quorum; or (b) the
material facts as to his or their relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or (c) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved or ratified
by the Board of Directors, a committee thereof or the stockholders; or (d) such
other facts or circumstances exist as would make such contract or transaction
not void or voidable solely for such reason under any applicable provision of
the General Corporation Law of the State of Delaware with respect to contracts
or transactions involving interested directors. Common or interested directors
may be counted in determining the presence of a quorum at a meeting of the Board
of Directors or of a committee which authorizes the contract or transaction.

Subject to the provisions of the above paragraph, the Corporation
may lend money to, or guarantee any obligation of, or otherwise assist any
officer or other employee of the Corporation or of any of its subsidiaries,
including any officer or employee who is a director of the Corporation or any of
its subsidiaries, whenever, in the judgment of the directors, such loan,
guaranty or assistance may reasonably be expected to benefit the Corporation.
The loan, guaranty or other assistance may be with or without interest, and may
be unsecured, or secured in such manner as the Board of Directors shall approve,
including, without limitation, a pledge of shares of stock of the Corporation.
Nothing in this Section contained shall be deemed to deny, limit or restrict the
powers of guaranty or warranty of any corporation at common law or under any
statute.

27. HONORARY ADVISORS TO THE BOARD. The Board of Directors may appoint
one or more Honorary Advisors, who shall hold such position for such period,
shall have such authority and perform such duties as the Board of Directors may
specify, subject to change at any time by the Board of Directors. An Honorary
Advisor to the Board shall not be a director for any purpose or with respect to
any provision of these By-Laws or of the General Corporation Law of Delaware,
and shall have no vote as a director. However, an Honorary Advisor to the Board
shall receive the same compensation and expense reimbursement as a director for
attendance at directors' meetings.

28. EMPLOYEE COMPENSATION MEASURES. No director shall vote upon any
employee compensation measure in which he has a direct personal interest and any
vote cast on such measures by such a director shall be nullified and deemed
void. Directors having such an interest may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such a measure. The term
"employee compensation measures" shall include, without limitation, salary,

10
<PAGE>

bonus, stock options, stock purchase plans, retirement benefits, etc., but shall
not include directors' fees and compensation as referred to in Section 17.

OFFICERS

29. TITLES AND RELATION TO BOARD OF DIRECTORS. The officers of the
Corporation shall include one or more Chief Executive Officers, a President, a
Secretary and a Treasurer. The Board of Directors may also choose a Chairman of
the Board, one or more Vice Chairmen of the Board, a Chief Financial Officer, a
General Counsel, and one or more Vice Presidents, Assistant Secretaries,
Assistant Treasurers or other officers. All officers shall perform their duties
and exercise their powers subject to the direction of the Board of Directors.
If there shall occur a vacancy, in the absence of appointment by the Board of
Directors, any Chief Executive Officer shall have the right and power to appoint
a Secretary, a Treasurer, a Chief Financial Officer, a General Counsel, an
Executive Vice President, one or more additional Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers, all of whom shall
serve at the pleasure of the Board of Directors, and shall perform their duties
and exercise their powers subject to the direction of any Chief Executive
Officer, subject to the overriding direction of the Board of Directors. No Vice
President, Assistant Secretary or Assistant Treasurer shall be appointed for a
term of office exceeding the term of office of the President, Secretary or
Treasurer, respectively. Any number of offices may be held by the same person.

30. ELECTION, TERM OF OFFICE AND VACANCIES. At its regular meeting
after each annual meeting of stockholders, the Board of Directors shall choose
the officers of the Corporation. No officer need be a member of the Board of
Directors except the Chairman of the Board. The officers shall hold office
until their successors are chosen, except that the Board of Directors may remove
any officer at any time. Subject to Section 29 of these By-laws, if an office
becomes vacant for any reason, the vacancy shall be filled by the Board.

31. RESIGNATION. Any officer may resign at any time upon written
notice to the Corporation without prejudice to the rights, if any, of the
Corporation under any contract to which the officer is a party. Such
resignation shall be effective when given unless the notice specifies a later
time. The resignation shall be effective regardless of whether it is accepted
by the Corporation.

32. SALARIES. The Board of Directors shall fix the salaries of the
Chairman of the Board, any Vice Chairman and any Chief Executive Officer and may
fix the salaries of other employees of the Corporation including the other
officers. If the Board does not fix the salaries of the other officers, any
Chief Executive

11
<PAGE>

Officer shall fix such salaries.

33. CHAIRMAN OF THE BOARD. The Chairman of the Board shall, if
present, preside at all meetings of the Board of Directors, and exercise and
perform such other powers and duties as may be from time to time assigned to him
by the Board of Directors or prescribed by the By-Laws. In the absence or
disability of any Chief Executive Officer, the Chairman of the Board shall
perform all the duties of any Chief Executive Officer, and when so acting shall
have all the powers, and be subject to all restrictions upon, the Chief
Executive Officer.

34. CHIEF EXECUTIVE OFFICER. Unless otherwise determined by the Board
of Directors, any Chief Executive Officer shall be deemed general manager of the
Corporation, and shall, in the absence of a Chairman of the Board, preside at
all meetings of the Board of Directors and stockholders, shall be ex officio a
member of any committees of the Board, shall effectuate orders and resolutions
of the Board of Directors and shall exercise such other powers and perform such
other duties as the Board of Directors shall prescribe.

35. PRESIDENT AND VICE PRESIDENTS. In the absence or disability of any
Chief Executive Officer and of the Chairman of the Board, the President, and in
the absence or disability of the President, the Vice President, if any, or if
more than one, the Vice Presidents in order of their rank as fixed by the Board
of Directors or, if not so ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of any Chief Executive Officer, and when
so acting shall have all the powers of, and be subject to all the restrictions
upon, the Chief Executive Officer. The President and Vice Presidents shall have
such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Board of Directors or the By-Laws.

36. SECRETARY. The Secretary shall have the following powers and
duties:

(a) RECORD OF CORPORATE PROCEEDINGS. The Secretary shall attend
all meetings of the Board of Directors and its committees and shall record all
votes and the minutes of such meetings in a book to be kept for that purpose at
the principal executive office of the Corporation or at such other place as the
Board of Directors may determine. The Secretary shall keep at the Corporation's
principal executive office the original or a copy of the By-Laws, as amended.

(b) RECORD OF SHARES. Unless a transfer agent is appointed by
the Board of Directors to keep a share register, the Secretary shall keep at the
principal executive office of the Corporation a share register showing the names
of the stockholders

12
<PAGE>

and their addresses, the number and class of shares held by each, the number and
date of certificates issued, and the number and date of cancellation of each
certificate surrendered for cancellation.

(d) ADDITIONAL POWERS AND DUTIES. The Secretary shall exercise
such other powers and perform such other duties as the Board of Directors or any
Chief Executive Officer shall prescribe.

37. TREASURER. Unless otherwise determined by the Board of Directors,
the Treasurer of the Corporation shall be its chief financial officer, and shall
have custody of the corporate funds and securities and shall keep adequate and
correct accounts of the Corporation's properties and business transactions. The
Treasurer shall disburse such funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, shall render
to any Chief Executive Officer and directors, at regular meetings of the Board
of Directors or whenever the Board may require, an account of all transactions
and the financial condition of the Corporation and shall exercise such other
powers and perform such other duties as the Board of Directors or any Chief
Executive Officer shall prescribe.

38. OTHER OFFICERS. The other officers, if any, of this Corporation
shall perform such duties as may be assigned to them by the Board of Directors,
except as otherwise provided in Section 29.

39. CERTIFICATES. A certificate or certificates for shares of the
capital stock of the Corporation shall be issued to each stockholder when any
such shares are fully paid up. All such certificates shall be signed by the
Chairman of the Board, any Vice Chairman, any Chief Executive Officer, the
President or a Vice President and the Secretary or Assistant Secretary. Any
signature on the certificate may be by facsimile.

40. TRANSFERS OF SHARES OF CAPITAL STOCK. Transfers of shares shall be
made only upon the transfer books of this Corporation, kept at the office of the
Corporation or transfer agents designated to transfer such shares, and before a
new certificate is issued, the old certificate shall be surrendered for
cancellation.

41. REGISTERED SHAREHOLDERS. Registered stockholders only shall be
entitled to be treated by the Corporation as the holders in fact of the shares
standing in their respective names and the

13
<PAGE>

Corporation shall not be bound to recognize any equitable or other claim to or
interest in any share of any other person, whether or not it shall have express
or other notice thereof, except as expressly provided by the law of Delaware.

42. LOST OR DESTROYED CERTIFICATES. The Corporation may cause a new
stock certificate to be issued in place of any certificate previously issued by
the Corporation alleged to have been lost, stolen or destroyed. The Corporation
may, at its discretion and as a condition precedent to such issuance, require
the owner of such certificate to deliver an affidavit stating that such
certificate was lost, stolen or destroyed, or to give the Corporation a bond or
other security sufficient to indemnify it against any claim that may be made
against it, including any expense or liability, on account of the alleged loss,
theft or destruction or the issuance of a new certificate.

43. RECORD DATE AND CLOSING OF STOCK BOOKS. The Board of Directors may
fix a time, in the future, not more than sixty (60) nor less than ten (10) days
prior to the date of any meeting of stockholders, nor more than sixty (60) days
prior to the date fixed for the payment of any dividend or distribution, or for
the allotment of rights, or when any change or conversion or exchange of shares
shall go into effect, as a record date for the determination of the stockholders
entitled to notice of and to vote at any such meeting, or entitled to receive
any such dividend or distribution, or any such allotment of rights, or to
exercise the rights in respect to any such change, conversion, or exchange of
shares, and in such case except as provided by law, only stockholders of record
on the date so fixed shall be entitled to notice of and to vote at such meeting
or to receive such dividend, distribution, or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the Corporation after any record date fixed as aforesaid.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting unless the
Board of Directors fixes a new record date. The Board of Directors shall fix a
new record date if the adjourned meeting takes place more than thirty (30) days
from the date set for the original meeting.

44. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint
one or more transfer agents or transfer clerks, and one or more registrars, who
shall be appointed at such times and places as the requirements of the
Corporation may necessitate and the Board of Directors may designate.

AMENDMENTS

45. ADOPTION OF AMENDMENTS. New By-Laws of this Corporation may be
adopted or these By-Laws may be amended or repealed by a vote of either a
majority of directors of the Corporation or a

14
<PAGE>

majority of the shares of the Corporation; provided, however, that, except as
specifically provided in Section 13, the provisions set forth in Sections 5, 9,
13(a), 14, 15, and 45 shall not be adopted, amended or repealed, nor shall any
other By-Law be adopted, amended or repealed which will have the effect of
modifying or permitting the circumvention of such By-Laws unless such adoption,
amendment or repeal is approved by the affirmative vote of a majority of the
shares of the Corporation.

46. RECORD OF AMENDMENTS. Whenever an amendment or new
By-Law is adopted, it shall be copied in the Book of By-Laws with the original
By-Laws, in the appropriate place. If any By-Laws or By-Law is amended, the
fact of repeal with the date of the meeting at which the repeal was enacted or
written assent was filed shall be stated in said book.

CORPORATE SEAL

47. FORM OF SEAL. The corporate seal shall be circular in form, and
shall have inscribed thereon the name of the Corporation, the date of its
incorporation and the word "Delaware".

MISCELLANEOUS

48. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for
payment of money, notes, or other evidences of indebtedness, issued in the name
of or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time shall be determined by
resolution of the Board of Directors.

49. CONTRACTS, ETC.; HOW EXECUTED. The Board of Directors, except as
otherwise provided in these By-Laws, may authorize any officer or officers, or
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the Corporation, and such authority may be general or
confined to specific instances; and unless so authorized by the Board of
Directors, no officer, agent, or employee shall have any power or authority to
bind the Corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or for any amount.

50. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The Chairman of
the Board, any Chief Executive Officer, the President or any Vice President and
the Secretary or Assistant Secretary of this Corporation are authorized to vote,
represent, and exercise on behalf of this Corporation all rights incident to and
all shares of any other corporation or corporations standing in the name of this

15
<PAGE>

Corporation. The authority herein granted to said officers to vote or represent
on behalf of this Corporation any and all shares held by this Corporation in any
other corporation or corporations may be exercised either by such officers in
person or by any other person authorized so to do by proxy or power of attorney
duly executed by said officers.

51. INSPECTION OF BY-LAWS. The Corporation shall keep in its principal
office for the transaction of business the original or a copy of these By-Laws
as amended or otherwise altered to date, certified by the Secretary, which shall
be open to inspection by the stockholders at all reasonable times during office
hours.

52. DIVIDENDS. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock of the Corporation.
Before payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors,
from time to time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for any proper purpose, and the
Board of Directors may modify or abolish any such reserve.

53. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.

54. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise
requires, the general provisions, rules and construction, and definitions
contained in the General Corporation Law of Delaware shall govern the
construction of these By-Laws. Without limiting the generality of the
foregoing, the masculine gender includes the feminine and neuter, the singular
number includes the plural and the plural number includes the singular, and the
term "person" includes a corporation as well as a natural person.

<PAGE>
KRONISH, LIEB, WEINER & HELLMAN
ROBERT J. FEINSTEIN, ESQ.
CHET F. LIPTON, ESQ.
1114 Avenue of the Americas
New York, New York 10036
Telephone (212) 479-6000

- and -

GOLDBERG, STINNETT, MEYERS & DAVIS
A Professional Corporation
MERLE C. MEYERS, ESQ. #066849
44 Montgomery Street, Suite 2900
San Francisco, California 94104
Telephone: (415) 362-5045

Attorneys for Debtor in Possession

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

)
In re ) No. 93-48535 T
)
HEXCEL CORPORATION, a ) Chapter 11
Delaware corporation, )
)
Debtor. )
)
Tax Id. No. 94-1109521 )
___________________________________)

DEBTOR'S DISCLOSURE STATEMENT PURSUANT
TO SECTION 1125 OF THE BANKRUPTCY CODE
- - --------------------------------------

THIS IS NOT A SOLICITATION OF ACCEPTANCES OR REJECTIONS OF THE PLAN.
ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS
BEEN APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT HAS NOT BEEN
APPROVED BY THE BANKRUPTCY COURT.

Dated: July 27, 1994
<PAGE>

TABLE OF CONTENTS
-----------------

PAGE
----

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. OVERVIEW OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . 7

A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 7

B. Material Elements of the Plan. . . . . . . . . . . . . . . . .10

1. Rights Offering and Mutual
Series Stock Purchase. . . . . . . . . . . . . . . . . . .11
2. Treatment of Principal
Mutual Claims. . . . . . . . . . . . . . . . . . . . . . .13
3. Treatment of BNP Claims
and Renewal and Extension
of the Letters of Credit . . . . . . . . . . . . . . . . .13
4. Treatment of the
Subordinated Debentures. . . . . . . . . . . . . . . . . .16
5. Summary of Classification and
Treatment of All Claims and
Equity Interests Under the Plan. . . . . . . . . . . . . .17
6. Summary of Ownership of
Reorganized Hexcel Common Stock. . . . . . . . . . . . . .22

III. GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . .23

A. Description and History of Business. . . . . . . . . . . . . .23

B. Significant Product Lines. . . . . . . . . . . . . . . . . . .28

1. Honeycomb. . . . . . . . . . . . . . . . . . . . . . . . .28
2. Advanced Composites. . . . . . . . . . . . . . . . . . . .31
3. Reinforcement Fabrics. . . . . . . . . . . . . . . . . . .32
4. Resins . . . . . . . . . . . . . . . . . . . . . . . . . .33

C. Products and Processes, Research and Development . . . . . . .34

D. Raw Materials. . . . . . . . . . . . . . . . . . . . . . . . .34

E. Markets and Customers. . . . . . . . . . . . . . . . . . . . .34

F. Marketing. . . . . . . . . . . . . . . . . . . . . . . . . . .39

G. Backlog. . . . . . . . . . . . . . . . . . . . . . . . . . . .39

H. International Operations . . . . . . . . . . . . . . . . . . .40

<PAGE>
I. Hexcel S.A.. . . . . . . . . . . . . . . . . . . . . . . . . .42

J. Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . .44

1. Knytex . . . . . . . . . . . . . . . . . . . . . . . . . .44
2. Hexcel - Fyfe. . . . . . . . . . . . . . . . . . . . . . .44
3. DIC-Hexcel Ltd.. . . . . . . . . . . . . . . . . . . . . .45

K. Discontinued Operations. . . . . . . . . . . . . . . . . . . .47

L. Competition. . . . . . . . . . . . . . . . . . . . . . . . . .47

M. Patents and Know-How . . . . . . . . . . . . . . . . . . . . .48

N. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . .49

O. Properties . . . . . . . . . . . . . . . . . . . . . . . . . .49

P. Events Leading to the Commencement of the Chapter 11 Case. . .51

IV. EVENTS DURING THE CHAPTER 11 CASE. . . . . . . . . . . . . . . . . .59

A. Appointment of the Creditors'
Committee . . . . . . . . . . . . . . . . . . . . . . . . . .59

B. Appointment of the Equity Security
Holders' Committee . . . . . . . . . . . . . . . . . . . . . .61

C. DIP Credit Facility. . . . . . . . . . . . . . . . . . . . . .63

D. Employee Retention Plan. . . . . . . . . . . . . . . . . . . .64

E. Development and Implementation
of Revised Strategic Plan. . . . . . . . . . . . . . . . . . .64

1. Background . . . . . . . . . . . . . . . . . . . . . . . .64
2. Establishing A Core Business . . . . . . . . . . . . . . .66
3. Decision to Support Hexcel S.A.. . . . . . . . . . . . . .66
4. Low Observable Operations. . . . . . . . . . . . . . . . .67
5. Plant Consolidations . . . . . . . . . . . . . . . . . . .68
6. Downsizing . . . . . . . . . . . . . . . . . . . . . . . .69
7. Headquarters . . . . . . . . . . . . . . . . . . . . . . .70
8. Rationalizing and Streamlining of
Core Business. . . . . . . . . . . . . . . . . . . . . . .70
9. Improvement of Manufacturing Processes . . . . . . . . . .71
10. The Strategic Plan . . . . . . . . . . . . . . . . . . . .71

F. Approval of Transactions with Hexcel S.A.. . . . . . . . . . .72

G. Proposed Sale of Resins Business . . . . . . . . . . . . . . .73

<PAGE>
H. Fine Organics Litigation . . . . . . . . . . . . . . . . . . .75

I. Confidentiality Orders . . . . . . . . . . . . . . . . . . . .76

J. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . .77

V. THE PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . .77

A. Classification and Treatment of
Claims and Equity Interests. . . . . . . . . . . . . . . . . .78

1. Administrative Expense and Priority Tax Claims . . . . . .78
a. Administrative Expense Claims . . . . . . . . . . . .78
b. Priority Tax Claims . . . . . . . . . . . . . . . . .80
2. Class 1 -- Other Priority Claims . . . . . . . . . . . . .81
3. Class 2 -- Secured Claims. . . . . . . . . . . . . . . . .82
4. Class 3 -- IDRB Claims . . . . . . . . . . . . . . . . . .83
5. Class 4 -- BNP Claims. . . . . . . . . . . . . . . . . . .87
6. Class 5 -- General Unsecured Claims. . . . . . . . . . . .91
7. Class 6 -- Principal Mutual Claims . . . . . . . . . . . .92
8. Class 7 -- Environmental Claims. . . . . . . . . . . . . .94
9. Class 8 -- Intercompany Claims . . . . . . . . . . . . . 109
10. Class 9 -- Subordinated Debenture
Claims. . . . . . . . . . . . . . . . . . . . 109
11. Class 10 -- Section 510(b) Hexcel Common
Stock Trading Claims . . . . . . . . . . . . 110
12. Class 11 -- Hexcel Common Stock
Interests. . . . . . . . . . . . . . . . . . 111
13. Class 12 -- Hexcel Options . . . . . . . . . . . . . . . 113

B. Summary of Other Provisions of the Plan. . . . . . . . . . . 114

1. Reorganized Hexcel Common
Stock and Rights . . . . . . . . . . . . . . . . . . . . 114
2. The Stock Subscription
and Standby Purchase Agreement . . . . . . . . . . . . . 116
a. Stock Purchase if Class 9 Accepts
the Plan. . . . . . . . . . . . . . . . . . . . . 117
b. Stock Purchase if Class 9 Rejects
the Plan. . . . . . . . . . . . . . . . . . . . . 118
c. General Terms and Conditions. . . . . . . . . . . . 119
3. The Registration Rights Agreement. . . . . . . . . . . . 129
4. Conditions Precedent to the Plan . . . . . . . . . . . . 130
5. Time and Method of Distributions
Under the Plan . . . . . . . . . . . . . . . . . . . . . 131
6. Record Date and Surrender of
Existing Securities. . . . . . . . . . . . . . . . . . . 132
7. Executory Contracts and
Unexpired Leases . . . . . . . . . . . . . . . . . . . . 133
8. Retiree Benefits . . . . . . . . . . . . . . . . . . . . 135

iii

<PAGE>
9. Provisions for Treatment
of Disputed Claims . . . . . . . . . . . . . . . . . . . 135
10. Restatement of the Debtor's
Certificate of Incorporation
and By-laws. . . . . . . . . . . . . . . . . . . . . . . 136
11. Discharge of the Debtor. . . . . . . . . . . . . . . . . 140
12. Amendment of the Plan. . . . . . . . . . . . . . . . . . 141
13. Indemnification. . . . . . . . . . . . . . . . . . . . . 141
14. Revocation of the Plan . . . . . . . . . . . . . . . . . 142
15. Extinguishment of Causes of Action
Under the Avoiding Power Provisions. . . . . . . . . . . 142
16. Termination of Creditors'
and Equity Committees. . . . . . . . . . . . . . . . . . 142
17. Exculpation. . . . . . . . . . . . . . . . . . . . . . . 143
18. Supplemental Documents . . . . . . . . . . . . . . . . . 143

VI. CONFIRMATION AND CONSUMMATION PROCEDURE. . . . . . . . . . . . . . 144

A. Solicitation of Votes. . . . . . . . . . . . . . . . . . . . 144
B. The Confirmation Hearing . . . . . . . . . . . . . . . . . . 145
C. Confirmation . . . . . . . . . . . . . . . . . . . . . . . . 147

1. Acceptance . . . . . . . . . . . . . . . . . . . . . . . 147
2. Unfair Discrimination and
Fair and Equitable Tests . . . . . . . . . . . . . . . . 147

a. Secured Creditors . . . . . . . . . . . . . . . . . 148
b. Unsecured Creditors . . . . . . . . . . . . . . . . 148
c. Equity Interests. . . . . . . . . . . . . . . . . . 148

3. Feasibility. . . . . . . . . . . . . . . . . . . . . . . 149
4. Best Interests Test. . . . . . . . . . . . . . . . . . . 152

D. Consummation . . . . . . . . . . . . . . . . . . . . . . . . 155
E. Exit Financing . . . . . . . . . . . . . . . . . . . . . . . 156

VII. MANAGEMENT OF THE REORGANIZED DEBTOR . . . . . . . . . . . . . . . 156

A. Board of Directors and Management. . . . . . . . . . . . . . 156

1. Composition of the
Board of Directors . . . . . . . . . . . . . . . . . . . 156
2. Identity of Officers . . . . . . . . . . . . . . . . . . 157

B. Compensation of Executive Officers . . . . . . . . . . . . . 159
C. Compensation of Directors. . . . . . . . . . . . . . . . . . 171
D. Employment Agreements. . . . . . . . . . . . . . . . . . . . 172

1. Employment Agreements of
Messrs. Lee and Doyle. . . . . . . . . . . . . . . . . . 172
2. New Employment Agreement
with Mr. Lee . . . . . . . . . . . . . . . . . . . . . . 175

<PAGE>
3. Employment Separation Agreement
of Mr. Witt. . . . . . . . . . . . . . . . . . . . . . . 178
4. Contingency Employment Agreements. . . . . . . . . . . . 179
5. Compensation Committee Interlocks7
and Insider Participation. . . . . . . . . . . . . . . . 180

E. Incentive Bonus Plan . . . . . . . . . . . . . . . . . . . . 181
F. Executive Deferred Compensation and
Consulting Agreements. . . . . . . . . . . . . . . . . . . . 182
G. Deferred Compensation Plan . . . . . . . . . . . . . . . . . 182
H. 1988 Management Stock Option Program . . . . . . . . . . . . 183
I. New Long Term Incentive Plan . . . . . . . . . . . . . . . . 184

1. Purpose. . . . . . . . . . . . . . . . . . . . . . . . . 185
2. Eligibility and Extent of
Participation. . . . . . . . . . . . . . . . . . . . . . 185
3. Administration . . . . . . . . . . . . . . . . . . . . . 186
4. Types of Awards. . . . . . . . . . . . . . . . . . . . . 187

a. Stock Option. . . . . . . . . . . . . . . . . . . . 187
b. Incentive Stock Option. . . . . . . . . . . . . . . 187
c. Stock Option in Lieu of
Compensation Election . . . . . . . . . . . . . . . 188
d. Stock Appreciation Rights . . . . . . . . . . . . . 188
e. Restricted Shares . . . . . . . . . . . . . . . . . 189
f. Dividend or Equivalent . . . . . . . . . . . . . . 189
g. Stock Award . . . . . . . . . . . . . . . . . . . . 189
h. Other Stock-Based Awards. . . . . . . . . . . . . . 189

5. Securities Subject to the Plan . . . . . . . . . . . . . 189
6. Exercise and Term of Options . . . . . . . . . . . . . . 189
7. Transferability of Options and Awards. . . . . . . . . . 191
8. Effect of Certain Changes. . . . . . . . . . . . . . . . 191
9. Amendment and Termination of the
Incentive Plan. . . . . . . . . . . . . . . . . . . 192
10. Certain Federal Income Tax
Consequences . . . . . . . . . . . . . . . . . . . . . . 193

a. General . . . . . . . . . . . . . . . . . . . . . . 193
b. Nonstatutory Stock Options. . . . . . . . . . . . . 193
c. Incentive Stock Options . . . . . . . . . . . . . . 194
d. Stock Option in Lieu of
Compensation Election . . . . . . . . . . . . . . . 195
e. Stock Appreciation Rights . . . . . . . . . . . . . 195
f. Restricted Shares . . . . . . . . . . . . . . . . . 196

J. Salaried Employees Retirement Program. . . . . . . . . . . . 197
K. Retiree Stock Bonus Plan . . . . . . . . . . . . . . . . . . 198
L. Compensation for Extraordinary Efforts . . . . . . . . . . . 198
M. Post-Effective Date Security Ownership
of Certain Beneficial Owners . . . . . . . . . . . . . . . . 200
N. Investment by Management . . . . . . . . . . . . . . . . . . 201

<PAGE>
VIII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES
LAWS TO THE REORGANIZED HEXCEL COMMON STOCK AND
RIGHTS TO BE DISTRIBUTED UNDER THE PLAN. . . . . . . . . . . . . . 201

A. Issuance of Securities . . . . . . . . . . . . . . . . . . . 201

1. Generally. . . . . . . . . . . . . . . . . . . . . . . . 201
2. Resale Considerations. . . . . . . . . . . . . . . . . . 203
3. Delivery of Disclosure Statement . . . . . . . . . . . . 207

IX. REORGANIZATION VALUES. . . . . . . . . . . . . . . . . . . . . . . 207

X. CERTAIN RISK FACTORS TO BE CONSIDERED. . . . . . . . . . . . . . . 212

A. Overall Risks to Recovery by
Holders of Claims. . . . . . . . . . . . . . . . . . . . . . 212

1. Projected Financial Information. . . . . . . . . . . . . 213
2. Ability to Refinance Debt. . . . . . . . . . . . . . . . 214
3. Key Customer Relationship. . . . . . . . . . . . . . . . 215
4. Hexcel S.A.. . . . . . . . . . . . . . . . . . . . . . . 215
5. Competition; Industry Excess
Capacity . . . . . . . . . . . . . . . . . . . . . . . . 216
6. Northrop Agreement . . . . . . . . . . . . . . . . . . . 217
7. Dividend Policy. . . . . . . . . . . . . . . . . . . . . 217
8. Preferred Stock. . . . . . . . . . . . . . . . . . . . . 218

B. Hart-Scott-Rodino Act Requirements . . . . . . . . . . . . . 219

XI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . 219

A. Tax Consequences to Hexcel . . . . . . . . . . . . . . . . . 221

1. Cancellation of Debt . . . . . . . . . . . . . . . . . . 221

a. General . . . . . . . . . . . . . . . . . . . . . . 221
b. Stock-for-Debt Exception. . . . . . . . . . . . . . 223

(1) Nominal or Token Test. . . . . . . . . . . . . 223
(2) Proportionality Test . . . . . . . . . . . . . 226

c. Effect of the Plan. . . . . . . . . . . . . . . . . 226
d. Claims for Accrued Interest . . . . . . . . . . . . 227

2. Limitation on Net Operating Losses . . . . . . . . . . . 229

a. Section 382(l)(6) Regime. . . . . . . . . . . . . . 230
b. Section 382(l)(5) Regime. . . . . . . . . . . . . . 231
c. Effect of the Plan. . . . . . . . . . . . . . . . . 235

3. Settlement of Principal Mutual Claims. . . . . . . . . . 235

<PAGE>
B. Tax Consequences to Creditors. . . . . . . . . . . . . . . . 235

1. Creditors Other Than Holders of
Subordinated Debentures. . . . . . . . . . . . . . . . . 236
2. Holders of Subordinated Debentures. . . . . . . . . . . 236
a. Reinstatement of Claim. . . . . . . . . . . . . . . 236
b. Debenture Exchange. . . . . . . . . . . . . . . . . 237
1. Classification of the
Subordinated Debentures
as Securities. . . . . . . . . . . . . . . . . 237
2. Tax Treatment of the Debenture Exchange. . . . 238

C. Tax Consequences to Holders of
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 241

1. Elimination of the Poison Pill
Rights . . . . . . . . . . . . . . . . . . . . . . . . . 241
2. Tax Treatment of Distribution of
Hexcel Stock Rights. . . . . . . . . . . . . . . . . . . 241
3. Alternative Minimum Tax. . . . . . . . . . . . . . . . . 243
4. Backup Withholding and Information Reporting . . . . . . 243

D. Tax Consequences to Holders of Hexcel
Options. . . . . . . . . . . . . . . . . . . . . . . . . . . 243

E. Tax Consequences to Holders of Rights. . . . . . . . . . . . 244

XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION
OF THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . 244

A. Liquidation Under Chapter 7. . . . . . . . . . . . . . . . . 245
B. Alternative Plan of Reorganization . . . . . . . . . . . . . 246

XIII. CONCLUSION AND RECOMMENDATION. . . . . . . . . . . . . . . . . . . 246

vii

<PAGE>

EXHIBITS

Exhibit A The Plan of Reorganization
Exhibit B Confirmation Order
Exhibit C Hexcel Corporation's Form 10-K 1993 Annual Report and Form 10-
K/A Amendment
Exhibit D Hexcel Corporation's Form 10-Q Quarterly Report for the Quarter
Ended April 3, 1994
Exhibit E Hexcel Corporation's Projected Financial Information
Exhibit F Hexcel Corporation's Liquidation Analysis
Exhibit G Hexcel Corporation's New Long Term Incentive Plan

viii

<PAGE>
I. INTRODUCTION

Hexcel Corporation (referred to herein as "Hexcel" or
the "Debtor") submits this Disclosure Statement pursuant to
Section 1125 of title 11 of the United States Code (the
"Bankruptcy Code") to holders of Claims (1) against and Equity
Interests in the Debtor in connection with (i) the solicitation
of acceptances of the Debtor's Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code dated July 26, 1994 (the
"Plan") filed by the Debtor with the United States Bankruptcy
Court for the Northern District of California (the "Bankruptcy
Court") and (ii) the hearing to consider confirmation of the Plan
(the "Confirmation Hearing") scheduled for ______________, 1994.

Attached as Exhibits to this Disclosure Statement are
copies of the following:
- The Plan (Exhibit A);
- Order of the Bankruptcy Court dated August ___,
1994, among other things, approving this
Disclosure Statement and establishing certain
procedures with respect to the solicitation and
tabulation of votes to accept or reject the Plan
(Exhibit B);
- Hexcel Corporation's Form 10-K 1993 Annual Report
and Form 10-K/A Amendment (Exhibit C);
- - ------------------------
1 Unless otherwise defined herein, all capitalized terms
contained herein have the meanings ascribed to them in the
Plan.

<PAGE>
- Hexcel Corporation's Form 10-Q Quarterly Report
for the Quarter Ended April 3, 1994 (Exhibit D);
- Hexcel Corporation's Projected Financial
Information (Exhibit E);
- Hexcel Corporation's Liquidation Analysis (Exhibit
F);
- Hexcel Corporation's New Long Term Incentive Plan
(Exhibit G);
In addition, a ballot for the acceptance or rejection of the Plan
is enclosed with the Disclosure Statement submitted to the
holders of Claims and Equity Interests that Hexcel believes may
be entitled to vote to accept or reject the Plan.
On August ___, 1994, after notice and a hearing, the
Bankruptcy Court approved this Disclosure Statement as containing
adequate information of a kind and in sufficient detail to enable
hypothetical, reasonable investors typical of the Debtor's
creditors and equity security holders to make an informed
judgment whether to accept or reject the Plan. APPROVAL OF THIS
DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A
DETERMINATION BY THE BANKRUPTCY COURT AS TO THE FAIRNESS OR
MERITS OF THE PLAN.
Each creditor and equity security holder of the Debtor
entitled to vote to accept or reject the Plan should read this
Disclosure Statement and the Plan in their entirety before voting
on the Plan.

<PAGE>
Pursuant to the provisions of the Bankruptcy Code, only
holders of allowed claims or equity interests in classes of
claims or equity interests that are impaired under the terms and
provisions of a chapter 11 plan are entitled to vote to accept or
reject the Plan.
Classes 4, 5, 6, 7, 8, 9(2), 10 and 11 of the Plan are
impaired and, to the extent that such Claims or Interests in such
Classes are Allowed Claims or Equity Interests, the holders of
such Claims or Equity Interests will receive distributions under
the Plan. Holders of Claims or Equity Interests in those Classes
are entitled to vote to accept or reject the Plan. Classes 1, 2
and 3 are unimpaired under the Plan and the holders of Claims in
those Classes are conclusively presumed to have accepted the
Plan. Class 12 is impaired under the Plan, is not receiving any
distribution under the Plan and is therefore deemed to reject the
Plan under Section 1126(g) of the Bankruptcy Code. Therefore,
the Debtor is soliciting acceptances only from holders of Allowed
Claims and Equity Interests in Classes 4, 5, 6, 7, 8, 9, 10 and
11.
The Bankruptcy Code defines "acceptance" of a plan by a
class of claims as acceptance by creditors in that class that
hold at least two-thirds in dollar amount and more than one-half
in number of the claims that cast ballots for

- - ------------------------
2 As discussed below, if Class 9 does not accept the Plan, it
will be impaired. Holders of Claims in Class 9 will be
entitled to vote to accept or reject the Plan.

<PAGE>
acceptance or rejection of the plan. The Bankruptcy Code defines
"acceptance" of a plan by a class of equity interests as
acceptance by equity interest holders in that class that hold at
least two-thirds in amount of the allowed interests that cast
ballots for acceptance or rejection of the plan. For a complete
description of the requirements for confirmation of the Plan, SEE
Section VI, "Confirmation and Consummation Procedure."
If a Class of Claims or Equity Interests rejects the
Plan or is deemed to reject the Plan, the Debtor has the right,
and intends, to request confirmation of the Plan pursuant to
Section 1129(b) of the Bankruptcy Code. Section 1129(b) permits
the confirmation of a plan notwithstanding the nonacceptance of
such plan by one or more impaired classes of claims or equity
interests if the provisions of that section are complied with.
Under that section, a plan may be confirmed by a bankruptcy court
if it does not "discriminate unfairly" and is "fair and
equitable" with respect to each nonaccepting class. For a more
detailed description of the requirements for confirmation of a
nonconsensual plan, SEE Section VI.C.2, "Confirmation and
Consummation Procedure -- Unfair Discrimination and Fair and
Equitable Tests."
The Debtor believes that (i) through the Plan,
creditors and equity security holders will obtain a substantially
greater recovery from the estate of the Debtor than the recovery
which would be available if the assets of the Debtor were
liquidated under Chapter 7 of the Bankruptcy

<PAGE>
Code and (ii) the Plan will afford Hexcel the opportunity and
ability to continue in business as a viable going concern and
preserve ongoing employment for Hexcel's employees.
After carefully reviewing this Disclosure Statement,
including the Exhibits, each holder of an Allowed Claim or
Allowed Equity Interest in Classes 4, 5, 6, 7, 8, 9, 10 and 11
should vote on the Plan.
THE DEBTOR BELIEVES THAT ACCEPTANCE OF THE PLAN IS IN
THE BEST INTERESTS OF THE DEBTOR AND ITS CREDITORS AND EQUITY
SECURITY HOLDERS AND URGES THAT CREDITORS AND EQUITY SECURITY
HOLDERS VOTE TO ACCEPT THE PLAN.
If you are entitled to vote to accept or reject the
Plan, a ballot is enclosed for the purpose of voting on the Plan.
If you hold a Claim or Equity Interest in more than one Class and
you are entitled to vote Claims or Equity Interests in more than
one Class, you will receive separate ballots which must be used
for each separate Class of Claims or Equity Interests. Please
vote and return your ballot(s) to:
HEXCEL CORPORATION PLAN OF REORGANIZATION
c/o Poorman Douglas Corporation
P.O. Box 19550
Portland, Oregon 97280-9922

or, if delivered by hand or courier:

HEXCEL CORPORATION PLAN OF REORGANIZATION
c/o Poorman-Douglas Corporation
1325 Southeast Custer Drive
Portland, Oregon 97219

DO NOT RETURN YOUR NOTES OR SECURITIES WITH YOUR BALLOT.

<PAGE>
TO BE COUNTED, YOUR BALLOT INDICATING ACCEPTANCE OR
REJECTION OF THE PLAN MUST BE RECEIVED NO LATER THAN 4:00 P.M.,
PACIFIC DAYLIGHT SAVINGS TIME _______________, 1994.
If you are a creditor or equity security holder
entitled to vote on the Plan and did not receive a ballot,
received a damaged ballot or lost your ballot, or if you have any
questions concerning the Disclosure Statement, the Plan or the
procedures for voting on the Plan, please call ______ at ______.
Pursuant to Section 1128 of the Bankruptcy Code, the
Confirmation Hearing will be held on ____________, 1994 at __:__
a.m. before the Honorable Leslie Tchaikovsky, United States
Bankruptcy Judge, at the United States Bankruptcy Court, 1300
Clay Street, Oakland, California 94612. The Bankruptcy Court has
directed that objections, if any, to confirmation of the Plan be
served and filed so that they are received on or before
___________, 1994 at 4:00 p.m., Pacific Daylight Savings time, in
the manner described below in Section VI.B, "Confirmation and
Consummation Procedure -- The Confirmation Hearing." The
Confirmation Hearing may be adjourned from time to time by the
Bankruptcy Court without further notice except for the
announcement of the adjournment date made at the Confirmation
Hearing or at any subsequent adjourned Confirmation Hearing.

<PAGE>
II. OVERVIEW OF THE PLAN

A. INTRODUCTION.

The Plan is the product of intense efforts, over the
last seven months, by the Debtor and its professionals, to design
a plan of reorganization which satisfies creditors' Allowed
Claims and which would create a sound capital structure for the
reorganized entity. The Plan will substantially reduce the level
of the Debtor's pre-petition indebtedness through the infusion of
$40 or $50 million in new equity capital. Depending upon whether
the Plan is accepted by Class 9 (Subordinated Debentures), the
new equity capital will be derived by means of a $23 or $25
million investment in common stock of Reorganized Hexcel by
Mutual Series Fund Inc. ("Mutual Series") and a $17 or $25
million "rights offering" for the common stock of Reorganized
Hexcel with Mutual Series being a committed standby purchaser,
pursuant to the Stock Subscription and Standby Purchase Agreement
dated as of July 27, 1994.
By way of background, the Debtor has been pursuing the
means to confirm a plan of reorganization which maximizes
recoveries to creditors and minimizes the dilution of the
interests of Hexcel's present stockholders. The Debtor concluded
that the most advantageous way to proceed was to propose a plan
entailing an infusion of at least $40 million of new equity by
means of a new investment and a rights offering, pursuant to
which existing shareholders would retain

<PAGE>
an interest in Reorganized Hexcel and receive rights to purchase
common stock of Reorganized Hexcel at a specified exercise price.
The commitment of a standby purchaser to purchase (i) all stock
of the reorganized company not purchased pursuant to the exercise
of rights distributed to Hexcel's shareholders, and (ii) certain
additional shares of the reorganized company, is required to
ensure that there will be sufficient new capital to fund payments
to creditors under a plan of reorganization.
Since March of this year, pursuant to the terms of a
confidentiality order, more than 75 potential investors have been
provided with confidential information by the Debtor or one of
the Committees with a view towards interesting them to invest and
to act as the standby purchaser for a rights offering to generate
$40 million in connection with a plan of reorganization.
Thereafter, those potential investors who were interested in
pursuing a transaction were permitted to conduct due diligence,
including visiting Hexcel's facilities and meeting with Hexcel
management personnel.
Hexcel determined that in order to elicit the highest
and best offer to become standby purchaser from the marketplace,
it would be best to initiate an auction process. Thus, Hexcel,
after consulting with the Creditors' Committee, developed a
process for the solicitation of bids from potential qualified
investors. In late May of 1994, the Debtor sent bid solicitation
letters to 19 prospective standby purchasers who had expressed
any continuing interest in

<PAGE>
pursuing an investment in Hexcel (whether introduced to Hexcel by
the Debtor or by one of the Committees). The letter informed
prospective bidders that they could continue their due diligence
efforts up to a fixed deadline for submission to the Debtor of
their final bids (June 17, 1994), and then submit their bids in
accordance with instructions contained in the letter.
The bid process established by Hexcel provided that the
Restructuring Committee of the Board of Directors of Hexcel,
consisting of three independent outside directors, would review
all bids received and select the highest and best offer. After
all bids were reviewed and the highest and best offer was
selected by the Restructuring Committee, the Debtor would then
enter into a definitive stock subscription and standby purchase
agreement with the successful bidder and proceed to file a plan
of reorganization incorporating a rights offering backed up by
the successful bidder. In order to ensure a level playing field,
it was stipulated that prospective bidders need not retain
existing management but could identify management of their own
choosing.
The above-described bidding process was conducted and
yielded one bid, by Mutual Series. In summary, Mutual Series'
proposal (the "Mutual Series Proposal") provided that Mutual
Series would commit to invest $40 million in Reorganized Hexcel
Common Stock. On June 20, 1994, the Restructuring Committee
reviewed the Mutual Series Proposal and determined not only that
it was the highest and best offer

<PAGE>
(since it was the only offer) but more importantly that it was a
reasonable offer that will enable Hexcel to provide a maximum
recovery to creditors under a plan that also will provide
valuable distributions to Hexcel's existing stockholders. The
Restructuring Committee concluded that it was in Hexcel's best
interests to pursue negotiations with Mutual Series with a view
toward entering into a definitive agreement incorporating the
terms of the Mutual Series Proposal, or better terms if such
could be obtained in further discussions.
Further negotiations led to the execution of the Stock
Subscription and Standby Purchase Agreement on July 27, 1994,
which provides for an investment of up to $40 million if the Plan
is accepted by Class 9 or up to $50 million if it is rejected by
Class 9. A copy of the Stock Subscription and Standby Purchase
Agreement is annexed to the Plan as Exhibit B. For a detailed
summary of the Stock Subscription and Standby Purchase Agreement,
See Section V.B.2., "Summary of Other Provisions of the Plan --
The Stock Subscription and Standby Purchase Agreement."

B. MATERIAL ELEMENTS OF THE PLAN.
The following is a brief summary of the material
provisions of the Plan. This overview is qualified in its
entirety by reference to the provisions of the Plan, a copy of
which is annexed hereto as Exhibit A, and the more detailed
financial and other information contained elsewhere in this

<PAGE>
document and in the Exhibits hereto. In addition, for a more
detailed description of the terms and provisions of the Plan, see
Section V, "The Plan of Reorganization."
1. RIGHTS OFFERING AND MUTUAL SERIES STOCK PURCHASE.
The Plan provides and is premised upon a rights offering ("Rights
Offering") to holders of Hexcel's existing Common Stock, with
Mutual Series purchasing shares underlying all unexercised Rights
at the Rights Offering exercise price, and a guaranteed minimum
investment by Mutual Series at the same price per share (the
"Stock Purchase").
The terms of the Rights Offering and the Stock Purchase
will depend on whether the Plan is accepted by Class 9, the
holders of Subordinated Debentures. If Class 9 accepts the Plan,
and the holders of Subordinated Debentures are thereby entitled
to receive Reorganized Hexcel Common Stock, then the Rights
Offering and Mutual Series' standby purchase commitment will
generate $17 million, and Mutual Series will invest $23 million
in addition. In that case, pursuant to the Rights Offering,
Rights to purchase an aggregate of 8,500,000 shares of
Reorganized Hexcel Common Stock will be issued to Hexcel's
present stockholders. Each present shareholder will receive
1.1628 Rights for each share of Common Stock held by it. Each
Right will entitle the holder thereof to purchase one share of
Reorganized Hexcel Common Stock for an exercise price of $2.00
until the expiration of the Rights Offering, which is 30 days
after the Effective Date. The Stock Purchase

<PAGE>
by Mutual Series will be for 11,500,000 shares for $2.00 per
share for an aggregate of $23 million.
If Class 9 rejects the Plan, and the Subordinated
Debentures are Reinstated, then the Rights Offering and Mutual
Series' Standby Purchase commitment will generate $25 million,
and Mutual Series will invest $25 million in addition. In that
case, pursuant to the Rights Offering, Rights to purchase
approximately 12,500,000 shares of Reorganized Hexcel Common
Stock will be issued to Hexcel's present shareholders. Each
present shareholder will receive 1.71 Rights for each share of
Hexcel Common Stock held by it. Each Right will entitle the
holder thereof to purchase one share of Reorganized Hexcel Common
Stock for an exercise price of $2.00 per share until the
expiration of the Rights Offering, which is 30 days after the
Effective Date. The Rights will be freely tradeable. The Stock
Purchase by Mutual Series will be for 12,500,000 shares for $2.00
per share for an aggregate of $25 million.
Pursuant to the Stock Subscription and Standby Purchase
Agreement, Mutual Series has agreed to purchase shares of
Reorganized Hexcel Common Stock at the same price per share as
the Rights Offering price, for an aggregate purchase price of $23
million if Class 9 accepts the Plan and $25 million if Class 9
rejects the Plan on the Effective Date, simultaneously with the
commencement of the Rights Offering. Accordingly, Hexcel will
receive an aggregate amount of $40 million from the Stock
Purchase and the Rights Offering if

<PAGE>
Class 9 accepts the Plan, and $50 million if Class 9 rejects the
Plan.
2. TREATMENT OF PRINCIPAL MUTUAL CLAIMS. Whereas
other senior lenders are to be paid their Allowed Claims in Cash
on the Distribution Date, Principal Mutual has agreed to remain
as a lender to Hexcel, to modify certain covenants in its $30
million 10.12% Principal Mutual Note agreement with Hexcel which
Hexcel believes would prevent Hexcel from securing the Exit
Financing Facility and to modify the prepayment premium provided
for in that agreement. On account of its Claims, Principal
Mutual will receive Cash in the approximate amount of $810,000,
representing the amount of principal and accrued and unpaid
interest on the Principal Mutual 8.75% Note at the contract non-
default rate; Cash in the approximate amount of $3,037,000,
representing the unpaid accrued interest on the Principal Mutual
10.12% Note at the contract non-default rate; 1,629,756 shares of
Reorganized Hexcel Common Stock; and the Amended and Restated
Principal Mutual 10.12% Note in the principal amount of $30
million. By agreeing to this treatment, Principal Mutual has
made it possible for Hexcel to use the Cash to be generated by
the Rights Offering and Stock Purchase to pay the Claims of other
senior creditors in full in Cash on the Distribution Date.
3. TREATMENT OF BNP CLAIMS AND RENEWAL AND EXTENSION
OF THE LETTERS OF CREDIT. Prior to the Petition Date, BNP had
issued eight letters of credit to provide credit enhancement to
Hexcel's obligations on various industrial

<PAGE>
development revenue bonds ("IDRB'S"). Under the Plan, BNP will
receive (i) Cash in the amount of $181,931.54 for all prepetition
unreimbursed drawings under seven of the eight letters of credit
(the "BNP Letters of Credit"), draw fees, letter of credit fees,
attorneys' fees and fees and expenses paid by BNP to the
remarketing agent for the IDRB's; (ii) Cash in the amount of all
post-petition unreimbursed drawings under the BNP Letters of
Credit and unpaid accrued interest thereon at the contract non-
default rate, and draw fees, letter of credit fees and expenses
paid by BNP to the remarketing agent for the IDRB's for which BNP
is entitled to reimbursement under the terms of the seven related
BNP Reimbursement Agreements; and (iii) payment of Cash in the
amount of $502,000 as a one-time reinstatement and extension
commitment fee for BNP's extension of the seven BNP Letters of
Credit. In return, BNP will extend the maturity of the seven BNP
Letters of Credit to October 1, 1998; waive all prior defaults
under the seven related BNP Reimbursement Agreements and modify
those seven BNP Reimbursement Agreements with Hexcel to, among
other things, modify covenants which Hexcel believes would
prevent Hexcel from securing the Exit Financing Facility; and the
letter of credit commitment fees and the interest rate on the
Liquidity Reimbursement Obligations (as defined in the those
seven BNP Reimbursement Agreements) and all other obligations
under those seven BNP Reimbursement Agreements will be increased.
Commencing 90 days after the Effective Date and every three
months thereafter until the

<PAGE>
expiration of the BNP Letters of Credit, Reorganized Hexcel will
deposit $600,000 per quarter into a sinking fund in which BNP
and/or the trustees for the IDRB's will hold a first priority
security interest to secure the Debtor's obligations under the
seven BNP Reimbursement Agreements, subject to the right of
Reorganized Hexcel to use all or a portion of the sinking fund to
reduce the available amounts of the seven related BNP Letters of
Credit by the optional redemption of IDRB's in a like principal
amount. All net proceeds from the sale, disposition or
refinancing of any assets financed by the IDRB's will be applied
to the reduction of the available amounts of the seven BNP
Letters of Credit by optional redemption of the IDRB's or will be
deposited into the sinking fund. Such net proceeds may, at the
option of Reorganized Hexcel, be credited against the $600,000
quarterly deposit referred to above.
The eighth letter of credit (the "BNP Ottawa Letter of
Credit") was issued by BNP in connection with IDRB's issued with
respect to a facility which has been sold by Hexcel to Cambrex
Corporation ("Cambrex"). Cambrex has assumed Hexcel's
liabilities with respect to such IDRB's, including Hexcel's
liabilities to BNP with respect to the BNP Ottawa Letter of
Credit and the related reimbursement agreement. With respect to
the BNP Ottawa Letter of Credit and related reimbursement
agreement, as of the Effective Date either (i) the BNP Ottawa
Letter of Credit shall have been cancelled and replaced by a
substitute letter of credit provided by Cambrex, (ii) BNP

<PAGE>
shall have been furnished by Cambrex with a standby letter of
credit or other security reasonably satisfactory to BNP to secure
the Debtor's liability to BNP under the BNP Ottawa Letter of
Credit, or (iii) BNP will (1) reinstate the BNP Ottawa Letter of
Credit, (2) waive all defaults under the related reimbursement
agreement through the Effective Date and in connection with
consummation of the Plan; and (3) the related reimbursement
agreement will be amended and restated to (x) change the
covenants so that consummation of the Plan and the establishment
of the Exit Financing Facility obtained to satisfy the condition
precedent described in Section 10.1 of the Plan will not cause or
constitute a default thereunder, and (y) contain such
representations, warranties, conditions, covenants and other
terms, including restrictions on existing and additional
indebtedness, restrictions on existing and additional liens and
encumbrances, financial covenants, and default provisions (but
not any increases in rates or fees), as BNP and the Debtor may
agree with respect to the other Amended and Restated BNP
Reimbursement Agreements.
4. TREATMENT OF THE SUBORDINATED DEBENTURES. The
Plan provides for conversion of the Class 9 Subordinated
Debentures into Reorganized Hexcel Common Stock if Class 9
accepts the Plan, and the Reinstatement of the Subordinated
Debentures if Class 9 rejects the Plan. Thus, if Class 9 accepts
the Plan, holders of Subordinated Debentures will receive their
ratable share of 9,703,050 shares of Reorganized Hexcel Common
Stock, representing 27.6537% of the pro-forma

<PAGE>
fully diluted ownership of the reorganized company (without
giving effect to dilution as a result of stock options or
management stock purchases). If the Class of Subordinated
Debentures rejects the Plan, the Subordinated Debentures will be
Reinstated and rendered unimpaired.
5. SUMMARY OF CLASSIFICATION AND TREATMENT OF ALL
CLAIMS AND EQUITY INTERESTS UNDER THE PLAN. The following table
briefly summarizes the classification and treatment of all Claims
and Equity Interests under the Plan. The recoveries set forth
below are merely estimated recoveries based upon various
assumptions. The estimated recoveries assume that if the Class
of Subordinated Debentures accepts the Plan, approximately
26,587,719 shares of Reorganized Hexcel Common Stock and Rights
to purchase approximately 8,500,000 shares of Reorganized Hexcel
Common Stock will be issued under the Plan to holders of Claims
and Interests, while if the Class of Subordinated Debentures
rejects the Plan, approximately 17,884,669 shares of Reorganized
Hexcel Common Stock and Rights to purchase 12,500,000 shares of
Reorganized Common Stock will be issued under the Plan to holders
of Claims and Interests. For a discussion of the valuation of
the Reorganized Hexcel Common Stock and Rights, see Section IX.,
"Reorganization Values." There is no assurance that the
Reorganized Hexcel Common Stock issued under the Plan will
actually trade at the projected reorganization value. For a
complete description of the risks

<PAGE>
associated with the recoveries provided under the Plan, see
Section X., "Certain Risk Factors To Be Considered."
The Plan designates 10 Classes of Claims and 2 Classes
of Equity Interests. These Classes take into account the
differing nature and priority under the Bankruptcy Code of the
various Claims and Equity Interests.

