HEXCEL CORP /DE/, 10-Q, 1994-11-16

HEXCEL CORP /DE/
10-Q, 1994-11-16
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549
--------------------------

FORM 10-Q

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended October 2, 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 November 11, 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
Ended October 2, 1994 and September 30, 1993 2

- Condensed Consolidated Balance Sheets--
October 2, 1994 and December 31, 1993 3

- Condensed Consolidated Statements of
Cash Flows -- The Year-to-Date
Ended October 2, 1994 and September 30, 1993 4

- Notes to Condensed Consolidated
Financial Statements 5

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

PART II. OTHER INFORMATION 17

SIGNATURES 19

EXHIBIT INDEX 20

EXHIBIT 21
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HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED
---------------------------------------------------
THE QUARTER ENDED THE YEAR-TO-DATE ENDED
----------------------- ------------------------
OCT 2, SEPT 30, OCT 2, SEPT 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Net sales $ 74,434 $ 69,763 $ 237,080 $ 237,000
Cost of sales (62,833) (59,240) (199,631) (200,312)
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Gross margin 11,601 10,523 37,449 36,688

Other operating costs and expenses:
Marketing, general and administrative expenses (10,850) (11,625) (34,441) (40,373)
Other income (expenses) (8,033) 497 (8,146) (142)
Restructuring expenses -- (44,000) -- (44,000)
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Operating loss (7,282) (44,605) (5,138) (47,827)
Interest expenses (2,336) (2,123) (7,086) (6,617)
Bankruptcy reorganization expenses (5,036) -- (11,945) --
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Loss from continuing operations before income taxes (14,654) (46,728) (24,169) (54,444)
Benefit (provision) for income taxes (665) 1,249 (1,369) 3,786
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Loss from continuing operations (15,319) (45,479) (25,538) (50,658)

Discontinued operations:
Income (losses) from operations, net of provision for
income taxes of $126 and $441 for the quarter and
year-to-date ended October 2, 1994, respectively,
and $67 and $288 for the quarter and year-to-date
ended September 30, 1993, respectively 216 (6,117) 989 (6,367)
Losses during phase-out period, net of benefit for
income taxes of $202 and $383 for the quarter and
year-to-date ended September 30, 1993, respectively (2,836) (3,675) (2,836) (4,039)
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Loss before cumulative effect of accounting change (17,939) (55,271) (27,385) (61,064)

Cumulative effect of change in accounting for income taxes -- -- -- 4,500
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Net loss $ (17,939) $ (55,271) $ (27,385) $ (56,564)
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Net income (loss) per share and equivalent share:
Primary and fully diluted:
Continuing operations $ (2.09) $ (6.19) $ (3.50) $ (6.90)
Discontinued operations (0.36) (1.33) (0.25) (1.42)
Cumulative effect of change in accounting for income taxes 0.00 0.00 0.00 0.61
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Net loss $ (2.45) $ (7.52) $ (3.75) $ (7.71)
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Weighted average shares and equivalent shares 7,310 7,349 7,310 7,333
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</TABLE>

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

2
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HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

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UNAUDITED
-------------------------------
OCTOBER 2, December 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1994 1993
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<S> <C> <C>
ASSETS

Current assets:
Cash and equivalents $ 1,099 $ 11,348
Accounts receivable 64,910 61,104
Inventories 48,730 42,513
Prepaid expenses 3,990 3,915
Net assets of discontinued operations 12,000 11,411
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Total current assets 130,729 130,291
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Property, plant and equipment 206,684 221,152
Less accumulated depreciation 115,335 113,426
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Net property, plant and equipment 91,349 107,726
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Investments and other assets 20,720 20,806
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Total assets $ 242,798 $ 258,823
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Notes payable and current maturities of long-term liabilities $ 20,393 $ 24,596
Accounts payable 14,915 10,975
Accrued liabilities 28,421 33,651
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Total current liabilities 63,729 69,222
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Long-term liabilities, less current maturities 49,169 49,592
Liabilities subject to disposition in bankruptcy reorganization 132,130 119,256
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Shareholders' equity (deficit):
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
Accumulated deficit (70,129) (42,744)
Minimum pension obligation adjustment (646) (646)
Cumulative currency translation adjustment 5,910 1,508
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Total shareholders' equity (deficit) (2,230) 20,753
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Total liabilities and shareholders' equity (deficit) $ 242,798 $ 258,823
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</TABLE>

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

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HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
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UNAUDITED
----------------------------
OCT 2, Sept 30,
THE YEAR-TO-DATE ENDED (IN THOUSANDS) 1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Loss from continuing operations $ (25,538) $ (50,658)
Reconciliation to net cash provided (used) by continuing operations:
Depreciation and amortization 10,522 10,567
Restructuring expenses -- 44,000
Working capital changes and other 10,211 758
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Net cash provided (used) by continuing operations (4,805) 4,667
Net cash provided (used) by discontinued operations (2,436) 1,412
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Net cash provided (used) by operating activities (7,241) 6,079
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Cash flows from investing activities:
Capital expenditures (3,057) (4,965)
Proceeds from equipment sold 41 121
Proceeds from business sold -- 4,500
Investments in joint ventures -- (1,750)
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Net cash used by investing activities (3,016) (2,094)
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Cash flows from financing activities:
Payments of long-term debt, including current maturities (7,832) (3,206)
Proceeds of short-term debt, net 8,490 6,000
Principal payments of capital lease obligations (451) (361)
Proceeds from issuance of common stock for employee and
shareholder stock plans -- 405
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Net cash provided by financing activities 207 2,838
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Effect of exchange rate changes on cash and equivalents (199) (279)
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Net increase (decrease) in cash and equivalents (10,249) 6,544
Cash and equivalents at beginning of year 11,348 367
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Cash and equivalents at end of period $ 1,099 $ 6,911
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</TABLE>

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

4
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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 October 2, 1994, and the results of
operations for the quarters and year-to-date periods ended October 2, 1994 and
September 30, 1993, and the cash flows for the year-to-date periods ended
October 2, 1994 and September 30, 1993. The condensed consolidated balance
sheet of the Company as of December 31, 1993 was derived from the audited 1993
consolidated balance sheet. The Company adopted 13-week fiscal quarters for
financial reporting purposes beginning in 1994. Consequently, the third quarter
of 1994 consists of the period July 4, 1994 through October 2, 1994, and the
1994 year-to-date period consists of the period from January 1, 1994 through
October 2, 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

5
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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.

PLAN OF REORGANIZATION
On November 9, 1994, the Bankruptcy Court approved, with slight
modifications, the disclosure statement relating to the first amended plan of
reorganization (the "Amended Plan") proposed by Hexcel Corporation and the
Official Committee of Equity Security Holders (the "Equity Committee") in its
Chapter 11 case. The Company can now proceed to solicit the acceptances of
shareholders and creditors entitled to vote on the plan. A hearing on
confirmation has been scheduled for January 10, 1995.

The Amended Plan dated November 7, 1994 is similar to the plan of
reorganization submitted on October 25, 1994, which had superseded two
previous plans filed separately by Hexcel Corporation and the Equity Committee
in July, 1994. The Amended Plan provides for, among other things, the sale of
additional shares of Hexcel Corporation common stock which would result in a
dilution of existing equity interests, and the satisfaction or reinstatement
of all allowed creditors' claims in full. For information relating to the
Amended Plan, 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
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CONDENSED FINANCIAL INFORMATION

The following condensed financial information for Hexcel Corporation, the
debtor-in-possession, as of October 2, 1994 and December 31, 1993 and for the
quarter and year-to-date ended October 2, 1994, has been prepared using the
equity method to account for investments in subsidiaries:

CONDENSED BALANCE SHEETS FOR
THE PARENT COMPANY

<TABLE>
<CAPTION>
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10/2/94 12/31/93
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<S> <C> <C>
Current assets $ 83,043 $ 79,325
Property, plant and equipment, net 60,346 77,108
Investments and other assets 53,081 45,763
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Total assets $ 196,470 $ 202,196
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Current liabilities $ 33,477 $ 18,586
Long-term notes payable and deferred liabilities 30,593 41,101
Liabilities subject to disposition in bankruptcy reorganization 134,630 121,756
Shareholders' equity (deficit) (2,230) 20,753
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Total liabilities and shareholders' equity (deficit) $ 196,470 $ 202,196
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</TABLE>

Liabilities subject to disposition in bankruptcy reorganization includes a
note payable for $2,500 to a European subsidiary. This Parent Company
obligation is eliminated in the condensed consolidated financial statements.

CONDENSED OPERATING INFORMATION FOR
THE PARENT COMPANY

<TABLE>
<CAPTION>
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THE PERIOD ENDED OCTOBER 2, 1994
QUARTER YEAR-TO-DATE
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<S> <C> <C>
Net sales $ 51,164 $ 154,279
Operating loss (8,546) (9,456)
Net loss (17,939) (27,385)
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</TABLE>

Operating loss includes an $8,000 provision recorded in the third quarter
of 1994 to reflect the estimated cost of restructuring or liquidating DIC-Hexcel
Limited, a joint venture in which the Company owns a 50% interest (see Note 5).

CONDENSED STATEMENT OF CASH FLOWS FOR
THE PARENT COMPANY

<TABLE>
<CAPTION>
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THE PERIOD ENDED OCTOBER 2, 1994
YEAR-TO-DATE
- - ------------------------------------------------------------------------------------------------------
<S> <C>
Net cash used by operating activities $ (9,486)
Net cash used by discontinued operations (1,667)
Net cash used by investing activities (9,202)
Net cash provided by financing activities 12,469
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Net decrease in cash and equivalents (7,886)
Cash and equivalents at beginning of year 7,886
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Cash and equivalents at end of period $ --
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</TABLE>

7
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NOTE 3 - DISCONTINUED OPERATIONS

Following a strategic review of its products and markets, the Company
concluded that there is little interrelationship between its core businesses
(honeycomb, advanced composites and reinforcement fabrics) and its resins
business. Consequently, the Company intensified its efforts to sell the resins
business. As a result of those efforts, the Company now believes that the sale
of its resins operations on acceptable terms can be arranged, and intends
to divest the resins business subject to the approval of the Bankruptcy
Court. Accordingly, the resins business is accounted for as a discontinued
operation in the accompanying condensed consolidated financial statements for
all periods presented.

The Company recorded a $2,800 provision in the third quarter of 1994 to
write down the net assets of the resins business to expected realizable value,
and a $6,000 charge in the third quarter of 1993. The Company recorded a $2,800
provision in the third quarter of 1993 to write down the remaining net assets of
the discontinued fine chemicals business, the sale of which was completed in the
first quarter of 1994.

Net sales of discontinued operations were:

<TABLE>
<CAPTION>
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THE QUARTER ENDED THE YEAR-TO-DATE ENDED
10/2/94 9/30/93 10/2/94 9/30/93
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<S> <C> <C> <C> <C>
Discontinued resins business $ 7,684 $ 6,416 $ 23,843 $ 21,309
Discontinued fine chemicals business -- 816 -- 5,704
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Total discontinued operations $ 7,684 $ 7,232 $ 23,843 $ 27,013
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</TABLE>

Net assets of the discontinued resins business were:

The discontinued fine chemicals business had no remaining net asset value
as of December 31, 1993.

8
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NOTE 4 - INVENTORIES

Inventories at October 2, 1994 and December 31, 1993 were:

<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
10/2/94 12/31/93
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<S> <C> <C>
Raw materials $ 18,905 $ 13,187
Work in progress 13,823 10,937
Finished goods 14,890 17,448
Supplies 1,112 941
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Total inventories $ 48,730 $ 42,513
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</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 5 - 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
been holding discussions with DIC regarding a restructuring or liquidation of
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 proceeds from the sale of the
venture's assets. As of November 11, 1994, the guaranteed bank debt of the
venture totaled approximately $19,800 (at current exchange rates).

During the third quarter of 1994, DIC proposed to liquidate the joint
venture. The Company responded with a proposal to restructure the venture,
subject to various conditions, which DIC has agreed to consider. Under either
proposal, the Company would assume responsibility for a portion of the venture's
guaranteed bank debt. Accordingly, the Company recorded an $8,000 provision in
the third quarter of 1994 to reflect the estimated cost of restructuring or
liquidating DIC-Hexcel Limited.

9
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NOTE 6 - LIABILITIES SUBJECT TO DISPOSITION IN BANKRUPTCY REORGANIZATION

Liabilities subject to disposition in bankruptcy reorganization as of
October 2, 1994 and December 31, 1993 were:

<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
10/2/94 12/31/93
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable $ 22,092 $ 21,000
Accrued liabilities 9,057 9,057
Accrued liability for restructuring or liquidating DIC-Hexcel Ltd. 8,000 --
U.S. revolving credit agreement 12,000 12,000
10.12% senior notes originally due 1998 30,000 30,000
7% convertible subordinated debentures originally due 2011 25,625 25,625
Obligations under IDB variable rate demand notes
originally due through 2024 15,650 15,650
Various U.S. notes payable and capital lease obligations 3,201 4,100
Accrued interest on prepetition debt 6,505 1,824
- - ------------------------------------------------------------------------------------------------------
Total liabilities subject to disposition in bankruptcy reorganization $ 132,130 $ 119,256
- - ------------------------------------------------------------------------------------------------------
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</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 almost $6.9 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 amounts for
claims that may arise from the rejection of certain executory contracts and
unexpired leases, or for bankruptcy reorganization expenses or other claims that
may arise as a result of the bankruptcy reorganization process.

Approximately $6.5 billion of claims against Hexcel Corporation consist of
over 200 environmental claims, most of which are duplicative and bear no
relation to the Company's estimated environmental liabilities. Most of these
environmental claims relate to "superfund" sites which Hexcel Corporation never
owned, and assert the total amount of present and estimated future clean-up
costs for an entire site. Moreover, multiple claims were filed by potentially
responsible parties for various sites. The Bankruptcy Court has already ruled
on Hexcel Corporation's motion to disallow certain environmental claims in
excess of $5.4 billion, and additional claims objections are pending.
Settlements between Hexcel Corporation and certain claimants will eliminate
substantially more claims and are currently awaiting Bankruptcy Court approval.
The balance of unresolved environmental claims will survive the conclusion of
bankruptcy proceedings.

Another $0.3 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 Company has
reserves for estimated environmental, legal and other disputed claims totaling
approximately $9,000.

10
<PAGE>

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
prepetition debt, absent a Bankruptcy Court order or 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 7 - 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 $1,249 and $3,786 during the quarter and year-to-date ended
September 30, 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 third quarter and year-to-date
ended October 2, 1994, the Company continued to reserve for the deferred income
tax assets generated by the Parent 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 $665 for
the third quarter, and $1,369 for the year-to-date.

NOTE 8 - SUBSEQUENT EVENT: SALE OF MANUFACTURING FACILITY AND RELATED ASSETS

On November 3, 1994, Hexcel signed a definitive agreement to sell its
Chandler, Arizona manufacturing facility and related assets and its electro-
magnetically tailored (or "EMT") materials and technology to Northrop Grumman
Corporation, subject to the approval of the Bankruptcy Court. Under the terms
of the agreement, the Company will earn a royalty on certain future sales of EMT
materials produced using Hexcel developed technology, and retain a royalty-free,
non-exclusive license to use EMT technology in non-military applications. The
sale will generate cash proceeds of approximately $30,000, and the Company
expects to record a gain on the sale of about $16,000 in the fourth quarter of
1994.

11
<PAGE>

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

BANKRUPTCY REORGANIZATION

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.

On November 9, 1994, the Bankruptcy Court approved, with slight
modifications, the disclosure statement relating to the first amended plan of
reorganization (the "Amended Plan") proposed by Hexcel Corporation and the
Official Committee of Equity Security Holders (the "Equity Committee") in its
Chapter 11 case. The Company can now proceed to solicit the acceptances of
shareholders and creditors entitled to vote on the plan. A hearing on
confirmation has been scheduled for January 10, 1995.

The Amended Plan dated November 7, 1994 is similar to the plan of
reorganization submitted on October 25, 1994, which had superseded two previous
plans filed separately by Hexcel Corporation and the Equity Committee in July,
1994. The Amended Plan provides for, among other things, the sale of additional
shares of Hexcel Corporation common stock which would result in a dilution of
existing equity interests, and the satisfaction or reinstatement of all allowed
creditors' claims in full. For information relating to the Amended Plan, 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.

DISCONTINUED OPERATIONS

Following a strategic review of its products and markets, the Company
concluded that there is little interrelationship between its core businesses
(honeycomb, advanced composites and reinforcement fabrics) and its resins
business. Consequently, the Company intensified its efforts to sell the resins
business. As a result of those efforts, the Company now believes that the sale
of its resins operations on acceptable terms can be arranged, and intends
to divest the resins business subject to the approval of the Bankruptcy
Court. Accordingly, the condensed consolidated financial statements included in
this Quarterly Report on Form 10-Q reflect the resins business as a discontinued
operation for all periods presented, and the discussion below refers only to the
continuing operations of the Company unless otherwise indicated.

12
<PAGE>

RESULTS OF OPERATIONS

THIRD QUARTER
Net sales were $74.4 million for the third quarter of 1994, a 7% increase
over net sales of $69.8 million for the third quarter of 1993. Gross margin was
15.6% of sales for the 1994 quarter compared with 15.1% for the 1993 quarter.
The increase in third quarter sales and gross margin is attributable to the
improved performance of the Company's composites and fabrics businesses,
partially negated by the poor performance of the Chandler, Arizona honeycomb
facility. The Company has signed a definitive agreement to sell the Chandler
facility, along with related assets and technology, to Northrop Grumman
Corporation, as discussed below. Until the sale has been completed, overhead
costs for the Company's honeycomb operations will remain high.

Operating loss was $7.3 million for the third quarter of 1994 compared with
$44.6 million for the third quarter of 1993. The 1994 loss includes an $8.0
million provision for the estimated cost of restructuring or liquidating DIC-
Hexcel Limited, a joint venture in which the Company owns a 50% interest. The
1993 loss includes a $44.0 million charge for a major expansion of the Company's
restructuring program. Third quarter marketing, general and administrative
expenses declined by $0.8 million, or 7%, from 1993 to 1994, as a result of
further cost reductions.

The Company incurred $5.0 million of bankruptcy reorganization expenses
during the third 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.

Third quarter interest expenses were $2.3 million for 1994 and $2.1 million
for 1993. The Company continues to record accrued interest on Hexcel
Corporation's prepetition indebtedness. The Company also recorded a $0.7
million provision for income taxes for the 1994 quarter, compared with a $1.2
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.

Net loss from continuing operations was $15.3 million or $2.09 per share
for the third quarter of 1994, and $45.5 million or $6.19 per share for the same
quarter of 1993.