<PAGE>
SUMMARY OF CLASSIFICATION AND TREATMENT
OF ALL CLAIMS AND EQUITY INTERESTS UNDER THE PLAN(3)

Type of Claim or
Class Equity Interest Treatment
- - ----- --------------- ----------
<C> <S> <C>
-- Administrative Expense Claims Unimpaired; paid in full in Cash on the Effective Date, or in accordance with
the terms and conditions of transactions or agreements relating to
obligations incurred in the ordinary course of business during the pendency
of the Chapter 11 Case or assumed by the Debtor in Possession.

-- Priority Tax Claims Unimpaired; at the option of Reorganized Hexcel either paid in full, in Cash
on the Effective Date, or paid over a six-year period from the date of
assessment as provided in section 1129(a)(9)(C) of the Bankruptcy Code with
interest payable at a rate of 7% per annum or as otherwise established by the
Bankruptcy Court.

1 Other Priority Claims Unimpaired; paid in full in Cash on the Effective Date.

2 Secured Claims Unimpaired; Reinstated.

3 IDRB Claims Unimpaired; Reinstated.

<FN>

- - ---------------------
3 This table is only a summary of the classification and treatment of Claims and Equity Interests under the Plan. Reference
should be made to the entire Disclosure Statement and the Plan for a complete description of the classification and treatment
of Claims and Equity Interests.

</TABLE>

19
<PAGE>

Type of Claim or
Class Equity Interest Treatment
- - ----- --------------- ----------
<C> <S> <C>

4 BNP Claims Impaired; Cash in the amount of $181,931.54 for all prepetition unreimbursed
drawings under the seven BNP Letters of Credit, draw fees, letter of credit
fees, attorneys' fees and prepetition fees and out-of-pocket expenses paid by
BNP to the remarketing agent for the IDRB's; Cash in the amount of all post-
petition unreimbursed drawings under the seven BNP Letters of Credit and
unpaid accrued interest thereon at the contract non-default rate, and draw
fees, letter of credit fees and expenses paid by BNP to the remarketing agent
for the IDRB's for which it is entitled to reimbursement under the terms of
the seven BNP Reimbursement Agreements; and Cash on the Effective Date in the
amount of $502,000 as a one-time reinstatement and extension commitment fee.
BNP will extend the expiration date of the seven BNP Letters of Credit to
October 1, 1998, and waive all prior defaults under the seven related BNP
Reimbursement Agreements; the seven BNP Reimbursement Agreements will be
amended and restated to amend certain covenants and increase commitment fees
and interest rates on Liquidity Reimbursement Obligations and other
obligations; Hexcel will deposit $600,000 sinking fund payments every 3
months to secure the seven BNP Reimbursement Agreements or redeem a like
amount of IDRBs. With respect to an eighth letter of credit and
reimbursement agreement relating to IDRBs issued in connection with a
facility sold by Hexcel, either the purchaser of the facility will

4 BNP Claims provide a substitute letter of credit and BNP's letter of credit will be
cancelled, or such purchaser will provide BNP with a standby letter of credit
to secure Hexcel's obligations to BNP with respect to BNP's letter of credit
and related reimbursement agreement, or BNP will reinstate, but not extend,
such letter of credit and waive all prior defaults, and amend certain
covenants, under the related reimbursement agreement.

5 General Unsecured Claims Impaired; paid in full in Cash on the Distribution Date.

6 Principal Mutual Claims Impaired; Cash on the Effective Date in the amount of the outstanding
principal amount of, and unpaid accrued interest on, the Principal Mutual
8.75% Note; Cash on the Effective Date in the amount of the unpaid accrued
interest on the Principal Mutual 10.12% Note through the last interest
payment date falling on or prior to the Effective Date; 1,629,756 shares of
Reorganized Hexcel Common Stock; and the $30 million Amended and Restated
Principal Mutual 10.12% Note.
</TABLE>

<PAGE>

Type of Claim or
Class Equity Interest Treatment
- - ----- --------------- ----------
<C> <S> <C>

7 Environmental Claims Impaired; each Environmental Claim will receive distributions in accordance
with the provisions of Section 4.7 of the Plan if, as and when such Claim is
Allowed.

8 Intercompany Claims Impaired; the holder of the Hexcel Lyon Claim will receive the Hexcel Lyon
Note; each holder of an Other Intercompany Claim will receive Cash in an
amount equal to such holder's Other Intercompany Claim 30 days after payment
in full of the Amended and Restated Principal Mutual 10.12% Note.

9 Subordinated Debenture Claims Impaired if Class 9 accepts the Plan, each holder of an Allowed Subordinated
Debenture Claim shall receive its ratable share of 9,703,050 Shares of
Reorganized Hexcel Common Stock; if Class 9 rejects the Plan, the
Subordinated Debentures will be Reinstated and rendered unimpaired.

10 Section 510(b) Hexcel Common Stock Impaired; each holder shall receive its ratable share of 100,000 shares of
Trading Claims Reorganized Hexcel Common Stock.

11 Hexcel Common Stock Impaired; if Class 9 accepts the Plan, each holder of Common Stock will
receive, for each two shares of Common Stock, one share of Reorganized Hexcel
Common Stock; in addition, for each share of Common Stock, such holder will
receive 1.1628 Rights to purchase Reorganized Hexcel Common Stock; each Right
will entitle the holder to purchase one share of Reorganized Hexcel Common
Stock for $2.00 in Cash. If Class 9 rejects the Plan, each holder of Common
Stock will receive, for each two shares of Common Stock, one share of
Reorganized Hexcel Common Stock; in addition, for each share of Common Stock,
such holder will receive 1.71 Rights to purchase Reorganized Hexcel Common
Stock; each Right will entitle the holder to purchase one share of
Reorganized Hexcel Common Stock for $2.00 in Cash. The old Common Stock
shall be cancelled and extinguished as of the Effective Date.

12 Hexcel Options Impaired; holders of Hexcel Options will receive no distributions under the
Plan and the Hexcel Options will be cancelled.
</TABLE>

- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------

For a more detailed explanation of the time and manner of
distributions under the Plan, see Section V.B.5, "The Plan of Reorganization --
Time and Method of Distributions Under the Plan."

<PAGE>
6. SUMMARY OF OWNERSHIP OF REORGANIZED
HEXCEL COMMON STOCK
------------------------------------

The following table summarizes the approximate percentage ownership
interest of Reorganized Hexcel Common Stock following the Distribution Date
(without giving effect to the dilution resulting from the exercise of options to
be issued pursuant to the New Long Term Incentive Plan and management stock
purchases), assuming that (i) Class 9 (Subordinated Debentures) accepts the Plan
and (ii) holders of Common Stock exercise all the Rights distributed to them:

Existing Shareholders 34.6415%
Section 510(b) Trading Claims 0.285%
Holders of Subordinated Debentures 27.6547%
Principal Mutual 4.6448%
Mutual Series 32.775%
--------
100.00%

The following table summarizes the approximate percentage ownership
interest of Reorganized Hexcel Common Stock following the Distribution Date
(without giving effect to the dilution resulting from the exercise of options to
be issued pursuant to the New Long Term Incentive Plan and management stock
purchases and possible conversion of the Subordinated Debentures after the
Effective Date), assuming that (i) Class 9 rejects the Plan and (ii) holders of
Common Stock exercise all the Rights distributed to them:
Existing Shareholders 53.16798%
Section 510(b) Trading Claims 0.32911%

<PAGE>
Principal Mutual 5.36374%
Mutual Series 41.13917%
---------
100.00%

III. GENERAL INFORMATION
A. DESCRIPTION AND HISTORY OF BUSINESS
Hexcel, directly and through its non-debtor subsidiaries, is an
international developer and manufacturer of honeycomb, advanced composites,
reinforcement fabrics and resins used in commercial aerospace, space and
defense, general industrial and other markets throughout the world. The
Company(4) is headquartered in Pleasanton, California and, directly and through
its subsidiaries, operates plants in the United States and Europe.
Founded in 1946, Hexcel Corporation was initially incorporated in
California in 1948, and reincorporated in Delaware in 1983. The founders of the
Company, Roger Steele and Roscoe Hughes, spent two years after World War II
researching a form of structural material which became known as "honeycomb".
Aerospace applications were developed by sandwiching honeycomb between a variety
of materials to form lightweight but very strong panels. In 1948, the Company
obtained its first contract from the Industrial Planning Division at Wright-
Patterson Air Force Base to research and

- - ------------------------
4 Unless otherwise specified herein, references to Hexcel refer to the
Debtor, and reference to the "Company" refers to the Debtor and its wholly-
owned subsidiaries, which are not debtors under chapter 11.

<PAGE>
develop method, materials, and equipment to produce fiberglass-plastic
honeycomb. In 1949, the Company won and successfully completed its first
manufacturing contract to produce fiberglass honeycomb for the B-36 bomber.
By 1954, sales reached almost $2 million, and doubled the following
year, with the Company's expanded product line, which included aluminum and
stainless steel honeycomb. Even at this early stage of its history, the
Company's sales had already become highly dependent upon unpredictable
variations in military spending. Recognizing that the Company's greatest
strength was its reputation for technological leadership, management made
significant investments in research and development, and by 1959 had begun
submitting non-proprietary ideas to governmental and industrial agencies for
funding. Therefore, R&D not only supported the Company's industry leadership,
but also became a source of corporate revenue, a strategy which has continued
into the 1990's.
From the 1960's through the mid-1980's, the Company grew largely
through acquisitions, financed by both cash and Hexcel shares. In 1968, Hexcel
acquired the assets of Coast Manufacturing & Supply Co. ("Coast") based in
Livermore, California, an acquisition which included three of the present
manufacturing plants (Livermore, California; Seguin, Texas; and Lancaster,
Ohio). Coast had been Hexcel's principal supplier of pre-impregnated glass
cloth used to make fiberglass core. In 1969, the Company acquired Rezolin,
Inc.,

<PAGE>
a manufacturer of resins with plants in St. Ouen L'Aumone, France and
Chatsworth, California. The Company then acquired a series of specialty
chemical companies, starting in 1973 with Fine Organics Corporation ("Fine
Organics") in Lodi, New Jersey, followed in 1977 with the Sumner Division of
Miles Laboratories in Zeeland, Michigan and in 1981 with Seal Sands Chemical Co.
Ltd. in Teesside, England.
In 1980, the Company acquired a manufacturer of brazed and welded
honeycomb, Metallurgical Consultants, Inc., located in Montebello, California.
Also, in 1980, the Company purchased a 50% interest in the Lyon, France
reinforcement fabrics division of J.P. Stevens & Co., Stevens-Genin, S.A.
(renamed Hexcel, S.A.); the remaining 50% was acquired in 1985. In 1984, the
Company acquired Dittmer & Dacy, Inc., a producer of carbon composite parts, in
San Diego, California and in 1985 it purchased the assets of APCO, a resin
manufacturer located in El Segundo, California. In 1986, the Company bought the
assets of Hi-Tech Composites, Inc., including facilities in Gastonia, North
Carolina and Reno, Nevada and in 1987, the Company acquired the common stock of
Knytex, Inc., located in Seguin, Texas, which added to the Company's
reinforcement fabrics product line.
With the growth of military spending during the Reagan and Bush
Administrations in the 1980's, the Company increased its concentration in the
aerospace business. Both military and commercial aerospace represented strong
markets for the Company's honeycomb and advanced composites product

<PAGE>
lines. By the late 1980's, the Company was investing heavily in related plant
and equipment, as well as in R&D infrastructure, to service what management
perceived to be an expanding future for the commercial and military aerospace
business. This period was highlighted by a $25 million investment in a facility
in Chandler, Arizona, tied closely to the B-2 or Stealth Bomber project for
which Hexcel provided "low observable" ("LO") materials. Management had
projected revenues of approximately $500 million from the B-2 program over the
life of the contract from the expected production of 133 of these planes.
However, with the reduction of the Soviet military threat and the defeat of
their weapons systems in the Persian Gulf War in 1991, political pressure within
the U.S. to end large military expenditures for new weapons systems was
immediate. For example, it now appears that no more than 22 B-2 Bombers may be
built, unless additional funding is approved by Congress. Unfortunately, a
nearly simultaneous negative trend developed in new aircraft demand for
commercial aviation in the early 1990's due to the financial problems of
airlines worldwide.
The Company's ramp-up of worldwide production capability during the
late 1980's to satisfy projected aerospace opportunities left the Company with
too much production capacity for the declining demand that resulted in the
1990's. Also remaining was the dual legacy of a debt structure with which the
Company's 1980's expansion had been financed and an overhead and R&D structure
no longer directly

<PAGE>
or indirectly absorbed by defense contracts. Obviously unprofitable and non-
synergistic businesses were disbanded or divested. The Company sold, among
other things, the brazed and welded honeycomb business in City of Industry,
California in 1991, the fine chemicals operation located in Zeeland, Michigan in
1992 and the remaining fine chemical business located in Teesside, England in
January 1994.
Early in 1993, the Company's prior management began to attempt to
restructure its overall business, including streamlining its organizational
chart and facilitating the downsizing of the Company, taking cognizance of the
fact that the Company had become almost exclusively a structural materials
manufacturer. The effectiveness of these efforts, however, was impeded by the
Company's financial difficulties culminating in the chapter 11 filing on
December 6, 1993 (see Section III.P, "Events Leading to the Commencement of the
Chapter 11 Case").
A second aspect of the restructuring of the Company's operations is
the consolidation of its manufacturing plants. A difficult process under most
circumstances, in the Company's case, moving operations from one location to
another requires the recertification by customers of certain processes and
equipment used to produce products for the aerospace industry. Thus, the move
of Hexcel's honeycomb products business from its 30-year old plant in Graham,
Texas, which commenced in April 1993, primarily to its facilities in Arizona
(with smaller segments to be distributed to other

<PAGE>
plants in the United States and Europe), has involved challenging transfers of
process know-how. The effectiveness of the move was impaired by inadequate
process documentation, deficient management information systems, and
insufficient incentives to motivate the movement of hourly workers familiar with
plant operations.
In order to complete its restructuring program and to maintain ongoing
operations, the Company needed substantial additional financing and a
restructuring of its U.S. debt. Negotiations were ongoing with existing senior
U.S. lenders throughout most of 1993 to obtain this financing and restructure
the Company's domestic obligations. Alternative financing sources were also
pursued including debt and equity arrangements. These efforts failed and,
lacking any viable alternative, Hexcel filed a voluntary petition for relief
under the provisions of chapter 11 of the federal bankruptcy laws on December 6,
1993. For a detailed discussion of the Company's growing liquidity and other
problems in 1993 which led to the chapter 11 filing, see Section III.P, "Events
Leading to the Filing of the Chapter 11 Case".

B. SIGNIFICANT PRODUCT LINES

1. HONEYCOMB

The Company has been the world leader in developing and manufacturing
honeycomb for over 45 years. Honeycomb is a unique, lightweight, cellular
structure composed generally of hexagonal cells nested together, similar in
appearance to a

<PAGE>
cross-sectional slice of a beehive. The hexagonal shape of the cells gives
honeycomb a high strength-to-weight ratio when used in "sandwich" form, and a
uniform resistance to crushing under pressure. These characteristics are
combined with the physical properties of the material from which the honeycomb
is made to meet various engineering requirements.
The Company produces honeycomb from a number of metallic and non-
metallic materials. Most metallic honeycomb is made of aluminum and is
available in a selection of alloys, cell sizes and thicknesses. Non-metallic
honeycomb materials include fiberglass; graphite; thermoplastic; Nomex-R-, a
non-flammable aramid fiber paper; Kevlar-R-, an aramid fiber; and several other
specialty materials.
The Company sells honeycomb in standard blocks and sheets of honeycomb
core, and adds value by contouring and machining the core into complex shapes to
meet customer specifications. In addition, honeycomb is fabricated into bonded
panels and final bonded assemblies. In bonded sandwich panel construction,
sheets of aluminum, stainless steel, resin-impregnated reinforcement fiber
"skins" or other laminates are bonded with adhesives to each side of a honeycomb
core. Bonded panels are many times stronger and stiffer than solid or laminated
structures of equivalent weight. Use of an autoclave allows the Company to
manufacture parts requiring the high temperature and pressure necessary to
produce complex bonded assemblies.

<PAGE>
The largest markets for the Company's honeycomb are the commercial and
military aerospace markets. Advanced processing is used in the production of
aircraft components such as wing flaps, ailerons and helicopter rotor blades.
Specific applications include control surfaces (movable parts such as rudders,
flaps, spoilers and speed brakes that control the direction or speed of an
airplane); engine nacelles, cowlings, pylons and nozzles; fairings (flap track
and wing-to-body); interiors (walls, floors, partitions and luggage bins);
landing gear doors and access doors; wings, wing tips, wing leading edge and
trailing edge panels; horizontal stabilizers; radomes; electromagnetic shielding
and absorption; and satellite components.
Non-aerospace general industrial honeycomb applications include high-
speed trains and mass transit vehicles (doors, walls, ceilings, floors and
external structures); energy absorption products; athletic shoe components;
clean room facilities (walls and ceilings); automotive components (air flow
controllers in fuel injection systems, protective head and knee restraints);
portable military shelters and military support equipment; naval vessel
compartments (bulkheads, water closets, doors, floor panels, partitions and
bunks); and business machine cabinets.
The Company operates seven honeycomb manufacturing and advanced
processing facilities worldwide, including the Graham, Texas facility, which is
scheduled to be closed by the end of 1994.

30
<PAGE>
2. ADVANCED COMPOSITES
Advanced composites combine high performance reinforcement fibers with
resins to form a composite material with exceptional structural properties not
found in the fibers or resins alone. The Company impregnates reinforcement
fabrics and fibers aligned into unidirectional tapes, with resins. These
materials are then partially cured under heat to produce a "prepreg."
In addition to standard S-2-R- and E-type fiberglass, the Company
produces advanced composite materials from a variety of commercially available
fibers. Graphite fiber exhibits high strength and stiffness relative to weight
and is sold principally for aerospace and recreational uses. Kevlar-R- is
exceptionally resistant to impact and is used extensively in new generation
aircraft and in various armor and protection applications. Quartz and ceramic
fibers are resistant to extremely high temperatures and are used in various
aerospace and general industrial applications. Electrically and thermally
conductive Thorstrand-R- is used mainly by the aerospace industry. Resin
systems include epoxy, polyester, bismaleimide, phenolic, cyanates and
polyimide.
Advanced composites are sold to several markets including
transportation (commercial and private aircraft, mass transit, freight and
passenger vehicles); space and defense (military aircraft, naval vessels, space
vehicles, defense systems and military support equipment); recreation (athletic
shoes, fishing rods, bicycles, tennis rackets,

<PAGE>
baseball bats, golf clubs, surfboards, snow skis and racing cars); general
industrial (utility surge arrestors, antennae and insulative rods for electrical
repairs); and medical (orthotics and prosthetics).
Net sales of honeycomb and advanced composites, sold separately and
together as bonded structures, were $217.7 million in 1993, $253.9 million in
1992, and $263.2 million in 1991. The decline in 1993 was due mainly to a
significant drop in commercial and military aerospace business.
3. REINFORCEMENT FABRICS
The Company produces woven fabrics without resin impregnation from the
same fibers the Company uses to make advanced composites. These fibers include
S-2 and E-type fiberglass, high strength carbon fibers, impact resistant
Kevlar-R-, electrically conductive Thorstrand-R-, temperature resistant ceramic
and quartz fibers, and a variety of other specialty fibers.
The Company sells reinforcement fabrics for use in numerous
applications. These include aerospace, marine (commercial and pleasure boats),
printed circuit boards, metal and fume filtration systems, ballistics
protection, decorative window coverings, automotive, insulation, recreation,
civil engineering (architectural wraps), and other general and industrial
applications.
The Company entered into a strategic alliance with Owens-Corning
Fiberglas Corporation ("Owens-Corning") in July 1993. The joint venture
combined the weaving and

<PAGE>
stitchbonding technology of Hexcel Knytex with the worldwide reinforcement glass
fiber manufacturing, marketing and distribution capabilities of Owens-Corning.
The Knytex joint venture is a global market leader in the design and manufacture
of stitchbonded, multi-layer reinforcement fabrics. The stitchbonded materials
may be multiple layers of fabrics or fibers with varying orientations. For more
information on Knytex, see Section III.J.1., "General Information -- Joint
Ventures; Knytex".
Net sales of reinforcement fabrics were $93.0 million in 1993, $99.2
million in 1992 and $92.4 million in 1991. As a result of the joint venture
with Owens-Corning that started on July 1, 1993, the Company's 1993 sales only
reflect Hexcel Knytex sales for six months of $7.0 million.
4. RESINS
Resins include formulated epoxy and polyurethane products used in
aerospace, electronics, automotive, medical devices and other general industrial
applications. Applications for resin products include machinable tooling
boards, fastcast resins, laminating resins for wet lay-up of boats,
encapsulating materials for electronic circuits, adhesives and surface coatings.
Net sales of resins were $27.9 million in 1993, $33.2 million in 1992 and $31.0
million in 1991. As set forth in Section IV.G., "Events During the Chapter 11
Case - Proposed Sale of Resins Business", the Company is implementing a plan for
the possible sale of the resins business.

<PAGE>

C. PRODUCTS AND PROCESSES, RESEARCH AND DEVELOPMENT
The Company spent $8.7 million in 1993, $10.5 million in 1992 and
$10.6 million in 1991 for research and development of products and markets.
This represented 2.6% of net sales in 1993, and 2.7% of sales in each of 1992
and 1991. These expenditures were expensed as incurred. The Company's
materials rely primarily upon technology derived from the field of polymer
chemistry.

D. RAW MATERIALS
The Company purchases all raw materials used in production. Aluminum
and several other key raw materials are available from relatively few sources.
If these materials were no longer available, which the Company does not
anticipate, such an occurrence could have a material adverse effect on
operations.

E. MARKETS AND CUSTOMERS
The Company's materials are sold for a broad range of uses. The
following table displays the percentage distribution of consolidated net sales
by market for continuing operations for the five years ended December 31, 1993:
///

34
<PAGE>
1993 1992 1991 1990 1989
- - ----------------------------------------------------------------

Commercial aerospace 39% 43% 44% 44% 41%

General industrial
and other 45% 42% 39% 38% 35%

Space and defense 16% 15% 17% 18% 24%

- - ----------------------------------------------------------------
100% 100% 100% 100% 100%

The Boeing Company ("Boeing") and Boeing subcontractors accounted for
approximately 19% of 1993 sales. The loss of this business, which the Company
does not anticipate, could have a material adverse effect on sales and earnings.
Sales to U.S. government programs, including some of the sales to Boeing and
Boeing subcontractors noted above, were 16% of sales in 1993.
The Company's commercial aerospace and space and defense sales are
substantially dependent upon the level of activity within each industry as well
as acceptance by each industry of the Company's aerospace materials and
services. Considerations of aircraft performance have led to the increased use
of honeycomb and advanced composite materials in aircraft manufacture,
particularly in newer models and development programs. However, the Company
must continuously demonstrate the cost benefits of its products for aerospace
applications.
Commercial aerospace activity fluctuates in relation to two principal
factors. First, the number of revenue passenger miles flown by the airlines
affects the size of the

35
<PAGE>
airline fleets and generally follows the level of overall economic activity.
The second factor, which is less sensitive to the general economy, is the
replacement and retrofit rates for existing aircraft. These rates, resulting
mainly from obsolescence, are determined in part by Federal Aviation
Administration regulations as well as public concern regarding aircraft age,
safety and noise. Also, these rates may be affected by the desire of airlines
for higher payloads and more fuel efficient aircraft, which in turn is
influenced by the price of fuel.
Commercial aircraft build rates, based on the number of aircraft
delivered, declined by more than 20% from 1992 to 1993. Major aircraft builders
have announced significant personnel reductions which began in 1993 and are
expected to continue through 1994 into 1995. Based on current projections of
aircraft build rates, the Company believes that the commercial aerospace market
will likely continue to decline at least through 1995.
The Company believes activity within the military aerospace industry
fluctuates in relation to world tensions and the attitudes of the current
Administration and Congress toward defense spending. Since 1987, the aircraft
procurement budget of the U.S. Department of Defense has declined by more than
40%. Political changes in Eastern Europe, the former Soviet Union, and the
Middle East, combined with strong sentiment toward reduced defense spending
indicate that military procurement will continue to contract through 1994

36
<PAGE>
and beyond. Accordingly, the Company's sales to space and defense markets,
particularly military aerospace, continue to decline. In 1993, space and
defense sales decreased to $55.8 million from $59.4 million in 1992, and $67.3
million in 1991. The Company believes the space and defense markets for its
products will continue to shrink, and is currently evaluating its future
involvement in these markets.
The B-2 program, which began in the mid-1980's, has accounted for a
significant portion of the Company's recent space and defense sales. Program
delays and scheduling changes began in 1989. Orders then dropped far below the
level anticipated when the program began. The outlook beyond 1995 is extremely
uncertain. Originally, the Company expected to generate approximately $500
million in revenues over the life of the B-2 program. As a result of
substantially lower orders, revenues are now expected to total approximately
$100 million, most of which has already been earned.
B-2 program reductions have resulted in substantial underutilized
capacity at the Chandler, Arizona plant. For 1993, the Company negotiated to
bill the current unabsorbed fixed costs to the Northrop Grumman Corporation
("Northrop"), the program's prime contractor, contingent upon government
acceptance of this billing practice. In 1992 and 1991, the Company deferred
unabsorbed fixed costs of $2.0 million and $2.4 million, respectively. Hexcel
filed a claim for equitable relief associated with this program in connection
with the underutilized capacity at the Chandler and other

37
<PAGE>
plants. In addition to pursuing that claim, the Company has proposed an
agreement with Northrop to sell materials for the B-2 on a more profitable basis
to the Company, and is also considering a sale of certain assets to Northrop
which will allow it to complete the program. See Section IV.E., "Events During
the Chapter 11 Case -- Development and Implementation of Strategic Business
Plan."
The Company's contracts to supply materials for military and some
commercial projects contain provisions for termination at the convenience of the
U.S. government or the buyer. Hexcel is subject to U.S. government cost
accounting standards, which are applicable to companies with more than $25
million (increased from $10 million in November 1993) of government contract or
subcontract awards each year.
Hexcel, as a defense subcontractor, is subject to U.S. government
audits and reviews of negotiations, performance, cost classifications,
accounting and general practices relating to government contracts. The Defense
Contract Audit Agency reviews cost accounting and business practices of
government contractors and subcontractors including Hexcel. Hexcel has been
engaged in discussions on a number of cost accounting issues which could result
in claims by the government. Some of these issues have already been resolved
and management believes, based on available information and Hexcel's assertion
of a right of offset among individual issues, that it is unlikely these items in
the

<PAGE>
aggregate will have a material adverse effect on the earnings or financial
position of the Company.
Hexcel has a facility security clearance from the United States
Department of Defense. A portion of the Company's sales and other revenues in
1993 was derived from work requiring this clearance. Continuation of this
clearance requires that Hexcel remain free from foreign ownership, control or
influence (FOCI). Management does not believe there is presently any
substantial risk of FOCI that will cause the facility security clearance to be
revoked.

F. MARKETING
A staff of salaried market managers, product managers and salespeople
market the Company's products directly to customers. The Company also uses
independent distributors and/or manufacturer representatives for certain
products and markets, including reinforcement fabrics and resins.

G. BACKLOG
The backlog of orders for aerospace materials to be filled within 12
months was $61.6 million at December 31, 1993, $100.5 million at December 31,
1992 and $118.8 million at December 31, 1991. A major portion of the backlog is
cancelable without penalty. Aerospace backlog continued to decline for a number
of reasons, primarily the shrinking commercial and military aerospace market.
In addition, the

39
<PAGE>
aerospace industry is gradually moving toward "just-in-time" inventory delivery
and shorter lead time requirements to reduce investment in inventory and the
effect of order cancellations.
Orders for aerospace materials generally lag behind the award of
orders for new aircraft by a considerable period. Thus, the level of new
aircraft procurement normally will not have an impact on aerospace orders
received by the Company for about one to three years, depending on the nature of
the product, manufacturer and delivery schedules.
Backlog for non-aerospace materials amounted to $29.1 million at
December 31, 1993 compared with $16.8 million at December 31, 1992 and $20.2
million at December 31, 1991. Most of the Company's backlog is expected to be
filled within six months. Markets for the Company's products outside aerospace
are generally highly competitive requiring stock to be on hand for immediate
sale or short lead times for delivery. The backlog for non-aerospace markets
increased as the Company developed new applications for existing products and
the economy in the U.S. began to recover in the second half of 1993.

H. INTERNATIONAL OPERATIONS
In addition to exporting from the United States, the Company serves
foreign markets through four European operating subsidiaries located in Belgium
(Hexcel S.A.), France (Hexcel Lyon and Hexcel France) and the United Kingdom
(Hexcel U.K.).

40
<PAGE>
Each of these subsidiaries maintains manufacturing and marketing facilities.
The Company also maintains sales offices in Australia, Brazil, Germany, Italy,
Japan and Spain. All Company materials, with the exception of classified U.S.
military materials, are marketed throughout the world.
The following table displays the domestic and international net sales,
income (loss) before income taxes, identifiable assets, capital expenditures and
depreciation and amortization for continuing operations by geographic area as of
December 31, 1993, 1992, and 1991 and for the years then ended. International
net sales consist of the net sales of international subsidiaries, sold primarily
in Europe, and U.S. exports:

41
<PAGE>

- - ----------------------------------------------------------------
(amounts in thousands) 1993 1992 1991
- - ----------------------------------------------------------------
<S> <C> <C> <C>
Net sales:

United States $193,641 $216,171 $210,490
International 144,927 170,118 176,094
- - ----------------------------------------------------------------
Consolidated $338,568 $386,289 $386,584
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
Income (loss) before
income taxes:

United States $(61,818) $(10,743) $2,725
International (18,437) (13,312) 1,872
- - ----------------------------------------------------------------
Consolidated $(80,255) $(24,055) $4,597
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
Identifiable assets:

United States $169,621 $194,925 $199,569
International 98,740 115,925 143,737
- - ----------------------------------------------------------------
Consolidated $268,361 $310,850 $343,306
----------------------------------------------------------------
- - ----------------------------------------------------------------
Capital expenditures:
United States $4,694 $11,044 $9,966
International 1,848 6,049 4,762
- - ----------------------------------------------------------------
Consolidated $6,542 $17,093 $14,728
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
Depreciation and
amortization:
United States $10,118 $10,774 $10,530
International 5,722 4,960 4,891
- - ----------------------------------------------------------------
Consolidated $15,840 $15,734 $15,421
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
</TABLE>

I. HEXCEL S.A.

The downturn in the worldwide aerospace business and difficult
economic conditions in Europe have resulted in poor financial performance by
Hexcel S.A., Hexcel's wholly-owned Belgian subsidiary. This subsidiary has
experienced a 40% sales decline and significant operating losses over the past

42
<PAGE>
two years. Sales are not expected to improve in 1994, and interest costs and
restructuring actions continue to consume cash. Hexcel S.A. is also
investigating alleged product claims which could require additional cash
outlays.
On March 16, 1994 the commitment of credit facilities to Hexcel S.A.
by its existing bank lenders expired. The Company concluded that in order to
continue to restructure Hexcel S.A.'s operations to return the subsidiary to
positive cash flow and to induce its existing bank lenders to recommit the
existing credit lines, it was necessary to recapitalize the subsidiary. On June
8, 1994 the Company obtained Bankruptcy Court authority to enter into certain
transactions necessary to stabilize Hexcel S.A.'s finances and to induce Hexcel
S.A.'s existing bank lenders to agree to a two year lending commitment. These
transactions included the infusion of 200 million Belgian Francs (approximately
$6 million) in cash. (See Section IV.F., "Events During the Chapter 11 Case --
Approval of Transactions with Hexcel S.A."). Based upon these transactions,
Hexcel S.A.'s existing bank lenders have entered into an agreement to commit
their existing credit lines, which total in excess of $18 million, for a period
of two years. The Company has injected 100 million Belgian Francs into Hexcel
S.A. and will inject a further 100 million Belgian Francs before the end of
September, 1994. These actions have stabilized the finances of Hexcel S.A. and
will permit it to conclude its

43
<PAGE>
restructuring programs focused on restoring its operations to financial health.
J. JOINT VENTURES
The Company has entered into three joint ventures since 1990:
1. KNYTEX. The Company entered into a joint venture with Owens-
Corning in June 1993. The venture is a strategic alliance which combines the
stitchbonding capability of the Company with the reinforcement glass
manufacturing, marketing and distribution expertise of Owens-Corning to produce
and market stitchbonded fabrics worldwide. The venture began operations in July
1993 after the Company sold 50% of the Knytex business to Owens-Corning and
contributed the remaining 50% to the venture. The Company received proceeds of
$4.5 million and recorded a gain of approximately $1.5 million related to the
sale. The Company owns 50% of the Knytex venture, which had revenues during the
six months ended December 31, 1993 of $6.8 million.
2. HEXCEL-FYFE. The Company entered into a joint venture with Fyfe
Associates in October, 1992. Hexcel-Fyfe will sell and apply high strength
architectural wrap primarily for the seismic retrofitting and strengthening of
bridges and other structures. The major January 17, 1994 earthquake in Los
Angeles demonstrated the capability of the product, as certain test sites near
the epicenter survived with no damage. The Company owns 40% of the venture, and
Fyfe Associates owns the remainder. Revenues of the venture were not
significant

44
<PAGE>
in 1993 or 1992. On June 22, 1994, the Bankruptcy Court granted Hexcel's motion
to assume the Hexcel-Fyfe joint venture agreement.
3. DIC - HEXCEL LTD. In 1990, the Company entered into a joint
venture with Dainippon Ink and Chemicals ("DIC") for the production and sale of
Nomex honeycomb, advanced composites and decorative laminates for the Japanese
market. Construction of a manufacturing facility in Komatsu, Japan began in
1992. The manufacture and sale of the decorative laminates product line has
commenced, and pre-qualification manufacturing trials of honeycomb and
composites are being made. The Company owns 50% of this venture.
The significant reduction in demand for commercial aircraft has
reduced the size of the Japanese market for honeycomb and composites from that
envisioned when this joint venture was formed. There have also been changes in
the competitive environment. These changes have raised serious questions as to
the economic potential of the joint venture with DIC. The venture currently has
a negative cash flow which is expected to continue for several years until the
venture achieves a level of sales that will provide a break-even cash flow. The
Company is engaged in discussions with DIC as to the future of the venture in
light of these market changes and continuing cash needs, and is considering
whether to take steps to significantly reduce or totally eliminate its
participation in the joint venture.

45
<PAGE>
The Company's joint venture with DIC required that the venture incur
significant debt to fund the construction of its Komatsu, Japan plant. Under
the joint venture agreement, DIC agreed to guarantee all bank debt incurred by
the venture, and Hexcel provided an undertaking that in the event the venture
went into liquidation, it would reimburse DIC for 50% of any bank loans
satisfied by DIC under its guarantees, net of any proceeds from the sale in
liquidation of the venture's assets. The venture will need either to borrow
further substantial sums or obtain cash equity infusions from its investors to
continue to fund its operations in the coming years.
DIC has filed an unliquidated, contingent claim with respect to
Hexcel's undertaking. The bank debt of the venture is currently Yen 1,939
(approximately $19.5 million). Hexcel's contingent liability to DIC is
approximately one half of the excess of $19.5 million bank debt over any net
proceeds from the sale of the venture's assets, if any remain after payment of
claims of greater priority. Because the Company is in discussions with DIC as
to the future of the venture that might lead to elimination of its participation
in the venture, DIC's claim of up to $9.75 million may be liquidated in whole or
in part before the end of 1994. Accordingly, the estimated contingent liability
to DIC has been provided for in Hexcel's Projected Financial Information
(Exhibit E).

46
<PAGE>
K. DISCONTINUED OPERATIONS
In November 1990, the Company announced plans to sell the fine
chemicals business. On March 31, 1992, the Company sold the U.S. fine chemicals
business located in Zeeland, Michigan. On January 31, 1994, the Company sold
the European fine chemicals business located in Teesside, England, thus
completing the divestiture of discontinued operations.

L. COMPETITION
In the production and sale of its materials, the Company competes with
numerous U.S. and international companies on a worldwide basis, many of which
are considerably larger than the Company in size and financial resources. For
example, the Company competes with one major international manufacturer of
honeycomb, advanced composites, reinforcement fabrics and resins, as well as
several other major companies on specific products. The Company also competes
with many smaller U.S. and international manufacturers.
The broad markets for Company products are highly competitive. The
Company has focused on both specific markets and specialty products within
markets to gain market share. The Company's materials compete with substitute
structural materials, including building materials such as structural foam,
metal, wood and other engineered material. Depending upon the material and
markets, relevant competitive factors include price, delivery, service, quality
and product performance.

47
<PAGE>
Although the markets for the Company's honeycomb materials are highly
competitive, management knows of no other manufacturer that has produced and
sold as much non-paper honeycomb as the Company during the last five years.
While industry statistics are not available, management believes on the basis of
market research that the Company currently produces and sells the largest share
of metallic and non-metallic honeycomb used in the world. The Company continues
to maintain this competitive edge through the development of new honeycomb
materials for the markets it serves.

M. PATENTS AND KNOW-HOW
Management believes the ability to develop and manufacture materials
is dependent upon the know-how and special skills within the Company. In
addition, the Company has obtained and presently owns a number of patents,
patent applications, and patent and technology licenses. It is Company policy
to enforce the proprietary rights of the Company. To that end, the Company has
several patent infringement lawsuits pending. Management believes the patents
and know-how rights currently owned are adequate for the conduct of business.
In the opinion of management, however, no individual patent or license is of
material importance.

<PAGE>
N. EMPLOYEES
At May 31, 1994, the Company employed 2,290 full-time employees,
compared with 3,050 at December 31, 1992. Of these employees, 1,799 were in
manufacturing and the remainder were administrative, sales, engineering,
marketing, research and clerical personnel. Seventy-seven employees at one
domestic plant have union affiliations. Management believes that labor
relations in the Company are generally satisfactory.

O. PROPERTIES
The Company owns and leases manufacturing plants and sales offices
located throughout the United States and in several other countries as noted
below. The corporate offices and principal corporate support activities for the
Company are located in leased facilities in Pleasanton, California. The central
research and development laboratories for the Company are located in Dublin,
California.
The following table lists the manufacturing plants by geographic
location, approximate square footage and principal products. All properties
listed under the heading "United States" are owned or leased by Hexcel, and all
properties listed under "International" are owned or leased by Hexcel's non-
debtor subsidiaries.

49
<PAGE>

MANUFACTURING PLANTS

Approximate
Square
Plant Location Footage Principal Products
-------------- ------------ ------------------

United States:
Casa Grande, Arizona 210,000 Non-metallic honeycomb,
advanced honeycomb processing,
advanced composites

Chandler, Arizona 158,000 Non-metallic honeycomb,
advanced honeycomb processing,
advanced composites

Chatsworth, California(5) 42,000 Resins, tooling systems

Livermore, California 150,000 Advanced composites

Lancaster, Ohio 42,000 Advanced composites
Pottsville, Pennsylvania 100,000 Advanced honeycomb processing

Graham, Texas 250,000 Metallic honeycomb

Seguin, Texas 170,000 Woven reinforcement fabrics
Burlington, Washington 50,000 Advanced honeycomb processing

International:
Welkenraedt, Belgium 205,000 Metallic and non-metallic
honeycomb, advanced composites

Swindon, England 20,000 Non-metallic honeycomb
processing

Les Avenieres, France 373,000 Woven reinforcement fabrics,
advanced composites
St. Ouen l'Aumone, 100,000 Resins, tooling systems
France4

Hexcel leases the land on which the Burlington, Washington plant is
located and a portion of the Casa Grande, Arizona plant. International
subsidiaries lease the 20,000 square foot Swindon, England plant and 18,000
square feet of the Les Avenieres, France plant.
In April 1993, Hexcel announced the closing of the Graham, Texas
facility and the consolidation of the Graham operations into other plants. Even
after the Graham closure,

- - ---------------------

4 These plants would be sold in connection with the proposed sale of the
Company's resins business. See Section IV.G., "Events During the
Chapter 11 Case, Proposed Sale of Resins Business."

50
<PAGE>
management believes the Company has more facilities and production capacity than
required by either current or projected sales levels.
The Company sold the business located in the City of Industry in 1991,
and as such, the above table excludes the related 115,000 square foot production
building which is now vacant and listed for sale.
Certain of the properties secure loans made to the Company. See
Section V.A.2., "The Plan of Reorganization, Classification and Treatment of
Claims and Equity Interests, Class 2 -- Secured Claims." In addition,
substantially all U.S. equipment and fixtures, along with other personal
property, secure the debtor-in-possession financing. See Section IV.C., "Events
During the Chapter 11 Case -- DIP Credit Facility."

P. EVENTS LEADING TO THE COMMENCEMENT OF THE CHAPTER 11 CASE
In December 1992, the Company initiated a restructuring program
designed to improve facility utilization and determine the proper workforce
requirements to support future business levels. The restructuring was necessary
due to anticipated protracted weakness in the aerospace industry and the need to
make aggressive cost reductions to operate profitably at lower sales levels.
Restructuring actions were implemented during 1993 and included commencement of
the closure of the Graham, Texas plant, personnel reductions at

<PAGE>
all remaining manufacturing facilities, and a worldwide reorganization of sales,
marketing and administration.
The weakness of business conditions and the restructuring requirements
created financial strains on the Company which, in turn, precipitated severe
liquidity problems that ultimately led to the chapter 11 filing. In the fourth
quarter of 1992, a $23.5 million restructuring charge was taken and the Company
experienced a $5.2 million operating loss (before interest and taxes) which put
the Company out of compliance with certain financial covenants under its U.S.
financing agreements. In order to obtain the waivers of default from revolving
credit banks, and in order to obtain their consent for a proposed acquisition of
certain assets and stock from BASF in the U.S. and Europe, in March, 1993, the
Company entered into an amended revolving credit agreement. This amended
agreement reduced the credit commitment from $35 million to $12 million;
shortened the maturity by two years to March 15, 1994; required the Company to
provide by July 31, 1993 collateral consisting of substantially all of its U.S.
assets; and revised certain financial covenants. Consistent with prior
agreements, this agreement continued to provide for a prohibition on the
pledging of the Company's domestic assets, such that the consent of the existing
lenders would have been necessary to secure new financing. The Company
eventually was unable to complete the BASF acquisition.
The reduction in credit availability and the depletion of cash by the
operating losses in the first two

<PAGE>
quarters of 1993 resulted in insufficient cash to adequately fund the previously
announced restructuring program, despite infusion of $5.5 million of one-time
cash benefits from a foreign subsidiary loan and from the sale of one of the
Company's fabric plants to a new joint venture. Furthermore, the operating
losses and the inability to complete the planned acquisition in the first half
of 1993 caused the Company to be in default under the revised bank covenants.
As of June 30, 1993, the Company received waivers of a default through
July 31, 1993 under one of the revised financial covenants. As of July 31,
1993, the U.S. banks extended the waiver of this default and also waived the
covenant for collateral, both through September 15, 1993. Before considering
any further amendments to the existing credit agreement, the senior lenders
required the Company to submit to them a detailed business plan.
To implement the critical changes required for Hexcel's future
viability, the Board of Directors in June 1993 engaged Chanin and Company
("Chanin") to assist Hexcel with the deteriorating relationship with Hexcel's
senior lenders and to aid Hexcel with its financial restructuring. Thereafter,
on July 30, 1993 the Board terminated the employment of the CEO, Robert L. Witt,
and elected Director John J. Lee as Chairman of the Board and Director John L.
Doyle as Vice Chairman. Messrs. Lee and Doyle also were named co-CEOs of the
newly formed Office of the Chief Executive,

53
<PAGE>
which included Donald J. O'Mara, President and Chief Operating Officer.
Mr. Lee had just recently joined the Board in May 1993, as an outside
director and Mr. Doyle was the longest standing member of the Board. Mr.
Doyle's role was to oversee operations, while Mr. Lee's was to restructure the
Company's finances. Under Messrs. Doyle and O'Mara, the organizational
restructuring and plant consolidation continued, to the extent possible, while
Mr. Lee began an accelerated effort to solve the Company's serious liquidity
problems.
During August 1993, a new corporate management team was assembled and
began addressing a number of the legal and financial issues besieging the
Company. Commitments were obtained from European banks to maintain critical
lines of credit through March 16, 1994 relating to the Company's Belgian
subsidiary, Hexcel S.A. An agreement was reached for the sale of the Company's
fine chemical business in the United Kingdom which had been on the market for
more than three years and which was then incurring major losses and requiring
substantial amounts of cash. Hexcel began immediate corrective action for
alleged noncompliance with various cost accounting standards relating to its
military contracting business. In addition, a significant equipment lease
commitment was eliminated, without further cost or penalty, that had contained
financial covenants with which Hexcel could not comply and which was creating a
destabilizing impact on its financial structure.

54
<PAGE>
It became apparent that prior management's financial strategies
devised in early 1993 to deal with the liquidity issues facing day-to-day
operations were unrealistic. No new credit facility had been found to replace
the one obtained in March 1993, which proved to be inadequate; the proposed sale
of certain assets had not been a timely and viable option; and attempts to raise
cash through sale/leaseback transactions had proved unsuccessful.
By the end of August, overdue trade payables had reached precarious
levels and the Company had few options to improve its cash position. From
August forward, the Company was in a constant struggle to accelerate cash
collections and to negotiate progress payments from customers to raise
sufficient cash to maintain operations for an adequate time to develop a
workable financial solution. For example, settlement of a contract termination
claim and the collection of substantial progress payments from a major customer
in September helped prevent the Company from running out of cash during this
period.
Confronted by these realities, the new management team set out to
persuade the senior lenders to expand their credit facilities. Since the
Company had already previously agreed to provide senior lenders with a pledge of
substantially all U.S. assets, and since the existing credit agreements
contained a prohibition on the pledge of assets to secure any other financing,
the Company's options were severely limited. Any new debt financing would have
required

55
<PAGE>
senior lender waivers which could not be obtained absent a comprehensive debt
restructuring.
In compliance with senior lender demands, Hexcel prepared a new
business plan and submitted it to the senior lenders by the end of August, 1993.
Thereafter, the Company agreed to pay the cost of an independent auditing firm,
Price Waterhouse & Co., hired by the senior lenders to conduct due diligence on
the Company's business plan and prospects. This firm spent more than a month
evaluating the Company, and management kept the senior lenders fully apprised of
Hexcel's severe liquidity problems throughout the negotiations. These efforts
did not persuade the lenders to enter into a debt restructuring.
By late September, no agreement had been reached with the senior
lenders and the Debtor fell into noncompliance with various financial covenants.
Management's strategic plan reflected the continuing decline in the aerospace
business and the need for additional restructuring actions. In September 1993,
the Company announced an additional $50 million restructuring charge.
Using the strategic plan as a general basis, the Company sought new
capital from a wide variety of sources during October and November. Such new
capital was needed to supplement the ongoing efforts to obtain an increased
credit facility from the senior lenders. Despite the Company's precarious
financial condition and the limited time frame, the new management team was
successful in attracting an equity

56
<PAGE>
investor, Mutual Series. The transaction being considered in November 1993
provided for $40.0 million of new equity from Mutual Series, incorporated a
rights offering to existing shareholders (at an exercise price equal to Mutual
Series' per share purchase price) and was subject to agreement to a debt
restructuring by all of Hexcel's senior lenders. Such restructuring
contemplated that senior lenders would accept less than full payment of their
debts in cash.
During the final weeks prior to the filing, lenders representing most
of the senior debt agreed to the proposed transaction while one member of the
revolver bank group, which held a small portion of the senior debt, did not
agree. Efforts to reach a compromise solution proved fruitless. Although the
dissenting bank expressed a willingness to be bought out of its position on
terms more favorable than those offered to other senior lenders, and the Company
had arranged financing to do this, certain of the other lenders in the revolving
credit bank group would not accede to the compromise.
While these negotiations were ongoing, management made significant
efforts to control cash in order to maintain operations. It initiated
aggressive receivable collections including one time cash discounts. It
increasingly delayed payments to vendors. However, suppliers became very
anxious about the extended payments and no word of new financing from either the
senior lenders or other sources. As a result, a

57
<PAGE>
number of key suppliers refused to ship unless Hexcel paid cash with the order
or reduced outstanding balances.
By November 22, 1993, Hexcel's cash flow was such that it had stopped
paying vendors by regular checks with critical vendors being paid by wire. Only
by foregoing payment of payables and through aggressive receivable collection
efforts by offering one time cash discounts was the Company able to survive for
the remaining weeks. During this period, and up to and including the date of
the chapter 11 filing, intense negotiations continued with the senior lenders in
an attempt to find a solution that would make possible the equity investment.
The Company provided explicit advance notice to the senior lenders of the need
to file Chapter 11 by December 6, 1993 if no agreement was reached.
Unfortunately, the senior lenders failed to agree.
Operating at critically low levels of cash, without any remaining
credit availability and having already extended payments to trade vendors, the
Debtor's severe liquidity problems endangered its ability to continue as a going
concern. The extensive negotiations with existing senior U.S. lenders for an
expanded credit facility did not yield consensus on terms for a debt
restructuring with the senior lenders, which was a condition to the proposed $40
million equity investment the new management had succeeded in attracting.
Without sufficient financial resources to fund the cash needed to meet ongoing
operating requirements and to continue the operational restructuring necessary
to restore

<PAGE>
the Company to financial health and positive cash flow, Hexcel was left with no
reasonable alternative but to file a voluntary petition for relief under the
provisions of chapter 11 of the federal bankruptcy laws on December 6, 1993. The
Company's joint ventures and international subsidiaries are not included in the
bankruptcy proceedings and, as such, are not subject to the provisions of the
federal bankruptcy laws or the supervision of the Bankruptcy Court.