Third quarter losses from discontinued operations totaled $2.6 million or
$0.36 per share for 1994, and $9.8 million or $1.33 per share for 1993. The
1994 total includes a $2.8 million provision for the disposal of the resins
business, while the 1993 total includes a $2.8 million provision for the
disposal of the European fine chemicals business and a $6.0 million provision
for the resins business. The European fine chemicals business was sold on
January 31, 1994.

Net loss for the third quarter of 1994, including both continuing and
discontinued operations, was $17.9 million or $2.45 per share. Net loss for the
third quarter of 1993 was $55.3 million or $7.52 per share.

YEAR-TO-DATE
Net sales were $237.1 million for the first three quarters of 1994 compared
with $237.0 million for the same period in 1993. The 1993 total includes $7.0
million of sales by the Company's Knytex business, which was transferred to a
joint venture with Owens-Corning

13
<PAGE>

Fiberglas in June of 1993. Gross margin for the first three quarters of 1994
was 15.8% of sales, up slightly from 15.5% for the first three quarters of 1993.
As with the third quarter results, the improvement is due to the Company's
composites and fabrics businesses.

Operating loss for the year-to-date ended October 2, 1994 was $5.1 million,
including the $8.0 million provision for DIC-Hexcel Limited. Operating loss for
the comparable period of 1993 was $47.8 million, including the $44.0 million
restructuring charge. Marketing, general and administrative expenses were
reduced by $5.9 million, or 15%, from 1993 to 1994. These savings are the
result of a worldwide reorganization of sales, marketing and administration,
which contributed to a significant reduction in the Company's workforce since
the beginning of 1993.

The Company incurred $11.9 million of bankruptcy reorganization expenses
during the first three quarters of 1994.

Interest expenses were $7.1 million for the 1994 year-to-date compared with
$6.6 million for the same period of 1993. The increase is attributable to
increased borrowing and higher interest rates in the U.S., partially offset by
reduced borrowing and lower interest rates in Europe. The year-to-date income
tax provision was $1.4 million for 1994 versus a $3.8 million tax benefit for
1993. The 1994 provision is attributable to the same factors noted above for
the third quarter.

Net loss from continuing operations was $25.5 million or $3.50 per share
for the first three quarters of 1994, and $50.7 million or $6.90 for the same
period of 1993. Year-to-date losses from discontinued operations totaled $1.8
million or $0.25 per share for 1994, and $10.4 million or $1.42 per share for
1993. The 1994 and 1993 totals include the third quarter provisions noted
above. Net loss for the first three quarters of 1994 was $27.4 million or $3.75
per share. Net loss for the first three quarters of 1993 was $56.6 million or
$7.71 per share.

REVENUE TRENDS

The sales decline which began in the fourth quarter of 1992 was halted in
the second quarter of 1994, and sales increased modestly from the third quarter
of 1993 to the third 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 third quarter and first
three quarters 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 continued to
recover from the recent recession.

14
<PAGE>

The backlog of orders for aerospace materials as of October 2, 1994 was
approximately 7% lower than the backlog as of December 31, 1993, primarily
because of some sizable military aerospace shipments and a general decline in
defense related orders. The backlog of orders for non-aerospace materials also
declined during the first three quarters of 1994, due to delivery of some large
recreational and ballistics orders which were outstanding at the end of last
year.

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
November 9, 1994, outstanding borrowings totaled $11.6 million and approximately
$18.9 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.

The sale of the Company's Chandler, Arizona manufacturing facility and
related assets and technology to Northrop Grumman Corporation is expected to
generate cash proceeds of approximately $30 million. The Company plans to use
the proceeds from this transaction and the sale of the resins business to pay
down the debtor-in-possession credit facility and finance operating cash
requirements while Hexcel Corporation remains under bankruptcy protection. The
Amended Plan contemplates replacement of the debtor-in-possession facility with
a new revolving credit facility of not less than $35 million. This facility and
the proceeds from a proposed $50 million equity offering, along with the
remaining proceeds from the Chandler transaction and the sale of the resins
business, would be used to satisfy prepetition obligations and provide working
capital financing for reorganized Hexcel. For information relating to the
Amended Plan, see Part II., Item 1. "Legal Proceedings".

Earnings before interest, taxes, depreciation and amortization were $5.4
million for the first three quarters of 1994. However, cash payments for
restructuring costs and bankruptcy reorganization expenses, along with working
capital changes and discontinued operations, resulted in the net use of $7.2
million of cash for operating activities. Operating activities provided $6.1
million of cash for the first three quarters of 1993, which benefited from the
absence of bankruptcy costs as well as the generation of cash by discontinued
operations.

Working capital, excluding the net assets of discontinued operations, was
$55.0 million at October 2, 1994 and $49.7 million at December 31, 1993.

15
<PAGE>

During the first three quarters of 1994, accounts receivable increased by $3.8
million and inventories rose by $6.2 million, in part because of the rise in
value of European currencies relative to the U.S. dollar. A significant portion
of the Company's working capital is denominated in European currencies. The
accounts receivable increase is also attributable to higher sales for the third
quarter of 1994 than for the fourth quarter of 1993. The rise in inventories is
also due, in part, 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
$10.2 million reduction in cash and equivalents.

Capital expenditures were $3.1 million for the first three quarters of
1994, compared with $5.0 million for the same period of 1993. Capital spending
has been held to minimal levels, but is expected to increase in the fourth
quarter of 1994 and in 1995. The Company plans to invest in equipment designed
to improve manufacturing processes, and to reconfigure some of its honeycomb
manufacturing operations in connection with the sale of the Chandler facility.

Cash restructuring costs were $7.7 million for the first three quarters of
1994. Significant expenditures remain in the fourth quarter of 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 obtained at the time of Hexcel
Corporation's emergence from Chapter 11. The Amended Plan contemplates an
infusion of additional equity capital and a commitment of post-bankruptcy credit
facilities. For information relating to this plan, see Part II., Item 1. "Legal
Proceedings".

16
<PAGE>

PART II. OTHER INFORMATION

HEXCEL CORPORATION AND SUBSIDIARIES

ITEM 1. LEGAL PROCEEDINGS

On November 9, 1994, the Bankruptcy Court approved, with slight
modifications, the disclosure statement relating to the Amended
Plan proposed by Hexcel Corporation and the Official Committee
of Equity Security Holders in its Chapter 11 case. The
Company can now proceed to solicit the acceptances of
shareholders and creditors entitled to vote on the plan. A
hearing on confirmation has been scheduled for January 10, 1995.
The Amended Plan dated November 7, 1994 is similar to the plan of
reorganization submitted on October 25, 1994, which had
superseded two previous plans filed separately by Hexcel
Corporation and the Equity Committee in July, 1994.

The Amended Plan provides for an infusion of $50 million in new
equity financing, including the proceeds of a shareholder rights
offering ($41 million) and a cash investment by Mutual Series
Fund, Inc. ($9 million). Mutual Series Fund, Inc. will also be
the standby purchaser for the rights offering. The plan also
contemplates obtaining a working capital credit facility of not
less than $35 million, for which the Company has entered into
discussions with prospective lenders, to replace the debtor-in-
possession credit line.

In summary, the Amended Plan calls for prepetition claims and
interests to be treated as follows: (a) Administrative expense
claims, priority tax claims, other priority claims, secured
claims, IDRB claims, general unsecured claims, Principal Mutual
Life Insurance Company claims arising from the 10.12% senior
notes originally due 1998 and one additional note, and
subordinated debenture claims are all 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) environmental claims are
unimpaired and, unless otherwise provided by stipulation and
order, each claim that is not disallowed by the Bankruptcy Court
will be reinstated and not discharged; (d) Intercompany claims
are impaired, and will be satisfied through reinstatement with
modified terms; (e) Hexcel Corporation common stock trading
claims are unimpaired, and by stipulation will be satisfied in
full with shares of Reorganized Hexcel Corporation common stock;
(f) Hexcel Corporation common stock interests are impaired, and
will be deemed to receive one share of Reorganized Hexcel
Corporation common stock for each existing share of Hexcel
Corporation

17
<PAGE>

common stock, and rights to purchase additional shares under
specified terms; (g) Hexcel Corporation stock option interests
are unimpaired, and all issued and vested stock options will be
reinstated. The holders of all impaired claims and interests
will be entitled to vote to accept or reject the 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 6 to the condensed consolidated financial statements.
Payment and enforcement of these obligations is stayed by federal
bankruptcy laws for the duration of Hexcel Corporation's
bankruptcy proceedings.

ITEM 5. OTHER INFORMATION

On November 3, 1994, Hexcel signed a definitive agreement to sell
its Chandler, Arizona manufacturing facility and related assets
and its EMT materials and technology to Northrop Grumman
Corporation, subject to the approval of the Bankruptcy Court.
Under the terms of the agreement, the Company will earn a royalty
on certain future sales of EMT materials produced using Hexcel
developed technology, and retain a royalty-free, non-exclusive
license to use EMT technology in non-military applications. The
sale will generate cash proceeds of approximately $30 million,
and the Company expects to record a gain on the sale of about
$16 million in the fourth quarter of 1994.

ITEM 6. EXHIBITS

(a) Exhibits:

2. First Amended Plan of Reorganization proposed by Hexcel
Corporation and the Equity Committee.

10. Asset Purchase Agreement Between Hexcel Corporation and
Northrop Grumman Corporation.

11. Statement Regarding Computation of Per Share Earnings.

27. Financial Data Schedules.

18
<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)

November 14, 1994 /s/ Wayne C. Pensky
--------------------- -----------------------------
(Date) Wayne C. Pensky, Controller
Chief Accounting Officer
Authorized Officer

19
<PAGE>
EXHIBIT INDEX

PAGE NO.

2. First Amended Plan of Reorganization proposed by Hexcel
Corporation and the Equity Committee.

10. Asset Purchase Agreement Between Hexcel Corporation and
Northrop Grumman Corporation.

11. Statement Regarding Computation of Per Share Earnings.

27. Financial Data Schedules.

<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 the Debtor in Possession

MARCUS MONTGOMERY WOLFSON P.C.
PETER D. WOLFSON, ESQ.
ROBINSON MARKEL, ESQ.
SUZANNE D.T. LOVETT, ESQ.
53 Wall Street
New York, New York 10005
Telephone: (212) 858-5200

Attorneys for The Official Committee
of Equity Security Holders of
Hexcel Corporation

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 )
___________________________________)

FIRST AMENDED PLAN OF REORGANIZATION PROPOSED BY THE
DEBTOR AND THE OFFICIAL COMMITTEE OF EQUITY SECURITY
HOLDERS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
(DATED NOVEMBER 7, 1994)

<PAGE>

PLAN OF REORGANIZATION

TABLE OF CONTENTS

PAGE NO.

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

ARTICLE II. TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS. . . . . . . . . . . . 20

2.1. Administrative Expense Claims. . . . . . . . . . . . . . . . . . . 20

2.2. Priority Tax Claims. . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE III. CLASSIFICATION OF CLAIMS AND EQUITY
INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . 22

3.1. Class 1 (Other Priority Claims). . . . . . . . . . . . . . . . . . 22

3.2. Class 2 (Secured Claims) . . . . . . . . . . . . . . . . . . . . . 22

3.2.1. Class 2A (Graham Industrial Mortgage Claims) . . . . . . . . . . . 22

3.2.2. Class 2B (Greater Pottsville Mortgage Claims). . . . . . . . . . . 23

3.2.3. Class 2C (Pottsville PIDA (Schuylkill)
Mortgage Claims) . . . . . . . . . . . . . . . . . . . . . . . . . 23

3.2.4. Class 2D (Other Secured Claims). . . . . . . . . . . . . . . . . . 23

3.3. Class 3 (IDRB Claims). . . . . . . . . . . . . . . . . . . . . . . 23

3.3.1. Class 3A (California Pollution Control
Financing Authority) . . . . . . . . . . . . . . . . . . . . . . . 24

3.3.2. Class 3B (Industrial Development Authority
of the City of Casa Grande). . . . . . . . . . . . . . . . . . . . 24

3.3.3. Class 3C (Young County #1 Industrial
Development Corporation) . . . . . . . . . . . . . . . . . . . . . 24

3.3.4. Class 3D (Guadalupe-Blanco River Authority
Industrial Development Corporation). . . . . . . . . . . . . . . . 25

3.3.5. Class 3E (Port of Skagit County Industrial
Development Corporation) . . . . . . . . . . . . . . . . . . . . . 25

3.3.6. Class 3F (Industrial Development Authority
of the County of Los Angeles). . . . . . . . . . . . . . . . . . . 25

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<PAGE>

3.3.7. Class 3G (City of Lancaster) . . . . . . . . . . . . . . . . . . . 26

3.4. Class 4 (BNP Claims) . . . . . . . . . . . . . . . . . . . . . . . 26

3.5. Class 5 (General Unsecured Claims) . . . . . . . . . . . . . . . . 26

3.6. Class 6 (Principal Mutual Claims). . . . . . . . . . . . . . . . . 26

3.7. Class 7 (Environmental Claims) . . . . . . . . . . . . . . . . . . 26

3.8. Class 8 (Intercompany Claims). . . . . . . . . . . . . . . . . . . 26

3.8.1. Class 8A (Hexcel Lyon Claim) . . . . . . . . . . . . . . . . . . . 27

3.8.2. Class 8B (Other Intercompany Claims) . . . . . . . . . . . . . . . 27

3.9. Class 9 (Subordinated Debenture Claims). . . . . . . . . . . . . . 27

3.10. Class 10 (Section 510(b) Hexcel Common
Stock Trading Claims). . . . . . . . . . . . . . . . . . . . . . . 27

3.11. Class 11 (Common Stock). . . . . . . . . . . . . . . . . . . . . . 27

3.12. Class 12 (Hexcel Options) . . . . . . . . . . . . . . . . . . . . 27

ARTICLE IV. TREATMENT OF CLAIMS AND EQUITY INTERESTS. . . . . . . . . . . 27

4.1. Class 1 (Other Priority Claims). . . . . . . . . . . . . . . . . . 27

4.2. Class 2 (Secured Claims) . . . . . . . . . . . . . . . . . . . . . 28

4.2.1. Class 2A (Graham Industrial Mortgage
Claims). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

4.2.2. Class 2B (Greater Pottsville Mortgage
Claims). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

4.2.3. Class 2C (Pottsville PIDA (Schuylkill)
Mortgage Claims) . . . . . . . . . . . . . . . . . . . . . . . . . 29

4.2.4. Class 2D (Other Secured Claims). . . . . . . . . . . . . . . . . . 29

4.3. Class 3 (IDRB Claims). . . . . . . . . . . . . . . . . . . . . . . 30

4.3.1 Class 3A (California Pollution Control
Financing Authority).. . . . . . . . . . . . . . . . . . . . . . . 30

4.3.2 Class 3B (Industrial Development Authority
Of The City Of Casa Grande). . . . . . . . . . . . . . . . . . . . 30

4.3.3 Class 3C (Young County #1 Industrial
Development Corporation).. . . . . . . . . . . . . . . . . . . . . 31

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<PAGE>

4.3.4 Class 3D (Guadalupe-Blanco River Authority
Industrial Development Corporation). . . . . . . . . . . . . . . . 31

4.3.5 Class 3E (Port Of Skagit County
Industrial Development Corporation). . . . . . . . . . . . . . . . 31

4.3.6 Class 3F (Industrial Development Authority
Of The County Of Los Angeles). . . . . . . . . . . . . . . . . . . 32

4.3.7 Class 3G (City Of Lancaster) . . . . . . . . . . . . . . . . . . . 32

4.4. Class 4 (BNP Claims) . . . . . . . . . . . . . . . . . . . . . . . 33

4.5. Class 5 (General Unsecured Claims) . . . . . . . . . . . . . . . . 37

4.6. Class 6 (Principal Mutual Claims). . . . . . . . . . . . . . . . . 38

4.7. Class 7 (Environmental Claims) . . . . . . . . . . . . . . . . . . 39

4.8. Class 8 (Intercompany Claims). . . . . . . . . . . . . . . . . . . 39

4.8.1 Class 8A (Hexcel Lyon Claim) . . . . . . . . . . . . . . . . . . . 39

4.8.2 Class 8B (Other Intercompany Claims) . . . . . . . . . . . . . . . 40

4.9. Class 9 (Subordinated Debenture Claims). . . . . . . . . . . . . . 40

4.10. Class 10 (Section 510(b) Hexcel
Common Stock Trading Claims. . . . . . . . . . . . . . . . . . . . 41

4.11. Class 11 (Common Stock). . . . . . . . . . . . . . . . . . . . . . 41

4.12. Class 12 (Hexcel Options). . . . . . . . . . . . . . . . . . . . . 43

ARTICLE V. PROVISIONS OF EQUITY SECURITIES
TO BE ISSUED PURSUANT TO THE PLAN . . . . . . . . . . . . . . 44

5.1. Reorganized Hexcel Common Stock. . . . . . . . . . . . . . . . . . 44

5.2. Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

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 . . . . . . . . . . . . . . . . . . . . 46

6.1. Voting of Claims and Interests . . . . . . . . . . . . . . . . . . 46

6.2. Method of Distributions Under the Plan.. . . . . . . . . . . . . . 47

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<PAGE>

6.3. Distributions Relating to Disputed Claims. . . . . . . . . . . . . 49

6.4. Resolution of Disputed Administrative
Expense Claims and Disputed Claims . . . . . . . . . . . . . . . . 50

6.5. Cancellation and Surrender of Existing Debt
Securities and Agreements. . . . . . . . . . . . . . . . . . . . . 51

6.6. Record Date for Distribution of Securities . . . . . . . . . . . . 52

6.7. Cancellation and Exchange of Common Stock. . . . . . . . . . . . . 52

6.8. Delivery of Shares to the Standby Purchaser. . . . . . . . . . . . 53

6.9. Standby Purchase Commitment. . . . . . . . . . . . . . . . . . . . 54

6.10. John J. Lee Purchase . . . . . . . . . . . . . . . . . . . . . . . 54

6.11. Registration Rights Agreement for Affiliates . . . . . . . . . . . 54

ARTICLE VII. EXECUTORY CONTRACTS AND UNEXPIRED
LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

7.1. Assumption or Rejection of Executory
Contracts and Unexpired Leases . . . . . . . . . . . . . . . . . . 54

7.2. Indemnification Obligations. . . . . . . . . . . . . . . . . . . . 57

7.3. Compensation and Benefit Programs. . . . . . . . . . . . . . . . . 58

7.4. Retiree Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 59

ARTICLE VIII. PROVISIONS REGARDING CORPORATE
GOVERNANCE OF THE REORGANIZED
DEBTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