IV. EVENTS DURING THE CHAPTER 11 CASE

Since the Debtor commenced its Chapter 11 Case, it has continued to
operate its business and manage its properties as a debtor in possession
pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
The following is a brief description of some of the major events
during the Chapter 11 Case.

A. APPOINTMENT OF THE CREDITORS' COMMITTEE
On December 10, 1993, the United States Trustee appointed a committee
of unsecured creditors (the "Creditors' Committee") to represent unsecured
creditors of the Debtor. Since its formation, the Creditors' Committee has
consulted with the Debtor concerning the administration of the Chapter 11 Case.
The Debtor has kept the Creditors' Committee informed about its operations and
has sought the concurrence of the Creditors' Committee and Court approval for
actions and

59
<PAGE>
transactions taken outside of the ordinary course of the Debtor's business. The
Creditors' Committee has participated actively, together with the Debtor's
management and professionals, in, among other things, reviewing Hexcel's
business plan, the development of the bidding process for a standby purchaser
and the negotiation of a consensual plan of reorganization.
The Creditors' Committee currently consists of nine members and
includes representatives of each of the principal constituencies of unsecured
creditors of Hexcel. The current members of, and the attorneys and advisors
retained by, the Creditors' Committee are set forth below:

CREDITORS' COMMITTEE
---------------------

FIRST TRUST OF CALIFORNIA
101 California Street
Suite 1150
San Francisco, CA

E.I. DU PONT DE NEMOURS AND COMPANY
c/o The DuPont Company
P.O. Box 80705
Wilmington, DE 19805

WELLS FARGO BANK
343 Sansome Street
San Francisco, CA 94104

THE PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
711 High Street
Des Moines, IA 50392

COASTAL ALUMINUM ROLLING MILLS, INC.
2475 Trenton Avenue
Williamsport, PA 17701

BANQUE NATIONALE DE PARIS
180 Montgomery Street
San Francisco, CA 94104

60
<PAGE>
AMOCO CHEMICAL COMPANY
200 East Randolph Drive
P.O. Box 87759
Chicago, IL 60680-0759

MONSANTO COMPANY
800 N. Lindberg Boulevard
St. Louis, MO 63167

BANK OF AMERICA, N.T. & S.A.
333 South Hope Street, Suite 4346
Los Angeles, CA 90071

ATTORNEYS
---------

PILLSBURY MADISON & SUTRO
235 Montgomery Street, 14th Floor
San Francisco, CA 94104

FINANCIAL ADVISORS
------------------

ERNST & YOUNG
1900 Avenue of the Stars
Suite 2100
Los Angeles, CA 90067

ALEX BROWN & SONS, INC.
787 7th Avenue
New York, NY 10019

B. APPOINTMENT OF EQUITY SECURITY HOLDERS' COMMITTEE

On December 21, 1993, the United States Trustee appointed a committee
of equity security holders (the "Equity Committee") to represent equity security
holders of the Debtor. Since its formation, the Equity Committee has consulted
with the Debtor concerning the administration of the Chapter 11 Case. The
Debtor has kept the Equity Committee informed about its operations and has
sought the concurrence of the Equity Committee and Court approval for actions
and transactions taken outside of the ordinary course of the

61
<PAGE>
Debtor's business. The Equity Committee has participated actively, together
with the Debtor's management and professionals and the Creditors' Committee and
its professionals, in, among other things, reviewing Hexcel's business plan.
The Equity Committee currently consists of six members and one EX
OFFICIO member. The current members of, and the attorneys and advisors retained
by, the Equity Committee are set forth below:

EQUITY COMMITTEE
----------------

JOSEPH L. HARROSH
40900 Grimmer Boulevard
Fremont, CA 94538

FISHER INVESTMENTS, INC.
301 Henrick Road
Woodside, CA 94062

WILLIAM S. SMITH
1700 Lincoln Street, Suite 1930
Denver, CO 80203

ELIZABETH L. HUGHES
98 Diablo View
Orinda, CA 94563

ROBERT L. WITT
6784 Fox Run
Orinda, CA 94563

ROGER C. STEELE
1253 Upper Happy Valley Road
Lafayette, CA 94549

STATE OF WISCONSIN INVESTMENT BOARD
(EX OFFICIO)
121 East Wilson Street
P.O. Box 7842
Madison, Wisconsin 53707

62
<PAGE>
ATTORNEYS
---------

MARCUS MONTGOMERY WOLFSON P.C.
53 Wall Street
New York, NY 10005-2815

FINANCIAL ADVISORS
------------------

ROTHSCHILD, INC.
1251 Avenue of the Americas - 51st Floor
New York, NY 10020

C. DIP CREDIT FACILITY

Upon the commencement of the Chapter 11 Case, the restoration of trade
credit and support was of great importance to Hexcel. To restore vendor
support, immediately upon the commencement of the Chapter 11 Case, the Debtor
obtained a post-petition working capital facility (the "DIP Credit Facility")
from The CIT Group/Business Credit, Inc. ("CIT"). Pursuant to the DIP Credit
Facility, CIT agreed to make loans to, and to guaranty the issuance of letters
of credit for, Hexcel through the earlier of December 5, 1995, and the date that
a plan of reorganization becomes effective, in an aggregate amount not to exceed
$35.0 million. The DIP Credit Facility provides that the obligations of the
Debtor to CIT constitute administrative expense obligations with priority over
any and all administrative expenses of the kinds specified in Sections 503(b)
and 507(b) of the Bankruptcy Code (with limited exceptions) secured by a
superpriority lien on substantially all of Hexcel's unencumbered personal
property.
On December 8, 1993, the Bankruptcy Court approved the DIP Credit
Facility on an interim basis and on January 28,

63
<PAGE>
1994, the Bankruptcy Court approved it on a final basis. As a result of, among
other things, the Debtor obtaining the DIP Credit Facility, vendor confidence in
Hexcel was slowly restored. Vendors began to sell and ship material and
supplies to Hexcel. Credit terms and limits, however, remain significantly
below those in effect prior to the Commencement Date.
As of July 1, 1994, the Debtor's outstanding borrowings under the DIP
Facility were approximately $6,300,000.

D. EMPLOYEE RETENTION PLAN
To maintain the continued support, cooperation and morale of Hexcel's
employees, Hexcel obtained authority to pay employees for prepetition wages,
salaries and certain other compensation and benefits. In addition, to ensure
the retention of exempt employees, Hexcel obtained Bankruptcy Court approval of
an employee retention plan which provides eligible employees with bonus
compensation for remaining with the Company through the chapter 11 process until
confirmation of a plan of reorganization.

E. DEVELOPMENT AND IMPLEMENTATION OF REVISED STRATEGIC PLAN
1. BACKGROUND. At the time the Chapter 11 Case was filed, Hexcel's
management was attempting not only to solve the Company's liquidity crisis, but
also to turn around the precipitous two-year decline in profitability which was

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the cause of the liquidity crisis. The protection provided by chapter 11
allowed management the opportunity both to reassess the Company's 1993 crisis
planning and to develop a basis for Hexcel to emerge from bankruptcy on a solid
financial footing with a well-conceived strategy for the future. Management
recognized the need to obtain outside help in the reassessment, as well as in
formulating, developing and implementing a long-range business plan and,
ultimately, a plan of reorganization. Because Hexcel had essentially been
operating without a strategic planning department, management hired a consulting
firm, UniRock Management Corporation ("UniRock"), to step in immediately to fill
that role. In addition, Arthur Andersen/Andersen Consulting ("Andersen"), and
to a lesser extent the consulting division of the Company's outside auditor,
Deloitte & Touche, were hired to perform a number of important tasks for which
the Company lacked adequate experienced staff, which need was accentuated by the
critical timing involved. With this team assembled by the beginning of 1994,
over the ensuing months of the chapter 11 period the Company developed a revised
strategic plan and has begun to implement it. Management believes that the two-
year decline in profitability has been arrested and a turnaround is underway,
but the full implementation of the restructuring plan lies ahead. What follows
are the details of what has been undertaken and the various elements of the plan
that has been developed.

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2. ESTABLISHING A CORE BUSINESS. The first step of the strategic
planning process has involved a review of Hexcel's four major product groups,
with the objective of identifying at least a partially integrated core business
to sustain Hexcel after it emerges from chapter 11. It was concluded that three
of Hexcel's four major product lines -- honeycomb, advanced composites and
reinforcement fabrics -- constitute such a core business, but that there is
little interrelationship between those three operations and the fourth, Hexcel's
resin business. As a result of these conclusions, Hexcel intensified its
efforts to find buyers for its resin business, a process which it had begun
without success in early 1993. Several interested potential purchasers have
been identified, and Hexcel is now attempting to negotiate a sale of the resins
business. An agreement for the sale of such business will be subject to the
approval of Hexcel's Board of Directors and an overbid procedure which was
approved by the Bankruptcy Court on June 22, 1994. See Section IV.G., "Events
During the Chapter 11 Case -- Proposed Sale of Resins Business."
3. DECISION TO SUPPORT HEXCEL S.A. After thoroughly analyzing the
strategic implications of Hexcel's troubled Belgian operations, management
concluded that abandonment of these operations would likely have a material
long-term negative impact on Hexcel's worldwide position in the aerospace
business and an immediate adverse effect on Hexcel's U.S., as well as European,
operations. Accordingly,

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management decided to pursue the recapitalization of Hexcel S.A. pursuant to a
Court order dated June 9, 1994, and a reorganization of its business. Hexcel
S.A. subsequently negotiated an extension of its existing credit facilities
through June 30, 1996. The recapitalization included an infusion of capital
into Hexcel S.A. by the Company. See Section IV.F., "Events During the Chapter
11 Case -- Approval of Transactions with Hexcel S.A."
4. LOW OBSERVABLE OPERATIONS. Hexcel supplies honeycomb with LO
characteristics primarily to Northrop for the B-2 Bomber program and also to
other defense contractors. To support the B-2 program, Hexcel built its
Chandler, Arizona plant. As part of management's efforts during the Chapter 11
Case to put the Company on a sound operating basis, Hexcel has concluded that
the LO business must stand on its own business and financial merits. Therefore,
since late April, 1994, Hexcel has been holding serious discussions with
Northrop regarding the terms of Hexcel's continuing support for the B-2 program.
Two alternatives are being evaluated to satisfy Hexcel's and Northrop's mutual
interests. The first is for the Chandler plant to become a dedicated B-2
facility at least through 1995, but in a position in which it can operate on a
satisfactorily profitable basis. The potential sales for Hexcel's LO material
to the B-2 program after 1995 should be known by the third quarter of next year,
and under this first alternative future arrangements would be determined at that
time. The second alternative would be for Northrop to

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purchase the Chandler production facility and for Northrop to purchase or
license the LO technology for military applications and operate the Chandler
facility either directly or under a Hexcel operating contract. A decision on
which alternative will be pursued should be reached in the fall. The Projected
Financial Information reflects Hexcel's estimate of financial performance under
either alternative.
5. PLANT CONSOLIDATIONS. Hexcel has also been reassessing the most
effective way to complete the consolidation of its plant operations. At the
beginning of 1993, the Company had 14 plants worldwide. It expects that by the
end of 1994, or soon thereafter, the total number of plants will be reduced to
nine or ten. The City of Industry, California plant has been closed. The
Graham, Texas plant is scheduled to be closed in early 1995, after its
operations have been moved primarily to Casa Grande, Arizona. Hexcel is
attempting to sell the City of Industry and Graham plants. On January 31, 1994,
Hexcel sold its chemical plant in Teesside, England. The plants located near
Paris, France and in Chatsworth, California are expected to be sold as part of
the proposed divestiture of the resins business.
Upon completion of management's planned plant consolidation
initiatives, by early 1995, Hexcel will have created centers of excellence for
each of its remaining businesses. Domestically, Hexcel will have concentrated
its U.S. honeycomb process operations at the Casa Grande plant by completing the
Graham move and transferring its non-LO

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operations from Chandler (the latter due to be completed by year-end 1994),
while maintaining its U.S. aerospace composite operations at the Livermore,
California plant and keeping its U.S. fabric operations at the Seguin, Texas
plant. The Pottsville, Pennsylvania and Burlington, Washington plants will
remain the centers for honeycomb machining, and the Chandler plant either will
be sold or dedicated to the B-2 program and any additionally-developed LO
business. The Lancaster, Ohio plant will be the primary non-aerospace composite
facility. In Europe, the honeycomb operations and primary composite operation
will continue to be located at the Welkenraedt, Belgium facility, while the
Lyon, France facility will remain the centers for fabrics (and to a lesser
extent, composites). A small processing facility and European distribution
point for U.S. produced materials will be maintained in Swindon, England.
6. DOWNSIZING. Hexcel's general and administrative expenses have
been substantially reduced through a downsizing of the staff that remained as a
carryover from the Company's 1980's defense contracting activities. As a result
of present management's restructuring efforts, the head-count is expected to be
reduced company-wide by approximately 25%, from 3,050 at the end of 1992 to less
than 2,300 by year end 1994. Since December 1992, Hexcel has recorded
approximately $76 million in charges for restructuring and asset write-downs
with a cash cost of approximately $36 million. These restructuring actions are

<PAGE>
anticipated to produce cash savings in 1994 of approximately $24 million as
compared to 1992. These actions will account for a substantial portion of
Hexcel's profitability going forward, as projected in the Projected Financial
Information (Exhibit E).
7. HEADQUARTERS. The Company has not made a decision as to the
permanent location of its corporate headquarters. The interim plan calls for
remaining in Northern California, and the Company is attempting to negotiate a
rent reduction on its present office building as well as a reduction in term.
Although the Projected Financial Information assumes rejection of that lease, it
is not anticipated that a final decision on the headquarters will be made until
after the Chapter 11 Case is concluded.
8. RATIONALIZING AND STREAMLINING OF CORE BUSINESSES. Management
has undertaken a concentrated effort to rationalize its product lines and market
segments, a process which had not been rigorously pursued since the business was
originally built through a series of acquisitions many years ago. Actions have
now been initiated to take advantage of the findings of a study performed during
the chapter 11 period. Among the initial steps, Hexcel intends to increase the
efficiency of its order processing systems, to rationalize its inventory program
to improve deliveries, and to develop a network of distributors to serve small
customers. Hexcel will intensify these efforts in the honeycomb business

<PAGE>
initially, since that appears to be the segment with potential to yield the
greatest immediate savings.
9. IMPROVEMENT OF MANUFACTURING PROCESSES. Management has concluded
that there is a major opportunity for the Company to improve its manufacturing
processes. The aerospace business has traditionally emphasized performance in
its procurement. However, in the current economic environment, the competitive
markets the Company serves are now dictating lower costs which will require
process improvements as well as greater efficiency, less scrap, and other normal
cost-cutting measures. Specifically, Hexcel is working to identify key process
improvements which will lower its manufacturing costs for both composites and
honeycomb. This effort will accelerate over the remainder of 1994.
10. THE STRATEGIC PLAN. During the Chapter 11 Case, Hexcel has
prepared a five-year business plan, which was most recently updated on July 18,
1994, and has incorporated many of the strategic initiatives mentioned above.
Most of these initiatives have resulted from the analysis and strategic planning
undertaken by management during the chapter 11 period with the assistance of the
Company's consultants. Implementation of many of these strategic actions has
already commenced and is intended to help lead the Company successfully out of
bankruptcy.

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F. APPROVAL OF TRANSACTIONS WITH HEXCEL S.A.
On June 8, 1994, the Bankruptcy Court granted the Debtor's motion for
authority to enter into certain transactions necessary to stabilize Hexcel
S.A.'s business and induce Hexcel S.A.'s bank lenders to agree to a two-year
lending commitment with Hexcel S.A. Pursuant to the Court's ruling, the
following proposed transactions were approved:
1. Hexcel may invest, or lend in the form of new conditionally
forgiven subordinated debt, up to 200 million Belgian Francs ("MBF") in or to
Hexcel S.A.
2. Hexcel may conditionally forgive a promissory note owing from
Hexcel S.A. in the amount of $5.6 million, effective as of December 31, 1993.
The forgiveness will be conditional in that the underlying debt will be deemed
to be reinstated at then-current market interest rates once, and to the extent
that, Hexcel S.A. has returned to financial health, as measured by net worth
tests to be determined in negotiations with Hexcel S.A.'s bank lenders. The
conditionally forgiven debt shall accrue simple interest, and be reinstated in
the event of a sale, merger, dissolution or other disposition of Hexcel S.A.
3. Royalties that would otherwise accrue in favor of Hexcel under
licenses between Hexcel and Hexcel S.A. from January 1, 1994 until the end of
Hexcel S.A.'s lenders' two-year lending commitments will be waived and released
by Hexcel.

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4. Hexcel may acquire new redeemable preferred shares of Hexcel
(U.K.) Limited (hereinafter "HUKL"), another wholly owned subsidiary, in
exchange for payment of $350,000 in cash, simultaneously with full payment by
HUKL to Hexcel of the $350,000 debt owing from HUKL to Hexcel.
5. Hexcel may transfer to Hexcel S.A. certain manufacturing
equipment, together with related know-how, presently maintained at Hexcel's
Graham, Texas facility, in exchange for Hexcel S.A.'s payment of the appraised
value of such equipment.
Hexcel S.A. has now concluded an agreement with its bank lenders to
commit their existing credit facilities for a two-year period and will complete
the implementation of the foregoing transactions before the end of September
1994.

G. PROPOSED SALE OF RESINS BUSINESS
Hexcel originally embarked upon an effort to sell its resins business
in early 1993, but that process did not meet with success. However, following
completion of the strategic analysis of the business performed during the
Chapter 11 Case, as explained in subsection E. of this Section IV., the
Company's new management team concluded that there was virtually no synergy
between the resins operations and Hexcel's core businesses. As a result,
management is now pressing forward with the support of both the Equity and
Creditors' Committees to accomplish the sale of the Company's

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entire resins business, if a sale on acceptable terms can be arranged.
The resins business is comprised of a U.S. operation located in
Chatsworth, California and a European business based near Paris, France. The
European operation is comprised of a group of four subsidiaries located in
France, Germany, Spain and Italy. Because of the interrelationship of the U.S.
and European businesses, it was concluded that it would be an unduly complicated
matter to sell the operations separately, so a procedure was developed to sell
the entire resins business. This procedure was approved by the Court in an
Order filed on June 23, 1994.
The sale process entails reaching a detailed letter of intent with a
prospective buyer, which will be subject to the completion of a definitive
agreement and other preconditions, but with no further due diligence conditions.
Once the definitive agreement is reached, there will be an overbid process
conducted, which process is detailed in the Bankruptcy Court's June 23, 1994
Order. The Order provides for a deposit and a breakup fee in connection with
the signing of the letter of intent and definitive agreement, as well as a
qualifying process for prospective overbidders. Management anticipates that a
letter of intent will be signed this summer, and that the sale of the resins
business could be completed in the Fall, prior to the Effective Date.

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H. FINE ORGANICS LITIGATION
On April 28, 1994, Fine Organics filed a Proof of Claim with the
Bankruptcy Court in the amount of $32,181,000 based on various causes of action
arising out of the Lodi, New Jersey facility sold to Fine Organics by the Debtor

in 1986.
On April 29, 1994, Fine Organics commenced an adversary proceeding
against the Debtor. The complaint alleges that the Debtor failed to timely
implement the clean-up plan that the Debtor submitted to the New Jersey
Department of Environmental Protection (now the New Jersey Department of
Environmental Protection and Energy) ("NJDEPE") and failed to comply with
directives of the NJDEPE, and that as a result of the Debtor's alleged non-
compliance, Fine Organics failed to receive loans and other financing. The
complaint requests that the sale of the property be voided, the Debtor reimburse
Fine Organics for environmental work performed, the Debtor pay damages resulting
from the contamination on-site, and the Court order the Debtor to remediate the
site.
On June 10, 1994, the Debtor filed an answer and counterclaim to Fine
Organics' complaint. The Debtor, in its Answer, denied the allegations made in
the Complaint. Further, the Debtor alleges that it has performed dutifully,
diligently and in good faith, and has attempted to perform its responsibility
pursuant to an Administrative Order on Consent and all other directives of the
NJDEPE for the investigation and remediation of the site. In its counterclaim,
the Debtor alleges that Fine Organics willfully and maliciously

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obstructed, interfered with and delayed the Debtor's efforts to investigate and
remediate the property.
For further discussion of this matter, see Section V.A.7., "The Plan
of Reorganization, Classification and Treatment of Claims and Equity Interests,
Class 7 -- Environmental Claims, Class 7Q (Lodi, New Jersey)."

I. CONFIDENTIALITY ORDERS
On February 24, 1994, the Bankruptcy Court entered an Order regarding
the Committees' use of confidential information, pursuant to which the
dissemination of confidential information to the Committees was regulated, while
the dissemination of such information to third parties was prohibited other than
in limited circumstances.
The matter of the disclosure of confidential information to third
parties came before the Court again on March 29, 1994, and at that hearing the
Court approved procedures for dissemination of such information to third parties
later embodied in an Order dated April 12, 1994. That Order provided, INTER
ALIA, that before the Debtor or a Committee may disclose confidential
information to a third party, such third party must agree in writing to be bound
by the terms of a confidentiality agreement, and the party wishing to disclose
confidential information shall provide to the Debtor and each of the Committees
written notice of the identity of the third party and the information to be
disclosed. The Order further provided that each party shall

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have the opportunity to object to the disclosure of confidential information to
the identified third party. Since the March 29, 1994 hearing, and even before
the entry of the April 12, 1994 Order, the Equity Committee sent notices of its
intention to provide confidential information to more than 50 persons and
entities, while the Debtor disseminated confidential information to
approximately 20 persons and entities and the Creditors' Committee disseminated
such information to approximately 6 persons and entities. Many third parties
who have received confidential information from one of the constituencies have
requested the opportunity to visit Hexcel's headquarters to meet with senior
management to conduct due diligence. Hexcel cooperated fully with these
requests.

J. EXCLUSIVITY
On June 8, 1994, the Court granted the motion of the Equity Committee
to terminate the Debtor's exclusive right to file and seek acceptances of a plan
of reorganization.

V. THE PLAN OF REORGANIZATION

The Plan is annexed hereto as Exhibit A and forms a part of this
Disclosure Statement. The summary of the Plan set forth below is qualified in
its entirety by reference to the more detailed provisions set forth in the Plan.

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A. CLASSIFICATION AND TREATMENT OF
CLAIMS AND EQUITY INTERESTS

1. ADMINISTRATIVE EXPENSE AND PRIORITY TAX CLAIMS

a. ADMINISTRATIVE EXPENSE CLAIMS

Administrative Expense Claims are Claims constituting a cost or
expense of administration of the Chapter 11 Case allowed under Section 503(b) of
the Bankruptcy Code. Such claims include any actual and necessary costs and
expenses of operating the business of the Debtor in Possession, any indebtedness
or obligations incurred or assumed by the Debtor in Possession in connection
with the conduct of its business or the acquisition or lease of property or the
rendition of services, any allowance of compensation and reimbursement of
expenses to the extent allowed by a Final Order under Section 330 of the
Bankruptcy Code, fees or charges assessed against the estate of the Debtor under
section 1930 of title 28 of the United States Code and the CIT Claims.
Pursuant to the Plan, each Administrative Expense Claim will be paid
in full, in Cash, on the later of the Effective Date and the date such
Administrative Expense Claim becomes an Allowed Administrative Expense Claim.
Allowed Administrative Expense Claims representing obligations incurred in the
ordinary course of business by the Debtor in Possession (including amounts owed
to vendors and suppliers that have sold goods or furnished services to the
Debtor in Possession since the Commencement Date) other than

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professional compensation and expenses will be assumed and paid by Reorganized
Hexcel in accordance with the terms and conditions of the particular
transactions and any agreements relating thereto. The Debtor estimates that
Allowed Administrative Expense Claims (exclusive of compensation and
reimbursement of expenses payable to professionals retained in the Chapter 11
Case) to be paid on the Effective Date will be approximately $5,959,000 (which
includes the estimated CIT Claim of $4,109,000). In addition, the Debtor
estimates that there will be additional administrative expenses and other costs
relating to the Exit Financing Facility (as defined below) in the approximate
amount of $925,000.
All payments to professionals for compensation and reimbursement of
expenses and all payments to reimburse expenses of members of the Creditors'
Committee and the Equity Committee will be made in accordance with the
procedures established by the Bankruptcy Code, the Bankruptcy Rules and the
Bankruptcy Court relating to the payment of interim and final compensation and
expenses. The Debtor estimates that Allowed Administrative Expenses, including
compensation and reimbursement of expenses of professionals retained in the
Chapter 11 Case (not including previously allowed payments) will be
approximately $11,000,000 to $12,000,000. The Bankruptcy Court will review and
determine all requests for compensation and reimbursement of expenses.
In addition to the foregoing, Section 503(b) of the Bankruptcy Code
provides for payment of compensation to

<PAGE>
creditors, indenture trustees and other persons making a "substantial
contribution" to a reorganization case, and to attorneys for, and other
professional advisors to, such persons. Also, certain of the professionals
retained by the Debtor or the appointed committees may request approval and
payment of additional bonus or success compensation. The amounts, if any, which
may be sought by entities for such compensation are not known by the Debtor at
this time. Requests for compensation must be approved by the Bankruptcy Court
after a hearing on notice at which the Debtor and other parties in interest may
participate and, if appropriate, object to the allowance of any compensation and
reimbursement of expenses.
b. PRIORITY TAX CLAIMS
Priority Tax Claims are those Claims for taxes entitled to priority in
payment under Section 507(a)(7) of the Bankruptcy Code. The Debtor estimates
that the amount of Allowed Priority Tax Claims is approximately $4,009,000.
Each holder of an Allowed Priority Tax Claim will receive, at the sole

option of Reorganized Hexcel, (i) Cash in an amount equal to such Allowed
Priority Tax Claim on the later of the Effective Date and the date such Priority
Tax Claim becomes an Allowed Priority Tax Claim, or (ii) equal annual Cash
payments in an aggregate amount equal to such Allowed Priority Tax Claim,
together with interest in arrears at an annual rate equal to seven percent, over
a period through the sixth anniversary of the date of assessment of

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such Allowed Priority Tax Claim, or (iii) payment upon such other terms
determined by the Bankruptcy Court to provide the holder of such Allowed
Priority Tax Claim deferred Cash payments having a value, as of the Effective
Date, equal to such Allowed Priority Tax Claim.
2. CLASS 1 -- OTHER PRIORITY CLAIMS
The Other Priority Claims are Claims which are entitled to priority in
accordance with Section 507(a) of the Bankruptcy Code (other than Administrative
Expense Claims and Priority Tax Claims). Such Claims include (i) unsecured
claims for accrued employee compensation earned within ninety days prior to
commencement of the Chapter 11 Case to the extent of $2,000 per employee and
(ii) contributions to employee benefit plans arising from services rendered
within 180 days prior to the commencement of the Chapter 11 Case, but only for
each such plan to the extent of (x) the number of employees covered by such plan
multiplied by $2,000, less (y) the aggregate amount paid to such employees from
the estates for wages, salaries and commissions. The Debtor estimates that the
amount of Other Priority Claims is $0.
Pursuant to the Plan, holders of Allowed Other Priority Claims, if any
exist, will be paid in full, in Cash on the later of the Effective Date and the
date such Claim becomes an Allowed Claim. Class 1 is not impaired under the
Plan. Holders of Claims in Class 1 are not entitled to vote to accept or reject

the Plan.

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3. CLASS 2 -- SECURED CLAIMS
Class 2 consists of all Secured Claims, each of which shall be within
a separate subclass (with each subclass to be deemed a separate class for all
purposes under applicable provisions of the Bankruptcy Code), as follows:
a. CLASS 2A (GRAHAM INDUSTRIAL MORTGAGE CLAIMS) consists of all
Claims against the Debtor under that certain Real Estate Lien Note, dated
February 1, 1992, from the Debtor to Graham Industrial Association, Inc. in the
original principal amount of $150,000, and under the related deed of trust and
all other related documents, instruments and agreements. The Claim in Class 2A
shall be Allowed solely for purposes of the Plan in the amount of $143,288 of
principal plus all unpaid interest accrued through the Effective Date, unless
waived, or assumed by a third party or released prior to the Effective Date.
b. CLASS 2B (GREATER POTTSVILLE MORTGAGE CLAIMS) consists of all
Claims against the Debtor under that certain Promissory Note, dated June 13,
1980, from the Debtor to Greater Pottsville Industrial Development Corporation
in the original principal amount of $400,000, and under the related mortgage and
all other related documents, instruments and agreements. The Claims in Class 2B
shall be Allowed solely for purposes of the Plan in the amount of $158,414 of
principal plus all unpaid interest accrued through the Effective Date.

<PAGE>
c. CLASS 2C (POTTSVILLE PIDA (SCHUYLKILL) MORTGAGE CLAIMS) consists
of all Claims against the Debtor under that certain Note, dated May 11, 1988
from Schuylkill Economic Development Corporation to the Pennsylvania Development
Authority in the original principal amount of $498,220 and the related mortgage
and all other related documents, instruments and agreements. The Claim in Class
2C shall be Allowed solely for purposes of the Plan in the amount of $246,923 of
principal plus all unpaid interest accrued through the Effective Date.
Pursuant to the Plan, each of the Secured Claims in Classes 2A, 2B and
2C shall be Reinstated and rendered unimpaired in accordance with Section
1124(2) of the Bankruptcy Code. The legal, equitable and contractual rights of
the holders of the Secured Claims are not altered by the Plan. The Secured
Claims are not impaired by the Plan. Accordingly, the holders of the Class 2
Secured Claims are conclusively presumed to have accepted the Plan as holders of
Class 2 Secured Claims and are not entitled to vote to accept or reject the
Plan.
4. CLASS 3 -- IDRB CLAIMS.
Class 3 consists of all IDRB Claims, each of which shall be within a
separate subclass (with each subclass to be deemed a separate class for all
purposes under applicable provisions of the Bankruptcy Code), as follows:
a. CLASS 3A (CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY)
consists of all Claims against the Debtor

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under that certain Loan Agreement, dated as of April 1, 1988, between the Debtor
and California Pollution Control Financing Authority regarding $750,000 of
Multi-Modal Interchangeable Rate Pollution Control Revenue Refunding Bonds
(Hexcel Corporation Project), Series 1988 due March 1, 2008, and under all
related documents, instruments and agreements other than the BNP Claims.
b. CLASS 3B (INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF
CASA GRANDE) consists of all Claims against the Debtor under that certain Loan
Agreement, dated as of March 1, 1988, between the Debtor and Industrial
Development Authority of the City of Casa Grande regarding $2,050,000 of Multi-
Modal Interchangeable Rate Industrial Development Revenue Refunding Bonds
(Hexcel Corporation Project), Series 1988 due September 1, 2007, and under all
related documents, instruments and agreements other than the BNP Claims.
c. CLASS 3C (YOUNG COUNTY #1 INDUSTRIAL DEVELOPMENT CORPORATION)
consists of all Claims against the Debtor under that certain Loan Agreement,
dated as of April 1, 1988, between the Debtor and Young County #1 Industrial
Development Corporation regarding $800,000 of Multi-Modal Interchangeable Rate
Industrial Development Revenue Refunding Bonds (Hexcel Corporation Project),
Series 1988 due March 1, 2008, and under all related documents, instruments and
agreements other than the BNP Claims.
d. CLASS 3D (GUADALUPE-BLANCO RIVER AUTHORITY INDUSTRIAL
DEVELOPMENT CORPORATION) consists of all Claims

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against the Debtor under that certain Loan Agreement, dated as of April 1, 1988,
between the Debtor and Guadalupe-Blanco River Authority Industrial Development
Corporation regarding $3,150,000 of Multi-Modal Interchangeable Rate Industrial
Development Revenue Refunding Bonds (Hexcel Corporation Project), Series 1988
due March 1, 2008, and under all related documents, instruments and agreements
other than the BNP Claims.
e. CLASS 3E (PORT OF SKAGIT COUNTY INDUSTRIAL DEVELOPMENT
CORPORATION) consists of all Claims against the Debtor under that certain Loan
Agreement, dated as of December 1, 1989, between the Debtor and Port of Skagit
County Industrial Development Corporation regarding $3,000,000 of Variable Rate
Demand Revenue Bonds, 1989 (Hexcel Corporation Project), due December 1, 2024,
and under all related documents, instruments and agreements other than the BNP
Claims.
f. CLASS 3F (INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF
LOS ANGELES) consists of all Claims against the Debtor under that certain Loan
Agreement, dated as of March 1, 1988, between the Debtor and Industrial
Development Authority of the County of Los Angeles regarding $6,200,000 of
Multi-Modal Interchangeable Rate Industrial Development Revenue Refunding Bonds
(Hexcel Corporation Project), Series 1988 due September 1, 2007, and under all
related documents, instruments and agreements other than the BNP Claims.

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g. CLASS 3G (CITY OF LANCASTER) consists of all Claims against
the Debtor under that certain Loan Agreement, dated as of April 1, 1988, between
the Debtor and City of Lancaster regarding $1,000,000 of Multi-Modal
Interchangeable Rate Industrial Development Revenue Refunding Bonds (Hexcel
Corporation Project), Series 1988 due March 1, 2008, and under all related
documents, instruments and agreements other than the BNP Claims.
h. CLASS 3H (ECONOMIC DEVELOPMENT CORPORATION OF THE COUNTY OF
OTTAWA) consists of all Claims against the Debtor under that certain Loan
Agreement, dated as of April 1, 1988 between the Debtor and Economic Development
Corporation of the County of Ottawa regarding $4,150,000 of Multi-Modal
Interchangeable Rate Industrial Development Revenue Refunding Bonds (Hexcel
Corporation Project), Series 1988 due March 1, 2008, and under all related
documents, instruments and agreements other than the BNP Claims.
On the Effective Date, each of the IDRB Claims in Classes 3A, 3B, 3C,
3D, 3E, 3F, 3G and 3H shall be Reinstated and rendered unimpaired in accordance
with Section 1124(2) of the Bankruptcy Code. The legal, equitable and
contractual rights of the holders of the IDRB Claims are not altered by the
Plan. The IDRB Claims are not impaired by the Plan. Accordingly, the holders
of the Class 3 IDRB Claims are conclusively presumed to have accepted the Plan
as holders of Class 3 IDRB Claims and are not entitled to vote to accept or
reject the Plan.

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5. CLASS 4 -- BNP CLAIMS
Class 4 consists of the BNP Claims. Class 4 is impaired under the
Plan. The holder of the Allowed Claims in Class 4 is entitled to vote to accept
or reject the Plan.
On the Effective Date, the holder of the Allowed Class 4 Claims shall
receive the following:
(A) Cash in the amount of $181,931.54 for all pre-petition
unreimbursed drawings under the seven BNP Letters of Credit, draw
fees, letter of credit fees, attorneys' fees and fees and
expenses paid by BNP to the remarketing agent for the IDRB's;
(B) Cash in the amount of all post-petition (i) unreimbursed drawings
under the seven BNP Letters of Credit and unpaid accrued interest
thereon at the contract non-default rate; and (ii) draw fees,
letter of credit fees and expenses paid by BNP to the remarketing
agent for the IDRB's for which it is entitled to reimbursement
under the terms of the seven BNP Reimbursement Agreements; and
(C) Cash in the amount of $502,000 as payment of a one-time
reinstatement and extension commitment fee for BNP's extension of
the seven BNP Letters of Credit and modification of the seven BNP
Reimbursement Agreement.

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In addition, the following shall occur as of the Effective Date:
(A) BNP will extend the expiration date of the seven BNP Letters of
Credit to October 1, 1998;
(B) BNP will waive all defaults under the seven BNP Reimbursement
Agreements through the Effective Date and in connection with
consummation of the Plan; and
(C) The seven BNP Reimbursement Agreements will be amended and
restated pursuant to the Amended and Restated BNP Reimbursement
Agreements to (i) change the covenants so that consummation of
the Plan and the establishment of the Exit Financing Facility
obtained to satisfy the condition precedent described in Section
10.1 of the Plan will not cause or constitute a default
thereunder, (ii) increase the letter of credit commitment fees to
200 basis points per annum, payable quarterly in advance,
effective on the Effective Date, (iii) increase the interest rate
on the Liquidity Reimbursement Obligations (as defined in the
current BNP Reimbursement Agreements) to Prime (as defined in the
BNP Reimbursement Agreements) plus 2% per annum and to increase
the interest rate on all other obligations under the BNP
Reimbursement Agreements to Prime plus 3% per

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annum, and (iv) contain such representations, warranties,
conditions, covenants and other terms, including restrictions on
existing and additional indebtedness, restrictions on existing
and additional liens and encumbrances, financial covenants, and
default provisions, as BNP and the Debtor may agree;
(D) Commencing 90 days after the Effective Date and every three
months thereafter until the expiration of the BNP Letters of
Credit, Reorganized Hexcel will deposit $600,000 in a sinking
fund in which BNP and/or the trustees for the IDRB's will hold a
first priority security interest to secure Reorganized Hexcel's
obligations under the seven Amended and Restated BNP
Reimbursement Agreements, subject to the right of Reorganized
Hexcel to use all or a portion of the sinking fund to reduce the
available amounts of the seven BNP Letters of Credit by the
optional redemption of IDRB's in a like principal amount. All
net proceeds (including insurance proceeds and condemnation
awards) from the sale or other disposition (including
refinancing) of any plants, equipment or other property financed
or refinanced by the issuance of the IDRB's supported by the
seven BNP Letters of Credit

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will be applied to the reduction of the available amounts of the
seven BNP Letters of Credit by optional redemption of the IDRB's
or will be deposited into the sinking fund. Such net proceeds
may, at the option of Reorganized Hexcel, be credited against the
$600,000 quarterly deposit referred to above; and
(E) Either (i) the BNP Ottawa Letter of Credit shall have been
cancelled and replaced by a substitute letter of credit provided
by Cambrex, the present owner of the facility which is the
subject of the IDRB's described in Section 3.3.8 of the Plan,
(ii) BNP shall have been furnished by Cambrex with a standby
letter of credit or other security reasonably satisfactory to BNP
to secure the Debtor's liability to BNP under the BNP Ottawa
Letter of Credit, or (iii) BNP will (1) reinstate, but will not
extend, the BNP Ottawa Letter of Credit, (2) waive all defaults
under the BNP Ottawa Reimbursement Agreement through the
Effective Date and in connection with consummation of the Plan,
and (3) the BNP Ottawa Reimbursement Agreement will be amended
and restated to (x) change the covenants so that consummation of
the Plan and the establishment of the Exit Financing Facility

<PAGE>
obtained to satisfy the condition precedent described in Section
10.1 of the Plan will not cause or constitute a default
thereunder, and (y) contain such representations, warranties,
conditions, covenants and other terms, including restrictions on
existing and additional indebtedness, restrictions on existing
and additional liens and encumbrances, financial covenants, and
default provisions (but not any increase in rates or fees), as
BNP and the Debtor may agree with respect to the Amended and
Restated BNP Reimbursement Agreements.
6. CLASS 5 -- GENERAL UNSECURED CLAIMS
Class 5 consists of General Unsecured Claims against the Debtor, I.E.,
all Unsecured Claims other than Claims in Classes 2, 3, 4, 6, 7, 8, 9 and 10.
Such Claims include the Bank Revolver Claims, Claims in respect of the rejection
of leases of non-residential real property and other executory contracts, and
Claims of Hexcel's trade vendors and suppliers. The Debtor estimates that the
amount of the Allowed Claims in Class 5 will aggregate approximately
$46,034,000. The aggregate amount of the Claims in Class 5, as reflected in
proofs of claim filed by creditors in such Class, or, in the event no proof of
claim was filed, in the Debtor's Schedules, is $331,512,000, excluding Claims
for which no amounts were specified or otherwise unliquidated Claims. The
Debtor's

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estimates of Allowed Claims is based upon an analysis of the Claims.
Under the Plan, each holder of an Allowed Class 5 Claim will be
entitled to receive Cash in an amount equal to its Allowed Claim on the latest
of the Distribution Date, the date such Allowed Claim becomes an Allowed Claim
and the date such Allowed Claim becomes due. Class 5 is impaired by the Plan,
and the holders of Allowed Class 5 Claims are entitled to vote to accept or
reject the Plan.
7. CLASS 6 -- PRINCIPAL MUTUAL CLAIMS
Class 6 consists of the Principal Mutual Claims. Class 6 is impaired
by the Plan. The holder of the Principal Mutual Claims, which are Allowed as
provided herein, is entitled to vote to accept or reject the Plan.
On the Effective Date, the holder of the Allowed Principal Mutual
Claims in Class 6 shall receive the following:
(A) Cash in the amount of the outstanding principal ($750,000)
and unpaid accrued interest at the contract non-default rate
through the Effective Date on the Principal Mutual 8.75% Note
(approximately $60,000), or approximately $810,000;
(B) Cash in the amount of the unpaid accrued interest at the
contract non-default rate on the Principal Mutual 10.12% Note
through the last interest payment date falling on or prior

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to the Effective Date, or approximately $3,037,000;
(C) 1,629,756 shares of Reorganized Hexcel Common Stock;
(D) the Amended and Restated Principal Mutual 10.12% Note, the
principal terms of which are as follows:
(i) AGGREGATE PRINCIPAL AMOUNT: $30,000,000
(ii) INTEREST RATE: 10.12% per annum, payable in arrears
on the first of each April and October commencing after the
Effective Date.
(iii) MATURITY: October 1, 1998.
(iv) PREPAYMENT: The Note Agreement governing the
Principal Mutual 10.12% Note will govern the Amended and
Restated Principal Mutual 10.12% Note and will be amended to
permit prepayment without any premium or penalty within one
year from the Effective Date and thereafter to permit
prepayment upon payment of a premium equal to the Make-Whole
Premium Amount (as defined in such Note Agreement), except
that the definition of the Make-Whole Premium Amount shall
be amended by replacing the term "Treasury

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Rate" with "150 basis points above the Treasury Rate",
whenever it appears, which will have the effect of
decreasing the Make-Whole Premium Amount.
(v) COVENANTS: Such amendments to the covenants as may be
agreed to by the holder of the Allowed Class 6 Claims,
including but not limited to a change in the covenants so
that consummation of the Plan and the establishment of the
Exit Financing Facility will not cause or constitute a
default thereunder.
(vi) WAIVER: A waiver of all past defaults through the
Effective Date and in connection with consummation of the
Plan.
8. CLASS 7 -- ENVIRONMENTAL CLAIMS
Class 7 consists of unresolved Environmental Claims, I.E., asserted
Environmental Claims which have neither been (i) disallowed nor (ii)
consensually resolved (and by stipulation either Reinstated or treated as
Allowed Class 5 General Unsecured Claims). The Environmental Claims arise from
the Debtor's current or past ownership and/or operation of various manufacturing
facilities. In addition, the Debtor has been named as a potentially responsible
party ("PRP") at several disposal sites, some or all of which are included on
the Environmental Protection Agency's National Priorities List

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("NPL"), that it does not own or operate but to which the Debtor's purported
Hazardous Materials allegedly were sent.
In connection with the Chapter 11 Case, Proofs of Claim were filed
alleging that the Debtor's purported Hazardous Materials were sent to additional
disposal sites, also included on the NPL, but the Debtor has no record or
knowledge that its Hazardous Materials were sent to any such additional sites.
In all, 192 Environmental Claims asserting approximately $6 billion in
the aggregate were filed, but most are duplicative. Most of these Claims assert
the amount of the total clean-up costs for an entire site and multiple Claims
were filed by other PRPs at each site, resulting in an aggregate amount of
Proofs of Claims which bears no relation to Hexcel's estimate of its aggregate
liability in respect of all Environmental Claims, which is not more than
$5,992,160.
In addition to the Environmental Claims in Class 7, the Debtor had
possible environmental exposure with respect to the following facilities and
sites, as to which no timely proofs of claim have been filed: (a) The Debtor's
City of Industry facility in Los Angeles, California; (b) the Debtor's former
facility in Zeeland, Michigan; (c) asbestos at the Glick Building at the
Debtor's facility in Casa Grande, Arizona; (d) the Order to Abate Emissions from
Production Equipment issued by the Bay Area Air Quality Management District
regarding the Debtor's facility at Livermore, California; (e) the following
superfund sites: the GBF

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Pittsburgh site, Contra Costa, California; the Bush Valley Landfill site in
Maryland; the A.O. Polymer site in New Jersey; the Strasburg site in
Pennsylvania; the Thermo-Chem site in Muskegon, Michigan; the A-1 Disposal Corp.
site in Plainwell, Michigan; the American Chemical Services site, in Griffith,
Indiana; and the Hartley & Hartley site, in Kawkawlin, Michigan.
Hexcel has divided the Environmental Claims into sub-classes under the
Plan by site and the nature of the asserted claims, with each subclass deemed a
separate class for all purposes under applicable provisions of the Bankruptcy
Code, as follows:
a. CLASS 7A.1 (HELEN KRAMER LANDFILL IN GLOUCESTER, NEW JERSEY -
DIRECT CLAIM) consists of a Claim against the Debtor filed by the NJDEPE for the
clean-up and related costs and natural resource damages, incurred and to be
incurred, at the Helen Kramer site. The Claim is based on N.J.S.A. 58:10-23.11
ET SEQ. The NJDEPE claims total past costs of $56,001,135.31, including those
incurred at Helen Kramer and two other New Jersey sites and estimates total
future work of $58 million for all sites. (See subsection c., Class 7B, and
subsection d., Class 7C) The NJDEPE contends that the Debtor's liability is
joint and several with the other PRPs for the Helen Kramer site. There are more
than 200 PRPs at that site. The Debtor has sought to disallow in whole or in
part the Class 7.A.1 Claim pursuant to Section 502(b) of the Bankruptcy Code.

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b. CLASS 7A.2 (HELEN KRAMER LANDFILL IN GLOUCESTER, NEW JERSEY -
CONTRIBUTION CLAIMS) consists of approximately 47 Claims filed by PRPs of the
Helen Kramer site. The Claims seek the Debtor's alleged equitable share of the
common liability for the $115,000,000 clean-up and related costs said to have
been incurred and to be incurred by the United States Environmental Protection
Agency ("EPA") and unstated amounts incurred and to be incurred by the NJDEPE
(but included in the NJDEPE Claim). Each of the claimants filed a Proof of
Claim for the entire amount, resulting in aggregate asserted claims of $5.4
billion. The Debtor has sought to disallow these Claims pursuant to Section
502(e)(1)(A) and/or (B) of the Bankruptcy Code.
c. CLASS 7B (A TO Z LANDFILL IN NEW BRUNSWICK, NEW JERSEY) consists
of a Claim included in NJDEPE's Class 7A.1 Claim for contribution to the A to Z
Landfill. This Claim amount is included in the totals claimed in Class 7.1.1.
The Debtor has no record that its purported Hazardous Materials were sent to
this site. The Debtor has sought to disallow in whole or in part the Class 7.B
Claim pursuant to Section 502(b) of the Bankruptcy Code.
d. CLASS 7C (CHEMICAL CONTROL SUPERFUND SITE IN ELIZABETH, NEW
JERSEY) consists of a Claim included in NJDEPE's Class 7A.1 Claim for
contribution to the Chemical Control Superfund Site. This Claim amount is
included in the totals claimed by the NJDEPE in Class 7.A.1. The Debtor has no
record that its purported Hazardous Materials were sent to

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this site. The Debtor has sought to disallow in whole or in part this Claim
pursuant to Section 502(b) of the Bankruptcy Code.
e. CLASS 7D.1 (JONAS SEWELL TRANSFER STATION SITE - DIRECT CLAIM)
consists of a surrogate Claim filed by the Jonas Sewell Transfer Station
Respondents Group on behalf of the NJDEPE for all clean-up and related costs at
the Jonas Sewell Transfer Station, ongoing response costs and natural resource
damages incurred by the NJDEPE. No amount is claimed. The Debtor has no record
that its purported Hazardous Materials were sent to this site. The Debtor has
sought to disallow in whole or in part the Claim pursuant to Section 502(b) of
the Bankruptcy Code.
f. CLASS 7D.2 (JONAS SEWELL TRANSFER STATION SITE - CONTRIBUTION
CLAIMS) consists of Claims filed by several Class 7A.2 Claimants for
contribution for the Debtor's equitable share of common liability of all PRPs to
EPA and NJDEPE for clean-up and related costs of the Jonas Sewell Transfer
Station. Two Claimants have alleged potential total exposure of $20,000,000.
The Debtor has no record that its purported Hazardous Materials were sent to
this site. The Debtor has sought to disallow these Claims pursuant to Section
502(b), (e)(1)(A) and/or (e)(1)(B) of the Bankruptcy Code.
g. CLASS 7D.3 (MARVIN JONAS, INC. WASTE SITES - CONTRIBUTION CLAIMS)
consists of Claims filed by several Class 7A.2 Claimants for contribution for
the Debtor's alleged equitable share of the liability of all PRPs to EPA and
NJDEPE

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for the clean-up and related costs of other sites used by Marvin Jonas, Inc.
The Debtor has no record that its purported Hazardous Materials were sent to
these sites. Two claimants have alleged a potential total exposure for all
sites of $508,780,000. The Debtor has sought to disallow these Claims pursuant
to Section 502(e)(1)(A) and/or (B) of the Bankruptcy Code.
h. CLASS 7E (BUSBY VALLEY LANDFILL IN VOORHES, NEW JERSEY AND GEMS
LANDFILL IN NEW JERSEY) consists of Claims filed by two of the Class 7A.2
Claimants for contribution for the Debtor's alleged equitable share of the
common liability of all PRPs to the EPA and the NJDEPE for the clean-up and
related costs at the Busby Landfill and the GEMS Landfill sites. These
Claimants assert, incorrectly, that the Debtor is the "X-Cel" company which is a
PRP as to these sites. The Debtor has sought to disallow these claims pursuant
to Section 502(b) and (e)(1)(B) of the Bankruptcy Code.
i. CLASS 7F (SCIENTIFIC CHEMICAL PROCESSING, INC. SITE IN NEWARK,
NEW JERSEY) consists of Claims filed by two of the Class 7A.2 Claimants which
included Claims for contribution for the Debtor's alleged equitable share of the
common liability of all PRPs to the EPA and the NJDEPE for the clean-up and
related costs of the Scientific Chemical Processing, Inc. site in Newark, New
Jersey. The Debtor has fully performed its obligations under a 1985 consent
order entered with respect to this site, and the Debtor has no record that its
purported Hazardous Materials were sent to

<PAGE>
this site. The Debtor has sought to disallow these Claims pursuant to Section
502(b) and (e)(1)(B) of the Bankruptcy Code.
j. CLASS 7G (FLORENCE RECONTOURING LANDFILL IN FLORENCE, NEW JERSEY
AND PJP LANDFILL IN JERSEY CITY, NEW JERSEY) consists of a Claim filed by one of
the Class 7A.2 Claimants which included a Claim for contribution for the
Debtor's alleged equitable share of the common liability of all PRPs to the EPA
and the NJDEPE for the clean-up and related costs of the Florence Recontouring
Landfill and the PJP Landfill. The Debtor has no record that its purported
Hazardous Materials were sent to these sites. The Debtor has sought to disallow
these Claims pursuant Section 502(b) and (e)(1)(B) of the Bankruptcy Code.
k. CLASS 7H (FISHER CALO SITE IN KINGSBURG, INDIANA) consists of a
Claim filed by the PRP group, of which the Debtor is a member, for contribution
for the Debtor's alleged equitable share of the common liability of all PRPs for
the clean-up and related costs of the Fisher Calo site. The Claim asserts
$120,000 in anticipated administrative costs over the anticipated 30-year term
of the remediation at the Fisher Calo site. The Debtor has sought to disallow
this Claim pursuant to Section 502(e)(1)(A) and/or (B) of the Bankruptcy Code.
l. CLASS 7I (SEYMOUR, INDIANA SUPERFUND SITE) consists of a Claim
filed by the trust established for payments of costs at the Seymour, Indiana
Superfund site for

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the Debtor's 1.72% share of projected future operation and maintenance costs at
this site. The Debtor has sought to disallow this Claim pursuant to Section
502(e)(1)(A) and/or (B) of the Bankruptcy Code.
m. CLASS 7J.1 (SAN GABRIEL GROUND WATER BASIN IN CALIFORNIA - DIRECT
CLAIM) consists of a surrogate Claim filed by the Puente Valley Steering
Committee of PRPs on behalf of the EPA to recover $112,400 as the Debtor's 2.68%
share of a $4.2 million Remedial Investigation/Feasibility Study ("RI/FS") on
the Puente Valley Operable Unit of the San Gabriel Valley Superfund Site
pursuant to the Puente Valley RI/FS Administrative Consent Order dated September
30, 1993. The Debtor has paid $11,240 and owes no more than $101,160. The
Debtor has sought to disallow in whole or in part the Claim pursuant to Section
502(b) of the Bankruptcy Code.
n. CLASS 7J.2 (SAN GABRIEL GROUND WATER BASIN IN CALIFORNIA -
CONTRIBUTION CLAIMS) consists of Claims filed by 44 members of the Puente Valley
Steering Committee of PRPs for the contribution for the Debtor's alleged
$101,160 share for the RI/FS and its alleged equitable share of the common
liability of all PRP's to the EPA for the clean-up and related costs of the
Puente Valley Operable Unit of this site. The Debtor has sought to disallow
these Claims pursuant to Section 502(e)(1)(A) and/or (B) of the Bankruptcy Code.
o. CLASS 7K.1 (GRANVILLE SOLVENTS IN GRANVILLE, OHIO - DIRECT CLAIM)
consists of a Claim filed by the State of Ohio in the amount of $916,000 for the
State's claimed cost of

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cleaning-up the Granville Solvents site, a duplicate surrogate Claim filed for
the State, and a $20 million surrogate Claim for the EPA. The Debtor has sought
to disallow the State's Claim in whole or in part pursuant to Section 502(b) of
the Bankruptcy Code. The Debtor will seek to disallow the surrogate Claims
under Section 502(b) of the Bankruptcy Code.
p. CLASS 7K.2 (GRANVILLE SOLVENTS IN GRANVILLE, OHIO - CONTRIBUTION
CLAIMS) consists of a joint Claim filed by Abrasive Technology and 71 other PRPs
for contribution for the Debtor's alleged equitable share of the common
liability of all PRPs for the clean-up and related costs of the Granville, Ohio
site, specifically $1 million to the State of Ohio and $3-$20 million in
anticipated responsive actions (including $258,910.23 already expended by the
PRP Group). Claimants contend that the Debtor's share of this anticipated $21
million total maximum cost is not more than $290,000. The Debtor has sought to
disallow this Claim pursuant to Section 502(e)(1)(A) and/or (B) of the
Bankruptcy Code.
q. CLASS 7K.3 (GRANVILLE SOLVENTS IN GRANVILLE, OHIO - CONTRIBUTION
CLAIM) consists of a $15 million Claim filed by Union Tank Car for contribution
for the Debtor's alleged equitable share of the common liability for the clean-
up and related costs of the Granville, Ohio site. The Debtor has sought to
disallow this Claim pursuant to Sections 502(e)(1)(A) and/or (B) of the
Bankruptcy Code.
r. CLASS 7L (ORGANIC CHEMICAL SITE IN GRANDVILLE, MICHIGAN) consists
of Claims filed by 17 PRPs for contribution

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for the Debtor's alleged equitable share of the common liability of all PRPs to
the EPA and state authorities for the clean-up and related costs of this site.
The Debtor has sought to disallow these Claims pursuant to Section 502(e)(1)(B)
of the Bankruptcy Code.
s. CLASS 7M (DEBTOR'S PROPERTY OUTSIDE CASA GRANDE, ARIZONA)
consists of Claims filed by the Arizona State Lands Department and the Arizona
Department of Environmental Quality seeking $323,000 in past clean-up and
related costs and future clean-up and related costs with respect to the Debtor's
leased property located outside Casa Grande, Arizona. The Debtor has sought to
disallow in whole or in part these Claims pursuant to Section 502(b) of the
Bankruptcy Code.
t. CLASS 7N (KIN BUC SUPERFUND SITE IN EDISON, NEW JERSEY) consists
of Claims filed by 10 PRPs for contribution for the Debtor's alleged equitable
share of the liability of all PRPs to the EPA and the NJDEPE for the clean-up
and related costs of this site. The Debtor has sought to disallow these Claims
pursuant to Section 502(e)(1)(A) and/or (B) of the Bankruptcy Code.
u. CLASS 7O (SCIENTIFIC CHEMICAL PROCESSING SITE IN CARLSTADT, NEW
JERSEY) consists of Claims of approximately 113 PRPs for contribution for the
Debtor's alleged equitable share of the common liability of all PRPs to the EPA
and NJDEPE for the clean-up and related costs of this site. The Debtor has
sought to disallow these Claims pursuant to Section 502(e)(1)(B) of the
Bankruptcy Code.