8.1. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

8.2. Meetings of Stockholders . . . . . . . . . . . . . . . . . . . . . 60

8.3. Directors and Officers of Reorganized
Debtor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

8.4. Certificate of Incorporation and Bylaws. . . . . . . . . . . . . . 62

8.5. Issuance of New Securities . . . . . . . . . . . . . . . . . . . . 62

8.6 Cancellation of Preferred Stock Rights . . . . . . . . . . . . . . 63

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ARTICLE IX. EFFECT OF CONFIRMATION OF PLAN. . . . . . . . . . . . . . . . 64

9.1. Revesting of Assets. . . . . . . . . . . . . . . . . . . . . . . . 64

9.2. Discharge of Debtor. . . . . . . . . . . . . . . . . . . . . . . . 64

9.3. Extinguishment of Causes of Action Under
the Avoiding Power Provisions. . . . . . . . . . . . . . . . . . . 65

ARTICLE X. EFFECTIVENESS OF THE PLAN . . . . . . . . . . . . . . . . . . 65

10.1. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . 65

10.2. Effect of Failure of Conditions. . . . . . . . . . . . . . . . . . 66

10.3. Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . 67

ARTICLE XI. RETENTION OF JURISDICTION . . . . . . . . . . . . . . . . . . 67

ARTICLE XII. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . 69

12.1. Effectuating Documents and Further
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

12.2. Exemption from Transfer Taxes. . . . . . . . . . . . . . . . . . . 69

12.3. Exculpation and Releases . . . . . . . . . . . . . . . . . . . . . 70

12.4. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

12.5. Amendment or Modification of the Plan;
Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

12.6. Revocation or Withdrawal of the Plan . . . . . . . . . . . . . . . 72

12.7. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 72

12.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

12.9. Post-Effective Date Professional Fees. . . . . . . . . . . . . . . 73

12.10. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 74

12.11. Withholding and Reporting Requirements . . . . . . . . . . . . . . 74

12.12. Plan Supplement. . . . . . . . . . . . . . . . . . . . . . . . . . 74

12.13. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

12.14. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

12.15. Filing of Additional Documents . . . . . . . . . . . . . . . . . . 75

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EXHIBITS

Exhibit A - Subscription Rights Plan
Exhibit B - Standby Purchase Commitment and Exhibits,
including Security Agreement and Registration
Rights Agreement
Exhibit C - Restated Certificate of Incorporation
Exhibit D - Restated Bylaws
Exhibit E - Registration Rights Agreement for Affiliates

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") and the Official
Committee of Equity Security Holders of Hexcel (the "Equity Committee")
(collectively, the "Proponents"), hereby propose the following first amended
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, all reasonable out of pocket travel expenses of Equity Committee and
Creditors' Committee members, and all CIT Credit Claims.

1.2. ALLOWED means

(a) with respect to a Claim other than a Subordinated Debenture
Claim, any Claim that is not a Disputed

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Claim and proof of which was timely and properly filed or, if no proof of claim
was filed, which has been or hereafter is listed by the Debtor on its Schedules
as liquidated in amount and not disputed or contingent. "Allowed Administrative
Expense Claim" or "Allowed Claim" shall not include interest on such
Administrative Expense Claim or Claim from and after the Commencement Date
unless otherwise expressly specified in the Plan;

(b) with respect to a Subordinated Debenture Claim, any such
Claim properly reflected in the records of the indenture trustee for the
Subordinated Debentures or any agent thereof pursuant 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; and

(c) with respect to an Interest, any Interest as reflected in
the records of the transfer agent for Hexcel Common Stock at the close of
business on the Effective Date, and with respect to a Hexcel Option, any Options
as reflected in the records of the Debtor on the Effective 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. BALLOT means each of the voting forms to be distributed with the
Plan and the Disclosure Statement to

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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 of the Plan.

1.5. 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.

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

1.7. 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.

1.8. 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.

1.9. BASIC SUBSCRIPTION RIGHT means the right of a holder of Hexcel
Common Stock to purchase one share of Reorganized Hexcel Common Stock in
accordance with the provisions of the Rights Plan.

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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 Section 1.12 hereof,
including all Claims of BNP under the BNP reimbursement agreements described in
Section 1.13 and other documents, instruments and agreements related to such
letters of credit and reimbursement agreements.

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, as such letters of credit have been modified or
extended through the Effective Date.

1.13. 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.

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

1.15. BYLAWS means the Restated Bylaws of Hexcel in effect
immediately prior to the Effective Date.

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

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1.17. CERTIFICATE OF INCORPORATION means the Restated Certificate of
Incorporation of Hexcel in effect immediately prior to the Effective Date.

1.18. 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.

1.19. 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.

1.20. 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.

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

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

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remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.

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

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

1.25. 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 Plan.

1.26. 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.

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

1.28. CONFIRMATION ORDER means the order of the Bankruptcy Court
confirming the Plan pursuant to Section 1129 of the Bankruptcy Code.

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

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1.30. 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.

1.31. DEBTOR means Hexcel Corporation, a Delaware corporation.

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

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

1.34. DISPUTED means, with respect to a Claim,

(a) any Claim, proof of which was not timely and properly filed
and which in the case of a Claim has been or hereafter is listed on the
Schedules as unliquidated, disputed or contingent, or is not listed in the
Schedules or in the case of an Administrative Claim is reflected in the Debtor's
books and records as unliquidated, disputed or contingent or is not reflected in
the Debtor's books and records;

(b) any Claim as to which the Debtor or any other party in
interest has filed an objection or request for estimation on or before the
Effective Date or such other applicable limitation period fixed by the Plan, the
Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy Court, except to

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<PAGE>

the extent that such objection or request for estimation is withdrawn or
determined by a Final Order, in favor of the holder of such Claim;

(c) any Claim as to which a proof of claim is timely and
properly filed, except to the extent that the amount asserted in such proof of
claim does not exceed the liquidated, undisputed and noncontingent amount set
forth in the Schedules with respect to such Claim. A Claim that is Disputed
pursuant only to the provisions of this Subsection 1.34(c) shall cease to be
Disputed (i) on the ninetieth (90th) day following the Effective Date or on such
later applicable deadline fixed by the Plan, the Bankruptcy Code, the Bankruptcy
Rules or the Bankruptcy Court, unless an objection or request for estimation
with respect to such Claim has been filed by such deadline, or (ii) upon, and to
the extent, of a withdrawal of such objection or request for estimation or a
determination thereon by a Final Order in favor of the holder of such Claim; or

(d) as to Claims filed pursuant to Section 7.1(e) of the Plan or
any other Claim not filed prior to the Confirmation Date, the Debtor or any
other party in interest has filed an objection or request for estimation on or
before a deadline to be established by the Bankruptcy Court.

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

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<PAGE>

1.36. ELIGIBLE RIGHTS HOLDER means a Record Holder of Hexcel Common
Stock who has exercised, in accordance with the terms of the Rights Plan, all
Basic Subscription Rights issued to such holder by Reorganized Hexcel pursuant
to the Plan.

1.37. 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, of an Environmental Release (including, without limitation, sudden or
non-sudden accidental or non-accidental Environmental Releases), or exposure to
any Hazardous Material or other substance, chemical, material, pollutant,
contaminant, odor, or audible noise 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 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

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<PAGE>

environmental matters connected with the properties presently or formerly owned,
leased or operated by Hexcel.

1.38. ENVIRONMENTAL LAW means any federal, state, local or foreign
law (including common law), statute, code, ordinance, rule, regulation or other
requirement or guideline concerning an Environmental Release 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 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.

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<PAGE>

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

1.40. EPA means the Environmental Protection Agency.

1.41. 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, including
State of Wisconsin Investment Board as an EX OFFICIO member, as such committee
may be constituted from time to time.

1.42. 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.

1.43. EXIT FINANCING FACILITY means a working capital credit facility
in an amount not less than $35 million to be obtained by Reorganized Hexcel to
meet its ordinary working capital requirements.

1.44. 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

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<PAGE>

which any right to appeal, petition for CERTIORARI, reargue or rehear shall have
been waived in writing in form and substance satisfactory to the Proponents or
Reorganized Hexcel or, in the event that an appeal, writ of CERTIORARI,
reargument or 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.

1.45. GENERAL UNSECURED CLAIMS means all Unsecured Claims against the
Debtor, other than Claims in Classes 1, 2, 3, 4, 6, 7, 8, 9 and 10. Such Claims
include, without limitation, the Bank Revolver Claims, the claim of Barclays
Bank Ltd. under its Letter of Credit and Reimbursement Agreement, 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.

1.46. 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

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Environmental Law, including but not limited to, petroleum products, asbestos
and polychlorinated biphenyls.

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

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

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

1.50. IDRB'S shall mean all industrial revenue bonds issued pursuant
to the loan agreements specified in Section 3.3, and any of the documents,
instruments and agreements relating thereto, as amended, supplemented or
modified.

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.

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

1.55. OVERSUBSCRIPTION POOL means those shares of Reorganized Hexcel
Common Stock that are subject to Basic Subscription Rights but are not purchased
through exercise of such Basic Subscription Rights.

1.56. OVERSUBSCRIPTION RIGHTS means the rights of Eligible Rights
Holders under the Rights Plan to purchase, subject to Proration, those shares of
Reorganized Hexcel Common Stock in the Stockholder Pool.

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

1.58. PLAN means this chapter 11 plan of reorganization (including
all exhibits and schedules annexed hereto), either in its present form or as it
may be altered, amended, or modified from time to time.

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

1.60. 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

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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, or no longer require
notice.

1.61. 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.

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

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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.

1.63. 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.