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v. CLASS 7P.1 (LIVERMORE, CALIFORNIA SITES - DIRECT CLAIMS) consists
of Claims filed by the California Regional Water Quality Control Board ("RWQCB")
in the amount of $2,342,000 for the clean-up and related costs associated with
two adjacent properties in Livermore, California. The RWQCB had issued a clean-
up and abatement order regarding these sites. The Debtor owns one of the sites
and had sold the second in 1979. The Debtor has sought to disallow this Claim
in whole or in part pursuant to Section 502(b) of the Bankruptcy Code.
w. CLASS 7P.2 (LIVERMORE, CALIFORNIA SITES - F & P PROPERTIES, INC.)
consists of a Claim filed by F&P Properties, Inc. ("F&P"), the owner of the
Livermore property adjacent to the Debtor's site in the amount of $1.29 million.
The Claim asserts fraud, intentional interference, and promissory estoppel. F&P
contends that the Debtor sold the property to F&P's grantors, Donald and Suzanne
Smith (the "Smiths"), in 1979 and is responsible for various damages caused by
alleged deposits of Hazardous Materials on the property prior to 1979. The
Debtor has sought to disallow this Claim pursuant to Section 502(e)(1)(A) and/or
(B) of the Bankruptcy Code.
x. CLASS 7P.3 (LIVERMORE, CALIFORNIA SITES - SMITHS) consists of a
$5,000,000 Claim filed by the Smiths (purchasers of the F&P property from the
Debtor in 1979). The Smiths' Claim asserts that the Debtor breached a
settlement agreement with the Smiths by failing to execute an agreed draft
settlement agreement in an action brought by F&P against

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the Debtor and the Smiths. The Debtor has sought to disallow this Claim
pursuant to Section 502(e)(1)(A) and/or (B) of the Bankruptcy Code.
y. CLASS 7Q (LODI, NEW JERSEY) consists of all Environmental Claims
arising in connection with the Lodi, New Jersey property formerly owned by the
Debtor including, without limitation, the Claims filed by Fine Organics and
Barclay's Bank Ltd. ("Barclay's"). Fine Organics purchased the Lodi, New Jersey
property from the Debtor on March 31, 1986 by delivering cash plus a note which
has not been paid. In connection with the sale, the Debtor entered into an
Administrative Order On Consent with the NJDEPE for the clean-up of the site.
The order is secured by a $4 million letter of credit issued by Barclay's. Fine
Organics claims that the Debtor has not remediated the site. Fine Organics
seeks $10,727,000 in alleged actual damages (including the purchase price of the
property, consequential damages, and the alleged cost of compliance with the
consent order). Fine Organics also claims that it is entitled to treble damages
under N.J.S.A. 58:10-23.11, or $32,181,000. Barclay's has filed a contingent
claim in the amount of its letter of credit. The Debtor believes that it has
complied with the consent order except to the extent that Fine Organics has
prevented it from doing so. The Debtor is prepared to complete the clean-up in
accordance with the consent order as soon as Fine Organics permits it to do so.
The Debtor and Fine Organics are now in litigation in the Bankruptcy Court over
these issues. See

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V.H., "Events During the Chapter 11 Case -- Fine Organics Litigation." The
Debtor has sought to disallow the Fine Organics Claim pursuant to Section 502(b)
and (e)(1)(B) and/or 502(b) of the Bankruptcy Code. The Debtor estimates that
the completion of the clean-up of the Lodi site will cost no more than $4
million, and does not believe that the Barclay's letter of credit will be drawn
upon.
z. CLASS 7R (OTHER ENVIRONMENTAL CLAIMS) consists of all
Environmental Claims not specified in the foregoing provisions. The Debtor does
not believe there are any Claims in Class 7R.
The Plan provides that on the later of the Distribution Date or the
date an Environmental Claim becomes an Allowed Environmental Claim, Reorganized
Hexcel shall distribute to each holder of an Allowed Environmental Claim in each
of the subclasses in Class 7 Cash in an amount determined pursuant to the
provisions of Section 4.7(c) through (e) of the Plan. Section 4.7(c) of the
Plan provides that holders of Allowed Environmental Claims shall be entitled to
receive distributions of an aggregate of not more than $5,992,160, which amount
is allocated to the respective Subclasses of Class 7 as follows (the "Subclass
Environmental Distribution Amounts"):
(i) Subclasses 7A.1 and 7A.2 -- $50,000
(ii) Subclass 7B -- $1,000
(iii) Subclass 7C -- $1,000
(iv) Subclasses 7D.1, 7D.2 and 7D.3 -- $1,000

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(v) Subclass 7E -- $1,000
(vi) Subclass 7F -- $1,000
(vii) Subclass 7G -- $1,000
(viii)Subclass 7H -- $35,000
(ix) Subclass 7I -- $20,000
(x) Subclasses 7J.1 and 7J.2 -- $101,160
(xi) Subclasses 7K.1, 7K.2 and 7K.3 -- $290,000
(xii) Subclass 7L -- $50,000
(xiii)Subclass 7M -- $200,000
(xix) Subclass 7N -- $150,000
(xv) Subclass 7O -- $250,000
(xvi) Subclass 7P.1 -- $550,000
(xvii) Subclasses 7P.2 and 7P.3 -- $290,000
(xviii) Subclass 7Q -- $4,000,000
(xix) Subclass 7R -- $0
Section 4.7(d) of the Plan provides that, on the later of the
Distribution Date and the date as and when an Environmental Claim becomes an
Allowed Environmental Claim (including as an Allowed Environmental Claim any
Environmental Claim that, by Final Order, has been estimated pursuant to Section
502(c) of the Bankruptcy Code expressly for the purpose of its allowance),
Reorganized Hexcel shall distribute to such holder of such Allowed Environmental
Claim Cash in an amount equal to such Environmental Claim. Notwithstanding the
foregoing, Reorganized Hexcel shall be obligated to make such Cash distributions
to holders of Allowed Environmental Claims in any Subclass only to the extent
that Subclass Environmental

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Distribution Amount allocated by Section 4.7(c) to such Subclass has not been
exhausted by previous payments pursuant to the Plan.
Section 4.7(e) of the Plan provides that in the event (i) an
Environmental Claim has been previously disallowed pursuant to Section
502(e)(1)(B) of the Bankruptcy Code, (ii) such Environmental Claim is not an
Allowed Environmental Claim entitled to receive a distribution under Section
4.7(d), (iii) such disallowed Environmental Claim ceases to be contingent and
unliquidated by reason of the making of a payment to a third party by the holder
thereof, (iv) a determination shall have been made of the amount of the Debtor's
liability to the holder thereof, with respect to such Environmental Claim (the
"Liability Amount"), and (v) a Final Order shall have been entered determining
that such a previously disallowed Environmental Claim shall be allowed by a
Final Order, either by reason of reconsideration of such Environmental Claim
pursuant to Section 502(j) of the Bankruptcy Code or otherwise ("Reconsidered
Section 502(e) Claim"), then such Reconsidered Section 502(e) Claim shall be
treated as part of the Subclass that relates to the property that is the subject
of such Reconsidered Section 502(e) Claim and the holder thereof shall be
entitled to receive a distribution of Cash under, and subject to the limitations
of, the provisions of Section 4.7(d) of the Plan, in an amount equal to the
lesser of (i) the Liability Amount, or (ii) the Debtor's allocable equitable
share of the amount the holder of such Reconsidered

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Section 502(e) Claim was legally obligated to pay to others (as determined by an
order or other ruling of a court or governmental agency or officer) on account
of the Debtor's liability or obligations.
Class 7 is impaired by the Plan. Each holder of an Environmental
Claim in Class 7 is entitled to vote on the Plan if such claim has been allowed
pursuant to Section 502 of the Bankruptcy Code or by a Final Order.
9. CLASS 8 -- INTERCOMPANY CLAIMS
Class 8 consists of Intercompany Claims. Class 8A consists of the
Hexcel Lyon Claim which shall be Allowed in the amount of $2,589,000. On the
Effective Date, the holder of the Allowed Hexcel Lyon Claim shall receive the
Hexcel Lyon Note in the principal amount of the Allowed Hexcel Lyon Claim which
will be due 30 days after payment in full of the Amended and Restated Principal
Mutual 10.12% Note, and will bear interest payable semi-annually in arrears at
the rate of 6.9% per annum.
Class 8B consists of Other Intercompany Claims, which shall be allowed
in the aggregate amount of $366,000. Each holder of an Allowed Other
Intercompany Claim shall receive Cash in an amount equal to such holder's
Allowed Other Intercompany Claim 30 days after payment in full of the Amended
and Restated Principal Mutual 10.12% Note.
10. CLASS 9 -- SUBORDINATED DEBENTURE CLAIMS
Class 9 consists of all Claims arising under or related to that
certain Indenture dated as of August 1, 1986

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between Hexcel and The Bank of California, N.A., Trustee Re: 7% Convertible
Subordinated Debentures due 2011. As of the Commencement Date, the principal
amount of the Subordinated Debentures outstanding was $25,625,000 and the
accrued interest on the Subordinated Debentures was approximately $638,000.
Class 9 may be impaired by the Plan. Holders of Allowed Class 9 Subordinated
Debenture Claims are entitled to vote to accept or reject the Plan.
If Class 9 accepts the Plan, on the Effective Date, each holder of an
Allowed Class 9 Subordinated Debenture Claim shall be entitled to receive such
holder's ratable share of 9,703,050 shares of Reorganized Hexcel Common Stock.
If Class 9 rejects the Plan, then the Subordinated Debentures shall be
Reinstated and rendered unimpaired.
11. CLASS 10 -- SECTION 510(b) HEXCEL COMMON STOCK TRADING CLAIMS
Class 10 consists of any Claim (a) arising from rescission of a
purchase or sale of shares of Hexcel Common Stock, (b) for damages arising from
the purchase or sale of shares of Hexcel Common Stock, or (c) for reimbursement
or contribution allowed under Section 502 of the Bankruptcy Code on account of a
Claim described in clauses (a) or (b) of this Section V.B.11, other than a Claim
for reimbursement or contribution described in Section 7.2 of the Plan.
The only asserted claims in Class 10 arise out of three civil actions
filed against the Debtor and certain of its officers in December 1992 which were
consolidated into a

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single action in the U.S. District Court in the Northern District of California
entitled ANN TAXIER, ET AL. V. ROBERT L. WITT, ET AL. Plaintiffs are seeking to
have the case declared a class action on behalf of all persons who purchased or
otherwise acquired Hexcel shares between February 4, 1992 and December 11, 1992.
They seek recovery of damages from the Debtor and other defendants for claimed
violations of various securities laws purportedly caused by issuance of
information to the public which is alleged to have been materially false and
misleading when made in that it failed to disclose material adverse facts that
operated to artificially inflate the market value of the Hexcel Common Stock.
Hexcel has denied the material allegations of these complaints.
Each holder of an Allowed Class 10 Section 510(b) Common Stock Trading
Claims shall receive, on the Effective Date, such holder's ratable share of
100,000 shares of Reorganized Hexcel Common Stock. No distributions will be
made to holders of Allowed Claims in Class 10 until all of the Allowed Claims in
Class 10 and the holders thereof have been determined.
12. CLASS 11 -- HEXCEL COMMON STOCK INTERESTS
Class 11 consists of Equity Interests in Hexcel evidenced by the
shares of Common Stock, par value $.01 per share, of Hexcel, including all
Preferred Stock Rights. Holders of Equity Interests in Hexcel owned 7,309,827
shares of Hexcel Common Stock as of April 8, 1994. Class 11 is

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impaired. Holders of Hexcel Common Stock are entitled to vote to accept or
reject the Plan.
Each holder of record of Hexcel Common Stock as of the close of
business on the Effective Date shall receive one share of Reorganized Hexcel
Common Stock for each two shares of Hexcel Common Stock. In addition to such
shares of Reorganized Hexcel Common Stock, each holder of record of Hexcel
Common Stock as of the close of business on the Effective Date will receive
certain Rights entitling such holder to purchase additional shares of
Reorganized Hexcel Common Stock at an exercise price of $2.00 per share.
If Class 9 accepts the Plan, then for each share of Common Stock held
of record on the Effective Date, the holder shall receive 1.1628 Rights. If
Class 9 rejects the Plan, then for each share of Common Stock held on the
Effective Date, the holder shall receive 1.71 Rights.
Each Right will entitle the holder to purchase one share of
Reorganized Hexcel Common Stock. Certificates representing the Rights
("Subscription Certificates") will be distributed on or as soon as practicable
after the Effective Date. The Reorganized Hexcel Common Stock issuable on
exercise of any Rights will be issued as soon as is practicable following the
expiration date for the exercise of those Rights.
The principal terms of the Rights are as follows:
(i) AUTHORIZATION: If Class 9 accepts the Plan, 8,500,000 Rights,
each exercisable to purchase one share of

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Reorganized Hexcel Common Stock; if Class 9 rejects the Plan, 12,500,000 Rights,
each exercisable to purchase one share of Reorganized Hexcel Common Stock.
(ii) SUBSCRIPTION PRICE: $2.00 per share of Reorganized Hexcel
Common Stock.
(iii) VOTING: No voting rights.
(iv) EXPIRATION: The Rights must be exercised within 30 days after
the Effective Date.
(v) TRANSFERABILITY: The Rights will be transferable subject to
compliance with applicable federal and state securities laws.
13. CLASS 12 -- HEXCEL OPTIONS
Class 12 consists of Hexcel Options to purchase Hexcel Common Stock
and all other rights and awards issued pursuant to the Stock Option Plan, other
than any restricted Common Stock awarded thereunder (which shares are included
in Class 11). As of December 31, 1993, there were outstanding Hexcel Options to
purchase 533,475 shares of Hexcel Common Stock (I.E., 533,475 Hexcel Options),
with exercise prices ranging from $7.56 to $32.06.
Class 12 is impaired. The Plan provides that holders of Hexcel
Options shall not be entitled to retain or receive any property or other
distributions under the Plan. All Hexcel Options shall be cancelled and
extinguished on the Effective Date, and the holders of Allowed Hexcel Options

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shall have no Claims or Interests arising therefrom. In addition, the Stock
Option Plan will be cancelled and terminated. Holders of Hexcel Options are
deemed to have rejected the Plan under Section 1126(g) of the Bankruptcy Code.

B. SUMMARY OF OTHER PROVISIONS OF THE PLAN
The following paragraphs summarize certain other significant
provisions of the Plan. The Plan should be referred to for the complete text of
these and other provisions of the Plan.
1. REORGANIZED HEXCEL COMMON STOCK AND RIGHTS
Pursuant to the Plan, Reorganized Hexcel shall have authority to issue
70,000,000 shares of Reorganized Hexcel Common Stock. If Class 9 accepts the
Plan, an aggregate of approximately 15,087,719 shares of Reorganized Hexcel
Common Stock will be issued to holders of Allowed Claims and Interests in
Classes 6, 9, 10 and 11 pursuant to the Plan, approximately 11,500,000 shares
will be issued to Mutual Series pursuant to the Stock Subscription and Standby
Purchase Agreement, and an additional 8,500,000 shares will be issued upon
exercise of the Rights or, to the extent Rights are not exercised, to Mutual
Series pursuant to the Stock Subscription and Standby Purchase Agreement. If
Class 9 rejects the Plan, an aggregate of approximately 5,384,669 shares of
Reorganized Hexcel Common Stock will be issued to holders of Allowed Claims and
Interests in Classes 6, 10 and 11 pursuant to the

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Plan and approximately 12,500,000 shares will be issued to Mutual Series
pursuant to the Stock Subscription and Standby Purchase Agreement, and an
additional 12,500,000 shares will be issued upon exercise of the Rights or, to
the extent Rights are not exercised, to Mutual Series pursuant to the Stock
Subscription and Standby Purchase Agreement.
Under the Restated Certificate of Incorporation and By-Laws of
Reorganized Hexcel, copies of which are annexed to the Plan as Exhibits C and D,
respectively, holders of the Reorganized Hexcel Common Stock will be entitled to
receive such dividends as may be declared from time to time by the Board of
Directors of Reorganized Hexcel out of assets available therefor, after payment
of dividends required to be paid on outstanding preferred stock, if any. See
Section X, "Certain Risk Factors To Be Considered." In the event of the
liquidation, dissolution or winding up of Reorganized Hexcel, the holders of
Reorganized Hexcel Common Stock will be entitled to share ratably in all assets
remaining after payment of liabilities, subject to the prior distribution rights
of the holders of preferred stock then outstanding, if any. The Reorganized
Hexcel Common Stock will have no preemptive or conversion rights and will not be
subject to further calls or assessments by Reorganized Hexcel. The Reorganized
Hexcel Common Stock will, upon issuance, pursuant to the Plan, be duly
authorized, validly issued, fully paid and nonassessable.

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Holders of Reorganized Hexcel Common Stock will be entitled to one
vote per share on all matters to be voted upon by the stockholders. Holders of
a plurality of the shares voting for the election of directors can elect all of
the directors since the holders of Reorganized Hexcel Common Stock will not have
cumulative voting rights. For a more detailed description of the process by
which Reorganized Hexcel will elect its Board of Directors, see Section VII.A.1,
"Management of the Reorganized Debtor -- Composition of the Board of Directors."
Certain significant matters will require the approval of the holders of a
majority of the outstanding shares of Reorganized Hexcel Common Stock. See
Section V.C.9., "The Plan of Reorganization -- Summary of Other Provisions of
the Plan -- Restatement of the Debtor's Certificate of Incorporation and
Bylaws."

2. THE STOCK SUBSCRIPTION AND
STANDBY PURCHASE AGREEMENT
The Plan is premised on the Stock Subscription and Standby Purchase
Agreement. On July 27, 1994, Hexcel entered into the Stock Subscription and
Standby Purchase Agreement with Mutual Series which is a diversified open-end
management investment company registered under the Investment Company Act of
1940. The following description of certain provisions of the Stock Subscription
and Standby Purchase Agreement is qualified in its entirety by reference to the
full text of that document, which is annexed as Exhibit B to the Plan.

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(a) STOCK PURCHASE IF CLASS 9 ACCEPTS THE PLAN. Under the Stock
Subscription and Standby Purchase Agreement and subject to the satisfaction of
its conditions, if Class 9 accepts the Plan, on the Effective Date, a first
closing will be held at which Mutual Series will purchase 11,500,000 shares of
Reorganized Hexcel Common Stock representing 32.775% of all shares of
Reorganized Hexcel Common Stock which will be outstanding after giving effect to
the issuance of all shares of Reorganized Hexcel Common Stock to be issued to
the holders of Claims and Interests as contemplated by the Plan and to be
purchased by Mutual Series pursuant to the Stock Subscription and Standby
Purchase Agreement; in consideration for such shares, Mutual Series will pay an
aggregate purchase price of $23,000,000 at the first closing. In addition,
subject to the terms and conditions in the Stock Subscription and Standby
Purchase Agreement, after the closing of the Rights Offering a second closing
will be held at which Mutual Series will purchase all shares of Reorganized
Hexcel Common Stock which are offered but not purchased pursuant to the Rights
Offering for a purchase price equal to $17,000,000 less the aggregate exercise
price for all shares which are purchased in the Rights Offering. The aggregate
of all shares of Reorganized Hexcel Common Stock which will be sold in the
Rights Offering and the shares which will be purchased by Mutual Series pursuant
to the Stock Subscription and Standby Purchase Agreement will equal 57% of all
shares of Reorganized Hexcel Common Stock expected to be outstanding upon
consummation of

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the Plan, other than shares which may be issued pursuant to the New Long Term
Incentive Plan or purchased by management as described INFRA.
(b) STOCK PURCHASE IF CLASS 9 REJECTS THE PLAN. Under the Stock
Subscription and Standby Purchase Agreement and subject to the satisfaction of
its conditions, if Class 9 rejects the Plan, on the Effective Date, a first
closing will be held at which Mutual Series will purchase 12,500,000 shares of
Reorganized Hexcel Common Stock representing 41.13917% of all shares of
Reorganized Hexcel Common Stock which will be outstanding after giving effect to
the issuance of all shares of Reorganized Hexcel Common Stock to be issued to
the holders of Claims and Interests as contemplated by the Plan and to be
purchased by Mutual Series pursuant to the Stock Subscription and Standby
Purchase Agreement; in consideration for such shares, Mutual Series will pay an
aggregate purchase price of $25,000,000 at the first closing. In addition,
subject to the terms and conditions in the Stock Subscription and Standby
Purchase Agreement, after the closing of the Rights Offering a second closing
will be held at which Mutual Series will purchase all shares of Reorganized
Hexcel Common Stock which are offered but not purchased pursuant to the Rights
Offering for a purchase price equal to $25,000,000 less the aggregate exercise
price for all shares which are purchased in the Rights Offering. The aggregate
of all shares of Reorganized Hexcel Common Stock which will be sold in the
Rights Offering and the shares which will be purchased by Mutual Series

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pursuant to the Stock Subscription and Standby Purchase Agreement will equal
82.278% of all shares of Reorganized Hexcel Common Stock expected to be
outstanding upon consummation of the Plan, other than shares which may be issued
pursuant to the New Long Term Incentive Plan or purchased by management as
described INFRA.
(c) GENERAL TERMS AND CONDITIONS. The Stock Subscription and Standby
Purchase Agreement includes various representations from Hexcel to Mutual Series
including, but not limited to, representations covering such matters as (i) due
organization of Hexcel, (ii) due authorization of the Stock Subscription and
Standby Purchase Agreement and the related Registration Rights Agreement and all
transactions contemplated thereby, (iii) the capitalization of Hexcel, (iv) the
most recent audited and unaudited balance sheets of Hexcel, (v) disclosure of
all known actual and contingent liabilities of Hexcel, (vi) the absence of
certain changes in executive compensation, (vii) Hexcel's compliance with
reporting obligations under the Securities Exchange Act of 1934, (viii) tax
matters, (ix) title to assets of Hexcel and its subsidiaries, (x) ownership of
intellectual property and lack of known challenges or claims with respect
thereto, (xi) material contracts, (xii) ERISA matters, (xiii) actual and
threatened legal proceedings and claims, (xiv) environmental matters, and (xv)
the accuracy of this Disclosure Statement. The representations and warranties
set forth in the Stock Subscription and Standby Purchase Agreement will survive
for a

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period of 18 months after the first closing and Hexcel has agreed to indemnify
Mutual Series for any losses, liabilities, obligations, damages, costs and
expenses based upon or resulting from any misrepresentation, breach of warranty
or nonfulfillment of any agreement on the part of Hexcel under the Stock
Subscription and Standby Purchase Agreement to the extent they exceed $400,000
in the aggregate.
The Stock Subscription and Standby Purchase Agreement provides that it
may be terminated any time prior to the first closing:
(a) by mutual consent of Hexcel and Mutual Series;
(b) by either party which is not in breach in the event of material
breach by the other party which is not cured within 10 days after written
notice;
(c) by Mutual Series if by August 30, 1994 the Bankruptcy Court has
not determined, subject only to the entry of an appropriate order, to approve
certain provisions of the Stock Subscription and Standby Purchase Agreement
(including, among other things, the breakup fee and expense reimbursement and
overbid procedures), or if an order approving the same has not been entered by
September 15, 1994 or if after entry of such order, such order is reversed,
revoked, modified or stayed;
(d) by Mutual Series if an order approving the Disclosure Statement
is not entered on or prior to October 15, 1994 or if after entry of such order,
such order is reversed, revoked, voided, modified or stayed;

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(e) by Mutual Series if an order confirming the Plan is not entered
on or prior to December 15, 1994 or if after entry of such order, such order is
reversed, revoked, voided, modified or stayed;
(f) by Hexcel if an order confirming the Plan is not entered on or
prior to December 15, 1994 or if after entry of such order, such order is
reversed, revoked, voided, modified or stayed;
(g) by Hexcel or Mutual Series, in the event that Hexcel has advised
Mutual Series in writing of any condition to Mutual Series's obligation to
consummate its purchase of shares is not capable of being satisfied and, in the
case of Hexcel's right to terminate, Mutual Series fails to waive such condition
within seven business days after receipt of such notice;
(h) by Mutual Series or Hexcel, if the first closing date does not
occur by the 30th day following the date on which the confirmation order is
entered, except that Mutual Series has the election to extend such period for up
to another 30 days if it is not in material breach of the Stock Subscription and
Standby Purchase Agreement;
(i) by Mutual Series or Hexcel, in the event that Hexcel enters into
an agreement with any person with respect to any Acquisition Transaction (as
defined in the agreement and described below) or an Acquisition Transaction is
otherwise consummated;

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(j) by Mutual Series or Hexcel, in the event that Hexcel sponsors,
supports, endorses, recommends, proposes or seeks confirmation of any plan of
reorganization of Hexcel other than the Plan contemplated by the Stock
Subscription and Standby Purchase Agreement;
(k) by Mutual Series or Hexcel, in the event that the Bankruptcy
Court enters an order confirming any plan of reorganization of Hexcel based upon
or relating to any Acquisition Transaction or upon Hexcel's motion enters any
order otherwise authorizing an Acquisition Transaction; and
(l) by Mutual Series if the Creditors' Committee fails to support the
Plan and the Stock Subscription and Standby Purchase Agreement by August 19,
1994 or thereafter withdraws its support.
Hexcel is required to pay Mutual Series a break-up fee equal to the
excess of $1,250,000 over all amounts paid by Hexcel as expense reimbursements
to Mutual Series if the Stock Subscription and Standby Purchase Agreement (i) is
terminated by Hexcel or Mutual Series pursuant to paragraphs (i), (j) or (k)
above, (ii) is terminated by Hexcel if the Board of Directors receives a
proposal with respect to an Acquisition Transaction that the Board of Directors
has determined is more favorable to Hexcel, or (iii) is terminated by Hexcel
pursuant to paragraphs (f), (g) or (h) above and thereafter during the pendency
of the Chapter 11 Case, an Acquisition Transaction is consummated other than one
that is materially less favorable to Hexcel or the Creditors in Class 5 under
the Plan. No

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breakup fee is payable to Mutual Series in the event that Mutual Series is in
material breach of the Stock Subscription and Standby Purchase Agreement at the
date of such termination. For purposes of the Stock Subscription and Standby
Purchase Agreement, an "Acquisition Transaction" means (i) any business
combination involving Hexcel or either of Hexcel S.A. (Belgium) or Hexcel S.A.
(France), including but not limited to (A) the disposition of any business
currently conducted by Hexcel or either of such subsidiaries and which
represents sales in excess of 10% of Hexcel's consolidated sales for 1993 not
disclosed in this Disclosure Statement, and (B) the sale of assets of Hexcel or
such subsidiaries for $40 million or more in a single transaction or series of
related transactions, in the case of (A) and (B) not disclosed in this
Disclosure Statement, or (ii) the sale or issuance of a more than 5% equity
interest in Hexcel or either of such subsidiaries, excluding the issuance by
Hexcel of equity (A) in exchange for existing indebtedness of Hexcel and/or (B)
to holders of Common Stock on a PRO RATA basis. Acquisition Transaction does
not include a transaction or proposed transaction disclosed in the Disclosure
Statement.
In the event that the Stock Subscription and Standby Purchase
Agreement is terminated by either party, neither party has any further
obligation thereunder except that Hexcel will remain liable to reimburse Mutual
Series for its expenses and to pay the break-up fee, to the extent required
under the Stock Subscription and Standby Purchase Agreement. In the

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event of a material breach by Mutual Series of its obligations under the Stock
Subscription and Standby Purchase Agreement which results in the termination of
the agreement by Hexcel, Mutual Series is required to pay Hexcel $1,250,000 as
liquidated damages and Mutual Series will not be entitled to reimbursement of
its expenses.
Hexcel has agreed to reimburse Mutual Series for its out-of-pocket
expenses (including reasonable fees and expenses of its counsel and other
professionals) in connection with the negotiation, documentation and
implementation of the Stock Subscription and Standby Purchase Agreement and the
Registration Rights Agreement, including Mutual Series' due diligence expenses
and Mutual Series' expenses relating to, resulting from or arising out of any
claim, action or proceeding commenced or asserted in the Chapter 11 Case,
provided that if the first closing under the Stock Subscription and Standby
Purchase Agreement does not occur, the aggregate amount of such reimbursement
will be limited to $500,000. The expense reimbursement is payable at the first
closing under the Stock Subscription and Standby Purchase Agreement or on
termination of the Stock Subscription and Standby Purchase Agreement, except
that no expense reimbursement is payable to Mutual Series in the event of
material breach of the Stock Subscription and Standby Purchase Agreement by
Mutual Series.
The Stock Subscription and Standby Purchase Agreement prohibits Hexcel
from soliciting or initiating the

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submission of any offer or proposal for an Acquisition Transaction. Hexcel is
also prohibited from engaging in negotiations regarding an offer or proposal
received by Hexcel for a potential Acquisition Transaction unless the Board of
Directors or an appropriate committee of the Board believes in good faith that
such offer or proposal has a reasonable possibility of resulting in an
Acquisition Transaction more favorable to Hexcel than the transactions
contemplated by the Stock Subscription and Standby Purchase Agreement. Hexcel
is not prohibited from responding to any unsolicited requests for information
with respect to Hexcel and engaging in follow up due diligence sessions, subject
to compliance with the Bankruptcy Court order regarding confidential
information.
Mutual Series' obligations to consummate the first closing under the
Stock Subscription and Standby Purchase Agreement are subject to a number of
important conditions, including but not limited to the following:
(a) all of Hexcel's representations and warranties in the Stock
Subscription and Standby Purchase Agreement shall be true and correct in all
material respects at the time of the first closing as if made on that date and
Hexcel shall not be in material breach of the Stock Subscription and Standby
Purchase Agreement;
(b) all necessary notifications, filings and applications with
governmental agencies shall have been submitted and all applicable waiting
periods shall have expired;

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(c) Hexcel shall have entered into interim and long-term employment
arrangements with John J. Lee on terms reasonably satisfactory to Mutual Series;
Mr. Lee's prepetition contractual claims shall have been satisfied; and Hexcel
shall have caused the contingency employment agreements with certain specified
officers to be terminated or rejected;
(d) Hexcel shall have executed and delivered the Registration Rights
Agreement described below;
(e) five designees of Mutual Series shall have been appointed to the
Board of Directors of Hexcel to serve in the classes indicated by Mutual Series
(at least one of whom will be in Class I), and the four other directors, if not
on the Board of Directors on July 27, 1994, and the classes in which they serve
shall be reasonably satisfactory to Mutual Series;
(f) Hexcel shall have obtained the Exit Financing Facility of
$35,000,000 if Class 9 accepts the Plan, or $25,000,000 if Class 9 rejects the
Plan (in each case subject to availability restrictions) on commercially
reasonable terms reasonably satisfactory to Mutual Series and which will provide
Hexcel with sufficient working capital to meet its anticipated requirements as
reflected in the updated financial projections delivered prior to the first
closing;
(g) the Bankruptcy Court shall have entered all orders required
pursuant to the Stock Subscription and Standby Purchase Agreement, including an
order approving certain provisions of the Stock Subscription and Standby
Purchase Agreement, an order approving the Disclosure Statement and a

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confirmation order, and all such orders shall have become final orders and
remain in full force and effect;
(h) Hexcel shall have either (i) obtained a purchase order from
Northrop substantially in accordance with that contemplated by this Disclosure
Statement and obtained all necessary approvals for such purchase order to be
enforceable against Northrop or (ii) entered into another agreement with
Northrop which results in comparable economic value for Hexcel, as reasonably
determined by Mutual Series;
(i) Hexcel shall have entered into and obtained all necessary
approvals in connection with the Hexcel S.A. financing as approved by the
Bankruptcy Court on June 8, 1994;
(j) the 1986 Rights Agreement and rights to purchase preferred stock
pursuant thereto shall have been cancelled;
(k) this Disclosure Statement as approved by the Bankruptcy Court and
the Plan as confirmed by the Bankruptcy Court shall be in form and substance
satisfactory to Mutual Series and its counsel and shall be consistent with the
Stock Subscription and Standby Purchase Agreement;
(l) the Standard & Poor's 500 Index shall not have declined more than
15% from June 17, 1994;
(m) no legal proceedings shall have been instituted against Hexcel or
any of its subsidiaries which could reasonably result in material adverse change
to Hexcel and its subsidiaries taken as a whole;

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(n) no legal proceedings shall have been instituted or threatened or
a claim or demand made against Mutual Series seeking to restrain or prohibit or
to obtain substantial damages with respect to the consummation of the
transactions contemplated by the Stock Subscription and Standby Purchase
Agreement which in Mutual Series' reasonable judgment could have a material
adverse effect on it;
(o) there shall not be in effect any order of a governmental body
restraining or enjoining or otherwise prohibiting the consummation of the
transactions contemplated by the Stock Subscription and Standby Purchase
Agreement;
(p) there shall be no annual meeting of Hexcel or special meeting to
elect directors of Hexcel scheduled after the first closing date which shall
have a record date prior to the first closing date;
(q) there shall have occurred no material adverse change from the
business properties, results of operations, prospects or conditions, financial
or otherwise, of Hexcel and its subsidiaries taken as a whole since the latest
date as of which historical information in respect thereof is given in the
Disclosure Statement;
(r) Hexcel shall have delivered to Mutual Series updated projected
financial information in the same form as that included in Exhibit E to this
Disclosure Statement; and
(s) the conditions to the Effective Date shall have been satisfied
(except for the first closing under the Stock Subscription and Standby Purchase
Agreement).

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The conditions to Mutual Series' obligation to consummate the second
closing under the Stock Subscription and Standby Purchase Agreement include,
among other things, that the Rights Offering shall have terminated, the
Confirmation Order shall be in full force and effect and there shall not be any
order by any governmental body restraining, enjoining or prohibiting the
consummation of the transactions.
The Plan provides that Hexcel and Reorganized Hexcel shall perform
their obligations under the Stock Subscription and Standby Purchase Agreement in
accordance with its terms, including, without limitation, issuing all shares of
Reorganized Hexcel Common Stock to Mutual Series as provided therein.
3. THE REGISTRATION RIGHTS AGREEMENT
One condition to Mutual Series' obligation to close under the Stock
Subscription and Standby Purchase Agreement is that Hexcel enter into a
Registration Rights Agreement (the "Registration Rights Agreement"). The
following description of certain provisions of the Registration Rights Agreement
is qualified in its entirety by reference to the full text of that document,
which is annexed as part of Exhibit B to the Plan. The Registration Rights
Agreement will give Mutual Series the right to demand that Hexcel effect the
registration for public sale under the Securities Act of 1933, as amended, of
the Reorganized Hexcel Common Stock received by Mutual Series pursuant to the
Stock Subscription and Standby Purchase Agreement (the "Registrable
Securities"). If Mutual Series'

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investment is $20-30 million, Mutual Series will be entitled to compel
registration up to three times during the five-year period commencing on the
second closing date under the Stock Subscription and Standby Purchase Agreement,
and, if its interest is more than $30 million, it may compel registration up to
five times during such five-year period. Mutual Series may not compel
registration more than once during any 180-day period. Further, Mutual Series
may only compel registration with respect to sales representing the greater of
(i) 10% of the original amount of Registrable Securities issued to Mutual
Series, or (ii) 20% of the then outstanding Registrable Securities (excluding
certain securities which were previously registered or sold), provided, however,
that Mutual Series may always compel registration with respect to sales of all
of the Registrable Securities then held by it. In addition, Mutual Series will
be entitled to certain "piggyback" registration rights in connection with
certain registrations of securities by Hexcel during such five-year period.
4. CONDITIONS PRECEDENT TO THE PLAN
The Plan will not become effective unless and until (i) Reorganized
Hexcel shall have received the Exit Financing Facility to provide Reorganized
Hexcel with working capital sufficient to meet its ordinary and peak working
capital requirements, as determined by Hexcel, (ii) the first closing under the
Stock Subscription and Standby Purchase Agreement shall have occurred, and (iii)
the Reorganized Hexcel Common Stock shall have been approved for listing on the
New York

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Stock Exchange. In the event that any of the conditions precedent specified in
the Plan has not been satisfied or waived on or before 60 days after the
Confirmation Date, the Debtor may, upon notification submitted by the Debtor to
the Bankruptcy Court and counsel for the Committees, terminate the Plan, in
which event (a) the Confirmation Order will be vacated, (b) no distributions
will be made under the Plan, (c) the Debtor and all holders of Claims and Equity
Interests will be returned to the STATUS QUO ANTE and (d) all of the Debtor's
obligations with respect to the Claims and Equity Interests will remain
unchanged.
5. TIME AND METHOD OF DISTRIBUTIONS UNDER THE PLAN
Except for distributions to be made to holders of Subordinated
Debentures and Common Stock, all distributions under the Plan will be made by
Reorganized Hexcel to the holders of each Claim as set forth in the Claims
Register maintained by the Bankruptcy Court and Poorman-Douglas Corporation, as
the official claims agent, as of the Effective Date. All distributions to be
made to holders of Subordinated Debentures under the Plan will be made by
Reorganized Hexcel to the indenture trustee for such Debentures. Distributions
of Rights under the Plan will be made directly to holders of Common Stock. All
distributions of Reorganized Hexcel Common Stock to be made to holders of Common
Stock under the Plan will be made by Reorganized Hexcel to the transfer agent
for the Common Stock.

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Any payment of Cash made by Reorganized Hexcel pursuant to the Plan
will be made by check drawn on a domestic bank. No payment of Cash less than
one hundred dollars will be made by Reorganized Hexcel to any creditor unless a
request therefor is made in writing to Reorganized Hexcel. No fractional shares
of Reorganized Hexcel Common Stock, fractional Rights or Cash in lieu thereof
will be distributed.
6. RECORD DATE AND SURRENDER OF EXISTING
SECURITIES
After the close of business on the Effective Date, the transfer
ledgers for all Common Stock and, if the Plan is accepted by Class 9, the
transfer ledgers for the Subordinated Debentures, will be closed, there will be
no registrations or other changes in the record holders of any such securities
on the books of Reorganized Hexcel (or any indenture trustee, transfer agent or
registrar it may have employed in connection therewith), and Reorganized Hexcel,
any indenture trustee and any transfer agent will have no obligation to
recognize any transfer of such securities thereafter, but will be entitled
instead to recognize and deal only with those holders reflected on the transfer
ledgers as of the close of business on the Effective Date.
Until the holders of record as of the close of business on the
Effective Date or their lawful successors or assigns surrender, pursuant to
Sections 6.7 and 6.8 of the Plan, the certificates which had previously
evidenced the Common Stock or, if the Plan is accepted by Class 9, the

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Subordinated Debentures, the holders of such securities shall have no rights
(and the certificates shall evidence no rights) except the right to surrender
such certificates pursuant to such Sections and to receive in exchange therefor
the distributions to which such holders are entitled pursuant to the provisions
of Article IV of the Plan, except that holders of record of Common Stock as of
the Effective Date will have the right to receive the Rights distributable to
them before they surrender their certificates.
7. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
The Bankruptcy Code gives the Debtor the power, subject to the
approval of the Bankruptcy Court, to assume or reject executory contracts and
unexpired leases. If an executory contract or other unexpired lease is
rejected, the other party to the agreement may file a claim for damages incurred
by reason of the rejection. In the case of rejection of leases of real
property, such damage claims are subject to certain limitations imposed by the
Bankruptcy Code. Pursuant to the Plan, all unexpired real property leases which
exist between the Debtor and any person are deemed assumed as of the Effective
Date, except for any unexpired lease (i) which has been rejected pursuant to a
Bankruptcy Court order entered on or prior to the Confirmation Date, or (ii) for
which a motion for approval to reject such lease has been filed and served on or
prior to the Confirmation Date.

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The Plan provides that all executory contracts existing between the
Debtor and any party (other than certain employee-related matters) are to be
assumed as of the Effective Date unless the executory contract (i) has been
rejected pursuant to a Bankruptcy Court order entered on or prior to the
Confirmation Date, (ii) is set forth on Schedule 7.1(a) to the Plan, or (iii) is
the subject of a motion for the rejection of such contract filed and served on
or prior to the Confirmation Date. The executory contracts set forth in
Schedules 7.1(a) and 7.3 of the Plan will be rejected.
The Plan also provides that, except as set forth in Schedule 7.3 of
the Plan, all employment and severance practices and policies, and all employee
compensation and benefit plans, policies and programs of the Debtor for its
employees, officers or directors including, without limitation, all savings
plans, retirement plans, health care plans, severance benefit plans, incentive
plans, worker's compensation programs and life, disability and other insurance
plans will be deemed to be, and will be treated as, executory contracts assumed
under the Plan, unless any such contract (i) has been rejected pursuant to a
Bankruptcy Court order entered on or prior to the Confirmation Date, or (ii) is
the subject of a motion for the rejection of such contract filed and served on
or prior to the Confirmation Date. Except as stated in Section VII, "Management
of the Reorganized Debtor," the Debtor's obligations under such agreements,
plans, policies and programs will be assumed pursuant to Section 365(a) of the

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Bankruptcy Code, survive confirmation of the Plan, remain unaffected thereby and
will not be discharged in accordance with Section 1141 of the Bankruptcy Code.
8. RETIREE BENEFITS
The Plan provides that, pursuant to Section 1114(a) of the Bankruptcy
Code, the Debtor will provide, for the duration of the period for which it has
obligated itself to provide such benefits, payments due to any person for the
purpose of providing or reimbursing payments for retired employees and their
spouses and dependents for medical, surgical or hospital care or under any plan,
fund, or program (through the purchase of insurance or otherwise) maintained or
established in whole or in part by the Debtor prior to the Commencement Date.
9. PROVISIONS FOR TREATMENT OF DISPUTED CLAIMS
Unless otherwise ordered by the Bankruptcy Court, the Debtor will have
the exclusive right, except with respect to Claims of officers, directors and
employees and applications for the allowance of compensation and reimbursement
of expenses of professionals under Sections 330 and 503 of the Bankruptcy Code,
to object to the allowance of Claims filed with the Bankruptcy Court with
respect to which the liability is disputed in whole or in part. All objections
will be litigated to Final Order; however, the Debtor may compromise and settle
any objections to Claims, subject to the approval of the Bankruptcy Court. All
objections to Claims will be served and filed no later than the Distribution
Date,

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except as to Claims arising from the rejection of unexpired leases and other
executory contracts and other Claims filed after the Confirmation Date.
At such time as a Disputed Claim is resolved by Final Order and is
allowed, the holder thereof will receive, as soon as practicable thereafter, the
distributions to which such holder is then entitled under the Plan.
10. RESTATEMENT OF THE DEBTOR'S CERTIFICATE OF INCORPORATION AND BY-
LAWS
The Certificate of Incorporation and By-laws of the Reorganized Debtor
will be restated effective on the Effective Date, to the extent necessary to
prohibit the issuance of nonvoting equity securities in accordance with Section
1123(a)(6) of the Bankruptcy Code and to effectuate the provisions of the Plan.
In addition, the Certificate of Incorporation and By-laws of Hexcel will be
amended and restated substantially in the forms attached as Exhibits C and D to
the Plan (the "Restated Certificate" and "Restated By-laws," respectively).
The Restated Certificate will, among other things, authorize
Reorganized Hexcel to issue up to 70,000,000 shares of Reorganized Hexcel Common
Stock, par value $.01 per share, and up to 1,500,000 shares of preferred stock,
without par value (the "Preferred Stock"). For a more detailed description of
the New Common Stock, see Section V.B.1., "The Plan of Reorganization --
Reorganized Hexcel Common Stock and Rights."

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The Restated Certificate will also provide that the Board of Directors
of Reorganized Hexcel will be empowered, without the necessity of further action
or authorization of the stockholders (unless required in a specific case by
applicable law, rules or regulations), to cause Reorganized Hexcel to issue the
Preferred Stock from time to time in one or more series, and to fix by
resolution the designations, preferences and relative, participating, optional
or other special rights of each such series, if any, or the qualifications,
limitations or restrictions of each such series, if any. Each series of
Preferred Stock may rank senior to or PARI PASSU with the Reorganized Hexcel
Common Stock with respect to dividends and liquidation rights. The Board of
Directors of Hexcel believes it will be in the best interests of Reorganized
Hexcel to authorize the Preferred Stock in order to provide Reorganized Hexcel
with flexibility to respond to future developments and opportunities without the
delay and expense of a special stockholders' meeting. The Preferred Stock
provides such flexibility by providing an additional means of raising equity
capital and undertaking acquisitions, and for other general corporate purposes.
The Board of Directors of Reorganized Hexcel will be authorized to
determine, among other things, with respect to each series of Preferred Stock
that may be issued: (i) the distinctive designation of such series, (ii)
subject to the requirements of Section 1123(a)(6) of the Bankruptcy Code
described above, whether or not such shares have voting rights

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and the extent of such voting rights, (iii) whether or not holders will have the
right to elect directors and, if so, the term of office, requirements for the
filling of vacancies and other terms of the directorship of such directors, (iv)
dividend rights, if any, including dividend rates, preferences with respect to
other series or classes of stock, times of payment and the date from which
dividends will be cumulative, (v) the redemption price, the terms of redemption
and the amount of and provisions regarding any sinking fund for the purchase or
redemption thereof, (vi) the liquidation preferences and the amounts payable on
dissolution or liquidation, and (vii) the terms and conditions, if any, under
which the shares of a series of Preferred Stock may be converted into any other
series or class of stock or debt of Reorganized Hexcel.
At the Effective Date, there will be no shares of Preferred Stock
outstanding, and there are no current agreements or understandings for the
designation of any series of Preferred Stock or the issuance of shares
thereunder. For a description of certain considerations relating to the
Preferred Stock, see Section X.A.7., "Certain Risk Factors To Be Considered --
Preferred Stock."
The Board will be divided into three classes of directors: Class I,
Class II and Class III, equal in number of directors with the term of office of
the directors of one class expiring each year. Directors elected at the annual
meeting of Reorganized Hexcel's stockholders to succeed those

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directors whose terms expire will be elected for a term of office to expire at
the third annual meeting of Reorganized Hexcel's stockholders after their
election.
Generally, matters to be acted upon by the stockholders of Reorganized
Hexcel, including without limitation amending the Restated By-laws or Restated
Certificate, will require the affirmative vote of a majority of the voting power
of the corporation.
The first annual meeting of the stockholders of Reorganized Hexcel
will be held in May of 1995, on a date selected by the Board of Directors of
Reorganized Hexcel. The Restated By-laws will provide, among other things, that
(i) subsequent meetings of the stockholders of Reorganized Hexcel shall be held
on such date as shall be designated from time to time by the Board of Directors
and (ii) special meetings of the stockholders may be convened by the Board of
Directors, the Chairman of the Board, the President, or by a committee of the
Board of Directors which has been duly designated by the Board of Directors and
whose powers and authority, as provided in a resolution of the Board of
Directors or in the Restated By-Laws of the Corporation, include the power to
call such meetings, but such special meetings may not be called by any other
person or persons; provided, however, that if and to the extent that any special
meeting of stockholders may be called by any other person or persons specified
in any provisions of the Restated Certificate or any amendment thereto, or any
certificate filed under Section 151(g) of the Delaware General

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Corporation Law designating the number of shares of Preferred Stock to be issued
and the rights, preferences, privileges and restrictions granted to and imposed
on the holders of such designated Preferred Stock, as permitted by Section 5 of
the Restated Certificate, then such special meeting may also be called by such
other person or persons in the manner, at the times and for the purposes so
specified.
The brief statements and descriptions set forth above concerning the
Restated Certificate and Restated By-laws do not purport to be complete, and are
qualified in their entirety by reference to the forms of Restated Certificate
and Restated By-laws of Reorganized Hexcel, copies of which are attached as
Exhibits C and D to the Plan, respectively, and to the Delaware General
Corporation Law.
11. DISCHARGE OF THE DEBTOR
The rights afforded in the Plan and the treatment of the Claims and
Equity Interests therein will be in exchange for and in complete satisfaction,
discharge and release of all Claims and Equity Interests of any nature
whatsoever, including any interest accrued thereon from and after the
Commencement Date, against the Debtor, or its estate, properties or interests in
property. Except as otherwise provided in the Plan, upon the Effective Date,
all such Claims against and Equity Interests in the Debtor will be deemed
satisfied, discharged and released in full. Pursuant to the Confirmation Order,
all parties will be precluded from asserting against the Reorganized Debtor, its
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its assets or properties, any other or further Claims or Equity Interests based
upon any act or omission, transaction or other activity of any kind or nature
that occurred prior to the Confirmation Date.
12. AMENDMENT OF THE PLAN
The Debtor may alter, amend, or modify the treatment of any Claim
provided for under the Plan; PROVIDED, HOWEVER, that the holder of such Claim
agrees or consents to any such alteration, amendment or modification; and
PROVIDED, FURTHER, that such alteration, amendment or modification will not
materially improve the treatment of any Claim from that provided for under the
Plan.
13. INDEMNIFICATION
The Plan provides that the obligations of the Debtor to indemnify,
reimburse or limit the liability of certain officers, directors and employees of
the Debtor will remain unaffected by the Plan and will not be discharged.
Specifically, the indemnification, reimbursement and limitation of liability
obligations of the Debtor will continue as to any present or former officer,
director or employee who was an officer, director or employee of the Debtor on
the Commencement Date or who became an officer, director or employee of the
Debtor after the Commencement Date. The continuation of such obligations as to
such persons applies to any event occurring before, on or after the Commencement
Date.

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14. REVOCATION OF THE PLAN
The Debtor may revoke or withdraw the Plan at any time prior to the
Confirmation Date. If the Debtor revokes or withdraws the Plan prior to the
Confirmation Date, then it shall be deemed null and void.
15. EXTINGUISHMENT OF CAUSES OF ACTION UNDER THE
AVOIDING POWER PROVISIONS
Under Sections 544, 545, 547, 548, 549 and 553 of the Bankruptcy Code,
the debtor in possession has certain powers to recover money or other assets for
the debtor's estate, eliminate security interests in estate property or
eliminate debt incurred by the estate. During the Chapter 11 Case, the Debtor
reviewed and analyzed potential claims under such provisions and has determined
that all claims, rights, causes of action, avoiding powers, suits and
proceedings under the avoiding power provisions should be extinguished on the
Effective Date.
16. TERMINATION OF CREDITORS' AND EQUITY COMMITTEES
The appointments of the Creditors' Committee and Equity Committee will
terminate on the Effective Date, except as to applications under Sections 330
and 503 of the Bankruptcy Code and objections to claims of the Debtor's
officers, directors and employees, as to which such appointments will continue
until the date of the hearing to consider applications for final allowances of
compensation and reimbursement of expenses or such claims objections.

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17. EXCULPATION
In accordance with the Plan, neither Reorganized Hexcel, Mutual
Series, the Creditors' Committee, nor the Equity Committee nor any of their
respective members, officers, directors, employees, advisors or agents will have
or incur any liability to any holder of a Claim or Equity Interest for any act
or omission in connection with, or arising out of, the pursuit of confirmation
of the Plan, the consummation of the Plan or the administration of the Plan or
the property to be distributed under the Plan except for willful misconduct or
gross negligence, and, in all respects, the Reorganized Debtor, the Standby
Purchaser, the Creditors' Committee, the Equity Committee and each of their
respective members, officers, directors, employees, advisors and agents shall be
entitled to rely upon the advice of counsel with respect to their duties and
responsibilities under the Plan.
18. SUPPLEMENTAL DOCUMENTS
Forms of the documents relating to the Plan will be contained in the
Plan Supplement and will be filed with the Clerk of the Bankruptcy Court at
least ten days prior to the last day upon which holders of Claims may vote to
accept or reject the Plan. The Plan Supplement may be inspected in the office
of the Clerk of the Bankruptcy Court during normal court hours. In addition,
holders of Claims and holders of Equity Interests may obtain a copy of the Plan
Supplement from the Debtor by contacting __________________ and submitting
payment to reimburse Hexcel's copying and shipping costs.

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VI. CONFIRMATION AND CONSUMMATION PROCEDURE

A. SOLICITATION OF VOTES
In accordance with Sections 1126 and 1129 of the Bankruptcy Code,
the Claims and Interests in Classes 4, 5, 6, 7, 8, 9, 10, and 11 of the Plan are
impaired and the holders of Claims and Interests in such Classes are entitled to
vote to accept or reject the Plan. If Class 9 votes to reject the Plan,
however, the Plan provides that the Subordinated Debentures will be Reinstated,
and that Class 9 shall therefore be unimpaired under the Plan. The holders of
Allowed Claims in Classes 1, 2 and 3 are unimpaired. Accordingly, such holders
are conclusively presumed to have accepted the Plan and the solicitation of
acceptances with respect to such Classes is not required under Section 1126(f)
of the Bankruptcy Code. Class 12 also is impaired under the Plan. Because no
distribution is being made with respect to Class 12, the holders of Interests in
Class 12 are deemed to reject the Plan and their votes will not be solicited.
As to classes of claims entitled to vote on a plan, the Bankruptcy
Code defines acceptance of a plan by a class of creditors as acceptance by
holders of at least two-thirds in dollar amount and more than one-half in number
of the claims of that class that have timely voted to accept or reject a plan.
For purposes of calculating the number of Claims in a Class of Claims held by
holders of Allowed Claims in such Class that have voted to accept or reject the
Plan under

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Section 1126(c) of the Bankruptcy Code, the Plan provides that all Claims in
such Class held by the same entity or an affiliate thereof (as defined in the
Securities Act of 1933 and the rules and regulations promulgated thereunder)
will be aggregated and treated as one Claim in such Class. A vote may be
disregarded if the Bankruptcy Court determines, after notice and a hearing, that
such acceptance or rejection was not solicited or procured in good faith or in
accordance with the provisions of the Bankruptcy Code.
Any creditor of an impaired Class (i) whose Claim has been listed by
the Debtor in the Schedules filed with the Bankruptcy Court (provided that such
Claim has not been scheduled as disputed, contingent or unliquidated) or (ii)
who filed a proof of claim within any other applicable period of limitations, or
with leave of the Bankruptcy Court, which Claim is not the subject of an
objection, is entitled to vote.
B. THE CONFIRMATION HEARING
The Bankruptcy Code requires the Bankruptcy Court, after notice, to
hold a confirmation hearing. The Confirmation Hearing in respect of the Plan
has been scheduled for ____________, 1994 at __ a.m. before the Honorable Leslie
Tchaikovsky, United States Bankruptcy Judge at the United States Bankruptcy
Court, 1300 Clay Street, Oakland, California 94612. The Confirmation Hearing
may be adjourned from time to time by the Bankruptcy Court without further
notice except for an announcement of the adjourned date made at the Confirmation

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Hearing. Any objection to confirmation must be made in writing and specify in
detail the name and address of the objector, all grounds for the objection and
the amount of the Claim or number of shares of stock of the Debtor held by the
objector. Any such objection must be filed with the Bankruptcy Court (with a
copy to Chambers) and served so that it is received by the Bankruptcy Court,
Chambers and the following parties on or before ____________, 1994 at 4:00 p.m.
Pacific Daylight Savings Time:

HEXCEL CORPORATION
5794 West Las Positas Blvd.
Pleasanton, CA 94588-8781
Attn: Rodney P. Jenks, Jr., Esq.

KRONISH LIEB WEINER & HELLMAN
1114 Avenue of the Americas
New York, NY 10036
Attn: Robert J. Feinstein, Esq.

GOLDBERG, STINNETT, MEYERS & DAVIS
A Professional Corporation
44 Montgomery Street, Suite 2900
San Francisco, CA 94104
Attn: Merle C. Meyers, Esq.

PILLSBURY, MADISON & SUTRO
P.O. Box 7860
235 Montgomery Street, 14th Floor
San Francisco, CA
Attn: M. David Minnick, Esq.

MARCUS MONTGOMERY WOLFSON P.C.
53 Wall Street
New York, NY 10005-2815
Attn: Peter Wolfson, Esq.

Objections to confirmation of the Plan are governed by Bankruptcy Rule 9014.

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C. CONFIRMATION
At the Confirmation Hearing, the Bankruptcy Court will confirm the
Plan only if all of the requirements of Section 1129 of the Bankruptcy Code are
met. Among the requirements for confirmation of a plan are that the plan is (i)
accepted by all impaired classes of claims and equity interests or, if rejected
by an impaired class, that the plan "does not discriminate unfairly" and is
"fair and equitable" as to such class, (ii) feasible, and (iii) in the "best
interests" of creditors and stockholders which are impaired under the plan.
1. ACCEPTANCE
Classes 4, 5, 6, 7, 8, 9, 10 and 11 of the Plan are impaired under the
Plan and are entitled to vote to accept or reject the Plan. Class 12 Interests
are impaired under the Plan and do not receive any distribution under the Plan.
Holders of Class 12 Interests are deemed to reject the Plan and are not eligible
to vote. The Debtor reserves the right to seek nonconsensual confirmation of
the Plan under Section 1129(b) of the Bankruptcy Code with respect to any Class
of Claims or Interests that rejects or is deemed to reject the Plan. Moreover,
the Plan provides that the Claims in Class 9 shall be Reinstated if Class 9
rejects the Plan.
2. UNFAIR DISCRIMINATION AND FAIR AND EQUITABLE TESTS
To obtain nonconsensual confirmation of the Plan, it must be
demonstrated to the Bankruptcy Court that the Plan

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"does not discriminate unfairly" and is "fair and equitable" with respect to
each impaired, nonaccepting Class. The Bankruptcy Code provides a non-exclusive
definition of the phrase "fair and equitable." The Bankruptcy Code establishes
"cram down" tests for secured creditors, unsecured creditors and equity holders,
as follows:
a. SECURED CREDITORS. Either (i) each impaired secured
creditor retains its liens securing its secured claim and receives on
account of its secured claim deferred cash payments having a present
value equal to the amount of its allowed secured claim, (ii) each
impaired secured creditor realizes the "indubitable equivalent" of its
allowed secured claim or (iii) the property securing the claim is sold
free and clear of liens with such liens to attach to the proceeds of
the sale and the treatment of such liens on proceeds is provided in
clause (i) or (ii) of this subparagraph.
b. UNSECURED CREDITORS. Either (i) each impaired unsecured
creditor receives or retains under the plan property of a value equal
to the amount of its allowed claim or (ii) the holders of claims and
interests that are junior to the claims of the dissenting class will
not receive or retain any property under the plan.
c. EQUITY INTERESTS. Either (i) each holder of an equity
interest will receive or retain under

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the plan property of a value equal to the greatest of the fixed liquidation
preference to which such holder is entitled, the fixed redemption price to which
such holder is entitled or the value of the interest or (ii) the holder of an
interest that is junior to the nonaccepting class will not receive or retain any
property under the plan.
The Debtor believes that the Plan and the treatment of all Classes of
Claims and Equity Interests under the Plan satisfy the foregoing requirements
for nonconsensual confirmation of the Plan.
3. FEASIBILITY
The Bankruptcy Code requires that confirmation of a plan is not likely
to be followed by liquidation or the need for further financial reorganization.
For purposes of determining whether the Plan meets this requirement, Hexcel has
analyzed its ability to meet its obligations under the Plan. As part of this
analysis, Hexcel has prepared projections of its financial performance for the
three months ending December 31, 1994, and the four fiscal years in the period
ending December 31, 1998 (the "Projection Period") under two scenarios: (i) if
Class 9 accepts the Plan, and the holders of Subordinated Debentures receive
distributions of Reorganized Hexcel Common Stock, and (ii) if Class 9 rejects
the Plan and the Subordinated Debentures are Reinstated. These projections, and
the assumptions on which they are

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based, are included in Hexcel Corporation's Projected Financial Information
annexed hereto as Exhibit E. Based upon such projections, the Debtor believes
that it will be able to make all payments required pursuant to the Plan and,
therefore, that confirmation of the Plan is not likely to be followed by
liquidation or the need for further reorganization. The Debtor further believes
that it will be able to repay or refinance any and all of the then-outstanding
secured indebtedness under the Plan at or prior to the maturity of such
indebtedness.
The Projected Financial Information appended to this Disclosure
Statement as Exhibit E includes the following:
- Pro Forma Consolidated Balance Sheet of Reorganized Hexcel as of
October 3, 1994;
- Projected Consolidated Balance Sheet of Reorganized Hexcel as of
December 31, 1994, 1995, 1996, 1997 and 1998;
- Projected Consolidated Income Statements of Reorganized Hexcel
for the three months ending December 31, 1994 and each of the
four fiscal years through the year ending December 31, 1998;
- Projected Consolidated Cash Flow Statements of Reorganized Hexcel
for the three months ending December 31, 1994 and each of the
four fiscal years through the year ending December 31, 1998.

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The pro forma financial information and the projections are based on
the assumption that the Plan will be confirmed by the Bankruptcy Court and, for
projection purposes, that the Effective Date of the Plan and the initial
distributions thereunder take place as of October 3, 1994. Although the
projections and information are based upon an October 3, 1994 Effective Date,
Hexcel believes that an actual Effective Date in the fourth quarter of 1994
would not have any material effect on the projections.
Hexcel has prepared these financial projections based upon certain
assumptions which it believes to be reasonable under the circumstances. Those
assumptions considered to be significant are described in the Projected
Financial Information, annexed hereto as Exhibit E. The Projected Financial
Information has not been examined or compiled by independent accountants.
Hexcel makes no representation as to the accuracy of the projections or its
ability to achieve the projected results. Many of the assumptions on which the
projections are based are subject to significant uncertainties. See Section X,
"Certain Risk Factors to be Considered." Inevitably, some assumptions will not
materialize and unanticipated events and circumstances may affect the actual
financial results. Therefore, the actual results achieved throughout the
Projection Period may vary from the projected results and the variations may be
material. All holders of Claims and Equity Interests that are entitled to vote
to accept or reject the Plan are urged to examine

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carefully all of the assumptions on which the Projected Financial Information is
based in evaluating the Plan.
4. BEST INTERESTS TEST
With respect to each impaired Class of Claims and Equity Interests,
confirmation of the Plan requires that each holder of a Claim or Equity Interest
either (i) accept the Plan or (ii) receive or retain under the Plan property of
a value, as of the Effective Date, that is not less than the amount such holder
would receive or retain if the Debtor were liquidated under chapter 7 of the
Bankruptcy Code. To determine what holders of Claims and Equity Interests of
each impaired Class would receive if the Debtor were liquidated under chapter 7,
the Bankruptcy Court must determine the dollar amount that would be generated
from the liquidation of the Debtor's assets and properties in the context of a
chapter 7 liquidation case. The cash amount which would be available for
satisfaction of Unsecured Claims and Equity Interests would consist of the
proceeds resulting from the disposition of the unencumbered assets of the
Debtor, augmented by the unencumbered cash held by the Debtor at the time of the
commencement of the liquidation case. Such cash amount would be reduced by the
amount of the costs and expenses of the liquidation and by such additional
administrative and priority claims that may result from the termination of the
Debtor's business and the use of chapter 7 for the purposes of liquidation.
Significantly, in a chapter 7 case, Hexcel would not have an infusion of $40 or
$50 million in Cash as it would

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under the Plan pursuant to the Stock Subscription and Standby Purchase Agreement
and the Rights Offering.
The Debtor's costs of liquidation under chapter 7 would include the
fees payable to a trustee in bankruptcy, as well as those which might be payable
to attorneys and other professionals that such a trustee may engage. In
addition, claims would arise by reason of the breach or rejection of obligations
incurred and leases and executory contracts assumed or entered into by the
Debtor in Possession during the pendency of the Chapter 11 Case. The foregoing
types of claims and other claims which may arise in a liquidation case or result
from the pending Chapter 11 Case, including any unpaid expenses incurred by the
Debtor in Possession during the Chapter 11 Case such as compensation for
attorneys, financial advisors and accountants, would be paid in full from the
liquidation proceeds before the balance of those proceeds would be made
available to pay prepetition Unsecured Claims.
To determine if the Plan is in the best interests of each impaired
class, the present value of the distributions from the proceeds of the
liquidation of the Debtor's unencumbered assets and properties, after
subtracting the amounts attributable to the foregoing Claims, are then compared
with the value of the property offered to such Classes of Claims and Equity
Interests under the Plan.
After considering the effects that a chapter 7 liquidation would have
on the ultimate proceeds available for distribution to creditors in a chapter 11
case, including (i)

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the increased costs and expenses of a liquidation under chapter 7 arising from
fees payable to a trustee in bankruptcy and professional advisors to such
trustee, (ii) the erosion in value of assets in a chapter 7 case in the context
of the expeditious liquidation required under chapter 7 and the "forced sale"
atmosphere that would prevail and (iii) the substantial increases in Claims
which would be satisfied on a priority basis or on parity with creditors in the
Chapter 11 Case, the Debtor has determined that confirmation of the Plan will
provide each holder of an Allowed Claim or Equity Interest with a recovery that
is not less than such holder would receive pursuant to liquidation of the Debtor
under chapter 7.
The Debtor also believes that the value of any distributions to each
Class of Allowed Claims in a chapter 7 case, including all Secured Claims, would
be less than the value of distributions under the Plan because such
distributions in a chapter 7 case would not occur for a substantial period of
time. It is likely that distribution of the proceeds of the liquidation could
be delayed for two years after the completion of such liquidation in order to
resolve claims and prepare for distributions. In the likely event litigation
was necessary to resolve claims asserted in the chapter 7 case, the delay could
be prolonged.
The Debtor's Liquidation Analysis is attached hereto as Exhibit F.
The information set forth in Exhibit F provides a summary of the liquidation
values of the Debtor's assets

154
<PAGE>
assuming a chapter 7 liquidation in which a trustee appointed by the Bankruptcy
Court would liquidate the assets of the Debtor's estate. Reference should be
made to the Liquidation Analysis for a complete discussion and presentation of
the Liquidation Analysis. The Liquidation Analysis was prepared by management
of Hexcel.
Underlying the Liquidation Analysis are a number of estimates and
assumptions that although developed and considered reasonable by management, are
inherently subject to significant economic and competitive uncertainties and
contingencies beyond the control of the Debtor and management. The Liquidation
Analysis is also based upon assumptions with regard to liquidation decisions
that are subject to change. Accordingly, the values reflected may not be
realized if the Debtor were, in fact, to undergo such a liquidation. The
liquidation period is assumed to be a period of approximately six months,
allowing for the (i) discontinuation of operations, (ii) sale of assets, and
(iii) collection of receivables.
D. CONSUMMATION
The Plan will be consummated following the Effective Date. The
Effective Date of the Plan is the date on which the conditions precedent to the
effectiveness of the Plan, as set forth in Section 10.1 thereof, are satisfied
or waived. For a more detailed discussion of the conditions precedent to the
Plan and the impact of the failure to meet such conditions, see Section V.B.4,
"The Plan of Reorganization -- Summary of

155
<PAGE>
Other Provisions of the Plan -- Conditions Precedent to the Plan."
The Plan is to be implemented pursuant to the provisions of the
Bankruptcy Code.
E. EXIT FINANCING
In order to consummate the Plan, Reorganized Hexcel will enter into a
credit facility (the "Exit Financing Facility") to fund its working capital
requirements in the amount of up to between $25,000,000 and $35,000,000. The
Exit Financing Facility will be a revolving credit facility, the proceeds of
which will be available to fund the working capital requirements of Reorganized
Hexcel, and to the extent needed, to fund payments to creditors under the Plan.
In addition, the Exit Financing Facility may be used for trade letters of credit
and standby letters of credit. It is expected that the Exit Financing Facility
will be secured, and contain customary affirmative and negative covenants,
financial covenants and events of default.

VII. MANAGEMENT OF THE REORGANIZED DEBTOR
As of the Effective Date, the management, control and operation of the
Reorganized Debtor will become the general responsibility of the Board of
Directors.
A. BOARD OF DIRECTORS AND MANAGEMENT
1. COMPOSITION OF THE BOARD OF DIRECTORS.
The initial Board of Directors of Reorganized Hexcel will consist of
nine directors, including the Chairman and

156
<PAGE>
Chief Executive Officer of Hexcel and eight other individuals whose names and
affiliations will be disclosed at or prior to the Confirmation Hearing. Five of
the directors will be nominees of Mutual Series, provided that one of such
nominees will resign if at the second closing under the Stock Subscription and
Standby Purchase Agreement the purchase price paid by Mutual Series for the
shares not purchased in the Rights Offering is less than $7 million, if Class 9
accepts the Plan, or $5 million if Class 9 rejects the Plan. The four other
directors, if not directors on July 27, 1994, and the classes they serve in must
be reasonably satisfactory to Mutual Series.
2. IDENTITY OF OFFICERS.
It is currently anticipated that the officers of the Debtor
immediately prior to the Effective Date will continue in their then current
positions as the officers of the Reorganized Debtor. Set forth below is the
name, age and position with Hexcel of each current officer, together with a
description of each officer's employment history:

157
<PAGE>

NAME AGE OFFICER SINCE POSITION
---- --- ------------- ---------
<C> <C> <C> <S>
John J. Lee 57 1993 Chairman of the Board of
Directors and Chief
Executive Officer since
January 1994; Chairman and
Co-Chief Executive Officer
from July to December 1993;
Director since May 1993.
Mr. Lee has been the
Chairman of the Executive
Committee and a director of
XTRA Corporation, a
transportation equipment
leasing company, since 1990,
and the Chairman of the
Board, President and Chief
Executive Officer of Lee
Development Corporation, a
merchant banking company,
since 1987. Mr. Lee has
also been a Trustee of Yale
University since 1993. From
July 1989 through April
1993, Mr. Lee served as
Chairman of the Board and
Chief Executive Officer of
Seminole Corporation, a
manufacturer and distributor
of fertilizer. From April
1988 through April 1993, Mr.
Lee served as a Director of
Tosco Corporation, a
national refiner and
marketer of petroleum
products. Mr. Lee also
served as President and
Chief Operating Officer of
Tosco from 1990 through
April 1993. Mr. Lee is also
a director of Playtex Family
Products, Inc. and Aviva
Petroleum Corp.

Donald J. O'Mara 56 1991 Director since January 1994;
President and Chief
Operating Officer since
March 1993; Vice President -
Honeycomb and Advanced
Products from 1991 to 1993.
From 1987 to 1991, Mr.
O'Mara served as managing
director of Sprague-Brooks
Associates. He was Vice
President and Chief
Operating Officer of Gates
Learjet Corporation from
1984 to 1987.

Robert D. Krumme 55 1993 Director and Vice Chairman
since January 1994; Vice
President, General Counsel
and Secretary from September
1993 to January 1994. Mr.
Krumme has been President of
The Corporate Management
Group since 1989 and, prior
to joining the Company in
1993, was a senior corporate
executive officer and
general counsel of three
public companies. Mr.
Krumme served as General
Counsel of The Gillette
Company from 1990-1991, as
Vice President and General
Counsel of Ingersoll-Rand
Company from 1986-1988 and,
prior to 1986, Senior Vice
President and General
Counsel and in other
executive positions of
Cluett, Peabody & Co., Inc.
for more than 15 years.

Rodney P. Jenks, Jr. 43 1994 Vice President, General
Counsel and Secretary of the
Company since March 1994.
Prior to joining the Company
in 1994, Mr. Jenks was a
partner in the law firm of
Wendel, Rosen, Black, Dean &
Levitan, from 1985.

158

<PAGE>

NAME AGE OFFICER SINCE POSITION
---- --- ------------- ---------
<C> <C> <C> <S>
Thomas J. Lahey 53 1989 Vice President - Worldwide
Sales since April 1993; Vice
President - Advanced
Composites from 1992 to
1993; General Manager of
Advanced Composites from
1991 to 1992; General
Manager of Advanced Products
from 1989 to 1991. Prior to
joining the Company in 1989,
Mr. Lahey held the position
of Executive Assistant to
the President of Kaman
Aerospace Corporation in
1987 and 1988, and was a
Vice President of Grumman
Corporation from 1985 to
1987.

William P. Meehan 59 1993 Vice President - Finance and
Chief Financial Officer of
the Company since September
1993, and Treasurer of the
Company since April, 1994.
Prior to joining the Company
in 1993, Mr. Meehan served
as President and Chief
Executive Officer of
Thousands Trails and NACO, a
membership campground and
resort business, from 1990
through 1992. From 1986
through 1989, Mr. Meehan
served as Vice President-
Finance and Chief Financial
Officer of Hadco
Corporation.

Robert A. Petrisko 40 1993 Vice President - Technology
since September 1993. Mr.
Petrisko joined the Company
in 1989, after serving as a
Research Specialist with Dow
Corning Corporation from
1985 to 1989.

Gary L. Sandercock 53 1989 Vice President -
Manufacturing since April
1993; Vice President -
Reinforcement Fabrics from
1989 to 1993; General
Manager of the Trevarno
Division from 1985 to 1989;
other manufacturing and
general management positions
from 1967 to 1985. Mr.
Sandercock joined the
Company in 1967.

William K. Woodrow 46 1993 Vice President - Marketing
and Business Development
since March 1993. Prior to
joining the Company in 1993,
Mr. Woodrow served as
Director of Corporate
Marketing of Raychem
Corporation from 1990 to
1992, and was Division
Manager of Chemelex-
Industrial Division from
1988 to 1990.
Wayne C. Pensky 38 1993 Controller since July 1993.
Prior to joining the Company
in 1993, Mr. Pensky served
as Service Line Director at
Arthur Andersen & Co., where
he was employed from 1979.

</TABLE>

B. COMPENSATION OF EXECUTIVE OFFICERS
1993 CASH COMPENSATION. The following table sets forth all cash
compensation paid by Hexcel in fiscal year 1993 to each of the five most highly
compensated executives of

159
<PAGE>
Hexcel (including Messrs. Witt, Schmidt and Penezic, who are either no longer
employed by Hexcel or are no longer active in its business) and to all executive
officers as a group, for services rendered in all of their respective capacities
in fiscal year 1993:

160

<PAGE>

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation(1) Long-Term Compensation
---------------------- -----------------------
-----------------------------------------------------------------------------------------------------------------------------------
Awards Payouts
---------------------- -------
-----------------------------------------------------------------------------------------------------------------------------------

Other Annual Restricted Stock Securities LTIP All Other
Name & Principal Salary Bonus Compensation Awards Underlying Payouts Compensation
Position Year ($) ($) ($)(5) ($)(6) Options/SARS ($)(8) ($)(9)
---------------- ---- ------ ----- ------------ ---------------- (#)(7) ------- ------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R.L. Witt (2) 1993 $210,000 $0 $ --- $110,813 68,000 $0 $ 810,141
----------------------------------------------------------------------------------------------------------------
Chairman & Chief 1992 360,000 0 --- 91,936 37,400 0 6,866
----------------------------------------------------------------------------------------------------------------
Executive Officer 1991 340,000 126,710 --- 82,529 88,375 0 ---
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
J.J. Lee (3) 1993 160,005 0 --- 0 0 0 51,675
-----------------------------------------------------------------------------------------------------------------------------------
Chairman and 1992 --- --- --- --- --- --- ---
-----------------------------------------------------------------------------------------------------------------------------------
Co-Chief Executive 1991 --- --- --- --- --- --- ---
-----------------------------------------------------------------------------------------------------------------------------------
Officer
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
J.L. Doyle (3) 1993 156,159 0 --- 0 0 0 68,475
-----------------------------------------------------------------------------------------------------------------------------------
Vice Chairman and 1992 --- --- --- --- --- --- ---
-----------------------------------------------------------------------------------------------------------------------------------
Co-Chief Executive 1991 --- --- --- --- --- --- ---
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------

161
<PAGE>

<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation(1) Long-Term Compensation
---------------------- -----------------------
-----------------------------------------------------------------------------------------------------------------------------------
Awards Payouts
---------------------- -------
----------------------------------------------------------------------------------------------------------------------------------

Other Annual Restricted Stock Securities LTIP All Other
Name & Principal Salary Bonus Compensation Awards Underlying Payouts Compensation
Position Year ($) ($) ($)(5) ($)(6) Options/SARS ($)(8) ($)(9)
---------------- ---- ------ ----- ------------ ---------------- (#)(7) ------- ------
----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Officer
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
D.J. O'Mara 1993 191,250 0 --- 49,619 33,500 0 6,000
-----------------------------------------------------------------------------------------------------------------------------------
President and Chief 1992 163,731 0 --- 33,713 15,000 0 4,364
-----------------------------------------------------------------------------------------------------------------------------------
Operating Officer 1991 80,000 27,000 --- 15,998 20,000 0 ---
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
D.G. Schmidt (4) 1993 179,317 0 --- 44,325 24,000 0 4,085
-----------------------------------------------------------------------------------------------------------------------------------
VP and Chief 1992 172,008 0 --- 35,138 15,000 0 4,364
-----------------------------------------------------------------------------------------------------------------------------------
Financial Officer 1991 160,000 50,000 --- 32,375 20,000 0 ---
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
R.A. Penezic 1993 152,004 0 --- 39,400 20,000 0 4,560
-----------------------------------------------------------------------------------------------------------------------------------
VP-Human Resources & 1992 152,004 0 --- 31,053 10,000 0 4,560
-----------------------------------------------------------------------------------------------------------------------------------
Administrative 1991 142,000 38,000 --- 27,576 20,000 0 ---
Operations
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
G.L. Sandercock 1993 140,004 0 --- 35,706 15,000 0 4,136
-----------------------------------------------------------------------------------------------------------------------------------
VP-Manufacturing 1992 140,004 0 --- 28,607 8,000 0 4,200
-----------------------------------------------------------------------------------------------------------------------------------
1991 131,000 20,000 --- 25,436 15,000 0 ---
-----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------

162

(1) Annual compensation includes amounts earned in the fiscal year, whether or
not deferred.
(2) Mr. Witt's employment as Chairman and Chief Executive Officer terminated
effective July 30, 1993.
(3) Messrs. Doyle and Lee served as Hexcel consultants in July and August, and
as employees from September 1 to December 31, 1993. Mr. Doyle resigned as
Co-Chief Executive Officer effective December 31, 1993.
(4) Included is Mr. Schmidt's $12,754 of short-term disability payments during
1993. In 1994, Mr. Schmidt was placed on long-term disability.
(5) Aggregate perquisite values do not exceed the lesser of $50,000 or 10% of
reported salary and bonus for each year.
(6) The restricted stock was issued under the 1988 Management Stock Program and
is subject to certain restrictions requiring that the executive remain in
Hexcel's employ for a period of five years before being entitled to receive
all of the shares issued. The executive does not pay cash for the shares
issued. The shares are non-transferrable while restricted; however, the
holder is entitled to vote the shares and receive, without restrictions,
all dividends and distributions, except dividends or distributions in stock
or other shares which then become restricted stock. The restrictions all
terminate upon the executive's retirement, death or disability. If
employment terminates otherwise during the term of restrictions, the
unvested shares are forfeited to Hexcel without payment of any
consideration. The restrictions on the restricted stock will lapse in
varying percentages between three and five years following issuance. In
the above table, the restricted stock is valued as of the date of grant.
The total number of restricted shares and the aggregate value at December
31, 1993 were as follows: Messrs. Witt, Lee and Doyle held no shares; Mr.
O'Mara held 8,085 shares valued at $28,803; Mr. Schmidt held 9,536 shares
valued at $33,972; Mr. Penezic held 10,067 shares valued at $35,864; and
Mr. Sandercock held 9,246 shares valued at $32,939. Aggregate market value
is based on December 31, 1993's closing price of $3.56.
(7) As of December 31, 1993, all options were underwater. Mr. Witt's options
expired 90 days after his separation date.
(8) No awards were earned under the Incentive Plan during 1993.
(9) Consists of (i) in the case of Mr. Witt, his Separation Agreement, valued
at $801,806, including $720,000 of salary continuation payments, and the
contributions to his Salaried Employees' Retirement Plan of $8,335; (ii) in
the case of Messrs. Lee and Doyle, directors' fees for services as
directors for the period prior to their employment in the amounts of $8,175
and $24,225, respectively, and consulting fees during July and August,
1993, in their capacities as Co-Chief Executive Officers, in the amounts of
$43,500 and $44,250, respectively; and (iii) in the case of

163
<PAGE>

the other officers, contributions to the Salaried Employees' Retirement
Plan. Messrs. Lee and Doyle did not participate in the Salaried Employees'
Retirement Plan for 1993. Consistent with the transition rules, amounts
for 1991 are not reported.

</TABLE>

164
<PAGE>

The following table sets forth information with respect to all grants to
executive officers of Hexcel Options and stock appreciation rights ("SARs")
exercised in the fiscal year ended December 31, 1993:

AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Number of Value of
Securities Unexercised In
Underlying the Money
Unexercised Options/SARs AT
Options/SARs at Fiscal Year End
Fiscal Year End ($)
Shares Acquired Value Realized (#) Exercisable/
on Exercise ($) Exercisable/Unex Unexercisable
Name (#) -------------- ---------------- -------------
---- --------------- (1)(2) ERCISABLE (1)(2)
--------- ------
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R.L. Witt 0 0 0/0 0/0
---------------------------------------------------------------------------------------
J.J. Lee 0 0 0/0 0/0
---------------------------------------------------------------------------------------
J.L. Doyle 0 0 0/0 0/0
---------------------------------------------------------------------------------------
D.J. O'Mara 0 0 43,500/33,500 0/0
---------------------------------------------------------------------------------------
D.G. Schmidt 0 0 35,000/24,000 0/0
---------------------------------------------------------------------------------------
R.A. Penezic 0 0 45,448/20,000 0/0
---------------------------------------------------------------------------------------
G.L. Sandercock 0 0 34,875/15,000 0/0
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------

165

<PAGE>

<FN>

(1) Market value of underlying securities at December 31, 1993 close minus the
exercise or base price.

(2) All Options were cancelled or are underwater and will be cancelled under
the Plan.
</TABLE>

166

<PAGE>

The following table sets forth the annual pension benefits payable by
Hexcel to certain key executive employees designated by the Board of Directors
pursuant to the Executive Deferred Compensation Plan ("EDCA"):

Pension Plan Table (1)
Annual Retirement Income
<TABLE>
<CAPTION>

------------------------------------------------------------------------
------------------------------------------------------------------------
YEARS OF SERVICE (2)(3)
-----------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Remuneration 10 15 20 25
------------ ------------ -------------- ----------- -----------
<S> <C> <C> <C> <C>
$125,000 $18,750 $28,125 $37,500 $46,875
------------------------------------------------------------------------
150,000 22,500 33,750 45,000 56,250
------------------------------------------------------------------------
175,000 26,250 39,375 52,500 65,625
------------------------------------------------------------------------
200,000 30,000 45,000 60,000 75,000
------------------------------------------------------------------------
250,000 37,500 56,250 75,000 93,750
------------------------------------------------------------------------
300,000 45,000 67,500 90,000 112,500
------------------------------------------------------------------------
350,000 52,500 78,750 105,000 131,250
------------------------------------------------------------------------
400,000 60,000 90,000 120,000 150,000
------------------------------------------------------------------------
------------------------------------------------------------------------

<FN>
- - -----------------------
(1) Executive Deferred Compensation Plan (EDCA). This retirement plan consists
of individual agreements between Hexcel and certain key executive employees
designated by the Board of Directors. The agreements generally provide an
annual retirement income to these key employees of up to 1 1/2% of

167
<PAGE>
their salary and bonuses for each year they are covered under the plan.
Messrs Lee and Doyle did not participate in EDCA during 1993.
(2) Benefits are payable beginning at age 65 monthly for life (with a minimum
of 120 monthly payments). Each employee may elect (with the Company's
consent) to receive, in lieu of such payments, a lump sum benefit in an
amount equal to the present value at age 65 of such benefits (based on the
1971 Group Annuity Mortality table), or any other form of retirement
benefit actuarially equivalent thereto. The employee is also entitled to
certain life and medical insurance benefits.
(3) Estimated credited years of service are as follows: Mr. Witt - 13 years;
Mr. O'Mara - 3 years; Mr. Schmidt - 3 years; Mr. Penezic - 12 years; and
Mr. Sandercock - 4 years.
</TABLE>

168
<PAGE>

The following table sets forth the Hexcel Option grants during the
fiscal year ended December 31, 1993:

OPTIONS/GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Potential Realizable Value at Assumed
Annual Rates of Stock Price
Appreciation for 10-year
Individual Grants in 1993 Option Term
----------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Granted Employees in 5% 10%
to Fiscal Year Exercise Expiration ---------------- ----------------
Name (#) (1) Price (2) Date Dollar Gains (4) Dollar Gains (4)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R.L. Witt 68,000 24.71% $12.31 1/12/03(3) --- (3) --- (3)
----------------------------------------------------------------------------------------------------------
J.J. Lee 0 --- --- --- --- ---
----------------------------------------------------------------------------------------------------------
J.L. Doyle 0 --- --- --- --- ---
----------------------------------------------------------------------------------------------------------
D.J. O'Mara 25,000 9.08% 12.31 01/12/03 $71,415 $296,043
----------------------------------------------------------------------------------------------------------
8,500 3.09% 9.13 05/04/03 50,509 126,371
----------------------------------------------------------------------------------------------------------
D.G. Schmidt 24,000 8.72% 12.31 01/12/03 68,558 284,201
----------------------------------------------------------------------------------------------------------
R.A. Penezic 20,000 7.27% 12.31 01/12/03 57,132 236,835
----------------------------------------------------------------------------------------------------------
G.L. Sandercock 15,000 5.45% 12.31 01/12/03 42,849 177,626
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------

<FN>

(1) Based on 275,100 options to all employees. Options become fully vested
after one year from date of grant. Upon termination of employment, a
participant may exercise fully vested options for three months after date
of termination.
(2) Fair Market Value on date of grant.
(3) Option grant to Mr. Witt expired unexercised on October 31, 1993.
(4) The dollar amounts under these columns are calculated at 5% and 10% annual
stock growth rates prescribed by the Securities and Exchange Commission
(SEC) for this purpose, and therefore, are not intended to forecast
possible future appreciation, if any, of the

169
<PAGE>
Company's Common Stock. The potential value is calculated net of the exercise
price based on the term of options at the time of grant, 10 years, compounded
annually. No gain to the optionee is possible without stock price appreciation,
which will commensurately benefit all stockholders.
</TABLE>

All Options were cancelled or are underwater and will be cancelled under
the Plan.

170

<PAGE>
C. COMPENSATION OF DIRECTORS.

Except for Messrs. Lee, O'Mara and Krumme, the only directors who are
salaried employees of the Company, directors are compensated for services as
directors in the amount of $13,500 per year ($14,500 per year for Committee
chairmen). Directors are also paid $800 for each Board and Committee meeting
they attend. Messrs. Lee and Doyle, who were each employed by Hexcel for a
portion of 1993, received the annual and meeting compensation for the period
during 1993 that each was a director but not an employee.
In addition, directors may participate in the Directors' Retirement
Plan. A director who has served as a director for at least 5 years, and during
which period does not accrue other Company retirement benefits, is entitled, on
retirement, to a total retirement benefit equal to 50% of his or her annual
compensation as a director, averaged for the three years prior to retirement,
multiplied by the number of years he or she served on the Board while not
accruing other Hexcel retirement benefits, payable over a period not to exceed
10 years. The amount and term of payment is subject to adjustment in certain
events. At December 31, 1993, Messrs. Brown and Doyle were the only directors
who were entitled to receive retirement benefits, which total $158,025 and
$231,486, respectively.

171

<PAGE>
Messrs. Lee and Doyle became Co-Chief Executive Officers on August 1,
1993 and employees on September 1, 1993. During July and August, 1993, they
were each paid consulting fees by Hexcel, with Mr. Lee being paid $43,500 and
Mr. Doyle being paid $44,250, which amounts are set forth in a footnote to the
Summary Compensation Table. As employees, they have received compensation in
amounts set forth in the Summary Compensation Table, in accordance with the
provisions of Employment Agreements described below.
D. EMPLOYMENT AGREEMENTS.
1. EMPLOYMENT AGREEMENTS OF MESSRS. LEE AND DOYLE.
As of August 1, 1993, Messrs. Lee and Doyle were engaged to act as Co-
Chief Executive Officers ("Co-CEOs") of the Company. Mr. Doyle took primary
responsibility for managing and restructuring the business operations and Mr.
Lee took primary responsibility for managing and restructuring the finances and
debt structure. Each was expected to expend at least 50% of his time in his
role as the Co-CEO. During July and August, 1993, Messrs. Lee and Doyle were
compensated in their capacities as directors and received consulting fees as
noted above; they became employees as of September 1, 1993. Mr. Doyle resigned
as Co-CEO effective December 31, 1993, remaining as a director, and Mr. Lee
became the sole Chief Executive Officer on January 1, 1994.

172
<PAGE>
The employment agreements for Messrs. Lee and Doyle (the "Employment
Agreements") provide that they each earn a base salary of $480,000 for services
performed on behalf of Hexcel during the annual period September 1, 1993 through
August 31, 1994 (the "Employment Term").
To conserve cash and facilitate Hexcel's reorganization, Messrs. Lee
and Doyle each offered to accept $200,000, for the Employment Term, in cash,
payable on the regular compensation schedule for Hexcel's other executives, and
the balance of the base salary of $280,000 in deferred compensation. Under the
Employment Agreements, the deferred compensation is payable in one lump sum at
the end of the Employment Term. To provide additional incentives to Messrs. Lee
and Doyle to restructure Hexcel in the short term, certain substitute or
additional incentives were provided, which are discussed below.
Messrs. Doyle and Lee earned a PRO RATA portion of deferred and cash
compensation for their four months of service as employees during 1993. The
amount of the deferred compensation earned prior to the filing of the Chapter 11
Case ($70,000) is a pre-petition claim against the Company.
As a result of his resignation as Co-CEO, Mr. Doyle's Employment
Agreement and, thus, his compensation, terminated as of December 31, 1993. Mr.
Doyle received no severance compensation as a result of his resignation.

173
<PAGE>

The Employment Agreements both provided for the following additional
incentives, in which, as a result of his resignation as Co-CEO, Mr. Doyle will
not participate:
- Had Hexcel completed a restructuring of its debt outside chapter
11, each Co-CEO would have been eligible for a grant of 70,000
option shares in lieu of his deferred compensation. The
Executive Compensation Committee has determined and Mr. Lee has
concurred, that this incentive is no longer applicable under his
agreement.
- If Hexcel completes a merger or sale during the Employment Term,
each Co-CEO shall be paid 1/2 of 1% of the value of the
transaction in lieu of the deferred compensation.
- If there occurs an equity investment in Hexcel, each Co-CEO shall
receive a cash bonus equal to 1% of such investment, in addition
to the deferred compensation.
Because none of the above-described events occurred during 1993,
neither Mr. Lee nor Mr. Doyle received an incentive compensation award under the
Employment Agreements in 1993.
During the Employment Term, Messrs. Lee and Doyle are not entitled to
receive any Board of Director fees, but

174
<PAGE>
they remain eligible to participate in, and have their service during the
Employment Term credited towards, Hexcel's Directors' Retirement Plan. Mr.
Doyle did not participate in Hexcel's Salaried Employees' Retirement Plan. Mr.
Lee became a participant in Hexcel's Salaried Employee's Retirement Plan during
1994.
2. NEW EMPLOYMENT AGREEMENT WITH MR. LEE
It is contemplated that Hexcel will enter into an employment agreement
with Mr. Lee, effective as of the Effective Date, to employ him as Hexcel's
Chairman of the Board of Directors and, at least initially, as its Chief
Executive Officer. The terms of such employment are summarized below.
The employment agreement will have a term of three years, and will
provide for automatic renewal for additional one-year terms unless either Hexcel
or Mr. Lee notifies the other at least 90 days prior to expiration of the term
that the agreement will not be renewed.
Mr. Lee will be responsible for strategic planning (including major
corporate finance decisions, major corporate transactions, reorganization of
Hexcel and recruiting a new chief executive officer). Prior to the time that a
new chief executive officer is in place, Mr. Lee will serve as Hexcel's Chief
Executive Officer. Mr. Lee's service to Hexcel will

175
<PAGE>
constitute his principal business activity, although he will expressly be
permitted to have other business activities.
Mr. Lee will receive a base salary of $400,000 per year until such
time as a new chief executive officer is in place, and an annual bonus based on
his participation in the Incentive Bonus Plan described in Section VII.E. Mr.
Lee's base salary will be adjusted by mutual agreement of Lee and Hexcel at the
time a new chief executive officer is hired.
No later than December 31, 1994, Hexcel will award Mr. Lee stock
options to purchase up to 2% of Hexcel's issued and outstanding stock (based on
the shares outstanding on the Distribution Date) at an exercise price per share
equal to the exercise price for the Rights distributed to existing stockholders
of Hexcel pursuant to the Plan. These options will be exercisable for a period
of five years from the date of grant. One-third of the options will vest on
each of the first, second and third anniversaries of the date of grant.
Mr. Lee will be entitled to all insurance and other benefits and
perquisites generally available to senior executives of Hexcel and will be
entitled to participate in all retirement and other benefit plans generally
available to all senior executives and other employees of Hexcel, including an
executive deferred compensation agreement as described in Section F., INFRA.
For purposes of the computation of Mr. Lee's retirement benefits under his
executive deferred

176
<PAGE>
compensation agreement, Mr. Lee will be deemed to have been an executive
employee of Hexcel for 15 years at an annual compensation level equal to his
1995 salary and bonus from Hexcel. Mr. Lee will be entitled to reimbursement
for reasonable expenses incurred in the performance of his duties.
Mr. Lee will be entitled to be indemnified by Hexcel to the fullest
extent permitted by law.
If Mr. Lee's employment with Hexcel is terminated by Hexcel without
cause, or if Mr. Lee terminates his employment for cause, Mr. Lee will be
entitled to severance equal to the greater of (i) the amount which would have
been payable under his agreement if his employment had continued until the end
of the term of the agreement (including a reasonable estimate of his annual
bonus) or (ii) the product of two times the sum of his annual base salary plus
the highest bonus earned by Mr. Lee in any year during the term of the
agreement. In addition, all of Mr. Lee's stock options, if any, will
immediately vest and become exercisable for a period of not less than one year
and/or the remainder of the original three-year term (if longer), and Mr. Lee
will be entitled to be paid the amount of any non-vested benefits under the
Salaried Employees Retirement Program which are forfeited as a result of his
termination. In addition, if Hexcel notifies Mr. Lee that it will not renew his
employment for any of the one-year renewal periods, Mr. Lee will be entitled to
severance pay

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equal to the product of two times the sum of his annual base salary.
Mr. Lee's right to severance payments will not be subject to any duty
on his part to mitigate damages and will not be reduced by any amount of
compensation which Mr. Lee may earn from any other sources.
Hexcel will provide Mr. Lee with suitable executive office space in
the greater New York metropolitan area.
Mr. Lee will be subject to a customary two-year non-compete provision
after termination of his employment and a customary confidentiality provision.
Mr. Lee's claims against Hexcel under his existing employment
agreement will be resolved to Mr. Lee's satisfaction and Hexcel will enter into
an interim agreement with Mr. Lee covering the period from September 1, 1994 to
the Effective Date on terms satisfactory to Mr. Lee.
3. EMPLOYMENT SEPARATION AGREEMENT OF MR. WITT.
Mr. Witt's employment with Hexcel terminated on July 30, 1993.
Pursuant to an agreement negotiated between Hexcel and Mr. Witt, Mr. Witt is to
be paid his then current salary through July 31, 1995, in the same manner salary
is paid to other employees. The total amount of this salary continuation is
$720,000. Mr. Witt also received certain amounts from other retirement plans
and continues to remain eligible for certain benefits made available to all
employees of Hexcel.