1.64. PRO RATA means (i) regarding Claims, the ratio of the amount of
an Allowed Claim in a particular Class to the aggregate amount of Allowed Claims
in such Class; and (ii) regarding Interests, the ratio of the amount of the
Allowed Interest to the aggregate amount of Allowed Interests.

1.65. PRORATION means the method set forth in the Rights Plan for
apportioning the shares of Reorganized Hexcel Common Stock in the Stockholder
Pool among Eligible Rights Holders in the event that there are an insufficient
number of shares in the Stockholder Pool to satisfy all exercised
Oversubscription Rights.

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

1.67. RECORD HOLDER OF HEXCEL COMMON STOCK means a stockholder of
record of Hexcel Common Stock as of the close of business on the Effective Date.

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

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

1.70. 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.

1.71. 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,
and includes the Basic Subscription Rights and the Oversubscription Rights.

1.72. RIGHTS PLAN means the Subscription Rights Plan substantially in
the form of EXHIBIT A hereto, pursuant to which the Rights are to be issued.

1.73. 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.

1.74. 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 1.74, other than a Claim for reimbursement or contribution described in
Section 7.2 of the Plan.

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1.75. 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.

1.76. STANDBY POOL means 25% of the amount of shares of Reorganized
Hexcel Common Stock, if any, which remain available in the Oversubscription Pool
after the first 108,108 shares of Reorganized Hexcel Common Stock in the
Oversubscription Pool have been allocated for purchase by John J. Lee.

1.77. STANDBY PURCHASE COMMITMENT means the Standby Purchase
Commitment substantially in the form of EXHIBIT B hereto, pursuant to which the
Standby Purchaser has agreed to purchase certain shares of Reorganized Hexcel
Common Stock, including but not limited to the Minimum Shares (as defined
therein), and those shares, if any, in the Standby Pool and the balance of
shares remaining, if any, in the Stockholder Pool after satisfaction of all
Oversubscription Rights.

1.78. STANDBY PURCHASER means Mutual Series Fund Inc.

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

1.80. STOCKHOLDER POOL means 75% of the amount of shares of
Reorganized Hexcel Common Stock, if any, which remain available in the
Oversubscription Pool after the first

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108,108 shares of Reorganized Hexcel Common Stock in the Oversubscription Pool
have been allocated for purchase by John J. Lee.

1.81. 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.

1.82. 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, N.A., Trustee Re: 7% Convertible Subordinated Debentures
due 2011 (the "SUBORDINATED DEBENTURE INDENTURE").

1.83. SUBSCRIPTION RIGHTS EXPIRATION DATE means the first Business
Day that occurs not less than forty five calendar days after the Effective Date.

1.84. SUBSCRIPTION RIGHTS CERTIFICATE means a certificate
substantially in the form attached to the Rights Plan.

1.85. SUBSCRIPTION RIGHTS PERIOD means the period commencing on the
fifteenth day after the Effective Date and concluding at 5:00 p.m. EST on the
Subscription Rights Expiration Date.

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1.86. SUBSIDIARY means any entity of which Hexcel owns directly or
indirectly at least 95% of the outstanding capital stock.

1.87. 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 shall pay to each holder of an Allowed
Administrative Expense

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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 five percent (5%), 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 cash payments
having a value, as

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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:

3.2.1 CLASS 2A (GRAHAM INDUSTRIAL MORTGAGE CLAIMS) consists of
all Claims against the Debtor under that

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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).

3.2.4 CLASS 2D (OTHER SECURED CLAIMS) consists of all other
Secured Claims.

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 the 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
Development Authority of the County of Los Angeles regarding

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$4,900,000 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.

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

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

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

3.7. CLASS 7 (ENVIRONMENTAL CLAIMS) consists of all Environmental
Claims, except the Claim filed by Barclays Bank Ltd. with respect to the
$4,000,000 undrawn letter of credit securing the Debtor's performance of its
obligations under an Administrative Order on Consent with the State of New
Jersey.

3.8. CLASS 8 (INTERCOMPANY CLAIMS) consists of two subclasses (with
each subclass to be deemed a separate class

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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.

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 and all restricted
shares of Common Stock issued pursuant to the Stock Plan.

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.

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(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 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.

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(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 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.

4.2.4 CLASS 2D -- OTHER SECURED CLAIMS.

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

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(b) DISTRIBUTIONS. On the Effective Date, the Secured Claims,
if any, in Class 2D shall be Reinstated.

(c) RETENTION OF LIENS. Each holder of a Claim in Class 2D
shall retain the liens securing such holder's 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, at the Proponents' option, be paid in full or 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.

(b) DISTRIBUTIONS. On the Effective Date, the Claims in Class
3B shall, at the Proponents' option, be paid in full or Reinstated.

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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, at the Proponents' option, be paid in full or 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, at the Proponents' option, be paid in full or 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, at the Proponents' option, be paid in full or 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, at the Proponents' option, be paid in full or 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, at the Proponents' option, be paid in full or Reinstated.

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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.

On the Effective Date, the holder of the Claims in Class 4 shall
receive:

(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 IDRBs;

(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 IDRBs for which BNP 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 fee for BNP's extension of the seven
BNP Letters of Credit and modification of the seven BNP
Reimbursement Agreements.

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(D) In addition, the following shall occur as of the Effective
Date:

(i) BNP will extend the expiration date of the seven BNP
Letters of Credit to December 31, 1998;

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

(iii) The seven BNP Reimbursement Agreements will be
amended and restated pursuant to the Amended and Restated
BNP Reimbursement Agreements to (a) 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, (b) increase the
letter of credit commitment fees to 200 basis points per
annum, payable quarterly in advance, effective on the
Effective Date, (c) increase the interest rate on the
Liquidity

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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 (d) 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, the Debtor and the Equity Committee may
agree; and

(E) 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 at its option either deposit
$600,000 in a sinking fund in which BNP and/or the trustees for
the IDRBs will hold a first priority security interest to secure
Reorganized Hexcel's obligations under the Amended and Restated
BNP

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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 IDRBs in a like principal amount, or
provide a letter of credit in the amount of $600,000 for the
benefit of BNP to secure Reorganized Hexcel's obligations under
the Amended and Restated BNP Reimbursement Agreements. All net
Cash 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 IDRBs supported by the seven
BNP Letters of Credit will be applied to the reduction of the
available amounts of one or more of the BNP Letters of Credit by
optional redemption of the IDRBs or will be deposited into the
sinking fund. Such net Cash proceeds may, at the option of
Reorganized Hexcel, be credited against the $600,000 quarterly
deposit referred to above. In addition, in the event that the
Debtor or Reorganized Hexcel otherwise causes the available
amounts of one or more of the BNP Letters of Credit to be

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reduced as the result of the optional redemption of any IDRBs, it
may, at its option, credit the amount of such reduction against
any sinking fund payments or letters of credit designated by it
until the full amount of such reduction has been so credited.

4.5. CLASS 5 -- GENERAL UNSECURED CLAIMS.

(a) NONIMPAIRMENT. Class 5 is unimpaired by the Plan. The holders of
Claims in Class 5 are conclusively presumed to have accepted the Plan as
holders of Allowed Class 5 Claims and are 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 5, on the latest of (A) the Effective Date, (B) the
date such Allowed Claim becomes an Allowed Claim and (C) the date such
Allowed Claim becomes due, Cash in an amount equal to:

(i) Such Allowed Claim; and

(ii) Interest on such Allowed Claim calculated at the rate of
five percent (5%) per annum for (A) the period commencing on the
Commencement Date and ending on the date such Allowed Claim is
paid in full in the case of any such Allowed Claim consisting of
debt which contractually requires payment of interest

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prior to maturity, and (B) the period commencing on the later of
the Commencement Date and the date that the obligation underlying
the Allowed Claim became due (without acceleration) and ending on
the date such Allowed Claim is paid in full in the case of any
other such Allowed Claim;

PROVIDED, HOWEVER, that (1) Reorganized Hexcel shall not pay interest on
any Allowed Claim which becomes Allowed pursuant to a compromise or
settlement or judgment that does not expressly provide for the accrual or
payment of interest and (2) Reorganized Hexcel shall pay interest on any
Allowed Claim which became or becomes Allowed pursuant to a compromise or
settlement or judgment that expressly provides for a different rate of
interest at such different rate. For purposes of this section, an
Acknowledgement of Extinguishment of Scheduled Claim shall not constitute a
compromise or settlement or judgment.

4.6. CLASS 6 -- PRINCIPAL MUTUAL CLAIMS

(a) NONIMPAIRMENT. Class 6 is unimpaired by the Plan. The holder of
the Claims in Class 6 is conclusively presumed to accept the Plan and is
not entitled to vote to accept or reject the Plan.

(b) DISTRIBUTIONS.

(i) The holder of the Allowed Claims in Class 6 shall receive
payment on the Effective Date of $35.5

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million plus interest thereon at 10% per annum commencing October 1, 1994
in Cash.

4.7. CLASS 7 -- ENVIRONMENTAL CLAIMS.

(a) NONIMPAIRMENT. Class 7 is unimpaired by the Plan. The holders of
Claims in Class 7 are conclusively presumed to have accepted the Plan as
holders of Allowed Class 7 Claims and are not entitled to vote to accept or
reject the Plan.

(b) DISTRIBUTIONS. Unless otherwise provided by stipulation and
order, each Environmental Claim that is not disallowed pursuant to a Final
Order shall be reinstated and rendered unimpaired pursuant to Section
1124(1) of the Bankruptcy Code.

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 September 30, 1998
and will bear interest payable semi-annually in arrears at the rate of 6.9%
per annum from the Effective Date.