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Hexcel also agreed to transfer to him the car then leased by Hexcel for him and
provide him with certain life insurance, outplacement service and other
benefits. See Summary Compensation Table for additional information. As a
result of the Chapter 11 filing, Mr. Witt's salary continuation payments cannot
be paid currently, but constitute a general unsecured claim against the Company,
subject to disposition pursuant to the Company's Plan.
4. CONTINGENCY EMPLOYMENT AGREEMENTS.
Hexcel has agreements with certain key employees that provide for
their continued employment during Hexcel's reorganization and in the event of a
change in control of Hexcel. The agreements were designed to encourage
dedication to their duties without distraction in the event of a change or
attempted change in control of Hexcel. The agreements, which are all similar,
were each approved by the Committee and were entered into with each of the
officers named in the Summary Compensation Table, other than Messrs. Lee and
Doyle, along with certain other key employees. Mr. Witt's agreement has
terminated.
The agreements provide, in substance, that, in the event of a "change
in control" of Hexcel (as defined therein), Hexcel will continue to employ the
employee for four years thereafter in a similar capacity and at similar salary,
bonus and benefit levels, with increases in salary, bonus, and

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benefits consistent with the Company's policies for similarly situated
employees. If there is a change in control and the employment is terminated by
Hexcel without cause or the employee terminates his employment for "good reason"
(as defined therein) during the four-year term, the employee is entitled to a
lump sum payment, which, under most circumstances, would be 75% of base salary
for the remainder of the period plus 15% of such base salary for lost fringe
benefits, plus certain bonus amounts. The lump sum payment is subject to
certain maximum allowable deductions for income tax purposes under the Internal
Revenue Code and other limiting factors.
Since termination of these agreements is a condition to the Stock
Subscription and Standby Purchase Agreement, it is expected Hexcel will
terminate all of these agreements prior to the Effective Date.
5. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
The following directors were members of the Executive Compensation
Committee of the Board of Directors during 1993: Gary Depolo (member from May
14, 1993, Chairman from November 12, 1993); Cyrus Holley (Member from November
12, 1993); John L. Doyle (former Chairman until May 14, 1993); Charles R. Weaver
(former member, Chairman from May 14, 1993 until November 11, 1993); and John J.
Lee (former member from May 14, 1993 until August 30, 1993). Messrs. Lee and
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became the Co-Chief Executive Officers of the Company on August 1, 1993, and
employees of the Company on September 1, 1993.
During 1993, Mr. Lee was also a member of the compensation committee
of XTRA Corporation. Mr. Lewis Rubin, a director of the Company during 1993,
also served as President and Chief Executive Officer of XTRA Corporation. Mr.
Rubin has not served on the Executive Compensation Committee of Hexcel
Corporation.
E. INCENTIVE BONUS PLAN.
Upon recommendation of the Executive Compensation Committee, the Board
annually selects certain officers as participants in the plan and establishes
target levels of earnings and other measures of success of the Company for both
the following year and the following three years. The participants can earn an
incentive bonus based on a percentage of base salary, payable in the year
following the measuring period, proportionate to the extent to which the target
level is reached or exceeded. Corporate performance is measured by Cash Flow
Return on Investment (CFROI). CFROI is the ratio of profit after tax plus
depreciation to average gross assets. No awards were earned for the year 1993
and this plan was not operative in 1994. After the Effective Date, the
Executive Compensation Committee intends to consider changes to the

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Incentive Bonus Plan including changes to the criteria by which corporate
performance is measured.
F. EXECUTIVE DEFERRED COMPENSATION AND CONSULTING AGREEMENTS.
This program consists of individual agreements between Hexcel and
certain key executives designated by the Board. The agreements provide an
annual retirement income to these key executives generally of 1.5% of their
salary and bonuses for each year they are covered under the program. The
retirement benefits are payable monthly, as a life annuity (with a minimum of
120 monthly payments); however, Hexcel has the right to consent to the
executive's request for a different form of benefit payout, including a lump sum
payment. Each agreement also requires Hexcel to continue to cover the key
executive under Hexcel's group medical and dental insurance plans and to provide
life insurance for so long as the executive is receiving payments under the
agreement and has not attained the age of 75. The retirement benefits generally
commence upon the later of the executive's attainment of age 65 or retirement.
This program will be continued by Reorganized Hexcel after the Effective Date.
G. DEFERRED COMPENSATION PLAN.
Under this Plan, all or part of an officer's incentive bonus received
under the Incentive Bonus Plan may be either deferred for future payment, or
exchanged for discounted stock options. The officer may defer payment for

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up to ten years following termination of his employment, with interest accruing
on the deferred amount at the prime rate. This Plan is expected to be continued
by Reorganized Hexcel after the Effective Date.
H. 1988 MANAGEMENT STOCK PROGRAM.
The 1988 Management Stock Program ("Stock Program") consists of three
separate incentive stock plans: a stock option plan, a discounted stock option
plan and a restricted stock plan.
Under the stock option plan, options are granted to purchase shares of
Hexcel's Common Stock at prices not less than the fair market value of the
shares at the date of grant.
Under the discounted stock option plan, each officer may elect to
exchange all or a portion of his or her incentive bonus for options pursuant to
Hexcel's Deferred Compensation Plan. The number of shares of Common Stock
subject to an option grant pursuant to this plan is equal to the amount of the
incentive bonus exchanged divided by the difference between the fair market
value of a share of Common Stock on the grant date and the greater of one dollar
or 50% of such fair market value. The exercise price of a discounted option is
the greater of one dollar or 50% of the fair market value of the Common Stock on
the grant date.
Under the restricted stock plan, Hexcel issues shares of its Common
Stock to its key executives. The shares

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are subject to certain restrictions requiring that the key executives remain in
Hexcel's employ for a period of five years before being entitled to receive all
of the shares issued. The shares are non-transferable while restricted;
however, the holder is entitled to vote the shares and receive, without
restrictions, all dividends and distributions, except dividends or distributions
in stock or other shares which become restricted stock. The restrictions
terminate upon the shareholder's retirement, death or disability. If employment
terminates otherwise during the term of restrictions, the unvested shares are
forfeited to Hexcel without payment of any consideration. The restrictions on
the restricted stock will lapse in varying percentages between three and five
years following issuance.
The Stock Program will be terminated on the Effective Date, except
that the restrictions with respect to the outstanding restricted stock will
continue to govern any restricted shares of Reorganized Hexcel Common Stock
issued with respect thereto. The Hexcel Options are treated in Class 12 of the
Plan and will be cancelled. The Stock Program will be replaced by the New Long-
Term Incentive Plan described below.
I. NEW LONG TERM INCENTIVE PLAN.
The Long-Term Incentive Plan ("Incentive Plan") was adopted by the
Board of Directors of Reorganized Hexcel (the

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"Board") on ___________, 1994, which will become effective on the Effective
Date, subject to its approval by Reorganized Hexcel's stockholders within 12
months of such adoption. The Incentive Plan will replace the 1988 Management
Stock Program described above which will be terminated on the Effective Date.
The following summarizes the principal features of the Incentive Plan
and is qualified in its entirety by reference to the full text of the Plan (a
copy of which is annexed hereto).
1. PURPOSE. The purpose of the Incentive Plan is to attract and
retain employees of Reorganized Hexcel, and to induce such employees to exert
their maximum efforts toward Reorganized Hexcel's success and thereby increase
overall stockholders' value.
2. ELIGIBILITY AND EXTENT OF PARTICIPATION. Under the Incentive
Plan, Reorganized Hexcel may grant to eligible individuals stock options (with
or without stock appreciation rights), dividend equivalent rights, stock awards,
restricted share awards, or other awards which are valued in whole or in part by
reference to, or are otherwise based on, the common stock, all in stand alone,
combination or tandem basis (the "Awards"). Any employee, officer, director
(other than a member of the Committee) or consultant of Reorganized Hexcel or
any subsidiary thereof, as selected by the Compensation and

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Organization Committee of the Board of Reorganized Hexcel, or such other
committee of the Board of Reorganized Hexcel as may be designated by the Board
of Reorganized Hexcel to administer the Incentive Plan (the "Committee") is
eligible to receive Awards under the Incentive Plan.
3. ADMINISTRATION. The Incentive Plan shall be administered by the
Committee, as such Committee may be composed from time to time. The Committee
shall have the authority, in its discretion, to take the following actions under
the Incentive Plan:
a. To determine the individuals to whom Awards shall be granted (the
"Participants"), the times at which Awards shall be granted, the type
of Awards granted, and the grant terms of the Awards (including
vesting schedules, price, restriction or option period, dividend
rights, post-retirement and termination rights, payment alternatives
such as cash, stock, contingent awards, or other means of payment, and
any other such terms and conditions which the Committee deems
appropriate).
b. To determine the disposition of the grant of each Award in the
event of retirement, disability, death or other termination of a
Participant's employment with Hexcel.

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c. To interpret the Incentive Plan and any Award agreement.
d. To provide for the conditions and circumstances under which
Awards shall be forfeited.
4. TYPES OF AWARDS. Under the terms of the Incentive Plan, the
Committee, at its discretion, may grant the following types of Awards, and other
common stock-based Awards, on a stand alone, tandem or combination basis:
a. STOCK OPTION. A right to buy a specified number of shares of
Reorganized Hexcel Common Stock at a fixed exercise price during a
specified time, all as the Committee may determine.
b. INCENTIVE STOCK OPTION. An Award in the form of a stock option
which shall comply with the requirements for treatment as an Incentive
Stock Option ("ISO") as provided in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") or any successor
section. Section 422 of the Code places certain restrictions on ISOs.
The exercise price of an ISO may not be less than 100% of the fair
market value of the Reorganized Hexcel Common Stock on the date of
grant and an ISO, by its terms, may not be exercisable after 10 years
of the date of its grant. However, the exercise price in the case of
an ISO held by a Participant who owns

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more than 10% of the total combined voting power of all classes of
shares of Reorganized Hexcel or any subsidiary (a "Principal
Stockholder") may not be less than 110% of the fair market value of
the Reorganized Hexcel Common Stock on the date of grant, and such
ISO, by its terms, may not be exercisable more than five years after
it is granted. An ISO may not be granted to an employee if the
exercisability of such ISO would cause the aggregate fair market value
(determined at the time of grant) of Reorganized Hexcel's capital
stock for which any ISOs are exercisable for the first time by such
employee during any calendar year, under any plans of Reorganized
Hexcel, its parent and its subsidiaries, to exceed $100,000.
c. STOCK OPTION IN LIEU OF COMPENSATION ELECTION. A right given to
a director, officer or key employee to elect to exchange director fees
or compensation for stock options.
d. STOCK APPRECIATION RIGHT. A right which may or may not be
contained in the grant of a stock option or ISO to receive the excess
of the fair market value of a share of Reorganized Hexcel Common Stock
on the date the option is surrendered over the

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option exercise price or a base price set by the Committee.
e. RESTRICTED SHARES. A transfer of Reorganized Hexcel Common Stock
to a Participant subject to forfeiture until such restrictions, terms
and conditions as the Committee may determine are fulfilled.
f. DIVIDEND OR EQUIVALENT. A right to receive dividends or their
equivalent in value in Reorganized Hexcel Common Stock, cash or in a
combination of both with respect to any new or previously existing
Award.
g. STOCK AWARD. An unrestricted transfer of ownership of
Reorganized Hexcel Common Stock.
h. OTHER STOCK-BASED AWARDS. Other common stock-based Awards which
are related to or serve a similar function to those Awards set forth
above.
Each Award granted under the Incentive Plan shall be evidenced by a
written agreement setting forth the terms and conditions of the Award and
executed by Reorganized Hexcel and the Participant.
5. SECURITIES SUBJECT TO THE PLAN. The maximum aggregate number of
shares of Reorganized Hexcel Common Stock as to which Awards may at any time be
granted under the Incentive Plan is an amount equal to 7% of the shares of

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Reorganized Hexcel Common Stock outstanding on the Distribution Date. Such
shares may be either authorized but unissued shares, or shares previously issued
and reacquired by Reorganized Hexcel. If, and to the extent, Awards granted
under the Plan terminate, expire or are canceled, forfeited or surrendered
without having been exercised, the unpurchased shares subject to such Award
shall again be available for the grant of Awards under the Plan. Awards payable
only in cash will not reduce the number of shares available for Awards granted
under the Plan.
6. EXERCISE AND TERM OF OPTIONS. The dates on and the extent to
which an Award is exercisable or becomes effective shall be fixed by the
Committee, in its discretion, at the time such Award is granted. The expiration
of each Award shall be fixed by the Committee, in its discretion, at the time
such Award is granted.
A Participant will not have any of the rights of a stockholder with
respect to the shares covered by an Award until the date the Participant becomes
the holder of record.
Unless payment alternatives are specified in the Award agreement,
payment for such shares may be made (i) in U.S. dollars by personal check, bank
draft or money order payable to Reorganized Hexcel, by money transfers or direct
account debits; (ii) through the delivery or deemed delivery based on
attestation to the ownership of shares of common

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stock with a fair market value equal to the total payment due from the
Participant; (iii) pursuant to a broker-assisted "cashless exercise" program if
established by Reorganized Hexcel; (iv) by a combination of the methods
described in (i) through (iii) above; or (v) by such other methods as the
Committee may deem appropriate.
7. TRANSFERABILITY OF OPTIONS AND AWARDS. Unless otherwise specified
in the Award agreement, no Award is transferable or assignable, except by will
or the laws of descent and distribution. During the lifetime of the
Participant, the Award shall be exercised only by such Participant.
8. EFFECT OF CERTAIN CHANGES. The aggregate number of shares of
Reorganized Hexcel Common Stock as to which Awards may be granted, the number of
shares thereof covered by each outstanding Award, and the price per share
thereof in each such Award, shall all be proportionately adjusted for any
increase or decrease in the number of issued shares of Reorganized Hexcel Common
Stock resulting from a subdivision or consolidation of shares or other capital
adjustment, or the payment of a stock dividend or other increase or decrease in
such shares, or other change in corporate or capital structure; provided,
however, that any fractional shares resulting from any such adjustment shall be
eliminated. The Committee may also make the foregoing changes and any other

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changes, including changes in the classes of securities available, to the extent
it is deemed necessary or desirable to preserve the intended benefits of the
Incentive Plan for Reorganized Hexcel and the Participants in the event of any
other reorganization, recapitalization, merger, consolidation, spin-off,
extraordinary dividend or other distribution or similar transaction.
9. AMENDMENT AND TERMINATION OF THE INCENTIVE PLAN. The Incentive
Plan will terminate on the tenth anniversary of the adoption of the Incentive
Plan. No Awards may be granted after the termination of the Incentive Plan.
The Incentive Plan may from time to time be modified or amended, or at any time
be terminated, by the affirmative vote of the holders of a majority of the
outstanding shares of the capital stock of Reorganized Hexcel present or
represented and entitled to vote at a duly held stockholders meeting.
The Committee may at any time terminate the Incentive Plan or from
time to time make such modifications or amendments of the Incentive Plan as it
may deem advisable; provided, however, that the Committee shall not make any
material amendments to the Incentive Plan without approval by the affirmative
vote of the holders of a majority of the outstanding shares of the capital stock
of Reorganized Hexcel present or represented and entitled to vote at a duly held
stockholders meeting.

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No termination, modification or amendment of the Incentive Plan may
adversely affect the rights conferred by an Award without the consent of the
recipient thereof.
10. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
a. GENERAL. The following summary describes the principal
federal (and not state and local) income tax consequences of Awards which may be
granted under the Incentive Plan. It is general in nature and is not intended
to cover all tax consequences that may apply to a particular employee or to
Reorganized Hexcel.
b. NONSTATUTORY STOCK OPTIONS. A nonstatutory stock
option is an option that on the date of the option grant does not qualify as an
incentive stock option under Section 422 of the Code. If a nonstatutory stock
option is granted to a Participant in accordance with the terms of the Incentive
Plan, no income will be recognized by such Participant at the time the Option is
granted.
On exercise of a nonstatutory stock option, the amount by which the
fair market value of the Reorganized Hexcel Common Stock on the date of exercise
exceeds the purchase price of such shares will generally be taxable to the
Participant as ordinary income, and will be generally deductible for tax
purposes by Reorganized Hexcel (or one of its subsidiaries) in the year in which
the Participant recognizes the ordinary income. The disposition of shares

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acquired upon exercise of a nonstatutory stock option will ordinarily result in
long-term or short-term capital gain or loss (depending on the applicable
holding period) in an amount equal to the difference between the amount realized
on such disposition and the sum of the purchase price and the amount of ordinary
income recognized in connection with the exercise of the nonstatutory stock
option.
c. INCENTIVE STOCK OPTIONS. If an ISO is granted to a
Participant in accordance with the terms of the Incentive Plan, no income will
be recognized by such Participant at the time the ISO is granted.
On exercise of an ISO, the Participant will generally not recognize
any income and Reorganized Hexcel (or one of its subsidiaries) will generally
not be entitled to a deduction for tax purposes. However, the difference
between the purchase price and the fair market value of the Reorganized Hexcel
Common Stock received on the date of exercise will be treated as a positive
adjustment in determining the Participant's alternative minimum taxable income,
which may subject the Participant to the alternative minimum tax. The
alternative minimum tax paid with respect to the exercise of an ISO in one year
will be a credit against the regular tax in a subsequent year. The disposition
of shares acquired upon exercise of an ISO will ordinarily result in long-term
capital gain or loss. However, if the

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Participant disposes of shares acquired upon exercise of an ISO within two years
after the date of grant or within one year after the date of exercise (a
"disqualifying disposition"), the Participant will generally recognize ordinary
income, and Reorganized Hexcel (or one of its subsidiaries) will generally be
entitled to a deduction for tax purposes, in the amount of the excess of the
fair market value of the Reorganized Hexcel Common Stock on the date the ISO is
so exercised over the purchase price (or the gain on sale, if less). Any excess
of the amount realized by the Participant on the disqualifying disposition over
the fair market value of the shares on the date of exercise of the ISO will
ordinarily constitute capital gain.
d. STOCK OPTION IN LIEU OF COMPENSATION ELECTION. If a
Participant, pursuant to an Award, elects to exchange his compensation or fees
for stock options, such Participant would recognize income under the rules
described above with respect to nonstatutory stock options.
e. STOCK APPRECIATION RIGHTS. The amount of any cash (or
the fair market value of any Reorganized Hexcel Common Stock) received upon the
exercise of Stock Appreciation Rights ("SARs") under the Incentive Plan will be
includible in the Participant's ordinary income and Reorganized Hexcel (or one
of its subsidiaries) generally will be entitled to a deduction for such amount.
Upon disposition

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of any stock received upon exercise of an SAR, the grantee will recognize
capital gain or loss, which will be long- or short-term depending on the period
elapsed since the date of such exercise equal to the difference between the
amount realized on such disposition and the fair market value of such stock on
the date the SAR was exercised.
f. RESTRICTED SHARES. If restricted shares are awarded to
a Participant in accordance with the terms of the Incentive Plan, generally no
income will be recognized by such Participant at the time the Award is made.
Generally, such Participant will be required to include in his ordinary income,
as compensation, the fair market value of such restricted shares upon the lapse
of the forfeiture provisions applicable thereto, less any amount paid therefor.
The Participant may, however, elect within 30 days after acquiring the shares,
to be taxed immediately upon receipt of such shares rather than when the
forfeiture provisions lapse. If such election is made, the Participant will
recognize ordinary income in the taxable year of his Award in an amount equal to
the fair market value of such restricted shares (determined without regard to
the restrictions which by their terms will lapse) at the time of receipt, less
any amount paid therefor. Absent the making of the election referred to in the
preceding sentences, any cash dividends or other distributions paid with respect
to restricted shares prior to

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lapse of the applicable restrictions will be includible in the Participant's
ordinary income as compensation at the time of receipt. In each case,
Reorganized Hexcel (or one of its subsidiaries) will be entitled to a deduction
in the same amount as the Participant realizes compensation income.
J. SALARIED EMPLOYEES RETIREMENT PROGRAM.
This program includes a retirement savings plan (401(k) and after-tax
contributions) and a profit sharing plan. Both of these plans are qualified
under Section 401(a) of the Internal Revenue Code (the "Code"). This program
also includes a non-qualified "excess" plan. All full time salaried employees
are eligible to participate after three months of continuous employment. Each
year, participants may defer a percentage of their base salaries on a before-
and/or after-tax basis to the retirement savings plan. Hexcel contributes to
the retirement savings plan one-half of the amount deferred by employees, up to
6% of each employee's base salary (I.E., 3% from Hexcel). Hexcel contributes to
the profit sharing plan a percentage of profit before taxes, reduced by the
contributions to the retirement savings plan and certain other retirement
expenses. Profit sharing contributions are allocated among the profit sharing
plan participants on the basis of salary plus incentive bonus plus overtime. To
the extent that any amount cannot be allocated to a plan participant because it
exceeds the limits under

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Section 415 of the Code, the participant is credited with an equal amount in the
non-qualified excess plan under the program. The participant becomes fully
vested after 67 months or upon retirement at or after age 65.
This program is expected to be continued by Reorganized Hexcel after
the Effective Date.
K. RETIREE STOCK BONUS PLAN.
Under this plan, Hexcel issues to certain retiring employees, without
cost to them, shares of Common Stock. Retiring employees with 15 years of
service receive 15 shares and those with 20 years of service receive 25 shares.
The Retiree Stock Bonus Plan will be terminated on the Effective Date.
L. COMPENSATION FOR EXTRAORDINARY EFFORTS.
In recognition of the extraordinary efforts of certain key employees
of the Debtor through the course of the Chapter 11 Case, the Debtor has created
a Cash bonus pool of $1,200,000 (the "Consummation Bonus Pool") to fund special
one-time distributions among certain employees. On the Effective Date, the
Chairman and Chief Executive Officer, Mr. Lee, will receive a Cash bonus equal
to $500,000. The bonus to Mr. Lee is (i) in satisfaction of his claim pursuant
to the provision in his employment agreement with Hexcel dated September 28,
1993 providing that if there occurs an equity or equity equivalent investment in
Hexcel (in any form), Mr. Lee

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is entitled to receive a Cash bonus in an amount equal to 1% of such investment,
and (ii) in recognition of (a) the fact that Mr. Lee's contractual compensation,
which was fixed under his prepetition employment agreement on the basis of his
service as Co-CEO, was not increased since January 1, 1994 when at the request
of the Board of Directors, he assumed the responsibilities of sole CEO, (b) the
fact that Mr. Lee was deliberately excluded from the Employee Retention Bonus
Plan, and (c) Mr. Lee's extensive time commitment and positive contributions to
Hexcel's reorganization. If the Cash bonus is not paid to Mr. Lee on the
Effective Date, his contract claim in (i) above will be Allowed and paid in full
at such time. On the Effective Date, the Vice Chairman, Robert Krumme will
receive a Cash bonus equal to $[ * ], and William Meehan, the Vice President -
Finance and Chief Financial Officer will receive a Cash bonus equal to $[ * ].
These bonuses are in recognition of (a) the fact that Messrs. Krumme and Meehan
each have pre-petition employment agreements with the Company which provided for
bonuses to be paid to them in the event of a successful out-of-court
restructuring of Hexcel, evidencing an intent to compensate them for their
efforts in bringing about a successful resolution to Hexcel's financial crisis,
(b) the fact that Messrs. Krumme and Meehan were deliberately excluded from the
Employee Retention Bonus Plan, (c) their extensive time commitment and positive
contributions to

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Hexcel's reorganization, and (d) their agreement to continue to serve Hexcel
until such time as their successors are chosen. The remainder of the
Consummation Bonus Pool, or $[ * ], will be distributed to other employees which
the Debtor believes were critical to the reorganization effort, also on the
Effective Date. The Board of Directors of Hexcel has determined that the amount
and the terms of the Consummation Bonus Pool are appropriate and reflective of
(i) market standards for individuals who, like Messrs. Lee, Krumme and Meehan
and the other recipients of the Consummation Bonus Pool, have superior
capabilities, (ii) the demonstrable hard work over a significant period of time
performed by Messrs. Lee, Krumme and Meehan and the other recipients of the
Consummation Bonus Pool and (iii) the positive performance of the Company in
light of the restructuring and reorganization.
M. POST-EFFECTIVE DATE SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
The following table sets forth those entities which, to the knowledge
of the Debtor, will own beneficially more than five percent of Reorganized
Hexcel Common Stock as of the Effective Date:

Mutual Series Fund, Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078

In addition, if Class 9 accepts the Plan, the following entities also
will own beneficially more than five

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percent of Reorganized Hexcel Common Stock as of the Effective Date:
Hellmold Associates, Inc.
Loomis - Sayles
Finally, if Class 9 rejects the Plan, The Principal Mutual Life
Insurance Company also will own beneficially more than five percent of
Reorganized Hexcel Common Stock as of the Effective Date.
N. INVESTMENT BY MANAGEMENT.
It is contemplated that on or after the Effective Date, Reorganized
Hexcel's executive officers will be offered the opportunity to invest up to an
aggregate of $2 million in Reorganized Hexcel Common Stock at the same price per
share as the exercise price for the Rights distributed to holders of Common
Stock pursuant to the Plan.

VIII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS TO THE
REORGANIZED HEXCEL COMMON STOCK AND RIGHTS TO BE DISTRIBUTED
UNDER THE PLAN

A. ISSUANCE OF SECURITIES
1. GENERALLY.
The Confirmation Order will authorize the issuance of Reorganized
Hexcel Common Stock (including Reorganized Hexcel Common Stock issuable on
exercise of the Rights) and the Rights (collectively, the "New Securities") to
be issued

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under the Hexcel Plan. The New Securities distributed to holders of Allowed
Claims and Interests will be issued without registration under the Securities
Act of 1933, as amended, or under any state or local law, in reliance on the
exemptions set forth in Section 1145 of the Bankruptcy Code.
In order for the issuance of those securities to be exempt from
registration under Section 1145 of the Bankruptcy Code, three principal
requirements must be satisfied: (a) the securities must be issued by a debtor,
its successor under a plan of reorganization, or an affiliate participating in a
joint plan of reorganization with the debtor (for this purpose Reorganized
Hexcel is considered a successor to Hexcel); (b) each recipient of the
securities must hold a claim against the debtor or an affiliate, an interest in
the debtor or an affiliate, or a claim for an administrative expense against the
debtor or an affiliate; and (c) the securities must be issued in exchange for
the recipient's claim against or interest in the debtor or an affiliate, or
"principally" in such exchange and "partly" for cash or other property.
Hexcel believes that the issuance of the New Securities will satisfy
all three requirements because (a) the securities to be issued will be
securities of Hexcel, which is a debtor, and the issuance of the securities is
specifically mandated under the Plan; (b) the recipients of the securities

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are holders of claims or interests; and (c) the recipients of the securities
will receive such securities in exchange for their claims and interests.
2. RESALE CONSIDERATIONS.
Hexcel believes that the resale or disposition by the recipients of
the New Securities (other than Mutual Series) will be exempt from registration
under the Securities Act of 1933 if the recipients are not deemed to be
"underwriters" under Section 1145(b) of the Bankruptcy Code. Section 1145(b) of
the Bankruptcy Code defines four types of underwriters: (a) a person who
purchases a claim against, interest in, or claim for administrative expense in
the case concerning, a debtor with a view to distributing any security received
in exchange for that claim or interest; (b) a person who offers to sell
securities offered or sold under a plan for the holders of those securities; (c)
a person who offers to buy those securities from the holders of those
securities, if the offer is (i) made with a view to distribution of the
securities, and (ii) made under an agreement made in connection with the plan,
its consummation or the offer or sale of securities under the plan; and (d) a
person who is an "issuer" with respect to the securities as the term "issuer" is
defined in Section 2(11) of the Securities Act of 1933.
Under Section 2(11) of the Securities Act of 1933 an "issuer" will
include any person directly or indirectly

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controlling or controlled by Hexcel, or any person under direct or indirect
common control with Reorganized Hexcel (an "Affiliate"). Whether a person is an
Affiliate, and therefore an "underwriter", with respect to Reorganized Hexcel
for purposes of Section 1145(b) of the Bankruptcy Code will depend on a number
of factors. These factors include: (a) the person's equity interest in
Reorganized Hexcel; (b) the distribution and concentration of other equity
interests in Reorganized Hexcel; (c) whether the person is an officer or
director of Reorganized Hexcel; (d) whether the person, either alone or acting
in concert with others, has a contractual or other relationship giving that
person power over management policies and decisions of Reorganized Hexcel; and
(e) whether the person actually has that power notwithstanding the absence of
formal indicia of control. An officer or director of Reorganized Hexcel may be
deemed an Affiliate.
To the extent that a person deemed to be an "underwriter" receives
securities, resales by that person would not be exempted by Section 1145 of the
Bankruptcy Code from registration under the Securities Act of 1933 except in
"ordinary trading transactions" (within the meaning of Section 1145(b)(1) of the
Bankruptcy Code).
The Bankruptcy Code does not define the term "ordinary trading
transactions," and the Securities and Exchange Commission (the "Commission") has
not given

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definitive guidance with respect to the proper construction of the term. In a
no-action letter the staff of the Commission has, however, concurred in the view
that a transaction will be an "ordinary trading transaction" if it is carried
out on an exchange or in the over-the-counter market at a time when the issuer
of the traded securities is a reporting company under the Exchange Act and does
NOT involve any of the following factors:
(i) (x) concerted action by two or more recipients of securities
issued under a plan of reorganization in connection with the sale of those
securities, or (y) concerted action by distributors on behalf of one or
more such recipients in connection with sales;
(ii) the preparation or use of informational documents concerning
the offering of the securities to assist in the resale of the
securities, other than the disclosure statement approved in connection
with the plan (and any supplement thereto) and documents filed with
the Commission by the debtors or the reorganized company pursuant to
the Exchange Act; or
(iii) special compensation to brokers or dealers in connection
with the sale of the securities designed as a special incentive to
resell the securities, other than compensation that would

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be paid pursuant to arm's-length negotiations between a seller and a broker
or dealer, each acting unilaterally that is not greater than the
compensation that would be paid for a routine similar-sized sale of similar
securities of a similar issuer.
In addition, a person deemed to be an "underwriter" solely because he
is an Affiliate may be able to sell securities without registration, in
accordance with Rule 144 under the Securities Act of 1933, which permits public
sales of securities received pursuant to a plan by statutory underwriters
subject to volume limitations and certain other conditions. Based on the views
of the Commission expressed in no-action letters, a person deemed to be an
underwriter solely because he is an Affiliate may be able to sell securities
without registration in accordance with Rule 144, without complying with the
holding period requirement of Rule 144(d).
BECAUSE OF THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION WHETHER A
PARTICULAR HOLDER MAY BE AN UNDERWRITER, HEXCEL MAKES NO REPRESENTATION
CONCERNING THE ABILITY OF ANY PERSON TO DISPOSE OF THE NEW SECURITIES. HEXCEL
RECOMMENDS THAT RECIPIENTS OF SECURITIES UNDER THE HEXCEL PLAN CONSULT WITH
THEIR OWN COUNSEL CONCERNING THE LIMITATIONS ON THEIR ABILITY TO DISPOSE OF
THOSE SECURITIES.

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3. DELIVERY OF DISCLOSURE STATEMENT.
Under Section 1145(a)(4) of the Bankruptcy Code, "stockbrokers" (as
that term is defined in Section 101(48) of the Bankruptcy Code) are required to
deliver to their customers, for the first 40 days after the Effective Date of
the Plan, a copy of this Disclosure Statement (and any supplement to it ordered
by the Bankruptcy Court) at or before the time of delivery of any security
issued under the Plan. This requirement specifically applies to trading and
other after-market transactions in the securities issued under the Plan. In
this regard, however, the staff of the Commission has stated in no-action
letters that when a company is and will be a "reporting person" required to file
current information with the Commission under the Exchange Act, it would not
recommend enforcement action if a stockbroker did not comply with the disclosure
statement delivery requirements of Section 1145(a)(4) of the Bankruptcy Code.
Hexcel has complied, and following the Effective Date of the Plan, Reorganized
Hexcel will comply, with the reporting requirements of the Exchange Act,
including by the filing of Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q, and other required information.

IX. REORGANIZATION VALUES
The Debtor has been advised by Andersen with respect to the value of
Reorganized Hexcel. The reorganization value

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of Hexcel was assumed for purposes of the Plan by Hexcel to be between
approximately $165,000,000 and $185,000,000 as of an assumed Effective Date of
October 3, 1994. Such assumed reorganization value represents the range of
values prepared by Andersen during July, 1994 in respect of the business and
assets of Reorganized Hexcel.
Based upon the assumed reorganization value of Reorganized Hexcel, an
assumed total debt for valuation purposes (including capital lease obligations
and the present value of anticipated payments on environmental and legal claims)
of approximately $103,000,000, and conversion of the Subordinated Debentures
upon acceptance of the Plan by Class 9, Hexcel has employed an assumed range of
equity values for Reorganized Hexcel of approximately $62,000,000 to $80,000,000
or $1.77 to $2.34 per share based upon a distribution of approximately
15,087,719 shares, Rights to purchase 8,500,000 shares of Reorganized Hexcel
Common Stock to be issued to the holders of Claims and Interests under the Plan
and a purchase of approximately 11,500,000 shares of Reorganized Hexcel Common
Stock by Mutual Series.
Based upon the assumed reorganization value of Reorganized Hexcel, an
assumed total debt for valuation purposes (including capital lease obligations
and the present value of anticipated payments on environmental and legal claims)
of approximately $112,000,000 and Reinstatement of the

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Subordinated Debentures upon rejection of the Plan by Class 9, Hexcel has
employed an assumed range of equity values for Reorganized Hexcel of
approximately $62,000,000 to $80,000,000 or $1.77 to $2.34 per share based upon
a distribution of approximately 5,384,669 shares, and Rights to purchase
12,500,000 shares of Reorganized Hexcel Common Stock to be issued to the holders
of Claims and Interests under the Plan and a purchase of approximately
12,500,000 shares of Reorganized Hexcel Common Stock by Mutual Series.
The foregoing valuations are based on a number of assumptions,
including a successful reorganization of Hexcel's business and finances in a
timely manner, the achievement of the forecasts reflected in the Projected
Financial Information, the amount of available cash at the Effective Date, the
availability of certain tax attributes, the continuation of current market
conditions through the Effective Date and the Plan becoming effective in
accordance with its terms.
Estimates of value, like the above-described reorganization value,
represent the value of Reorganized Hexcel as the continuing owner and operator
of its business and assets. Such estimates do not purport to reflect or
constitute appraisals, liquidation values or estimates of the actual market
value that may be realized through the sale of any securities to be issued
pursuant to the Plan, which may be

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significantly different than the amounts set forth herein. The value of an
operating business such as Hexcel's is subject to uncertainties and
contingencies which are difficult to predict and will fluctuate with changes in
factors affecting the financial condition of and prospects for such a business.
AS A RESULT, THE ESTIMATE OF REORGANIZATION VALUES SET FORTH HEREIN IS NOT
NECESSARILY INDICATIVE OF ACTUAL OUTCOMES, WHICH MAY BE SIGNIFICANTLY MORE OR
LESS FAVORABLE THAN THOSE SET FORTH HEREIN. BECAUSE SUCH ESTIMATE IS INHERENTLY
SUBJECT TO UNCERTAINTIES, NEITHER HEXCEL, ANDERSEN, NOR ANY OTHER PERSON ASSUMES
RESPONSIBILITY FOR ITS ACCURACY. IN ADDITION, THE VALUATION OF NEWLY-ISSUED
SECURITIES SUCH AS THE REORGANIZED HEXCEL COMMON STOCK DOES NOT PURPORT TO BE AN
ESTIMATE OF THE POST-REORGANIZATION MARKET TRADING PRICE OF SUCH SECURITIES, THE
LATTER BEING SUBJECT TO ADDITIONAL UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH
ARE DIFFICULT TO PREDICT. Actual market prices of such securities at issuance
will depend upon, among other things, prevailing interest rates, conditions in
the financial markets, the anticipated initial securities holdings of
prepetition creditors, some of which may prefer to liquidate their investment
rather than hold it on a long-term basis, and other factors which generally
influence the prices of securities.
Andersen has undertaken its valuation analysis for purposes of
determining the value available to distribute to

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creditors pursuant to the Plan. The valuation is based on an analysis of the
Projected Financial Information as well as current market conditions and
statistics. Andersen primarily used the discounted cash flow methodology to
value Hexcel's business. This valuation technique reflects both the present
value of the future cash flows detailed in the Projected Financial Information
and the present value of the Company's terminal value at the end of the
Projection Period.
In preparing an estimated value of Reorganized Hexcel, Andersen: (i)
analyzed certain historical financial information of Hexcel for recent years and
interim periods, (ii) analyzed certain internal financial and operating data of
Hexcel including the Projected Financial Information as provided by management
relating to its business and prospects, (iii) met with certain members of senior
management of Hexcel to discuss operations and future prospects, (iv) analyzed
publicly available financial data and considered the market values of public
companies deemed generally comparable to Hexcel, and conducted such other
analyses as Andersen deemed appropriate. Although Andersen conducted an
analysis of Hexcel's business, operating assets and liabilities and business
plans, Andersen assumed and relied on the accuracy and completeness of all (i)
financial and other information furnished to it by Hexcel and by other firms
retained by Hexcel and (ii) publicly available information. In addition,

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Andersen did not independently verify management's projections in connection
with such valuation, and no independent evaluations or appraisals of the
Debtor's assets were sought or were obtained in connection therewith.

X. CERTAIN RISK FACTORS TO BE CONSIDERED

HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN THE DEBTOR SHOULD
READ AND CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER
INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT (AND THE DOCUMENTS DELIVERED
TOGETHER HEREWITH AND/OR INCORPORATED BY REFERENCE), PRIOR TO VOTING TO ACCEPT
OR REJECT THE PLAN. THESE RISK FACTORS SHOULD NOT, HOWEVER, BE REGARDED AS
CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE PLAN AND ITS
IMPLEMENTATION.
A. OVERALL RISKS TO RECOVERY BY HOLDERS OF CLAIMS
The ultimate recoveries under the Plan to holders of Claims (other
than those holders who are paid in cash under the Plan) depend upon the
realizable value of the notes to be issued pursuant to the Plan and the
Reorganized Hexcel Common Stock. The securities to be issued pursuant to the
Plan are subject to a number of material risks, including, but not limited to,
those specified below. The factors specified below assume that the Plan is
approved by the Bankruptcy Court and that the Effective Date occurs on or about
October 3,

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1994. Prior to voting on the Plan, each holder of a Claim or Equity Interest
entitled to vote should carefully consider the risk factors specified or
referred to below, the Exhibits annexed hereto, as well as all of the
information contained in the Plan and all exhibits thereto.
1. PROJECTED FINANCIAL INFORMATION
The Projected Financial Information included in this Disclosure
Statement is dependent upon the successful implementation of the business plan
upon which the Projected Financial Information is based and upon the validity of
the other assumptions contained therein. These projections reflect numerous
assumptions, including confirmation and consummation of the Plan in accordance
with its terms, the anticipated future performance of Hexcel, industry
performance, certain assumptions with respect to competitors of Hexcel, general
business and economic conditions, the sale of the resins business and other
matters, many of which are beyond the control of Hexcel. In addition,
unanticipated events and circumstances occurring subsequent to the preparation
of the projections may affect the actual financial results of Hexcel. Moreover,
there is an inherent uncertainty as to questions of valuation for tax purposes.
Although Hexcel believes that its assumptions as to the aggregate value of
Reorganized Hexcel Common Stock immediately after the Effective Date are
reasonable, there is a risk that the

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Internal Revenue Service will challenge the value used. This could affect
Hexcel's ability to utilize its pre-confirmation net operating losses, resulting
in increased federal income taxes due in any given year. Although Hexcel
believes that the projections are reasonably attainable, some or all of the
estimates will vary and variations between the actual financial results and
those projected may be material.
2. ABILITY TO REFINANCE DEBT
As of the Effective Date, if Class 9 accepts the Plan, Hexcel will
have $103,000,000 of interest bearing debt of which $16,500,000 will be due and
payable within one year and $75,600,000 (including the Amended and Restated
Principal Mutual 10.12% Note and the BNP Letters of Credit backing the IDRB's)
will be due and payable within four years. As of the Effective Date, if Class 9
rejects the Plan, Hexcel will have $120,800,000 of interest bearing debt of
which $15,600,000 will be due and payable within one year and $67,700,000
(including the Amended and Restated Principal Mutual 10.12% Note and the BNP
Letters of Credit backing the IDRB's) will be due and payable within four years.
In either case, Hexcel's financial projections indicate that it will not
generate enough cash flow from operations fully to pay off all such obligations
as they mature, indicating the need to refinance some or all of its debt. While
Hexcel believes it should be able to refinance its debt if it meets its
financial

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projections, there can be no assurance that such refinancing will in fact be
effected or that market conditions will allow any refinancing to take place on
favorable terms.
3. KEY CUSTOMER RELATIONSHIP
In 1993, approximately 30% of Hexcel's domestic revenues and 19% of
its worldwide revenues were derived from shipments to Boeing or Boeing
subcontractors. Primarily as a result of sales to the 777 program, these
percentages are anticipated to increase substantially by the end of the
Projection Period. While Hexcel believes that it has a strong supplier
relationship with Boeing and that this relationship is likely to continue, a
decision by Boeing to direct its purchasing to other suppliers (including a
decision to qualify a second supplier for certain products on programs like the
777 where Hexcel is the sole provider of those products) could have a material
negative impact on the Company's operations. Delays in the 777 program or
declines in the projected build rate for the 777 aircraft could also have a
material adverse effect on the Company's operations.
4. HEXCEL S.A.
On June 8, 1994, the Bankruptcy Court approved Hexcel's motion to
infuse 200 Million Belgian Francs conditionally forgive a subordinated
intercompany loan and otherwise recapitalize its Belgian subsidiary, Hexcel S.A.
As a result, Hexcel was able to obtain a 2-year committed credit

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facility on satisfactory terms. The proceeds of the recapitalization will be
used in part to complete the restructuring of Hexcel S.A.'s operations with a
view toward returning Hexcel S.A. to profitability and positive cash flow. If
Hexcel S.A. does not return to consistent profitability or if there is a further
downturn in its business, Hexcel S.A. may again be in default of its loan
agreements, including its financial covenants which are tied to future operating
performance. In such event, Hexcel would be forced either to infuse more
capital into Hexcel S.A. or risk losing its business and assets in a foreclosure
proceeding. Hexcel believes that the loss of Hexcel S.A. would have a material
adverse impact on its global competitiveness in the aerospace industry.
5. COMPETITION; INDUSTRY EXCESS CAPACITY
Much of Hexcel's business (particularly its composites business) is
characterized by worldwide overcapacity and downward pressure on prices and
margins. Further, many of Hexcel's competitors are subsidiaries or operating
divisions of corporations having substantially greater financial and other
resources than Hexcel. Hexcel has managed substantially to maintain its
customer base during the chapter 11 period and its operating results were
stabilized; to the extent that worldwide demand for Hexcel's product undergoes
further decline, Hexcel may not be in as favorable a

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position to compete as certain of its better capitalized competitors.
6. NORTHROP AGREEMENT
Hexcel anticipates entering into an Agreement with Northrop to supply,
on favorable terms, certain LO materials for the B-2 program or, alternatively,
to sell Northrop the Chandler facility. The Projected Financial Information
assumes that the proceeds from this agreement will be realized primarily in
1995. An agreement with Northrop on substantially the terms outlined in the
Projected Financial Information is a condition of the Stock Subscription and
Standby Purchase Agreement. Hexcel is confident that an agreement with Northrop
will be completed. In the event that such an agreement is not reached, however,
there would be a material impact on the Company's operations and Mutual Series
would have the right to terminate the Stock Subscription and Standby Purchase
Agreement.
7. DIVIDEND POLICY
Reorganized Hexcel does not anticipate paying any dividends on the
Reorganized Hexcel Common Stock in the foreseeable future. In addition, the
covenants in certain debt instruments to which Reorganized Hexcel will be a
party will likely prohibit payment of dividends. Certain institutional
investors may only invest in dividend-paying equity securities or may operate
under other restrictions

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which may prohibit or limit their ability to invest in Reorganized Hexcel Common
Stock.
8. PREFERRED STOCK
Until such time (if any) as the Board of Directors of Reorganized
Hexcel should issue Preferred Stock and establish the respective rights of the
holders of one or more series thereof, it is not possible to state the actual
effect of authorization of the Preferred Stock upon the rights of holders of
Reorganized Hexcel Common Stock. The effects of such issuance could include,
however: (i) reduction of the amount of cash otherwise available for payment of
dividends on Reorganized Hexcel Common Stock, (ii) dilution of the voting power
of Reorganized Hexcel Common Stock if the Preferred Stock has voting rights, and
(iii) restriction of the rights of holders of Reorganized Hexcel Common Stock to
share in Reorganized Hexcel's assets upon liquidation until satisfaction of any
liquidation preference granted to the holders of Preferred Stock. In addition,
so-called "blank check" preferred stock (such as the Preferred Stock) may be
viewed as having possible anti-takeover effects, if it were used to make a third
party's attempt to gain control of Reorganized Hexcel more difficult, time
consuming or costly. Hexcel has no current plans pursuant to which Preferred
Stock would be issued as an anti-takeover device or otherwise.

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B. HART-SCOTT-RODINO ACT REQUIREMENTS
Holders of Claims that acquired such Claims after the commencement of
the Chapter 11 Case and that are to receive equity securities under the Plan on
account of such Claims may have to observe the filing and waiting period
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"). Holders required to make HSR Act filings cannot receive any such
distribution of equity securities until the expiration or early termination of
the waiting periods under the HSR Act. Such holders should consult their own
counsel regarding their potential responsibilities under the HSR Act.

XI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN

The following discussion summarizes certain federal income tax
consequences of the Plan to the Debtor, the Creditors, and the holders of Equity
Interests in Hexcel based upon the Internal Revenue Code of 1986, as amended
(the "Tax Code"), the treasury regulations (including temporary or proposed
regulations) promulgated thereunder (the "Regulations"), judicial authorities
and current administrative rulings and practice. The tax consequences of
certain aspects of the Plan are uncertain because of the lack of applicable
legal authority and may be subject to administrative or judicial interpretations
that differ from

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the discussion below. The Debtor has not requested a ruling from the Internal
Revenue Service with respect to these matters, and no opinion of counsel has
been obtained by the Debtor with respect thereto. The following discussion does
not address state, local or foreign tax considerations that may be applicable to
the Debtor, Creditors, and holders of Equity Interests in Hexcel and does not
address the federal income tax consequences to certain types of Creditors and
holders of Equity Interests in Hexcel (including financial institutions, life
insurance companies, tax-exempt organizations and foreign individuals and
entities) to which special rules may apply. Further, the federal income tax
treatment of the Debtor, Creditors and holders of Equity Interests in Hexcel may
be affected by matters not discussed below. ACCORDINGLY, ALL CREDITORS AND
HOLDERS OF EQUITY INTERESTS IN HEXCEL ARE STRONGLY URGED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE PLAN TO THEM AND TO THE
DEBTOR. THE DEBTOR AND ITS COUNSEL ARE NOT MAKING ANY REPRESENTATIONS REGARDING
THE PARTICULAR TAX CONSEQUENCES OF CONFIRMATION AND CONSUMMATION OF THE PLAN AS
TO ANY CREDITOR OR HOLDER OF AN EQUITY INTEREST IN HEXCEL NOR ARE THE DEBTOR OR
ITS COUNSEL RENDERING ANY FORM OF LEGAL OPINION AS TO SUCH TAX CONSEQUENCES.

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A. TAX CONSEQUENCES TO HEXCEL
1. CANCELLATION OF DEBT.
Under the Plan, a reduction in the aggregate outstanding debt will
occur because some debt will be paid off in Cash and some debt will be satisfied

with Reorganized Hexcel Common Stock. Also, some Claims that do not constitute
debt of Hexcel will be satisfied with Reorganized Hexcel Common Stock.
Therefore, the following discussion will consider the tax effect of satisfying
debt and Claims with Reorganized Hexcel Common Stock.
a. GENERAL. With certain exceptions, to the extent that debt is
satisfied for consideration worth less than the amount of the adjusted issue
price of such debt, the Debtor will realize cancellation of debt ("COD") income.
Since reductions in Hexcel's debt resulting from implementation of the Plan will
occur in a case under the Bankruptcy Code, however, Hexcel will not be required
to include in income any COD realized as a result of such reduction. Rather,
the Debtor will be required to reduce certain of its tax attributes (e.g., its
net operating losses ("NOLs"), discussed below and, if the COD exceeds the
amount of NOLs, possibly the basis of its assets) by the amount of the COD not
included in income, except with respect to COD arising from a Claim to the
extent that such Claim is satisfied with Reorganized Hexcel

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Common Stock and where the other requirements of the "Stock-for-Debt Exception,"
defined below, are met.
Under the Plan, the holders of the Principal Mutual Notes will
receive, among other things, Reorganized Hexcel Common Stock in exchange for
their Claims with respect to certain alleged breaches in the note agreement.
These Claims do not constitute debts of Hexcel because they do not represent
cash advanced to Hexcel or a deduction claimed by Hexcel. Therefore,
satisfaction of these Claims with Reorganized Hexcel Common Stock will not be
treated as a COD that requires a reduction of Reorganized Hexcel's tax
attributes, and Hexcel will be permitted to deduct the value of the stock
exchanged for such Claims or amortize the value of such stock over the life of
the Principal Mutual Notes.
Under the Plan, the Subordinated Debenture holders will receive for
their Claims for Reorganized Hexcel Common Stock (the "Debenture Exchange") or
will have their Claims Reinstated. If Class 9 rejects the Plan and the
Subordinated Debentures are Reinstated, Hexcel will not be required to reduce
its tax attributes. Even if Class 9 accepts the Plan and the debt is considered
exchanged for Reorganized Hexcel Common Stock, Hexcel will not be required to
reduce its tax attributes if the Debenture Exchange qualifies for the Stock-for-
Debt Exception. However, to the extent that holders of debt are paid
consideration that does not include Reorganized

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Hexcel Common Stock qualifying for the Stock-for-Debt Exception in exchange for
their debt, as more fully discussed below, Hexcel will realize COD in an amount
equal to the excess of the adjusted issue price of such debt over the value of
all consideration paid to such holders, and consequently will be required to
reduce its tax attributes by such amount.
b. STOCK-FOR-DEBT EXCEPTION. A debtor in a chapter 11 case is not
considered to realize COD, and thus will avoid the attendant reduction in tax
attributes, to the extent that debt is considered paid with the debtor's stock
(regardless of the value of the debtor's stock exchanged for such claim),
provided that the amount and nature of the stock are such that certain
conditions described in sections 108(e)(8) and 108(e)(10) of the Tax Code (the
"Stock-for-Debt Exception") are met. These conditions require that the
Reorganized Hexcel Common Stock issued pursuant to the Plan satisfy the "nominal
or token" and "proportionality" tests described below.
In applying the Stock-for-Debt Exception, where debt is satisfied for
a combination of stock and cash, an amount of the claim equal to the cash is
considered satisfied by the cash, and the balance of the claim is considered
satisfied by the stock (regardless of its value).
(1) NOMINAL OR TOKEN TEST. Under Section 108(e)(8)(A) of the Tax
Code, the Debenture Exchange will qualify for the Stock-for-Debt Exception
only if the

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amount of Reorganized Hexcel Common Stock received by the Subordinated Debenture
Holders is not "nominal" or "token" (the "Nominal or Token Test"). The Treasury
has issued final Regulations regarding the application of the Nominal or Token
Test. The Regulations provide that the determination of whether the Reorganized
Hexcel Common Stock received in the Debenture Exchange is nominal or token will
depend on all of the facts and circumstances relevant to the Reorganized Hexcel
Common Stock and the Debenture Exchange. Although the Regulations do not
specify which facts and circumstances would be most relevant to this
determination, an earlier proposed version of the Regulations, which has since
been withdrawn, enumerated three nonexclusive factors to be considered in
determining whether stock is nominal or token: (a) the ratio of the value of the
stock received by a creditor to the amount of such creditor's claim treated as
exchanged for that stock, (b) the ratio of the value of the stock received by a
creditor to the total consideration received by such creditor in the exchange,
and (c) the ratio of the aggregate value of the stock received by all the
creditors in the exchange to the value of all the outstanding stock of the
debtor after the exchange.

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The final Regulations provide that the determination of whether common
stock issued for unsecured debt is nominal or token is made on an aggregate
basis with respect to all common stock issued for unsecured debt in a
chapter 11 case. Concurrently with the issuance of the Regulations, the
IRS issued a revenue procedure (Rev. Proc. 94-26) providing that common
stock issued for outstanding unsecured debt in a chapter 11 case will be
deemed not nominal or token if the ratio of the total value of common stock
issued for unsecured debt in the chapter 11 case is at least 15 percent of
the total value of all stock of the debtor corporation outstanding after
the chapter 11 case (the "Safe Harbor").
Given the large amount of Reorganized Hexcel Common Stock that will be
issued in the event the Debenture Exchange occurs and the aggregate
approach under the Regulations to determining whether stock is nominal or
token, the Reorganized Hexcel Common Stock to be issued under the Debenture
Exchange should satisfy the "facts and circumstances" standard of the
Regulations for not being nominal or token. In addition, the Safe Harbor
will be met. Thus, the Reorganized Hexcel Common Stock issued in the
Debenture Exchange will generally satisfy the Nominal or Token Test as set
out in Section 108(e)(8)(A) of the Tax Code.