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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
on demand at any time after September 30, 1998.

4.9. CLASS 9 -- SUBORDINATED DEBENTURE CLAIMS.

(a) NONIMPAIRMENT. Class 9 is unimpaired by the Plan. The
holders of Claims in Class 9 are conclusively presumed to have accepted the
Plan as holders of Class 9 Claims and are not entitled to vote to accept or
reject the Plan.

(b) DISTRIBUTIONS. On the Effective Date, the Claims in Class 9
shall be Reinstated, and all defaults thereunder shall be cured on the
Effective Date. The Debtor will assume all obligations pursuant to the
Subordinated Debenture Indenture and pay them in the ordinary course of
business, including without limitation the obligation pursuant to the
Subordinated Debenture Indenture to pay the indenture trustee thereunder
reasonable compensation and its reasonable expenses and disbursements, and,
to the extent allowed by the Bankruptcy Court upon application by the
indenture trustee, the reasonable fees, expenses and disbursements

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of its counsel. Nothing in thist Plan shall affect the charging lien rights
of the indenture trustee pursuant to the terms of the Subordinated
Debenture Indenture.

4.10. CLASS 10 -- SECTION 510(b) HEXCEL
COMMON STOCK TRADING CLAIMS.

(a) IMPAIRMENT AND VOTING. Class 10 is unimpaired by the Plan. Each
holder of an Allowed Claim in Class 10 is conclusively presumed to accept
the Plan as a holder of an Allowed Class 10 Claim and is not 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 $200,000 worth of shares of Reorganized
Hexcel Common Stock valued at a price equal to the average of the daily
average prices of Reorganized Hexcel Common Stock for the 20 trading days
beginning 30 calendar days following the Subscription Rights Expiration
Date; 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 as of the date of the order approving the Disclosure
Statement is entitled to vote to accept or reject the Plan.

(b) DISTRIBUTIONS. On the Effective Date, each Record Holder of
Hexcel Common Stock shall receive, in exchange for each share of Hexcel
Common Stock, (i) one

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share of Reorganized Hexcel Common Stock and (ii) 1.21273 Basic
Subscription Rights and the appurtenant Oversubscription Rights. Fractional
shares of Reorganized Hexcel Common Stock and fractional Basic Subscription
Rights shall be treated in accordance with Section 6.2(f) hereof. Each
Basic Subscription Right will entitle the holder to purchase one share of
Reorganized Hexcel Common Stock at an exercise price of $4.625 per share,
payable in Cash, in accordance with the Rights Plan. In addition, under the
Rights Plan if the holder exercises all of the Basic Subscription Rights he
receives from Hexcel pursuant to the Plan, such holder will have the right
to exercise his Oversubscription Rights and thereby subscribe for all or a
portion of the shares of Reorganized Hexcel Common Stock, if any, which are
in the Stockholder Pool, subject to Proration in accordance with the terms
of the Rights Plan. The number of shares of Reorganized Hexcel Common
Stock, if any, which such holder will actually be able to purchase through
the exercise of the Oversubscription Rights will depend upon the size of
the Stockholder Pool and will be subject to Proration in the event that the
total number of shares subscribed for pursuant to the exercise of
Oversubscription Rights exceeds the number of shares in the Stockholder
Pool. The Rights will expire on the Subscription Rights Expiration Date.
Certificates representing the Rights will be distributed as soon after

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the Effective Date as is practicable, but in no event later than 15 days
after the Effective Date, and will first be exercisable on the first day
which is not less than 15 calendar days 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 Subscription Rights
Expiration Date.

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

(d) CANCELLATION OF PREFERRED STOCK RIGHTS. As of the Effective
Date, all Preferred Stock Rights appurtenant to shares of Common Stock will
be cancelled and extinguished.

4.12. CLASS 12 -- HEXCEL OPTIONS.

(a) NONIMPAIRMENT. Class 12 is unimpaired by the Plan. The holders
of Claims in Class 12 are conclusively presumed to have accepted the Plan
as holders of Class 12 Claims and are not entitled to vote to accept or
reject the Plan.

(b) DISTRIBUTIONS. Holders of issued and vested Hexcel Options in
Class 12 shall retain their Hexcel

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Options. Proponents reserve the right to modify the Plan to provide
Reorganized Hexcel with an option, at its sole discretion, to make any
distributions to the holders of Options in Cash in an amount equal to the
fair market value of the Options. On the Effective Date, the Stock Option
Plan shall be cancelled and terminated, except that the provisions of the
Stock Plan applicable to outstanding Options and restricted Common Stock
shall remain in effect and shall apply to such Options and the Reorganized
Hexcel Common Stock issued with respect to such Options and restricted
Common Stock.

ARTICLE V

PROVISIONS OF EQUITY SECURITIES
TO BE ISSUED PURSUANT TO THE PLAN

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

(a) AUTHORIZATION: 40,000,000 shares.

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

(d) PREEMPTIVE RIGHTS: None.

(e) REGISTRATION: None.

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

(a) AUTHORIZATION: Approximately 8,864,865 Basic Subscription Rights
(the actual number may

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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: $4.625 per share payable in Cash.

(d) SUBSCRIPTION PERIOD: The Rights will be exercisable at any time
during the Subscription Rights Period.

(e) TRANSFERABILITY: The Basic Subscription Rights will be
transferable subject to compliance with applicable federal and state
securities laws. The Oversubscription Rights are not transferable.

(f) REGISTRATION: None.

(g) OVERSUBSCRIPTION RIGHTS: Each Eligible Rights Holder will have
the right to subscribe for the shares of Reorganized Hexcel Common Stock,
if any, which are included in the Stockholder Pool in accordance with the
terms of the Rights Plan. The number of shares of Reorganized Hexcel Common
Stock which an Eligible Rights Holder will be able to purchase through the
exercise of the Oversubscription Rights will depend upon the size of the
Stockholder Pool and will be subject to Proration in the event that
aggregate number of shares subscribed for pursuant to the exercise of
Oversubscription Rights exceeds the number of shares in the Stockholder
Pool.

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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.

(a) IN GENERAL. 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.

(b) CONTROVERSY CONCERNING IMPAIRMENT. In the event of a
controversy as to whether any Claim or Class of Claims is impaired under the
Plan, the Bankruptcy Court shall, after notice and a hearing, determine such
controversy. The Plan Proponents believe that Classes 1, 2, 3, 5, 6, 7, 9 and 12
are unimpaired and that those classes of Claims and Interests do not have the
right to vote on the Plan. The Plan

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Proponents are nevertheless soliciting acceptances of the Plan from Classes 5
and 6 so that the Plan can be confirmed even if the Bankruptcy Court determines
that holders of Claims in such Classes are impaired. However, if the Bankruptcy
Court determines that holders of Claims in such Classes are rendered unimpaired
by the Plan, the votes of the holders of such Claims will not be counted.

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 Court, or, with respect to Claims
governed by an indenture, to the indenture trustee on behalf of the holder of
each such Claim. The Debtor shall be entitled to rely on the most current claims
register provided by Poorman-Douglas Corporation prior to 20 days before the
Confirmation Date. All distributions of 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 and
payment shall be deemed made when the check is transmitted. Reorganized Hexcel
will make payment by wire transfer to any creditor whose Allowed Class 5 Claim
equals or exceeds $500,000 who provides a

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written request therefor, together with wire transfer instructions, on or before
five (5) Business Days prior to the Effective Date. Reorganized Hexcel shall be
entitled to rely on the wire transfer instructions provided by any such
creditor, provided that Reorganized Hexcel has made reasonable inquiry to
confirm the validity of such request. If Reorganized Hexcel is not reasonably
assured of the validity of such request, Reorganized Hexcel in its sole
discretion can make such payment by check.

(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. All payments or distributions due on the Effective
Date shall be made thereon or as soon as practicable thereafter, but in no event
later than 10 calendar days after the Effective Date.

(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. Payment of Cash less than one hundred
dollars need not be made by Reorganized Hexcel to any holder of a Claim unless a
request therefor is made in writing to Reorganized Hexcel.

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(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 Hexcel Common Stock and Rights to be distributed
shall be rounded (up or down) to the nearest whole share or Right, with .50
shares or Rights rounded up to the next highest share or Right, except that the
number of shares which may be purchased upon the exercise of Oversubscription
Rights will be rounded down to the next lowest whole share in accordance with
the Rights Plan.

(g) UNCLAIMED DISTRIBUTIONS.

(i) Any Cash or other distributions pursuant to the Plan,
including but not limited to any distributions of interest, that are
unclaimed for a period of one year after distribution thereof shall be
forfeited and revested in Reorganized Hexcel.

(ii) Any payment 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, that is 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.

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

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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; PROVIDED, however, that the undisputed portion of any Disputed
Claim shall be paid on the Effective Date together with interest thereon to the
same extent as an Allowed Claim in the same Class as that Claim. As to the
disputed portion of any Disputed Claim, any distribution in respect thereof
shall be made in accordance with the Plan to the holder of such Claim based upon
the amount of such disputed portion that becomes an Allowed Administrative
Expense Claim or Allowed Claim, as the case may be, together with interest
thereon to the same extent as an Allowed Claim in the same Class as that Claim.

6.4. RESOLUTION OF DISPUTED ADMINISTRATIVE EXPENSE CLAIMS AND DISPUTED
CLAIMS. Unless otherwise ordered by the Bankruptcy Court after notice and a
hearing (and 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), the Proponents
shall have the exclusive right to make and file objections to Administrative
Expense Claims and Claims, provided, however, that the Equity Committee will not
file an objection (other than with respect 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) without first making prior demand that

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the Debtor file such an objection and ten (10) days having elapsed without such
objection being filed by the Debtor.