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(2) PROPORTIONALITY TEST. Under Section 108(e)(8)(B) of the Tax
Code, the Stock-for-Debt Exception will not apply with respect to a
Subordinated Debenture holder if the ratio of the value of stock received
by such unsecured creditor to the amount of debt canceled or exchanged for
stock is less than 50 percent of a similar ratio computed for all unsecured
creditors (the "Proportionality Test"). The Proportionality Test is to be
applied to each Subordinated Debenture Holder on a debt-by-debt basis by
comparing (i) with respect to each debt held by such creditor, the ratio of
the value of stock received by such creditor with respect to such debt to
the portion of such debt deemed canceled or exchanged for stock, to (ii)
the ratio of the aggregate value of all stock issued to all creditors for
unsecured debt to the aggregate amount of unsecured debt deemed canceled or
exchanged for such stock. Since all of the Subordinated Debenture holders
will receive the same proportions of Reorganized Hexcel Common Stock in the
Debenture Exchange, and no other unsecured creditors will receive any
Reorganized Hexcel Common Stock, the Debenture Exchange should satisfy the
Proportionality Test.
C. EFFECT OF THE PLAN. On the basis of current law, current
valuation projections, and all the facts and

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circumstances relevant to the Debenture Exchange, the Debtor anticipates that,
if the Plan is confirmed, the Debenture Exchange will generally qualify for the
Stock-for-Debt Exception, and Hexcel will not realize COD with respect thereto.
As discussed above, if Hexcel has COD that is excluded from income
because Hexcel is in bankruptcy but is not eligible for the stock-for-debt
exception, Hexcel would be required to reduce its tax attributes by the amount
of such COD. The effect of such attribute reduction could be to eliminate all
of the NOLs and possibly even to reduce the tax bases of the assets held by
Hexcel, but not below the aggregate amount of liabilities of Hexcel immediately
after the Confirmation Date.
As discussed above, Reinstatement of the Subordinated Debentures will
not generate any COD income to Hexcel.
d. CLAIMS FOR ACCRUED INTEREST. Under the Debenture Exchange, if it
occurs, Reorganized Hexcel Common Stock will be distributed with respect to
Claims for accrued interest attributable to Claims of the Subordinated Debenture
holders. If Hexcel has accrued deductions for such interest, Claims for such
interest should be eligible for the Stock-for-Debt Exception under the
principles described above (although it is possible that the IRS will assert
that Hexcel is required to

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<PAGE>
treat any such amount as income other than COD income under "tax benefit
principles" to the extent that the previously taken deductions exceed the value
of Reorganized Hexcel Common Stock and other consideration treated as satisfying
Claims for accrued interest). If Hexcel has not accrued deductions for these
interest Claims, Hexcel will not realize income with respect to such Claims and
it will be allowed a deduction equal to the value of any Reorganized Hexcel
Common Stock and other consideration treated as satisfying such Claims.
The Debenture Exchange provides for the consideration paid to the
Subordinated Debenture holders in respect of their Claims to be allocated first
to the principal amount of such Claims and only thereafter to the accrued
interest thereon. However, there is some uncertainty as to whether allocations
between principal and interest in a bankruptcy plan will be respected for
federal income tax purposes. (See Section XI.B.2.b, "Federal Income Tax
Consequences -- Tax Consequences to Creditors -- Holders of Subordinated
Debentures - Debenture Exchange -- Tax Treatment of the Debenture Exchange.")
If the Subordinated Debentures are Reinstated, holders of the
Subordinated Debentures will receive Cash in exchange for their Claims for
accrued interest thereon. Since the Debtor will be satisfying such Claims for
Cash, it will not realize COD income with respect thereto. To the extent

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not previously deducted, such payment should be deductible by the Debtor.
2. LIMITATION ON NET OPERATING LOSSES. As of December 31, 1993, Hexcel
estimates it had NOLs (for federal income tax purposes) of approximately $30
million. It is unclear whether, as of that date, Hexcel had any "net unrealized
built-in losses" (also considered NOLs for purposes of the discussion in this
Section XI.A.2). The implementation of the Plan, together with transactions
that have occurred within the three-year period preceding the Confirmation Date,
will probably cause an "ownership change" as of the Confirmation Date for
federal income tax purposes. As a result, to the extent not reduced or
eliminated because of (A) the realization of COD income, as discussed above, or
(B) prior "ownership changes" that may have previously affected Hexcel's ability
to offset the NOLs against its taxable income, the use of any remaining NOLs
will be governed by Section 382 of the Tax Code, as discussed below.
Generally, under Section 382 of the Tax Code, a corporation's annual
taxable income for periods after an "ownership change" may be offset by NOLs
attributable to periods prior to such an "ownership change" only to the extent
of the product of (A) the fair market value of the corporation's stock
immediately before such "ownership change" and (B) the long-term tax-exempt rate
prescribed by the IRS.

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<PAGE>
For this purpose, fair market value is generally determined without regard to
capital contributions made during the two-year period ending on the date of the
"ownership change."
If a corporation that undergoes an "ownership change" has a "net
unrealized built-in gain," its general Section 382 limitation, as described in
the preceding paragraph, is increased, subject to certain limitations, by any
"built-in gain" recognized during the five-year period beginning with the date
of the "ownership change."
If a corporation that undergoes an "ownership change" has a "net
unrealized built-in loss," subject to certain limitations, any "built-in loss"
recognized during the five-year period beginning with the date of the "ownership
change" is treated as a pre-change loss and is subject to the general Section
382 limitation described above. (It is unclear whether Hexcel has "net
unrealized built-in losses".) However, when an "ownership change" occurs
pursuant to the implementation of a bankruptcy plan of reorganization, the
general Section 382 limitation does not apply. Instead, one of two other
"Section 382 regimes" is available to a debtor.
a. SECTION 382(L)(6) REGIME. Under Section 382(l)(6) of the Tax Code,
the applicable limitation on the Debtor's annual use of the NOLs would generally
be the same as the general Section 382 limitation (discussed above), except that
such applicable limitation would reflect the increase (if any)

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<PAGE>
in the value of Hexcel resulting from any surrender or cancellation by the
Creditors of Claims in exchange for Reorganized Hexcel Common Stock. Under the
Regulations, for purposes of Section 382(l)(6) of the Tax Code, the value of
stock of a "loss corporation" issued in connection with an "ownership change"
cannot exceed the amount of cash plus the value of any property (including debt
of the loss corporation) received by the "loss corporation" in consideration for
the issuance of that stock. The preamble to earlier proposed Regulations under
Section 382(l)(6) states that this "rule is designed to avoid valuation disputes
that otherwise might arise when taxpayers take the position that the 'intrinsic'
value of the stock is more than the amount paid for it (for example, because the
stock trades at a higher price at some later date when trading stabilizes)."
b. SECTION 382(l)(5) REGIME. Section 382(l)(5) of the Tax Code provides
that the general Section 382 limitation does not apply to an "ownership change"
resulting from transactions that are pursuant to a plan of reorganization of a
corporation in a chapter 11 case if the shareholders and creditors of such
corporation immediately before an "ownership change" own immediately after such
change (as a result of being shareholders or creditors immediately before such
change) at least 50 percent of the stock of the corporation by vote and value.
For purposes of this rule, stock transferred to a

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creditor is taken into account only to the extent that such stock is transferred
in satisfaction of debt and only if such debt either (1) was held by the
creditor at least 18 months before the filing of the chapter 11 case, or (2)
arose in the ordinary course of the trade or business of the old loss
corporation and is held by the person who at all times held the beneficial
interest in such debt. A claim for unpaid interest accrued after the filing of
a chapter 11 case or interest accrued within 18 months before the filing of a
chapter 11 case with respect to debt which was held for the requisite period is
considered qualifying debt for these purposes. Pursuant to Regulations under
Section 382(l)(5) of the Tax Code, options or warrants to acquire stock that are
outstanding at the time of an "ownership change" (including options or warrants
created pursuant to a plan of reorganization in a chapter 11 case) are generally
ignored unless they provide the owner of the option, prior to its exercise, with
a substantial portion of the attributes of ownership of the underlying stock, a
direct or indirect ownership interest of more than 50 percent (if such options
were exercised) or have been used to facilitate the creation of income to absorb
the NOLs prior to exercise of the option.
Under Regulations, for purposes of applying the 50 percent threshold
requirement of Section 382(l)(5) of the Tax Code as described above, a debtor
can rely on a DE MINIMIS

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rule under which it is entitled to treat debt as always having been owned by the
beneficial owners of the debt immediately before the ownership change if the
beneficial owner is not, immediately after the ownership change, either a 5
percent shareholder or an entity through which a 5 percent shareholder owns an
indirect ownership interest in the loss corporation.
Based upon the Debtor's understanding of the current status and
ownership of the Subordinated Debenture Holders' Claims, it is unlikely that the
50 percent threshold requirement of Section 382(l)(5) of the Tax Code as
described above will be met.
If Hexcel qualified under Section 382(l)(5) of the Tax Code, it could
avoid entirely the application of the general Section 382 limitation to the NOLs
and built-in losses, if any, but would, however, be required to reduce its NOLs
and possibly other tax attributes by: (1) any deduction for interest claimed by
Hexcel with respect to any debt converted into Reorganized Hexcel Common Stock
for (a) the three-year period preceding the taxable year of the "ownership
change" and (b) the portion of the year of the "ownership change" prior to the
Confirmation Date of the Plan, and (2) 50 percent of the excess of discharged
debt over the value of Reorganized Hexcel Common Stock and other consideration
transferred to Subordinated Debenture Holders in a transfer that qualifies for
the Stock-for-Debt Exception, discussed

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above. Since the amounts described in (1) and (2) above are contingent upon the
value of the Reorganized Hexcel Common Stock distributed to Creditors on the
Confirmation Date, if any, as well as other factors, which cannot be predicted
currently with certainty, the precise amount of NOL and other tax attribute
reduction that would be required under Section 382(l)(5) of the Tax Code cannot
currently be determined.
Under Section 382(l)(5)(D) of the Tax Code, if a second "ownership
change" with respect to Hexcel occurs within the two-year period following the
Confirmation Date, the Section 382(l)(5) exception would not apply and any NOLs
remaining after the second "ownership change" would be eliminated. Thus, if
Hexcel is governed by Section 382(l)(5) of the Tax Code, a risk exists that most
(if not all) of the utility of the NOLs could be lost because of the possibility
that Hexcel may undergo a second "ownership change" within the two-year period
following the Confirmation Date. This result would cause Hexcel to owe federal
income tax (in excess of otherwise payable corporate alternative minimum tax)
earlier than would be the case absent such an "ownership change" and would have
a significant negative impact upon Hexcel. The possibility of a second
"ownership change" within the two-year period, completely eliminating the
utility of the NOLs, might cause the Debtor to elect to have Section 382(1)(6)
of the Tax

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Code govern its ability to use its NOLs even if Section 382(1)(5) were otherwise
available.
c. EFFECT OF THE PLAN. The Debtor believes that its ability to use its
NOLs and built-in-losses (if any) would be governed by Section 382(l)(6) of the
Tax Code.
3. SETTLEMENT OF PRINCIPAL MUTUAL CLAIMS. Under the Plan, holders of the
Principal Mutual Notes will receive Reorganized Hexcel Common Stock in exchange
for their Claims with respect to certain alleged breaches under the note
agreement. Hexcel will take an income tax deduction equal to the value of the
stock so exchanged either currently or over the remaining term of the notes.
B. TAX CONSEQUENCES TO CREDITORS
The federal income tax consequences to Creditors arising from the Plan
will vary depending upon, among other things, the type of consideration received
by the Creditor in exchange for its Claim, and whether (i) the Creditor reports
income using the cash or accrual method, (ii) the Creditor has taken a "bad
debt" deduction with respect to its Claim, (iii) the Creditor's Claim
constitutes a "security" for federal income tax purposes, and (iv) the
consideration to be received pursuant to the Plan constitutes a "security" for
federal income tax purposes.
Creditors whose debt is reaffirmed without change under its pre-
petition terms and Creditors the terms of whose

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<PAGE>
debt is changed in a manner that does not constitute an "exchange" for tax
purposes should have no federal income tax consequences arising from the Plan.
1. CREDITORS OTHER THAN HOLDERS OF SUBORDINATED DEBENTURES. The holder
of the Principal Mutual 10.12% Note will likely have income equal to the value
of the Reorganized Hexcel Common Stock that it receives in exchange for its
Claims with respect to certain alleged breaches under the note agreement. Since
the debt of this Creditor is being paid in Cash or reinstated with its original
terms, implementation of the Plan will have no unusual tax consequences for it.
The tax basis of the Reorganized Hexcel Common Stock received by the
Principal Mutual Note holder will be such property's fair market value on the
Confirmation Date. The holding period for such property that is held as a
capital asset will begin on the day after the Confirmation Date.
2. HOLDERS OF SUBORDINATED DEBENTURES
A. REINSTATEMENT OF CLAIMS.
No unusual federal income tax consequences will result from
Reinstatement of the Subordinated Debentures pursuant to the Plan if Class 9
rejects the Plan. Cash received in exchange for Claims for accrued interest
will, however, generally be taxable as ordinary income to the holder of the
Subordinated Debentures.

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<PAGE>
B. DEBENTURE EXCHANGE.
The following discussion assumes that Class 9 accepts the Plan and the
holders of Subordinated Debentures receive Reorganized Hexcel Common Stock in
the Debenture Exchange.
(1) CLASSIFICATION OF THE SUBORDINATED DEBENTURES AS SECURITIES. The
federal income tax consequences of the Plan to Subordinated Debenture holders
will depend in part on whether their Claims constitute "securities" for purposes
of the "reorganization provisions" of the Tax Code. This determination depends
upon an evaluation of the nature of the particular item of debt. Important
factors to be considered include, among other things, length of time to
maturity, degree of continuing interest in the issuer, similarity of the debt
instrument to a cash payment, and the purpose of the borrowing. Generally,
corporate debt instruments with maturities when issued of less than five years
are not considered "securities," and corporate debt instruments with maturities
when issued of ten years or more generally are considered "securities." Claims
for accrued interest generally are not securities. Since the length of time
from issuance to maturity of the Subordinated Debentures is greater than ten
years, and given the other terms of the Subordinated Debentures, the
Subordinated Debentures should be treated as securities. The following
discussion reflects such treatment.

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<PAGE>
However, this treatment is not certain, and holders should consult their own tax
advisors as to whether their claims constitute "securities" for federal income
tax purposes.
(2) TAX TREATMENT OF THE DEBENTURE EXCHANGE. The Debenture Exchange will
likely constitute a "reorganization" for federal income tax purposes. As such,
except for income recognized with respect to accrued interest as discussed
below, holders of Subordinated Debentures will not (subject to the discussion of
market discount below) recognize gain or loss on the Debenture Exchange.
Assuming the Debenture Exchange constitutes a reorganization, no loss will be
recognized, except with respect to a Claim for accrued and previously taxed
interest that is not fully satisfied under the Plan.
The tax basis of the Reorganized Hexcel Common Stock received tax-free
by a holder (other than for accrued interest) will equal such holder's adjusted
tax basis in its Subordinated Debentures (other than basis attributable to
Claims for accrued interest) increased by the amount of gain, if any, recognized
by such holder on the Debenture Exchange. The tax basis of the Reorganized
Hexcel Common Stock received in the Debenture Exchange for accrued interest will
be its fair market value on the Confirmation Date.
The holding period for the Reorganized Hexcel Common Stock received in
the Debenture Exchange will include the

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<PAGE>
period during which a holder held the Subordinated Debentures exchanged
therefor, provided the Subordinated Debentures were held as a capital asset on
the Confirmation Date.
As noted above, pursuant to the Debenture Exchange, some Reorganized
Hexcel Common Stock will be distributed to the holders of the Subordinated
Debentures with respect to accrued interest. Thus, holders who have not
previously included these amounts in taxable income will be required to
recognize income to the extent of the consideration received with respect to
Claims for accrued interest.
Pursuant to the Debenture Exchange, the aggregate consideration paid
to holders is allocated first to the principal amount of Subordinated Debentures
and only thereafter to the accrued interest thereon. Certain legislative history
indicates that an allocation provided in a bankruptcy plan may be binding for
federal income tax purposes. However, the IRS may take either the position (1)
that consideration received should be allocated first to accrued interest and
thereafter to principal, or (2) that consideration should be allocated in
another manner, including the possibility of an allocation to the principal
amount of Subordinated Debentures and the accrued interest thereon in proportion
to the relative amounts thereof. Holders should consult their own tax advisors
generally with respect to this issue.

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<PAGE>
Notwithstanding the general rule described above that gain on the
Debenture Exchange will not be recognized, it is possible, although unlikely,
that under the market discount rules of the Tax Code, gain realized by a
security holder, even in a reorganization, must be recognized as ordinary income
to the extent of any accrued market discount on the claims surrendered on the
Confirmation Date. However, the market discount rules in the Tax Code also
provide that, under Regulations to be promulgated by the Treasury, recognition
of accrued market discount on exchanges such as the Debenture Exchange may be
limited to the amount of gain that would be recognized without regard to the
market discount rules. In this case, the application of such a provision would
result in gain being recognized only to the extent described in the preceding
paragraph. Such Regulations have not yet been issued; thus, it is unclear
whether this limitation will apply to the Debenture Exchange.
Under the market discount rules in the Tax Code, if the Subordinated
Debentures held by a holder constitute "market discount bonds," then unless all
of the market discount accrued on the Subordinated Debentures as of the
Confirmation Date is recognized in the Debenture Exchange, as described above,
the market discount rules may require the accrued but unrecognized market
discount on the Subordinated Debentures to be allocated to the Reorganized
Hexcel Common

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Stock received in the Debenture Exchange. In that case, such market discount
would have to be recognized as ordinary income upon disposition of such
Reorganized Hexcel Common Stock. Generally, a Subordinated Debenture is a
"market discount bond" if the holder acquired it for an amount less than its
stated principal amount. SUCH HOLDERS WHOSE SUBORDINATED DEBENTURES ARE "MARKET
DISCOUNT BONDS" ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE
TREATMENT OF THE REORGANIZED HEXCEL COMMON STOCK RECEIVED IN THE DEBENTURE
EXCHANGE UNDER THE MARKET DISCOUNT RULES.

C. TAX CONSEQUENCES TO HOLDERS OF COMMON STOCK.
On the Effective Date, holders of the outstanding Common Stock will be
entitled to receive one share of Reorganized Hexcel Common Stock for every two
shares of the outstanding Common Stock they hold and will lose certain poison
pill rights that they now have. Also, each holder of Common Stock will, in
addition to receiving shares of Reorganized Hexcel Common Stock, receive Rights
to purchase shares of Reorganized Hexcel Common Stock.
1. ELIMINATION OF THE POISON PILL RIGHTS. Elimination of the poison pill
rights should not be a taxable event to the existing holders of Common Stock.
2. TAX TREATMENT OF DISTRIBUTION OF HEXCEL STOCK RIGHTS. The Debtor
believes that under Section 305 of the Tax

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Code, the distribution of Rights will be a tax-free distribution to a holder of
Common Stock. As a result, such holder should not recognize gain or loss on
such distribution. Under Section 307 of the Tax Code, subject to the rule
described in the following sentence, such holder's basis in the Rights
distributed would be determined by allocating such holder's adjusted basis in
his shares of Common Stock between such holder's Common Stock and the Rights in
proportion to the fair market value of each on the Effective Date. If the fair
market value of the Rights distributed on the Effective Date is less than 15
percent of the fair market value of a holder's shares of Common Stock, such
holder's basis in such Rights will be zero unless such holder elects to allocate
basis between shares of Common Stock and Rights in the manner described above.
In the event that a holder fails to exercise his Rights, such holder
will recognize a loss upon the lapse of such Rights equal to such holder's
adjusted tax basis in such stock Rights. Such loss would be a capital loss if
the Common Stock to which such Rights relate would have been a capital asset in
the hands of such holder.
Hexcel believes that in general there will be no tax consequences to
holders of Common Stock in the event that they receive Rights pursuant to the
Plan or upon the lapse of such Rights. If such Rights are exercised, such
holders will have

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<PAGE>
a tax basis in any shares of Reorganized Hexcel Common Stock received equal to
the exercise price of the Rights. The foregoing discussion assumes that holders
of Common Stock do not elect to allocate a portion of their basis in their
shares of Common Stock to the Rights under Section 307 of the Tax Code.
3. ALTERNATIVE MINIMUM TAX. Holders of Common Stock should consult their
own tax advisors as to the applicability to them of the alternative minimum tax.
4. BACKUP WITHHOLDING AND INFORMATION REPORTING. Payors of interest,
dividends, and certain other reportable payments are generally required to
withhold 31% of such payments if the payee fails to furnish to the payor his
correct taxpayer identification number (social security number or employer
identification number). Exempt shareholders (including, among others,
corporations) are not subject to these backup withholding and reporting
requirements.
D. TAX CONSEQUENCES TO HOLDERS OF HEXCEL OPTIONS
Hexcel does not believe that the Plan will result in current tax
consequences to holders of Hexcel Options. If, however, the holder of a Hexcel
Option has a tax basis in such Hexcel Option, the holder will realize a loss
(generally a capital loss) on the Effective Date as a result of the cancellation
of such Hexcel Option.

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E. TAX CONSEQUENCES TO HOLDERS OF RIGHTS
Holders of the Rights who exercise such Rights will have a tax basis
in the Reorganized Hexcel Common Stock received from the exercise of such Rights
equal to their basis in such Rights plus the price paid upon exercise. A holder
who disposes of its Rights in a taxable transaction without having exercised
such Rights will recognize gain or loss in an amount equal to the difference
between the holder's basis in its Rights and the price received. Such gain or
loss should be capital gain or loss if the Rights were held as capital assets.
Any loss from the expiration of the Rights should be a capital loss if the
rights were held as capital assets.
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PLAN ARE
COMPLEX AND, IN MANY AREAS, UNCERTAIN. THE FOREGOING IS INTENDED TO BE A
SUMMARY ONLY AND, AS SUCH, DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR CREDITOR OR INTEREST HOLDER. ALL
CREDITORS AND INTEREST HOLDERS ARE STRONGLY URGED TO CONSULT WITH THEIR OWN TAX
ADVISORS REGARDING THE TAX CONSEQUENCES OF THE PLAN RELEVANT TO THEIR PARTICULAR
CIRCUMSTANCES.

XII. ALTERNATIVES TO CONFIRMATION AND
CONSUMMATION OF THE PLAN

If the Plan is not confirmed and consummated, the Debtor's
alternatives include (i) liquidation of the Debtor

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under chapter 7 of the Bankruptcy Code and (ii) the preparation and presentation
of an alternative plan or plans of reorganization.
A. LIQUIDATION UNDER CHAPTER 7
If no chapter 11 plan can be confirmed, the Chapter 11 Case may be
converted to a case under chapter 7 of the Bankruptcy Code in which a trustee
would be elected or appointed to liquidate the assets of the Debtor. A
discussion of the effect that a chapter 7 liquidation would have on the recovery
of holders of Claims and Equity Interests is set forth in Section VI.C.4.,
"Confirmation and Consummation Procedure -- Best Interests Test." The Debtor
believes that liquidation under chapter 7 would result in (i) smaller
distributions being made to creditors than those provided for in the Plan
because of the additional administrative expenses involved in the appointment of
a trustee and attorneys and other professionals to assist such trustee, (ii)
additional expenses and claims, some of which would be entitled to priority,
which would be generated during the liquidation and from the rejection of leases
and other executory contracts in connection with a cessation of the Debtor's
operations and (iii) the failure to realize the greater, going concern value of
the Debtor's assets.

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<PAGE>
B. ALTERNATIVE PLAN OF REORGANIZATION
If the Plan is not confirmed, the Debtor or any other party in
interest could attempt to formulate a different plan of reorganization. Such a
plan might involve either a reorganization and continuation of the Debtor's
business or an orderly liquidation of its assets.
The Debtor believes that the Plan enables the Debtor to successfully
and expeditiously emerge from chapter 11, preserves its business and allows
creditors to realize the highest recoveries under the circumstances. In a
liquidation under chapter 11 of the Bankruptcy Code, the assets of the Debtor
would be sold in an orderly fashion over a more extended period of time than in
a liquidation under chapter 7 and a trustee need not be appointed. Accordingly,
creditors would receive greater recoveries than in a chapter 7 liquidation.
Although a chapter 11 liquidation is preferable to a chapter 7 liquidation, the
Debtor believes that a liquidation under chapter 11 is a much less attractive
alternative to creditors because a greater return is provided for in the Plan to
creditors.

XIII. CONCLUSION AND RECOMMENDATION

The Debtor believes that confirmation and implementation of the Plan
is preferable to any of the alternatives described above because it will provide
the

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greatest recoveries to holders of Claims and Equity Interests. In addition,
other alternatives would involve significant delay, uncertainty and substantial
additional administrative costs. The Debtor urges holders of impaired Claims
and Equity Interests entitled to vote on the Plan to vote to accept the Plan and
to evidence such acceptance by returning their ballots so that they will be
received not later than 5:00 p.m., Pacific Daylight Savings Time on __________,
1994.

Dated: July 27, 1994

Hexcel Corporation,
a Delaware corporation

By: \s\ Robert D. Krumme
-----------------------------
Name: Robert D. Krumme
Title: Vice Chairman

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<PAGE>

EXHIBIT E

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED OPENING CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 3, 1994
ASSUMES CONVERSION OF SUBORDINATED DEBENTURES TO EQUITY
($000'S OMITTED)
(UNAUDITED)

<TABLE>
<CAPTION>
PRE- POST-
REORGANIZATION REORGANIZATION REORGANIZATION
BALANCES ADJUSTMENTS [2] BALANCES
-------------- --------------- --------------
<S> <C> <C> <C>
ASSETS

Cash $4,359 [1] $0 $4,359

Accounts Receivable 62,644 0 62,644

Inventories 48,454 0 48,454

Prepaid Expenses & Other 4,451 1,956 [3] 6,407
---------- ---------- ----------

TOTAL CURRENT ASSETS 119,908 1,956 121,864

Net Fixed Assets 93,201 0 93,201

Other Noncurrent Assets 21,531 0 21,531
---------- ---------- ----------
TOTAL ASSETS $234,640 $1,956 $236,596
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES & EQUITY

Current Portion - Long Term Debt $22,447 [4] $4,077 [5] $26,534

U.S. Revolving Debt Facility 0 16,437 16,437

DIP Financing 4,109 (4,109) [6] 0

Payables & Accruals 32,437 [8] 8,742 [8] 41,179

Restructuring Accrual 19,563 0 19,563
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 78,556 25,147 103,703

Long Term Debt 3,554 [4] 47,813 [5] 51,367

Long Term Accrued Liabilities 22,492 0 22,492
---------- ---------- ----------

TOTAL LIABILITIES 104,602 72,960 177,562

LIABILITIES SUBJECT TO 144,506 (144,506) 0
COMPROMISE

Common Stock and Paid-in Capital 68,827 62,866 [7] 131,693

Accumulated Deficit and
Cumulative Translation Adjustment (83,295) [9] 10,636 [9] (72,659)
---------- ---------- ----------

TOTAL EQUITY (14,468) 73,502 59,034
---------- ---------- ----------
TOTAL LIABILITIES & EQUITY $234,640 $1,956 $236,596
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

SEE ACCOMPANYING NOTES AND ASSUMPTIONS TO THE FINANCIAL STATEMENTS.
THESE FINANCIAL STATEMENTS AND ACCOMPANYING NOTES AND ASSUMPTIONS HAVE NOT BEEN
SUBJECT TO AUDIT OR REVIEW.

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED OPENING CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 3, 1994
NOTES AND ASSUMPTIONS
ASSUMES CONVERSION OF SUBORDINATED DEBENTURES TO EQUITY
($000'S OMITTED)
(UNAUDITED)

INTRODUCTION

Hexcel Corporation ("Hexcel" or the "Debtor") and Subsidiaries has prepared
financial projections based on a business plan covering the period from
October 3, 1994 through December 31, 1998 (the "Projection Period"). These
projections reflect numerous assumptions with respect to the anticipated future
performance of the Debtor's consolidated operations, markets in which it
competes, general business and economic conditions, and other matters which are
beyond the control of the Debtor. Therefore, the actual results achieved
throughout the Projection Period will vary from the projected results. These
variations may be material. While management of the Debtor believes that the
assumptions underlying the projections, when considered on an overall basis, are
reasonable in light of current circumstances, no assurances can be given or are
being given that the projections will be realized.

The reader is encouraged to refer to the Plan of Reorganization ("Plan") and
Disclosure Statement for a more detailed discussion of financial terms of the
Plan.

The pre-reorganization balances were derived by considering the actual operating
results of Hexcel through July 3, 1994 and the estimated results for the quarter
ending October 2, 1994, to reflect estimated consolidated balance sheet amounts
as of October 3, 1994. The projected opening consolidated balance sheet and
reorganization adjustments reflect all debt and equity restructuring and cash
distributions resulting from the Plan. Cash distributions under the Plan are
assumed to occur on October 3, 1994 (the "Effective Date") for purposes of these
projections. As defined by the American Institute of Certified Public
Accountants, Statement of Position 90-7, "Fresh Start Accounting" is likely not
applicable to Hexcel. While a final determination cannot be made at this time,
"Fresh Start Accounting" has not been applied for the purposes of this projected
opening consolidated balance sheet.

NOTES:

1. The projected pre-reorganization cash amount reflects the projected cash
flow from operations, capital expenditures, restructuring expenditures,
working capital changes, professional fee payments and other items
(including certain net proceeds from the sale of the Euro-Resins business)
through October 2, 1994.

The projected post-reorganization cash balance of $4,359 is comprised of
$3,359 in the European subsidiaries and $1,000 in the United States. A
minimum cash balance of $1,000 is maintained in the United States for
working capital purposes, and cash from the European operations is assumed
to remain in Europe.

<PAGE>

2. Sources and uses on the Effective Date are as follows:

<TABLE>
<CAPTION>
SOURCES USES
------- ----
<S> <C> <C> <C>
Reinstated Debt $ 47,884 Reinstated Debt $ 47,884
Deferred Payments 12,748 Deferred Payments 12,748
Revolving Debt Facility 16,437 Other Unsecured Claims 43,413
Rights Offering and Stock Purchase 40,000 Debt Converted to Equity 19,442
Equity Issued to Creditors 22,866 Pre- and Post-petition Interest 5,194
Debt Discharge Income 13,913 Debt Discharged 13,913
--------- Cure Payments 1,912
---------

Total Liabilities Subject to 144,506
Compromise
DIP Financing 4,109
Bonuses and Closing Costs 3,277
Consideration given to 1,956
Principal Mutual for
covenant modifications
---------
TOTAL SOURCES $ 153,848 TOTAL USES $ 153,848
--------- ---------
--------- ---------
</TABLE>

3. Of the $3,260 of common stock issued to Principal Mutual, $1,956 is
consideration for modification of certain covenants on the 10.12% Principal
Mutual note. In the projections, this amount has been capitalized as a
deferred asset under prepaid expenses and other. The amount is amortized
over the term of the loan.

4. The $26,001 of long term debt on the pre-reorganization consolidated
balance sheet, including the current portion of long term debt, represents
European debt.

5. The reorganization adjustments to long term debt and current portion of
long term debt include the following pre-petition claims which are
reinstated debt instruments, new debt instruments issued and new deferred
payment obligations:

<TABLE>
<CAPTION>
Total Current Long Term
Obligation Debt Portion Portion
---------- ----- ------- ---------
<S> <C> <C> <C>
Principal Mutual 10.12% Note $30,000 $ 0 $ 30,000
Industrial Development Revenue Bonds 15,650 2,400 13,250
Priority Tax Deferred Payments, 7% 4,009 667 3,342
Secured Mortgages & Capital Lease Obligations 1,481 260 1,221
Hexcel - FYFE 5.31% Note 750 750 0
-------- ------- --------

Totals $51,890 $4,077 $ 47,813
-------- ------- --------
-------- ------- --------
</TABLE>

6. The pre-reorganization balance on the Effective Date of $4,109 for Debtor-
in Possession (DIP) financing will be paid in full on the Effective Date.
This balance was incurred to fund the Debtor during the period December 6,
1993 through October 2, 1994.

2
<PAGE>

7. Under the Plan, all existing common stock will remain outstanding, subject
to a 2 to 1 reverse stock split. Reorganization adjustments to common
stock result from the following transactions:

Rights Offering and Stock Purchase $ 40,000
Conversion of Subordinated Debentures 19,406
Principal Mutual Consideration 3,260
Settlement of Shareholder Lawsuit, paid in common stock 200
--------

Total Common Stock Reorganization Adjustment $ 62,866
--------
--------

The Plan assumes the $27,723 of subordinated debenture claims as of the
Effective Date is converted at a value equal to 70% of the total claim
amount.

8. Pre-reorganization payables and accruals consist of liabilities incurred by
European operations and U.S. post-petition payables and accruals incurred
during the normal course of business subsequent to December 6, 1993.
Reorganization adjustments of $8,742 primarily represent the reinstatement
of pre-petition environmental and legal claims which were not settled in
the Plan.

9. Included in the pre-reorganization retained earnings balance is a charge of
$21,448 to record the amount of allowed claims that exceeded the recorded
amount in the financial statements and the costs of executory contract
rejections and cure payments.

The reorganization adjustments to retained earnings represent the following
items:

Debt Discharge Income $ 13,913.
Closing Costs & Bonuses (3,277)
--------
Total Adjustment to Retained Earnings $ 10,636.
--------
--------

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED CONSOLIDATED INCOME STATEMENTS
FOR 3 MONTHS ENDING DECEMBER 31, 1994 AND
YEARS ENDING DECEMBER 31, 1995 THROUGH 1998
ASSUMES CONVERSION OF SUBORDINATED DEBENTURES TO EQUITY
($000'S OMITTED)
(UNAUDITED)

3 MONTHS ENDING YEAR ENDING DECEMBER 31,
DECEMBER 31, ---------------------------------------------------------
1994 1995 1996 1997 1998
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET SALES $72,071 $326,524 $322,836 $328,078 $335,887

COST OF GOODS SOLD 59,101 252,472 255,652 260,606 267,515
------------- ----------- ----------- ----------- -----------

GROSS MARGIN 12,970 74,052 67,184 67,472 68,372

OPERATING EXPENSES 11,349 42,923 44,965 45,899 47,370
------------- ----------- ----------- ----------- -----------

OPERATING INCOME 1,621 31,129 22,219 21,573 21,002

INTEREST EXPENSE, net (2,266) (8,423) (6,815) (5,969) (5,389)

BANKRUPTCY EXPENSES (1,650) 0 0 0 0

OTHER INCOME (EXPENSES) (213) (949) (880) (841) (721)
------------- ----------- ----------- ---------- -----------

INCOME (LOSS) BEFORE TAXES (2,508) 21,757 14,524 14,763 14,892

INCOME TAX PROVISION 52 2,303 3,656 3,492 3,414
------------- ----------- ----------- ----------- -----------

NET INCOME (LOSS) ($2,560) $19,454 $10,868 $11,271 $11478
------------- ----------- ----------- ----------- -----------
------------- ----------- ----------- ----------- -----------
</TABLE>

SEE ACCOMPANYING NOTES AND ASSUMPTIONS TO THE FINANCIAL STATEMENTS.
THESE FINANCIAL STATEMENTS AND ACCOMPANYING NOTES AND ASSUMPTIONS HAVE NOT BEEN
SUBJECT TO AUDIT OR REVIEW.

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED CONSOLIDATED BALANCE SHEETS
1994 THROUGH 1998
ASSUMES CONVERSION OF SUBORDINATED DEBENTURES TO EQUITY
($000'S OMITTED)
(UNAUDITED)

<TABLE>
<CAPTION>
10/03/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
---------- ---------- ----------- ---------- ---------- ----------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Cash $4,359 $3,701 $3,832 $10,155 $17,550 $24,923

Accounts Receivable 62,644 58,374 63,948 66,671 67,909 70,105

Inventories 48,454 46,172 44,550 45,419 46,284 47,714

Prepaid Expenses & Other 6,407 6,254 5,854 5,581 5,280 5,070
---------- ---------- ---------- ---------- ---------- ----------

TOTAL CURRENT ASSETS 121,864 114,501 118,184 127,826 137,023 147,812

Net Fixed Assets 93,201 92,605 83,417 80,799 78,276 73,827

Other Noncurrent Assets 21,531 21,864 15,787 16,246 16,337 16,490
---------- ---------- ---------- ---------- ---------- ----------

TOTAL ASSETS $236,596 $228,970 $217,388 $224,871 $231,636 $238,129
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------

LIABILITIES & EQUITY

Current Portion--Long Term Debt $26,524 $25,632 $21,551 $23,236 $19,967 $14,797

U.S. Revolving Debt Facility 16,437 21,699 3,052 0 0 0

Payables & Accruals 41,179 38,087 45,722 47,437 48,854 49,502

Restructuring Accrual 19,563 14,156 2,275 1,664 1,164 1,114
---------- ---------- ---------- ---------- ---------- ----------

TOTAL CURRENT LIABILITIES 103,703 99,574 72,600 72,237 69,985 65,413

Long Term Debt 51,367 50,202 48,855 45,232 42,377 41,364

Long Term Accrued Liabilities 22,492 22,672 19,956 20,556 21,156 21,756
---------- ---------- ---------- ---------- ---------- ----------

TOTAL LIABILITIES 177,562 177,448 143,411 138,025 133,518 138,533

Common Stock and Paid-in Capital 131,693 131,693 131,693 131,693 131,693 131,693

Accumulated Deficit and
Cumulative Translation Adjustment (72,659) (75,171) (55,716) (44,847) (33,575) (22,097)
---------- ---------- ---------- ---------- ---------- ----------

TOTAL EQUITY 59,034 56,522 75,977 86,846 98,118 109,956
---------- ---------- ---------- ---------- ---------- ----------

TOTAL LIABILITIES &
EQUITY $236,596 $228,970 $217,388 $224,871 $231,636 $238,129
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>

SEE ACCOMPANYING NOTES AND ASSUMPTIONS TO THE FINANCIAL STATEMENTS.
THESE FINANCIAL STATEMENTS AND ACCOMPANYING NOTES AND ASSUMPTIONS HAVE NOT BEEN
SUBJECT TO AUDIT OR REVIEW.

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR 3 MONTHS ENDING DECEMBER 31, 1994 AND
YEARS ENDING DECEMBER 31, 1995 THROUGH 1998
ASSUMES CONVERSION OF SUBORDINATED DEBENTURES TO EQUITY
($000'S OMITTED)
(UNAUDITED)

3 MONTHS ENDING YEAR ENDING DECEMBER 31,
DECEMBER 31, ---------------------------------------------------------
1994 1995 1996 1997 1998
--------------- ------------ ------------ ------------ ------------
CASH PROVIDED (USED) BY
OPERATIONS
<S> <C> <C> <C> <C> <C>
Net Income (Loss) ($2,560) $19,454 $10,868 $11,271 $11,478

Adjustments:
Depreciation & Amortizattion 3,591 14,047 13,581 14,625 15,382
Changes in Working Capital:
(Incr.) Decr. in Accounts Receivable 4,270 (5,573) (2,723) (1,238) (2,196)
(Incr.) Decr. in Inventories 2,282 1,622 (869) (865) (1,430)
(Incr.) Decr. Prepaids & Other 153 400 273 300 211
Incr. (Decr.) in Payable & Accruals (3,868) 6,966 425 543 1,642
Incr. (Decr.) in Other Liabilities 957 (2,046) 1,890 1,474 (394)
------------ ------------ ------------ ------------ ------------
Total Changes in Working Capital 3,794 1,369 (1,004) 214 (2,167)
------------ ------------ ------------ ------------ ------------

CASH PROVIDED (USED) BY 4,825 34,870 23,445 26,110 24,693
OPERATIONS

CASH PROVIDED (USED) BY
INVESTING ACTIVITIES

Capital Expenditures (5,575) (10,100) (11,906) (11,545) (10,378)
Proceeds from the Disposition of Assets 0 4,000 1,500 0 0
Cash Restructuring Costs (2,629) (5,208) (611) (500) (50)
Other Investing Activities (485) 644 (1,015) (647) (709)
------------ ------------ ------------ ------------ ------------

CASH PROVIDED (USED) BY (8,689) (10,664) (12,032) (12,692) (11,137)
INVESTING ACTIVITIES

CASH PROVIDED (USED) BY
FINANCING ACTIVITIES

Net Proceeds/(Repayments) of Debt 3,206 (24,075) (5,090) (6,023) (6,183)
Other Financing Activities 0 0 0 0 0
------------ ------------ ------------ ------------ ------------

CASH PROVIDED (USED) BY 3,206 (24,075) (5,090) (6,023) (6,183)
FINANCING ACTIVITIES
------------ ------------ ------------ ------------ ------------

NET CASH PROVIDED/(USED) (658) 131 6,323 7,395 7,373

CASH BALANCE, Beginning of Period 4,359 3,701 3,832 10,155 17,550
------------ ------------ ------------ ------------ ------------

CASH BALANCE, End of Period $3,701 $3,832 $10,155 $17,550 $24,923
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES AND ASSUMPTIONS TO THE FINANCIAL STATEMENTS.
THESE FINANCIAL STATEMENTS AND ACCOMPANYING NOTES AND ASSUMPTIONS HAVE NOT BEEN
SUBJECT TO AUDIT OR REVIEW.

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED CONSOLIDATED FINANCIAL STATEMENTS
1994 THROUGH 1998
NOTES AND ASSUMPTIONS
ASSUMES CONVERSION OF SUBORDINATED DEBENTURES TO EQUITY
($000'S OMITTED)
(UNAUDITED)

The projected consolidated financial statements for Hexcel Corporation ("Hexcel"
or the "Debtor") and Subsidiaries are presented for the three months ending
December 31, 1994 and the four years ending December 31, 1998. The effective
date of the Plan of Reorganization (the "Plan") is assumed to be October 3, 1994
(the "Effective Date").

The projected consolidated financial statements are presented in accordance with
generally accepted accounting principles consistent with Hexcel's current
accounting policies and practices. As defined by the American Institute of
Certified Public Accountants, Statement of Position 90-7, "Fresh Start
Accounting" is likely not applicable to Hexcel. While a final determination
cannot be made at this time, "Fresh Start Accounting" has not been applied for
the purposes of these projected consolidated financial statements.

SETTLEMENT OF BANKRUPTCY CLAIMS

The projected consolidated financial statements are based on the settlement of
liabilities subject to compromise as presented in the Plan. The reader is
encouraged to refer to the Plan and Disclosure Statement for a more detailed
discussion of financial terms. A summary of the major points of the Plan are as
follows:

1. PRIORITY TAX CLAIMS
Priority tax claims in the amount of $4,009 will be paid in equal annual
cash payments over six years, bearing a fixed annual rate of interest of
7%.

2. SECURED CLAIMS.
The secured claims (defined as the Graham Industrial Mortgage, the Greater
Pottsville Mortgage and the Pottsville PIDA (Schuylkill) Mortgage) are
reinstated. Pre-petition and post-petition interest is paid in cash on the
Effective Date.

3. INDUSTRIAL DEVELOPMENT REVENUE BONDS (IDRBs) AND BNP LETTERS OF CREDIT
Seven of the IDRBs (including the California Pollution Control Financing
Authority Bonds, the Industrial Development Authority of the City of Casa
Grande Bonds, the Young County #1 Industrial Development Corporation Bonds,
the Guadalupe-Blanco River Authority Industrial Development Corporation
Bonds, the Port of Skagit County Industrial Development Corporation Bonds,
the Industrial Development Authority of the County of Los Angeles Bonds and
the City of Lancaster Bonds) and the letters of credit supporting them will
be reinstated, with cash payments to BNP on the Effective Date of $451 for
interest reimbursement and pre-petition fees and expenses and of $502 for
BNP's modification of covenants and commitment to extend the letters of
credit until October 1, 1998. Commencing 90 days after the Effective Date
and every 3 months thereafter until the expiration of the BNP Letters of
Credit, the Debtor will deposit $600 in a sinking fund in which BNP and/or
the trustees for the IDRBs will hold a first priority security interest.
The bonds issued by the Economic Development Corporation of the County of
Ottawa and the letter of credit supporting it are the subject of a
reimbursement agreement with Cambrex Corporation and will be reinstated.

<PAGE>

4. GENERAL UNSECURED CLAIMS
The general unsecured claims (including the Revolver Bank claims,
Thermoplastics note claim, trade claims, executory contract rejection
claims, and the estimated Dainippon Ink & Chemicals, Inc. contingent claim)
will be paid in cash as of the Effective Date. The litigation claims will
be paid in cash when and if they become allowed claims. Management has
estimated the cash requirements relating to these claims and these payments
are reflected in the projected consolidated financial statements.

5. PRINCIPAL MUTUAL NOTES
On the Effective Date, the Principal Mutual 10.12% Note will be reinstated
at its original principal amount of $30,000, and Principal Mutual will
receive a cash payment of $3,037 for pre-petition and post-petition accrued
interest on that note. Principal Mutual will also receive Reorganized
Hexcel Common Stock for modifications to covenants and the prepayment
penalty in its note agreement. Principal Mutual will be paid in cash for
its outstanding principal and pre-petition and post-petition interest,
totaling $810, on its 8.75% note.

6. ENVIRONMENTAL CLAIMS
The environmental claims will be paid through the ordinary course of
business. Management has estimated the cash requirements relating to these
claims and these payments are reflected in the projected consolidated
financial statements.

7. SUBORDINATED DEBENTURES
The subordinated debenture claims, including principal and pre-petition and
post-petition interest, will be converted to common stock at a value equal
to 70% of the total claim amount.

8. HEXCEL FYFE
On June 22, 1994, Hexcel's motion to begin immediate payment of the Hexcel
FYFE obligation was approved. The approved payment schedule is reflected
in the projected consolidated financial statements.

9. HEXCEL EQUITY HOLDERS
Each holder of Hexcel Common Stock, as of the Effective Date, will receive
one share of Reorganized Hexcel Common Stock for every 2 shares of Common
Stock. Additionally, each holder of Hexcel Common Stock, as of the
Effective Date, will receive certain Rights entitling such holder to
purchase additional shares of Reorganized Hexcel Common Stock.

10. HEXCEL LYON NOTE AND OTHER INTERCOMPANY PAYABLES
The holder of the Hexcel Lyon claim will receive a note for the principal
amount of the claim and accrued interest which will be due on demand at any
time after payment in full of the amended and restated Principal Mutual
Note and will bear interest at 6.9% payable semi-annually. Other
miscellaneous intercompany payables will also be paid after payment in full
of the Principal Mutual Note and will bear no interest. As these are
intercompany claims, they are not reflected on the projected consolidated
financial statements.

<PAGE>

SUMMARY TERMS OF POST-REORGANIZATION DEBT

Principal Mutual - $30,000 principal
- 10.12% interest rate
- Maturity of 10/1/98
- Semi-annual interest payments

Revolving Credit Facility - $35,000 line of credit
- 1.5% above prime
- Maturity of 10/1/97
- Secured by all assets

IDRBs - 7 Bonds totaling $15,650
- Fluctuating rates estimated at 4.0%
- Maturities ranging from 2007 through 2024
- Letters of credit supporting IDRBs require
sinking fund payments of $600 every three
months beginning 90 days after the
Effective Date

Mortgages - Three secured mortgages totaling $548
- Interest rates range from 2% to 9%
- Maturities range from 6/98 to 2/07

Capital Leases - Two capital leases with principal balances
totaling $933
- Lease 1 -- $159 @ 7.32% maturing 1/1/95
- Lease 2 -- $774 @ 9.09% maturing 11/21/99

Hexcel - FYFE - Effective date balance of $750
- 5.31% interest rate
- Quarterly principal payments of $250 plus
interest
- Terms approved by Bankruptcy Court in June
1994

European Debt - Various instruments principally consisting
of short term notes held in Belgium and
Lyon.

OPERATING ASSUMPTIONS

NET SALES

DOMESTIC SALES. Hexcel's forecasting models were used as the basis of the sales
forecast in conjunction with significant input from Hexcel's sales and marketing
personnel and product managers. Sales were forecasted for 1994 on an individual
customer level and product line basis. The detailed sales forecast by customer
is then compared to the marketing department's top down view of sales based on
build rates, industry trends, etc. Sales for the years 1995 through 1998 were
held constant from 1994 business plan levels, adjusted for major program
changes, the anticipated Northrop agreement (see below) and the sale of the Euro
and U.S. Resins businesses. Much of the expected increase in sales from 1995 to
1998 is due to the forecasted increase in shipments for the Boeing 777.

<PAGE>

INTERNATIONAL SALES. Hexcel's international business was forecasted on a
subsidiary by subsidiary basis. Each subsidiary was responsible for forecasting
its financial performance based on local market conditions in which it operates.
Assumptions for major program changes were provided by Hexcel's sales and
marketing personnel and product managers. The projections assume the sale of
the Euro-Resins business prior to the Effective Date.

NORTHROP AGREEMENT. Hexcel has been holding discussions with Northrop regarding
the terms of Hexcel's continuing support for the B-2 program. Hexcel
anticipates entering into an agreement with Northrop to supply, on favorable
terms, certain LO materials for the B-2 or, alternatively, to sell Northrop the
Chandler facility. The projected consolidated financial statements assume that
the proceeds from this agreement will be realized primarily in 1995. Sales
relating to the B-2 program beyond 1995 have not been included in the
projections.

GROSS MARGINS
Standard variable margins were used in 1994 and held constant for 1995 through
1998 at the product family level. These margins are based on current costs. The
U.S. business assumes no inflation for either revenue or factory costs, based on
the assumption that price increases or production improvements will be
sufficient to offset any factory cost increases. Additional process improvement
and material yield opportunities have been identified, but as they have not been
quantified, they are not reflected in the projections. The European revenues and
factory costs reflect inflation at approximately 3%.

Fixed plant costs for 1994 assume no additional plant closures, other than the
closing of the Graham facility and the sale of Euro-Resins. Domestic fixed
plant costs for 1995 through 1998 are maintained at the fourth quarter 1994 run
rates which include the closure of Graham and are adjusted for the sale of the
U.S. Resins facility on January 1, 1995 and the anticipated Northrop agreement.
Further margin improvements are projected in Europe as a result of restructuring
initiatives taken in Belgium in late 1994.

SALES & MARKETING EXPENSES
A reduction in personnel occurred in the sales and marketing departments in
April 1994 resulting in significant cost reductions. Sales and marketing
expenses for 1995 through 1998 are held at the same levels as the fourth quarter
of 1994, adjusted for inflation of 3% per year.

GENERAL AND ADMINISTRATIVE EXPENSES
Significant reductions in general and administrative personnel have been made
over the last year. Most of these occurred in the summer and fall of 1993 in
conjunction with the change from strategic business units to a functional
organization. Minor staff reductions were completed during April 1994. The
aggregate of these staff reductions result in significant cost savings. General
and administrative expenses in 1995 and beyond are held at the same levels as
the fourth quarter of 1994, adjusted for inflation of 3% per year.

RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses have been estimated at approximately 2.6% of
sales in 1994 through 1998, consistent with Hexcel's recent experience in actual
spending. Successful research and development activities are critical to
Hexcel's future, and Hexcel will need to continue to balance its needs to
effectively invest in research and development and to control its costs. Hexcel
undertook a rigorous analysis of its research and development projects in the
late summer of 1993. Based on this assessment, Hexcel significantly reduced the
number of projects in order to better focus its activities and more effectively
spend its money.

INCOME TAXES
Taxable income is forecasted to be substantially offset by utilization of Net
Operating Loss Carryforwards ("NOLs"). It is assumed that the total NOLs will
not be materially reduced by the restructuring because the recoveries of
creditors under the Plan do not result in taxable debt cancellation income due
to the applicability of the stock for debt exception under the tax code.

<PAGE>

Because of the ownership change which will occur under the Plan, the utilization
of NOLs in the U.S. after the Effective Date will be affected. It is expected
that the Debtor will make use of Section 382(l)(6) of the Internal Revenue Code,
whereby the annual allowable NOL deduction will be limited to an amount equal to
the product of the fair market value of the Hexcel stock immediately following
the ownership change caused by the Plan and the long term federal tax-exempt
rate (currently 6.01%). The Debtor will not qualify for other rules permitting
unlimited use of NOLs due to the makeup of the equity ownership post-
restructuring.

At this time it is uncertain whether the Debtor has a net unrealized built-in
gain or loss; however, Hexcel believes that it does not have a net unrealized
built-in loss and therefore it is assumed that future tax losses on facility or
asset dispositions will be fully deductible. However, due to the uncertainty of
the existence of a net unrealized built-in gain, no increase in the annual limit
on NOLs has been assumed.

The 1995 tax provision assumes that the income from certain components of the
potential Northrop agreement may be offset by pre-ownership change NOLs.

CAPITAL EXPENDITURES
Capital expenditures for 1990 to 1992 averaged over $18,000 per year. For
several years prior to 1990, capital expenditures were even greater due to the
addition of the Chandler facility. Due to the low cash levels in 1993, Hexcel
tightly monitored capital expenditures, and they were reduced to $6,500. On-
going capital expenditures during the projection period are set at levels
between $10,000 and $12,000 per year. These expenditures include replacement,
environmental and discretionary items.

CASH RESTRUCTURING COSTS
The cash restructuring costs include the Graham closure, the move of certain
product lines from Chandler to Casa Grande, severance, consulting fees, certain
MIS implementation costs and some relocations.

BALANCE SHEET ASSUMPTIONS

CASH
Hexcel is assumed to have a minimum U.S. cash balance of $1,000, with all cash
flow from the U.S. being swept to the revolving credit facility to repay
outstanding balances. Once the revolving credit facility has been paid in full,
cash balances were accumulated and not assumed to pay off debt early. Cash
balances in Europe are assumed to remain in Europe as working capital with the
exception of proceeds from the sale of the Euro-Resins business.

WORKING CAPITAL ACCOUNTS
Working capital accounts (inventory, accounts receivable, prepaid expenses,
accounts payable and accrued liabilities) are individually projected based on
management's estimates of underlying business trends, taking into consideration
the following extraordinary items:

- Due to the U.S. Bankruptcy proceedings, days in accounts payable in
the U.S. are held at approximately 10 days until the end of 1994, then
increased to normal 30 day terms beginning January 1, 1995.

- The U.S. Resins business is assumed to be sold as of January 1, 1995.

NET FIXED ASSETS
Net fixed assets are reduced for the closure of the Graham facility, an asset
write-down for Chandler, and the sale of Euro-Resins in 1994. In 1995, the U.S.
Resins facility (Chatsworth) is assumed to be sold, with proceeds received in
1996.

<PAGE>

OTHER NONCURRENT ASSETS
In 1995, the other noncurrent assets include the charge off of certain assets
against expected revenues to be received from the Northrop agreement.

CURRENT PORTION - LONG TERM DEBT AND LONG TERM DEBT
After reorganization adjustments on October 3, 1994, the current portion of long
term debt and long term debt consist of reinstated debt instruments, new debt
instruments issued and new deferred payment obligations are as follows:

<TABLE>
<CAPTION>
Total Current Long Term
Obligation Debt Portion Portion
---------- ----- ------- ---------
<S> <C> <C> <C>
European Debt - various $26,001 $ 22,447 $3,554
Principal Mutual 10.12% Note 30,000 0 30,000
Industrial Development Revenue Bonds - various 15,650 2,400 13,250
Priority Tax Deferred Payments, 7% 4,009 667 3,342
Secured Mortgages & Capital Lease Obligations 1,481 260 1,221
Hexcel - FYFE 5.31% Note 750 750 0
------- --------- -------
Totals $77,891 $ 26,524 $51,367
------- --------- -------
------- --------- -------
</TABLE>

The $30,000 Principal Mutual 10.12% Note is due on October 1, 1998. For
purposes of these projection, the note is assumed to be refinanced on similar
terms.

ACCRUED LIABILITIES - LONG TERM
Accrued liabilities are primarily comprised of accounting accruals for FASB 106
(post retirement benefits) and FASB 87 (pension liabilities).

COMMON STOCK
Common Stock is adjusted for the rights offering, the conversion of the
subordinated debt, the issuance of stock to Principal Mutual and the issuance
of stock in settlement of a shareholders' lawsuit.

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED OPENING CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 3, 1994
ASSUMES REINSTATEMENT OF SUBORDINATED DEBENTURES
($000'S OMITTED)
(UNAUDITED)

<TABLE>
<CAPTION>
PRE- POST-
REORGANIZATION REORGANIZATION REORGANIZATION
BALANCES ADJUSTMENTS BALANCES
-------------- -------------- --------------
ASSETS
<S> <C> <C> <C>
Cash $4,359 [1] $0 $4,359

Accounts Receivable 62,644 0 62,644

Inventories 48,454 0 48,454

Prepaid Expenses & Other 4,451 1,956 [3] 6,407
---------- ---------- ----------
TOTAL CURRENT ASSETS 119,908 1,956 121,864

Net Fixed Assets 93,201 0 93,201

Other Noncurrent Assets 21,531 0 21,531
---------- ---------- ----------
TOTAL ASSETS $234,640 $1,956 $236,596
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES & EQUITY

Current Portion - Long Term Debt $22,447 [4] $4,077 [5] $26,524

U.S. Revolving Debt Facility 0 8,535 8,535

DIP Financing 4,109 (4,109) [6] 0

Payables & Accruals 32,437 [8] 8,742 [8] 41,179

Restructuring Accrual 19,563 0 19,563
---------- ---------- ----------

TOTAL CURRENT LIABILITIES 78,556 17,245 95,801

Long Term Debt 3,554 [4] 73,438 [5] 76,992

Long Term Accrued Liabilities 22,492 0 22,492
---------- ---------- ----------

TOTAL LIABILITIES 104,602 90,683 195,285

LIABILITIES SUBJECT TO 144,506 (144,506) 0
COMPROMISE

Common Stock and Paid-in Capital 68,827 53,460 [7] 122,287

Accumulated Deficit and
Cumulative Translation Adjustment (83,295) [9] 2,319 [9] (80,976)
---------- ---------- ----------

TOTAL EQUITY (14,468) 55,779 41,311
---------- ---------- ----------

TOTAL LIABILITIES & EQUITY $234,640 $1,956 $236,596
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

SEE ACCOMPANYING NOTES AND ASSUMPTIONS TO THE FINANCIAL STATEMENTS.
THESE FINANCIAL STATEMENTS AND ACCOMPANYING NOTES AND ASSUMPTIONS HAVE NOT BEEN
SUBJECT TO AUDIT OR REVIEW.

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED OPENING CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 3, 1994
NOTES AND ASSUMPTIONS
ASSUMES REINSTATEMENT OF SUBORDINATED DEBENTURES
($000'S OMITTED)
(UNAUDITED)

INTRODUCTION

The reader is encouraged to refer to the Plan of Reorganization ("Plan") and
Disclosure Statement for a more detailed discussion of financial terms of the
Plan.

NOTES:

<PAGE>

2. Sources and uses on the Effective Date are as follows:

<TABLE>
<CAPTION>
SOURCES USES
------- ----
<S> <C> <S> <C>
Reinstated Debt $ 73,509 Reinstated Debt $ 73,509
Deferred Payments 12,748 Deferred Payments 12,748
Revolving Debt Facility 8,535 Other Unsecured Claims 43,413
Rights Offering and Stock Purchase 50,000 Debt Converted to Equity 1,504
Equity Issued to Creditors 3,460 Pre- and Post-petition Interest 5,824
Debt Discharge Income 5,596 Debt Discharged 5,596
--------- Cure Payments 1,912
---------

4. The $26,001 of long term debt on the pre-reorganization consolidated
balance sheet, including the current portion of long term debt, represents
European debt.

<TABLE>
<CAPTION>
Total Current Long Term
Obligation Debt Portion Portion
---------- ----- ------- ---------
<S> <C> <C> <C>
Principal Mutual 10.12% Note $30,000 $ 0 $30,000
Subordinated Debentures, 7% 25,625 0 25,625
Industrial Development Revenue Bonds 15,650 2,400 13,250
Priority Tax Deferred Payments, 7% 4,009 667 3,342
Secured Mortgages & Capital Lease Obligations 1,481 260 1,221
Hexcel - FYFE 5.31% Note 750 750 0
------- ------- -------

Totals $77,515 $ 4,077 $73,438
------- ------- -------
------- ------- -------
</TABLE>

<PAGE>

7. Under the Plan, all existing common stock will remain outstanding, subject
to a 2 to 1 reverse stock split. Reorganization adjustments to common
stock result from the following transactions:

<TABLE>
<CAPTION>
<S> <C>
Rights Offering and Stock Purchase $ 50,000
Principal Mutual Consideration 3,260
Settlement of Shareholder Lawsuit, paid in common stock 200
--------

Total Common Stock Reorganization Adjustment $ 53,460
--------
--------
</TABLE>

The reorganization adjustments to retained earnings represent the following
items:

<TABLE>
<CAPTION>
<S> <C>
Debt Discharge Income $ 5,596.
Closing Costs & Bonuses (3,277)
---------

Total Adjustment to Retained Earnings $ 2,319
---------
---------
</TABLE>

3
<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED CONSOLIDATED INCOME STATEMENTS
FOR 3 MONTHS ENDING DECEMBER 31, 1994 AND
YEARS ENDING DECEMBER 31, 1995 THROUGH 1998
ASSUMES REINSTATEMENT OF SUBORDINATED DEBENTURES
($000'S OMITTED)
(UNAUDITED)

3 MONTHS ENDING YEAR ENDING DECEMBER 31,
DECEMBER 31, -------------------------------------------
1994 1995 1996 1997 1998
------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
NET SALES $72,071 $326,524 $322,836 $328,078 $335,887

COST OF GOODS SOLD 59,101 252,472 255,652 260,606 267,515
------------ ----------- ----------- ---------- ----------

GROSS MARGIN 12,970 74,052 67,184 67,472 68,372

OPERATING EXPENSES 11,349 42,923 44,965 45,899 47,370
------------ ----------- ----------- ---------- ----------

OPERATING INCOME 1,621 31,129 22,219 21,573 21,002

INTEREST EXPENSE, net (2,605) (9,589) (8,233) (7,590) (7,058)

BANKRUPTCY EXPENSES (1,650) 0 0 0 0

OTHER INCOME (EXPENSES) (213) (949) (880) (841) (721)
------------ ----------- ----------- ---------- ----------

INCOME (LOSS) BEFORE TAX (2,847) 20,591 13,106 13,142 13,223

INCOME TAX PROVISION 52 2,076 3,328 3,083 2,987
------------ ----------- ----------- ---------- ----------

NET INCOME (LOSS) ($2,899) $18,515 $9,778 $10,059 $10,236
------------ ----------- ----------- ---------- ----------
------------ ----------- ----------- ---------- ----------

</TABLE>

SEE ACCOMPANYING NOTES AND ASSUMPTIONS TO THE FINANCIAL STATEMENTS.
THESE FINANCIAL STATEMENTS AND ACCOMPANYING NOTES AND ASSUMPTIONS HAVE NOT BEEN
SUBJECT TO AUDIT OR REVIEW.

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED CONSOLIDATED BALANCE SHEETS
1994 THROUGH 1998
ASSUMES REINSTATEMENT OF SUBORDINATED DEBENTURES
($000'S OMITTED)
(UNAUDITED)

<TABLE>
<CAPTION>
10/03/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS

Cash $4,359 $3,702 $7,925 $15,910 $21,717 $28,575

Accounts Receivable 62,644 58,374 63,948 66,671 67,909 70,105

Inventories 48,454 46,172 44,550 45,419 46,284 47,714

Prepaid Expenses & Other 6,407 6,254 5,854 5,581 5,280 5,070
--------- --------- --------- --------- --------- ---------

TOTAL CURRENT ASSETS 121,864 114,502 122,277 133,581 141,190 151,464

Net Fixed Assets 93,201 92,604 83,416 80,797 78,273 73,825

Other Noncurrent Assets 21,531 21,864 15,787 16,246 16,337 16,490
--------- --------- --------- --------- --------- ---------

TOTAL ASSETS $236,596 $228,970 $221,480 $230,624 $235,800 $241,779
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------

LIABILITIES & EQUITY

Current Portion -- Long Term Debt $26,524 $25,632 $21,551 $23,136 $19,967 $14,797

U.S. Revolving Debt Facility 8,535 13,688 0 0 0 0

Payables & Accruals 41,179 38,536 46,243 47,658 48,698 50,074

Restructuring Accrual 19,563 14,156 2,275 1,664 1,164 1,114
--------- --------- --------- --------- --------- ---------

TOTAL CURRENT LIABILITIES 95,801 92,012 70,069 72,458 69,829 65,985

Long Term Debt 76,992 75,827 74,480 70,857 68,002 66,989

Long Term Accrued Liabilites 22,492 22,672 19,956 20,556 21,156 21,756
--------- --------- --------- --------- --------- ---------

TOTAL LIABILITIES 195,285 190,511 164,505 163,871 158,987 154,730

Common Stock and Paid-in Capital 122,287 122,287 122,287 122,287 122,287 122,287

Accumulated Deficit and
Cumulative Translation Adjustment (80,976) (83,828) (65,312) (55,534) (45,474) (35,238)
--------- --------- --------- --------- --------- ---------

TOTAL EQUITY 41,311 38,459 56,975 66,753 76,813 87,049
--------- --------- --------- --------- --------- ---------

TOTAL LIABILITIES & EQUITY $236,596 $228,970 $221,480 $230,624 $235,800 $241,779
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>

SEE ACCOMPANYING NOTES AND ASSUMPTIONS TO THE FINANCIAL STATEMENTS.
THESE FINANCIAL STATEMENTS AND ACCOMPANYING NOTES AND ASSUMPTIONS HAVE NOT BEEN
SUBJECT TO AUDIT OR REVIEW.

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR 3 MONTHS ENDING DECEMBER 31, 1994 AND
YEARS ENDING DECEMBER 31, 1995 THROUGH 1998
ASSUMES REINSTATEMENT OF SUBORDINATED DEBENTURES
($000'S OMITTED)
(UNAUDITED)

3 MONTHS ENDING YEAR ENDING DECEMBER 31,
DECEMBER 31, ---------------------------------------------------------
1994 1995 1996 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH PROVIDED (USED) BY
OPERATIONS
Net Income (Loss) ($2,899) $18,515 $9,778 $10,059 $10,236

Adjustments:
Depreciation & Amortization 3,591 14,047 13,581 14,625 15,382
Changes in Working Capital:
(Incr.) Decr. in Accounts Receivable 4,270 (5,573) (2,723) (1,238) (2,196)
(Incr.) Decr. in Inventories 2,282 1,622 (869) (865) (1,430)
(Incr.) Decr. Prepaids & Other 153 400 273 300 211
Incr. (Decr.) in Payable & Accruals (3,868) 6,966 425 543 1,642
Incr. (Decr.) in Other Liabilities 1,406 (1,974) 1,590 1,098 333
------------ ------------ ------------ ----------- -----------
Total Changes in Working capital 4,243 1,441 (1,304) (162) (1,440)
------------ ------------ ------------- ------------ -----------

CASH PROVIDED (USED) BY 4,935 34,003 22,055 24,522 24,178
OPERATIONS

CASH PROVIDED (USED) BY
INVESTING ACTIVITIES

CASH PROVIDED (USED) BY (8,689) (10,664) (12,032) (12,692) (11,137)
INVESTING ACTIVITIES

CASH PROVIDED (USED) BY
FINANCING ACTIVITIES

Net Proceeds/(Repayments)of Debt 3,097 (19,116) (2,038) (6,023) (6,183)
Other Financing Activities 0 0 0 0 0
------------ ------------- ------------- ------------- -------------

CASH PROVIDED (USED) BY 3,097 (19,116) (2,038) (6,023) (6,183)
FINANCING ACTIVITIES ------------ ------------ ------------ ------------- ------------

NET CASH PROVIDED/(USED) (657) 4,223 7,985 5,807 6,858

CASH BALANCE, Beginning of Period 4,359 3,702 7,925 15,910 21,717
------------ ------------ ------------ ------------ ------------

CASH BALANCE, End of Period $3,702 $7,925 $15,910 $21,717 $28,575
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES AND ASSUMPTIONS TO THE FINANCIAL STATEMENTS.
THESE FINANCIAL STATEMENTS AND ACCOMPANYING NOTES AND ASSUMPTIONS HAVE NOT BEEN
SUBJECT TO AUDIT OR REVIEW.

<PAGE>

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED CONSOLIDATED FINANCIAL STATEMENTS
1994 THROUGH 1998
NOTES AND ASSUMPTIONS
ASSUMES REINSTATEMENT OF SUBORDINATED DEBENTURES
($000'S OMITTED)
(UNAUDITED)

SETTLEMENT OF BANKRUPTCY CLAIMS

1. PRIORITY TAX CLAIMS
Priority tax claims in the amount of $4,009 will be paid in equal annual
cash payments over six years, bearing a fixed annual rate of interest of
7%.

<PAGE>

7. SUBORDINATED DEBENTURES
On the Effective Date, the subordinated debentures, with an interest rate
of 7.0%, due August 1, 2011, will be reinstated at their total principal
amount of $25,625 and bondholders will receive cash totaling $2,098 for
pre-petition and post-petition accrued interest.

<PAGE>

SUMMARY TERMS OF POST-REORGANIZATION DEBT

Principal Mutual - $30,000 principal
- 10.12% interest rate
- Maturity of 10/1/98
- Semi-annual interest payments

Revolving Credit Facility - $35,000 line of credit
- 1.5% above prime
- Maturity of 10/1/97
- Secured by all assets

Subordinated Debentures - $25,625 principal
- 7.0% interest rate
- Maturity of 8/1/11
- Semi-annual interest payments

Mortgages - Three secured mortgages totaling $548
- Interest rates range from 2% to 9%
- Maturities range from 6/98 to 2/07

Capital Leases - Two capital leases with principal balances
totaling $933
- Lease 1 -- $159 @ 7.32% maturing 1/1/95
- Lease 2 -- $774 @ 9.09% maturing 11/21/99

Hexcel - FYFE - Effective date balance of $750
- 5.31% interest rate
- Quarterly principal payments of $250 plus
interest
- Terms approved by Bankruptcy Court in June
1994

European Debt - Various instruments principally consisting
of short term notes held in Belgium and
Lyon.

OPERATING ASSUMPTIONS

NET SALES

<PAGE>

INCOME TAXES
Taxable income is forecasted to be substantially offset by utilization of Net
Operating Loss Carryforwards ("NOLs"). It is assumed that the total NOLs will
not be materially reduced by the restructuring because the full recoveries of
creditors under the Plan do not result in taxable debt cancellation income.

4
<PAGE>

The 1995 tax provision assumes that the income from certain components of the
potential Northrop agreement may be offset by pre-ownership change NOLs.

BALANCE SHEET ASSUMPTIONS

- The U.S. Resins business is assumed to be sold as of January 1, 1995.

<PAGE>

OTHER NONCURRENT ASSETS
In 1995, the other noncurrent assets include the charge off of certain assets
against expected revenues to be received from the Northrop agreement.

<TABLE>
<CAPTION>
Total Current Long Term
Obligation Debt Portion Portion
---------- ----- ------- ---------
<S> <C> <C> <C>
European Debt - various $ 26,001 $ 22,447 $ 3,554
Principal Mutual 10.12% Note 30,000 0 30,000
Subordinated Debentures, 7% 25,625 0 25,625
Industrial Development Revenue Bonds - various 15,650 2,400 13,250
Priority Tax Deferred Payments, 7% 4,009 667 3,342
Secured Mortgages & Capital Lease Obligations 1,481 260 1,221
Hexcel - FYFE 5.31% Note 750 750 0
-------- --------- --------

Totals $103,516 $ 26,524 $ 76,992
-------- --------- --------
-------- --------- --------
</TABLE>

The $30,000 Principal Mutual 10.12% Note is due on October 1, 1998. For
purposes of these projection, the note is assumed to be refinanced on similar
terms.

ACCRUED LIABILITIES - LONG TERM
Accrued liabilities are primarily comprised of accounting accruals for FASB 106
(post retirement benefits) and FASB 87 (pension liabilities).

<PAGE>

EXHIBIT F

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Hexcel Corporation
(Debtor-in-Possession)

We have compiled the accompanying Liquidation Analysis (the "Analysis") for
Hexcel Corporation ("Hexcel") in accordance with the standards established by
the American Institute of Certified Public Accountants. The Analysis represents
management's estimated net value of Hexcel's assets as of April 3, 1994, if
Hexcel was to be liquidated under provisions of Chapter 7 of the United States
Bankruptcy Code, and the application of net proceeds of this liquidation among
Hexcel's creditors. The Analysis and this report were prepared for the use of
Hexcel in assessing the possible outcome of a liquidation of their assets under
certain described assumptions and should not be used for any other purpose. The
presentation utilized in the Analysis is not designed for those who are not
informed about such matters.

A compilation is limited to presenting information that is the representation of
management and does not include an evaluation of the support for underlying
assumptions. We have not audited or reviewed the Analysis and, accordingly, do
not express an opinion or any other form of assurance on the estimates and
assumptions that, although considered reasonable by management, are inherently
subject to significant uncertainties and contingencies beyond the control of
management. Accordingly, there can be no assurance that the results shown would
be realized if Hexcel was liquidated, and actual results in such a case could
vary materially from those presented. If actual results were lower than those
shown, or if the assumptions used in formulating the Analysis were not realized,
distributions to each member of each class of claims could be adversely
affected. We have no responsibility to update this report for events and
circumstances occurring after the date of this report.

Arthur Andersen & Co.
San Francisco, California
July 15, 1994

<PAGE>

HEXCEL CORPORATION
LIQUIDATION ANALYSIS
AS OF APRIL 3, 1994
(IN THOUSANDS)

Statement of Assets Estimated
Footnote Book Recovery Liquidation
Reference Value % Value
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Current Assets
Cash & Cash Investments 1 $321 100% $321
Accounts Receivable (Net) 2 31,224 73% 22,930
Inventory 3 30,718 54% 16,694
Accounts Receivable- Intercompany 4 8,597 0% 0
Other Current Assets 5 10,235 17% 1,695
--------- ---------- ------------
Total Current Assets $81,094 51% $41,640

Net Property and Equipment 6 $76,612 43% $32,818

Other Assets
Notes Receivable 7 $1,676 54% $898
Investments 8 16,236 25% 4,090
Intangibles - Net 9 4,703 4% 10,191
Other Non-Current Assets 10 4,203 55% 2,299
Intercompany Note Receivable 11 5,600 0% 0
--------- ---------- ------------
Total Other Assets $32,418 54% $17,477

Total Assets $190,125 48% $91,935
---------
---------

Other Proceeds 12
Sale of Hexcel Lyon $13,095
Sale of Hexcel Euro Resins 6,305
------------
Total Other Proceeds $19,400
------------

Total Available for Payments $111,335

Costs Associated with Liquidation
Chapter 7 Professional Fees 13 ($3,340)
Operating Costs 14
Net Administration (2,448)
Plant (7,996)
------------
Total Costs Associated with Liquidation ($13,784)
------------

Net Estimated Liquidation Proceeds $97,552
------------
------------
</TABLE>
<PAGE>

HEXCEL CORPORATION
LIQUIDATION ANALYSIS
AS OF APRIL 3, 1994
(IN THOUSANDS)

Allocation of Net Estimated Liquidation Proceeds 15
<TABLE>
<CAPTION>
AMOUNT AMOUNT
OF AVAILABLE
FOOTNOTE CLAIM CLAIM FOR RECOVERY
REFERENCE AMOUNT RECOVERED PAYMENTS %
------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Estimated Liquidation Proceeds $97,552

Post Petition Bank Debt 16 $0 $0 $97,552

Chapter 11 Post Petition Claims 17
Post Petition Liabilities $6,859 $6,859 100%
Administrative Expenses - Professional Fees 2,014 2,014 100%
------------ ----------
Total Chapter 11 Post Petition Claims $8,873 $8,873 $88,678

Priority Claims 18 4,009 4,009 $84,669 100%

Secured Claims 19 $565 $565 $84,104 100%

Senior Unsecured Claims 20
Senior Unsecured Pre-petition Claims 88,772 68,786 77%
Environmental and Legal Claims 8,739 5,216 60%
Cost of Lease Rejections 4,246 2,535 60%
Unfunded Pension 4,677 2,792 60%
Reimbursement Claim for Hexcel DIC Liquidation 8,000 4,775 60%
------------ ----------
Total Senior Unsecured Claims $114,434 $84,104 ($0)

Subordinated Claims 21 $26,263 $0 0%
510(b) Claims 22 $200 $0 0%
------------ ----------
Total $154,344 $97,552
------------ ----------
------------ ----------
</TABLE>
<PAGE>

Hexcel Corporation
Notes to Liquidation Analysis

In conjunction with developing the Plan of Reorganization (the "Plan"),
management has prepared a Liquidation Analysis (the "Analysis") which may be
helpful to holders of claims and interests in reaching their determination of
whether to accept or reject the Plan. The Analysis is based on the assumptions
discussed below.

The Analysis reflects the Debtor's estimates of the proceeds it would
realize if the Debtor were to liquidate in accordance with Chapter 7 of the
Bankruptcy Code. The Analysis is based on the Debtor's United States assets as
of April 3, 1994, plus amounts for the sale of its foreign subsidiaries Hexcel
Lyon and Hexcel Euro Resins. All other of the Debtor's foreign subsidiaries are
assumed to be insolvent in liquidation, and therefore of no value to the Debtor.

Underlying the Analysis are a number of estimates and assumptions that,
although developed and considered reasonable by management, are inherently
subject to significant economic and competitive uncertainties and contingencies
beyond the control of the Debtor and its management and upon assumptions with
respect to liquidation decisions which could be subject to change. Accordingly,
there can be no assurance that the values reflected in the Analysis would be
realized if the Debtor were, in fact, to undergo such a liquidation.

The Analysis assumes a liquidation period of six months.

Costs that have been specifically identified to the liquidation of the
individual assets have been netted against their estimated gross liquidation
value. All other costs associated with the liquidation are included in "Costs
Associated with Liquidation" (See Notes 13 and 14).

NOTE 1 - CASH & CASH INVESTMENTS

The Analysis assumes that subsequent operations during the liquidation period
will not affect the cash available for distribution except as reflected by the
net proceeds generated from liquidating non-cash assets.

NOTE 2 - ACCOUNTS RECEIVABLE (NET)

Accounts receivable consist primarily of third-party receivables, including
receivables from customers and governmental agencies who currently have
contracts with the Debtor for delivery of products over a multi-year period. The
recovery of third-party receivables is based on management's estimate of
collection, given such factors as the age of the receivable, whether or not the
Debtor has outstanding contracts with the third party, whether the third party
has to comply with governmental cost accounting standards subject to review,
future warranty claims that a third party may raise and pricing discounts the
Debtor may have to offer.

The Debtor currently is under contract with a government contractor. The
contractor has filed a $160 million damage claim against the Debtor based on
alleged breaches of contract. This analysis only includes a reserve of
approximately $3 million in connection with the contractor, the amount of the
account receivable outstanding with the contractor.

<PAGE>

The estimate of recovery represents gross proceeds. Personnel and other
expenses incurred to collect the accounts receivable are reflected in "Costs
Associated with Liquidation" under "Net Administration" costs (See Note 14).

NOTE 3 - INVENTORY

Inventory consists primarily of raw materials, work-in-process (WIP) and
finished goods. This Analysis assumes that the raw materials and finished goods
are sold as-is, and no additional manufacturing is completed to convert the WIP
to finished goods.

Recovery percentages are based on management's best estimate of amounts that
could be realized if the inventory were liquidated, given such factors as the
amount of inventory at each of the Debtor's individual operating plants, the
degree of completion of the WIP, the type of inventory and the normal margins
the Debtor has historically achieved for its inventory.

Plant operating expenses incurred to liquidate the inventory and other plant
assets (such as machinery and equipment) are included in "Costs Associated with
Liquidation" under "Plant" costs (See Note 14).

NOTE 4 - ACCOUNTS RECEIVABLE - INTERCOMPANY

Accounts receivable - intercompany consist primarily of receivables from the
Debtor's subsidiaries. Given the assumptions that the Debtor is able to sell
its Hexcel Lyon and Hexcel Euro Resin subsidiaries (See Note 12) and the
remainder of its subsidiaries are insolvent on a liquidation basis, management
has determined that it will not recover any of its accounts receivable from its
subsidiaries. Note that the proceeds from the sale of Hexcel Lyon and Hexcel
Euro Resins are recorded at the gross amounts which the Debtor would receive.
Any intercompany receivables and/or payables are assumed to be eliminated as
a result of the sale.

NOTE 5 - OTHER CURRENT ASSETS

Other current assets consist primarily of assets such as prepaid expenses,
assets held for sale and accrued revenue. The recovery percentages are based on
management's best estimate of amounts that could be realized given such factors
as the type of each asset and current negotiations for the sale of assets.

A portion of the prepaid expenses are included as reductions in "Unsecured
Claims" (deposits and retainers), "Cost Associated with Liquidation" (prepaid
rent and insurance) and "Chapter 11 Post-petition Claims" (professional
retainers).

Assets held for sale consist of the Debtor's vacant City of Industry facility
in Southern California. The Debtor is currently in negotiations for
the sale of the property.

The Debtor has accrued sales associated with government contracts. Because of
the nature of the contracts associated with the accrued sales, the Debtor is not
able to bill the amounts until certain milestones and cost accounting
requirements are accomplished. The estimated liquidation value

2
<PAGE>

represents management's best estimate of the Debtor's ability to bill and
ultimately collect the accrued sale amounts.

NOTE 6 - NET PROPERTY AND EQUIPMENT

Net property and equipment consists of the Debtor's facilities, including land,
buildings and equipment. Management's estimates of the liquidation values for
the land and buildings are based on an in-house review of the real estate
markets of the various property locations and various appraisals which have been
performed on the properties. Estimated liquidation values for its machinery and
equipment are based on estimates of recoverability given factors such as the
type and age of the equipment at each of the Debtor's facilities.

Costs for third party fees and/or commissions associated with liquidating the
property and equipment are included in the estimated liquidation values. In-
house costs associated with liquidating the property and equipment are included
in "Costs Associated with Liquidation" under "Net Administration" costs (See
Note 14).

NOTE 7 - NOTES RECEIVABLE

Notes receivable consist primarily of a note receivable issued by the Debtor in
connection with the purchase of certain property which surrounds the Debtor's
Livermore facility. The Debtor provided the funds to purchase the land by a
third-party. The estimated liquidation value represents management's estimate
of the ultimate collectability of the note if the Debtor were to liquidate.

NOTE 8 - INVESTMENTS

Investments consist of the Debtor's investments in joint ventures and its
original investments in its various subsidiaries. Management believes that it
could recover approximately 50% of its investments in its joint ventures.

Given the assumptions that the Debtor could sell its Hexcel Lyon and Hexcel Euro
Resins subsidiaries (See Note 12) and the remainder of its subsidiaries are
insolvent on a liquidation basis, management has determined that it will not
recover any of its original investment from its subsidiaries. Note that the
proceeds from the sale of Hexcel Lyon and Hexcel Euro Resins are recorded at the
gross amounts which the Debtor would receive. Any intercompany receivables
and/or payables are assumed to be eliminated as a result of the sale.

NOTE 9 - INTANGIBLES - NET

Management believes that the Debtor has certain unbooked proprietary
technologies that could be sold in liquidation. The liquidation value of the
technology is management's estimate of the proceeds that could be realized
during a six month liquidation, taking into consideration, among other things,
the amount of current sales of proprietary products derived from the
technologies.

<PAGE>

In addition, intangibles - net consist primarily of patents, not-to-compete
agreements and debt issuance costs. Management estimates that the Debtor
would receive nothing from the liquidation of its booked intangibles assets,
other than a 10% recovery of its patents.

NOTE 10 - OTHER NON-CURRENT ASSETS

Other non-current assets consist primarily of the Debtor's claim for equitable
relief relating to a government contractor. The liquidation value of the claim
is management's estimate of the immediate cash-settlement value of the claim.

NOTE 11 - INTERCOMPANY NOTE RECEIVABLE

Intercompany note receivable consists of a note receivable from the Debtor's
Belgium subsidiary. Given the assumption that the Debtor's subsidiaries (other
than Hexcel Lyon and Hexcel Euro Resin) are insolvent in liquidation, management
assumes that it will not collect its note receivable from its Belgium
subsidiary.

NOTE 12 - OTHER PROCEEDS

Under a liquidation scenario, management believes that it could sell its Hexcel
Lyon and Hexcel Euro Resins subsidiaries as going concerns. The estimates in
regards to the amounts the Debtor could sell the subsidiaries are based upon
managements best estimates.

The recovery amounts are net of any debt incurred by the subsidiaries and sales
commissions and/or fees payable in connection with the sale of the subsidiaries.

NOTE 13 - CHAPTER 7 PROFESSIONAL FEES

Chapter 7 professional fees are for professional services associated with the
Chapter 7 trustee, its counsel and other professionals which the trustee may
retain. The fees are based on 3% of the "Total Available for Payments".

NOTE 14 - OPERATING COSTS

Net administrative costs are based on management's best estimate of the costs to
wind-down its operations (such as collection of accounts receivable, sale of
land and other assets) during the liquidation period. The total administrative
costs have been offset by certain prepaid expenses (See Note 5).

Plant operating costs are based on management's best estimate of the costs to
close the Debtor's operating plants (such as sale of existing inventory, sale
of production machinery and equipment). Management has estimated the costs to
close each of the Debtor's plants on a plant-by-plant basis.

<PAGE>

NOTE 15 - ALLOCATION OF NET ESTIMATED LIQUIDATION PROCEEDS

The allocation of the net estimated liquidation proceeds has been made in
accordance with the priorities set forth in the Bankruptcy Code. The claim
amounts are based on management's estimate of allowable claims.

NOTE 16 - POST PETITION BANK DEBT

Post-petition bank debt represents borrowings under the DIP Line of Credit. As
of April 3, 1994, the Debtor had no borrowings under the DIP Line of Credit.

NOTE 17 - CHAPTER 11 POST-PETITION CLAIMS

Chapter 11 post-petition claims include amounts for professional fees (including
counsel and consultants for the Debtor, Creditor and Equity committees) incurred
through April 3, 1994. The Analysis assumes that no fees for professional
services after April 3, 1994 are incurred, except for Chapter 7 professional
fees (See Note 13). The professional fees are net of retainers the Debtor has
already paid, including amounts listed as prepaid assets (See Note 5). Post-
petition liabilities include amounts such as post-petition trade accounts
payable and other accrued liabilities for services and goods received after the
petition date.

Management estimates that holders of Chapter 11 post-petition claims will
receive 100% of their allowed claims in a liquidation scenario.

NOTE 18 - PRIORITY CLAIMS

Priority Claims are for priority taxes. Priority taxes are for various state and
local taxes owed by the Debtor, as listed on Schedule E of the Debtor's
statements and schedules.

Management estimates that holders of Priority Claims will receive 100% of their
allowed claims in a liquidation scenario.

NOTE 19 - SECURED CLAIMS

Secured claims are from claimants holding secured mortgages against certain of
the Debtor's properties. These claims include principal and pre-petition
interest.

Management estimates that holders of Secured Claims will receive 100% of their
allowed claims in a liquidation scenario.

<PAGE>

NOTE 20 - UNSECURED CLAIMS

Senior unsecured claims include pre-petition trade creditor claims, unsecured
bank notes, IDR bonds, lease and executory contract rejections costs, unfunded
pension costs, prepetition interest, reserves for the liquidation of Hexcel
DIC and environmental and legal. Due to the Debtor's insolvency under a
liquidation scenario, the Analysis assumes that no interest is accrued from
the petition date through April 3, 1994.

The cost of lease and executory contract rejections include management's
estimate of claims assuming all contracts are rejected. Currently the Debtor
has not assumed any leases or executory contracts which would result in priority
claims. All lease and executory contract rejection costs are for leases
currently rejected or for those not assumed.

The Debtor currently owns a 50% interest in a joint venture named DIC-Hexcel
("DHL"). The Debtor's partner in this venture has guaranteed the bank debt of
DHL. The Debtor in turn has agreed that in event of the liquidation of DHL,
the Debtor would reimburse its partner for 50% of any DHL bank debt satisfied
by its partner under its guarantee after the utilization of proceeds from the
liquidation of DHL's assets. Management estimates that DHL's assets could be
sold and would provide proceeds to satisfy DHL's bank debt of approximately
$3,000,000. As of 12/31/93, DHL had outstanding bank debt guaranteed by the
Debtor's partner of approximately $19,000,000. This Analysis assumes that DHL
would be liquidated, the assets of DHL would be sold and would satisfy
$3,000,000 of guaranteed bank debt and that the Debtor would be liable for 50%
of the remaining debt ($8,000,000).

Management estimates that holders of unsecured claims will receive a range of
60 - 76% of their allowed claims in a liquidation scenario, depending on whether
the unsecured claim receives the benefit of the subordination of the
subordinated claims.

NOTE 21 - SUBORDINATED CLAIMS

Subordinated claims are deemed to be subordinated to all classes of creditors,
except for environmental and legal claims, lease rejection claims, unfunded
pension costs, the DHL liability, the 510(b) claims and equity interests.

Management estimates that holders of Subordinated Claims will receive 0% of
their allowed claims in a liquidation scenario.

NOTE 22 - 510(b) CLAIMS AND EQUITY INTERESTS

510(b) Claims and Equity Interests are assumed to be junior to all classes of
creditors.

Management estimates that holders of 510(b) claims and equity interests will
receive 0% of their allowed claims in a liquidation scenario.

<PAGE>

EXHIBIT G

<PAGE>

HEXCEL CORPORATION

LONG-TERM INCENTIVE PLAN

-----------

I. PURPOSE

The purpose of the Hexcel Corporation Long-Term Incentive Plan (the
"Plan") is to attract and retain and provide incentives to employees, officers,
directors and consultants of the Corporation, and to thereby increase overall
shareholders' value. The Plan generally provides for the granting of stock,
stock options, stock appreciation rights, restricted shares, other stock-based
awards or any combination of the foregoing to the eligible participants.

II. DEFINITIONS

(a) "Award" includes, without limitation, stock options (including
incentive stock options within the meaning of Section 422(b) of the Code) with
or without stock appreciation rights, dividend equivalent rights, stock awards,
restricted share awards, or other awards that are valued in whole or in part by
reference to, or are otherwise based on, the Common Stock ("other Common
Stock-based Awards"), all on a stand alone, combination or tandem basis, as
described in or granted under this Plan.

(b) "Award Agreement" means a written agreement setting forth the terms
and conditions of each Award made under this Plan.

(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.

(e) "Committee" means the Executive Compensation and Organization
Committee of the Board or such other committee of the Board as may be designated
by the Board from time to time to administer this Plan the members of which
shall consist solely of members of the Board who are "disinterested persons"
within the meaning of Rule 16b-3 of the Exchange Act and are "outside directors"
for purposes of Code Section 162(m)(4)(C) of the Code.

(f) "Common Stock" means the $.01 par value common stock of the
Corporation.

(g) "Corporation" means Hexcel Corporation, a Delaware corporation.

<PAGE>

(h) "Employee" means an employee of the Corporation or a Subsidiary.

(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(j) "Fair Market Value" means the closing price for the Common Stock as
reported in publications of general circulation for the New York Stock Exchange
Composite Transactions on such date, or, if there were no sales on the valuation
date, on the next preceding date on which such closing price was recorded;
provided, however, that the Committee may specify some other definition of Fair
Market Value with respect to any particular Award.

(k) "Participant" means an Employee, officer, director or consultant who
has been granted an Award under the Plan.

(l) "Plan Year" means a calendar year.

(m) "Subsidiary" means any corporation or other entity, whether domestic
or foreign, in which the Corporation has or obtains, directly or indirectly, a
proprietary interest of more than 50% by reason of stock ownership or otherwise.

III. ELIGIBILITY

Any Employee, officer, director (other than a director described in
the next sentence) or consultant of the Corporation or Subsidiary selected by
the Committee is eligible to receive an Award. A director shall not be eligible
if he is (i) a member of the Committee; (2) a member of a Committee
administering any other stock option, stock appreciation, stock bonus or other
stock plan of the Corporation of any subsidiary unless such plan does not permit
participation by directors; or (3) a former (within one year) member of the
Committee or any Committee administering any other such plan.

IV. PLAN ADMINISTRATION

(a) Except as otherwise determined by the Board, the Plan shall be
administered by the Committee. The Board, or the Committee to the extent
determined by the Board, shall periodically make determinations with respect to
the participation of Employees, officers, directors and consultants in the Plan
and, except as otherwise required by law or this Plan, the grant terms of
Awards, including vesting schedules, price, restriction or option period,
dividend rights, post-retirement and termination rights, payment alternatives
such as cash, stock, contingent awards or other means of payment

2
<PAGE>

consistent with the purposes of this Plan, and such other terms and conditions
as the Board or the Committee deems appropriate which shall be contained in an
Award Agreement with respect to a Participant.

(b) The Committee shall have authority to interpret and construe the
provisions of the Plan and any Award Agreement and make determinations pursuant
to any Plan provision or Award Agreement which shall be final and binding on all
persons. No member of the Committee shall be liable for any action or
determination made in good faith, and the members shall be entitled to
indemnification and reimbursement in the manner provided in the Corporation's
Certificate of Incorporation, as it may be amended from time to time.

(c) The Committee shall have the authority at any time to provide for the
conditions and circumstances under which Awards shall be forfeited.

V. CAPITAL STOCK SUBJECT TO THE PROVISIONS OF THIS PLAN

(a) The capital stock subject to the provisions of this Plan shall be
shares of authorized but unissued Common Stock and shares of Common Stock held
as treasury stock. Subject to adjustment in accordance with the provisions of
Section X, and subject to Section V(c) below, shares of Common Stock
shall be available for grants of Awards.

(b) Any shares ceasing to be subject to an option because of the
surrender of such option in lieu of exercise shall become again available for
Awards under the Plan. The grant of a restricted share Award shall be deemed to
be equal to the maximum number of shares which may be issued under the Award.
Awards payable only in cash will not reduce the number of shares available for
Awards granted under the Plan.

(c) There shall be carried forward and be available for Awards under the
Plan, in addition to shares available for grant under paragraph (a) of this
Section V, all of the following: (i) any unused portion of the limit set forth
in paragraph (a) of this Section V; (ii) shares represented by Awards which are
cancelled, forfeited, surrendered, terminated, paid in cash or expire
unexercised; and (iii) the excess amount of variable Awards which become fixed
at less than their maximum limitations.

3
<PAGE>

VI. AWARDS UNDER THIS PLAN

As the Board or Committee may determine, the following types of Awards and
other Common Stock-based Awards may be granted under this Plan on a stand alone,
combination or tandem basis:

(a) STOCK OPTION. A right to buy a specified number of shares of
Common Stock at a fixed exercise price during a specified time, all as the
Committee may determine.

(b) INCENTIVE STOCK OPTION. An Award in the form of a stock
option which shall comply with the requirements of Section 422 of the Code or
any successor section as it may be amended from time to time. The exercise
price of any incentive stock option shall not be less than 100% of the Fair
Market Value of the Common Stock on the date of grant of the incentive stock
option Award. Subject to adjustment in accordance with the provisions of
Section X, the aggregate number of shares which may be subject to incentive
stock option Awards under this Plan shall not exceed shares, subject
to Section V above. To the extent that Section 422 of the Code requires certain
provisions to be set forth in a written plan, said provisions are incorporated
herein by this reference.

(c) STOCK OPTION IN LIEU OF COMPENSATION ELECTION. A right given
with respect to a year to a director, officer or key employee to elect to
exchange annual retainers, fees or compensation for stock options.

(d) STOCK APPRECIATION RIGHT. A right which may or may not be
contained in the grant of a stock option or incentive stock option to receive
the excess of the Fair Market Value of a share of Common Stock on the date the
option is surrendered over the option exercise price contained in the Award
Agreement.

(e) RESTRICTED SHARES. A transfer of Common Stock to a
Participant subject to forfeiture until such restrictions, terms and conditions
as the Committee may determine are fulfilled.

(f) DIVIDEND OR EQUIVALENT. A right to receive dividends or
their equivalent in value in Common Stock, cash or in a combination of both with
respect to any new or previously existing Award.

(g) STOCK AWARD. An unrestricted transfer of ownership of Common
Stock.

(h) OTHER STOCK-BASED AWARDS. Other Common Stock-based Awards
which are related to or serve a similar function to those Awards set forth in
this Section VI.

4
<PAGE>

VII. AWARD AGREEMENTS

Each Award under the Plan shall be evidenced by an Award Agreement setting
forth the terms and conditions of the Award and executed by the Corporation and
Participant.

VIII. OTHER TERMS AND CONDITIONS

(a) ASSIGNABILITY. Unless provided to the contrary in any Award, no
Award shall be assignable or transferable except by will, by the laws of descent
and distribution and during the lifetime of a Participant, the Award shall be
exercisable only by such Participant.

(b) TERMINATION OF EMPLOYMENT. The Committee shall determine the
disposition of the grant of each Award in the event of the retirement,
disability, death or other termination of a Participant's employment or other
relationship with the Corporation or a Subsidiary.

(c) RIGHTS AS A STOCKHOLDER. A Participant shall have no rights as a
stockholder with respect to shares covered by an Award until the date the
Participant is the holder of record. No adjustment will be made for dividends
or other rights for which the record date is prior to such date.

(d) NO OBLIGATION TO EXERCISE. The grant of an Award shall impose no
obligation upon the Participant to exercise the Award.

(e) PAYMENTS BY PARTICIPANTS. The Committee may determine that Awards
for which a payment is due from a Participant may be payable: (i) in U.S.
dollars by personal check, bank draft or money order payable to the order of the
Corporation, by money transfers or direct account debits; (ii) through the
delivery or deemed delivery based on attestation to the ownership of shares of
Common Stock with a Fair Market Value equal to the total payment due from the
Participant; (iii) pursuant to a broker-assisted "cashless exercise" program if
established by the Corporation; (iv) by a combination of the methods described
in (i) through (iii) above; or (v) by such other methods as the Committee may
deem appropriate.

(f) WITHHOLDING. Except as otherwise provided by the Committee, (i)
the deduction of withholding and any other taxes required by law will be made
from all amounts paid in cash and (ii) in the case of payments of Awards in
shares of Common Stock, the Participant shall be required to pay the amount of
any taxes required to be withheld prior to receipt of such stock, or
alternatively, a number of shares the Fair Market Value of which

5
<PAGE>

equals the amount required to be withheld may be deducted from the payment.

(g) RESTRICTIONS ON SALE AND EXERCISE. With respect to officers and
directors for purposes of Section 16 of the Exchange Act, and if required to
comply with rules promulgated thereunder, (i) no Award providing for exercise,
a vesting period, a restriction period or the attainment of performance
standards shall permit unrestricted ownership of Common Stock by the Participant
for at least six months from the date of grant, and (ii) Common Stock acquired
pursuant to this Plan (other than Common Stock acquired as a result of the
granting of a "derivative security") may not be sold for at least six months
after acquisition.

(h) MAXIMUM AWARDS. The maximum number of shares of Common Stock that
may be issued to any single Participant pursuant to options under this Plan
is

IX. TERMINATION, MODIFICATION AND AMENDMENTS

(a) The Plan may from time to time be terminated, modified or amended by
the affirmative vote of the holders of a majority of the outstanding shares of
the capital stock of the Corporation present or represented and entitled to vote
at a duly held stockholders meeting.

(b) The Board may at any time terminate the Plan or from time to time
make such modifications or amendments of the Plan as it may deem advisable;
provided, however, that the Board shall not make any material amendments to the
Plan without the approval of at least the affirmative vote of the holders of a
majority of the outstanding shares of the capital stock of the Corporation
present or represented and entitled to vote at a duly held stockholders meeting.

(c) No termination, modification or amendment of the Plan may adversely
affect the rights conferred by an Award without the consent of the recipient
thereof.

X. RECAPITALIZATION

The aggregate number of shares of Common Stock as to which Awards may be
granted to Participants, the number of shares thereof covered by each
outstanding Award, and the price per share thereof in each such Award, shall all
be proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a subdivision or consolidation of shares
or other capital adjustment, or the payment of a stock dividend or other
increase or decrease in such shares,

6
<PAGE>

effected without receipt of consideration by the Corporation, or other change in
corporate or capital structure; provided, however, that any fractional shares
resulting from any such adjustment shall be eliminated. The Committee may also
make the foregoing changes and any other changes, including changes in the
classes of securities available, to the extent it is deemed necessary or
desirable to preserve the intended benefits of the Plan for the Corporation and
the Participants in the event of any other reorganization, recapitalization,
merger, consolidation, spin-off, extraordinary dividend or other distribution or
similar transaction.

XI. NO RIGHT TO EMPLOYMENT

No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to be
retained in the employ of, or in the other relationship with, the Corporation or
a Subsidiary. Further, the Corporation and each Subsidiary expressly reserve
the right at any time to dismiss a Participant free from any liability, or any
claim under the Plan, except as provided herein or in any Award Agreement issued
hereunder.

XII. GOVERNING LAW

To the extent that federal laws do not otherwise control, the Plan shall
be construed in accordance with and governed by the laws of the State of
California.

XIII. SAVINGS CLAUSE

This Plan is intended to comply in all aspects with applicable laws and
regulations, including, with respect to those Employees who are officers or
directors for purposes of Section 16 of the Exchange Act, Rule 16b-3 under the
Exchange Act. In case any one more of the provisions of this Plan shall be held
invalid, illegal or unenforceable in any respect under applicable law and
regulation (including Rule 16b-3), the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby
and the invalid, illegal or unenforceable provision shall be deemed null and
void; however, to the extent permissible by law, any provision which could be
deemed null and void shall first be construed, interpreted or revised
retroactively to permit this Plan to be construed in compliance with all
applicable laws (including Rule 16b-3) so as to foster the intent of this Plan.

7
<PAGE>

XIV. EFFECTIVE DATE AND TERM

This Plan shall become effective immediately upon adoption by the Board of
Directors subject to approval by stockholders of the Corporation within twelve
months of such adoption as provided in section 422(b)(1) of the Code and Rule
16b-3(b). The Plan shall terminate on the tenth anniversary of the adoption of
the Plan. No awards shall be granted after the termination of the Plan.

<PAGE>

Exhibit 11

STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS - UNAUDITED

The Company reports net income (loss) per share data on primary and fully
diluted bases. Primary net income (loss) per share is based upon the weighted
average number of outstanding common shares and common equivalent shares from
stock options. Fully diluted net income (loss) per share is based upon (a) the
weighted average number of outstanding common shares and common equivalent
shares from stock options and adjusted for the assumed conversion of the 7%
convertible subordinated debentures and (b) net income (loss) increased by the
expenses on the debentures. Computations of net income (loss) per share on the
primary and fully diluted bases for the second quarter and first half of 1994
and 1993 were:

PRIMARY NET INCOME (LOSS) PER SHARE AND EQUIVALENT SHARE
- - ------------------------------------------------------------------------------------------------------------------------------
THE QUARTER ENDED THE YEAR-TO-DATE ENDED
JULY 3, JUNE 30, JULY 3, JUNE 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1994 1993 1994 1993
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loss from continuing operations $ (4,422) $ (2,303) $ (9,446) $ (5,429)
Loss from discontinued operations - (186) - (364)
Cumulative effect of change in accounting for income taxes - - - 4,500
- - ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (4,422) $ (2,489) $ (9,446) $ (1,293)
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 7,310 7,338 7,310 7,325
Weighted average common equivalent shares from stock options - - - -
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares and equivalent shares 7,310 7,338 7,310 7,325
- - ------------------------------------------------------------------------------------------------------------------------------
Primary net income (loss) per share and equivalent share from (1):
Continuing operations $ (0.60) $ (0.31) $ (1.29) $ (0.74)
Discontinued operations - (0.03) - (0.05)
Cumulative effect of change in accounting for income taxes - - - 0.61
- - ------------------------------------------------------------------------------------------------------------------------------
Primary net income (loss) per share and equivalent share(1) $ (0.60) $ (0.34) $ (1.29) $ (0.18)
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------

FULLY DILUTED NET INCOME (LOSS) PER SHARE AND EQUIVALENT SHARE
- - ------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations $ (4,422) $ (2,303) $ (9,446) $ (5,429)
Loss from discontinued operations - (186) - (364)
Cumulative effect of change in accounting for income taxes - - - 4,500
- - ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (4,422) $ (2,489) $ (9,446) $ (1,293)
Debenture interest and issuance costs 303 302 604 601
- - ------------------------------------------------------------------------------------------------------------------------------
Adjusted net income (loss) $ (4,119) $ (2,187) $ (8,842) $ (692)
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 7,310 7,338 7,310 7,325
Weighted average common equivalent shares
Stock options - - - -
7% convertible debentures 804 804 804 804
- - ------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares and equivalent shares 8,114 8,142 8,114 8,129
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
Fully diluted net income (loss) per share and equivalent share from (1):
Continuing operations $ (0.60) $ (0.31) $ (1.29) $ (0.74)
Discontinued operations - (0.03) - (0.05)
Cumulative effect of change in accounting for income taxes - - - 0.61
- - ------------------------------------------------------------------------------------------------------------------------------
Fully diluted net income (loss) per share and equivalent share(1) $ (0.60) $ (0.34) $ (1.29) $ (0.18)
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
<FN>

(1) For the second quarter and first half of 1994 and 1993, the primary and
fully diluted net income (loss) per share were the same because the fully
diluted computation was antidilutive.

</TABLE>