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 surety bond in form and substance (including,
without limitation, with respect to amount) reasonably satisfactory to the
Reorganized Debtor from a surety company

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satisfactory to 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 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.

The record date for distribution of Rights and Reorganized Hexcel
Common Stock shall be the Effective Date. Only Record Holders of Hexcel Common
Stock will be entitled to the distributions pursuant to Section 4.11.

6.7 CANCELLATION AND EXCHANGE OF COMMON STOCK. At the close of
business on the Effective Date, each issued and outstanding share of Common
Stock held of record shall automatically, without any further action by the
record holder thereof or by Reorganized Hexcel, be cancelled and exchanged for
one validly issued, fully paid and nonassessable share of Reorganized Hexcel
Common Stock (and each share of Common Stock held as a treasury share shall
automatically, without any further action by Reorganized Hexcel, be cancelled
and exchanged for one such treasury share). Each certificate for shares of
Common Stock outstanding immediately prior to the Effective Date shall on and
after the Effective Date represent

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the number of shares of Reorganized Hexcel Common Stock into which such shares
have been reclassified on the Effective Date pursuant to the Plan. Any record
holder of Hexcel Common Stock on the Effective Date may, at any time after the
Effective Date, receive a new certificate representing such holder's shares of
Reorganized Hexcel Common Stock by surrendering to the transfer agent his old
certificates representing an equivalent number of shares of Common Stock, or, in
the event of the destruction, loss, mutilation or theft of such old certificate,
at 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 a new certificate representing an appropriate
number of shares of Reorganized Hexcel Common Stock.

6.8. DELIVERY OF SHARES TO THE STANDBY PURCHASER. On the Effective
Date and as soon as practical after the Subscription Rights Expiration Date, the
Reorganized Hexcel Common Stock to be acquired by the Standby Purchaser at those

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times pursuant to the Standby Purchase Commitment shall be delivered directly to
the Standby Purchaser.

6.9. STANDBY PURCHASE COMMITMENT. Hexcel and Reorganized Hexcel, as
the case may be, shall perform their obligations under the Standby Purchase
Commitment in accordance with its terms, including, without limitation, issuing
all shares of Reorganized Hexcel Common Stock to the Standby Purchaser as
provided therein, making all payments required therein and entering into the
Registration Rights Agreement included in Exhibit B to the Plan.

6.10. JOHN J. LEE PURCHASE. On the Subscription Rights Expiration
Date, Reorganized Hexcel shall sell to John J. Lee and John J. Lee shall
purchase 108,108 shares of Reorganized Hexcel Common Stock at a purchase price
of $4.625 per share.

6.11. REGISTRATION RIGHTS AGREEMENT FOR AFFILIATES. On the Effective
Date, Reorganized Hexcel shall be bound by the Registration Rights Agreement for
Affiliates in the form of Exhibit E to the Plan which is for the benefit of
certain affiliates.

ARTICLE VII

EXECUTORY CONTRACTS AND UNEXPIRED LEASES

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

(a) EXECUTORY CONTRACTS. Except as otherwise provided herein or by
the Confirmation Order, as of the

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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. The Debtor shall pay all amounts that have come due and owing on or before
the Effective Date with respect to obligations under assumed executory contracts
immediately upon resolution of amounts thereby owing, and execution of
appropriate documents evidencing withdrawal of claims therefor, or upon further
order of the Bankruptcy Court.

(b) UNEXPIRED LEASES. Except as otherwise provided herein or by the
Confirmation Order, 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

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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. The Debtor shall pay all amounts
that have come due and owing on or before the Effective Date with respect to
obligations under assumed leases immediately upon resolution of amounts thereby
owing, and execution of appropriate documents evidencing withdrawal of claims
therefor, or upon further order of the Bankruptcy Court.

(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, (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, and (iv) the disallowance of all Claims arising from contracts and
leases assumed prior to or as of the Effective Date.

(d) CURE OF DEFAULTS. On the Effective Date, Reorganized Hexcel
shall Cure any and all defaults under any

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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 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

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be discharged irrespective of whether indemnification, reimbursement or
limitation is owed in connection with an event occurring before, on, or after
the Commencement Date. The Debtor shall pay all amounts that have come due and
owing on or before the Effective Date with respect to assumed indemnity
obligations immediately upon resolution of amounts thereby owing, and execution
of appropriate documents evidencing withdrawal of claims therefor, or upon
further order of the Bankruptcy Court.

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, 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. After the Effective Date, Debtor shall continue to maintain,
among other things, the Hexcel Corporation Hourly Employees' Pension Plan (the
"Hourly Employees' Pension Plan") in accordance with the Employee Retirement
Income Security Act of 1974, AS AMENDED ("ERISA"), subject to any and all
modification and termination

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rights of the Debtor contained therein. Debtor's obligations to the Pension
Benefit Guaranty Corporation, including obligations that may arise under 29
U.S.C. Section 1362-1364 if the Hourly Employees' Pension Plan is terminated
after the Effective Date or if Debtor withdraws from the Hourly Employees'
Pension Plan after the Effective Date, will survive confirmation of the Plan, be
unaffected thereby, and will not be discharged in accordance with Section 1141
of the Bankruptcy Code. The Debtor shall pay all amounts that have come due and
owing on or before the Effective Date with respect to assumed benefit programs
immediately upon resolution of amounts thereby owing, and execution of
appropriate documents evidencing withdrawal of claims therefor, or upon further
order of the Bankruptcy Court.

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. The Debtor
shall pay all amounts that have come due and owing on or before the Effective
Date with

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respect to assumed retiree benefits immediately upon resolution of amounts
thereby owing, and execution of appropriate documents evidencing withdrawal of
claims therefor, or upon further order of the Bankruptcy Court.

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 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 selected by the Board
of Directors of Reorganized Hexcel not earlier than nine months after the
Effective Date, unless otherwise agreed to by the board designees of the Standby
Purchaser and the Equity Committee, and thereafter in accordance with the
certificate of incorporation and bylaws of Reorganized Hexcel.

8.3. DIRECTORS AND OFFICERS OF REORGANIZED DEBTOR.

(a) BOARD OF DIRECTORS. As of the Effective Date, the Board of
Directors of Reorganized Hexcel shall initially consist of eight individuals
whose names shall be disclosed prior to the hearing to consider confirmation of
the Plan, and, as set forth herein, one or two additional directors will

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be added after the Effective Date. Initially, three directors will be designated
by the Equity Committee, two directors will be designated by the Standby
Purchaser, and three directors will be designated by joint selection of the
Equity Committee and the Standby Purchaser, all of whom will serve until the
election of their successors at the first annual meeting of Reorganized Hexcel
which is held after the Effective Date. One seat on the Board of Directors will
be reserved for a new Chief Executive Officer, who will join the board as a
director immediately upon the commencement of his or her employment by Hexcel.
In addition, if on the Subscription Rights Expiration Date the Standby Purchaser
owns more than 50% of the outstanding Reorganized Hexcel Common Stock, then the
Standby Purchaser shall designate one additional director; if on the
Subscription Rights Expiration Date the Standby Purchaser owns less than 25% of
the outstanding Reorganized Hexcel Common Stock, then one additional director
shall be designated by mutual agreement of those directors previously designated
by the Equity Committee, on the one hand, and those directors previously
designated by mutual agreement of the Equity Committee and the Standby
Purchaser, on the other hand, and such director will serve until his successor
is elected at the first annual meeting of stockholders of Reorganized Hexcel
which is held after the Effective Date.

(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

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Effective Date in accordance with any employment agreement with Reorganized
Hexcel and applicable nonbankruptcy law; provided that unless the directors
designated by the Equity Committee and the directors designated by the Standby
Purchaser otherwise agree, until the first annual meeting of stockholders held
after the Effective Date, no person who has served as the Chairman or as the
Chief Executive Officer of Hexcel at any time prior to October 1, 1994 shall
serve as Chairman of Reorganized Hexcel. In the event that a new Chief Executive
Officer to succeed John J. Lee has not been selected prior to the Effective
Date, then John J. Lee will continue to serve as Chief Executive Officer until a
new Chief Executive Officer has been selected by the mutual agreement of those
directors designated by the Equity Committee, on the one hand, and those
directors designated by the Standby Purchaser, on the other hand. Thereafter,
Lee will serve as a consultant on the terms set forth in the Standby Purchase
Commitment. Lee's compensation shall be as set forth in Exhibit C of the Standby
Purchase Commitment.

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 the following equity
securities by Reorganized Hexcel is

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hereby authorized without further act or action under applicable law,
regulation, order, or rule:

(a) approximately 18,163,881 to 18,271,989 shares of Reorganized
Hexcel Common Stock (depending upon whether a sufficient number of shares are
available in the Oversubscription Pool to cover the 108,108 shares of
Reorganized Hexcel Common Stock which will be sold to John J. Lee), which shall
be issued and distributed pursuant to the Plan (including the shares of Common
Stock which will be cancelled and exchanged for Reorganized Hexcel Common Stock,
shares issued to holders of Class 10 Claims, shares issued pursuant to the
exercise of Rights distributed pursuant to the Plan, shares issued to the
Standby Purchaser and shares issued to John J. Lee); and

(b) approximately 8,864,865 Basic Subscription Rights plus the
appurtenant Oversubscription Rights.

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,
subject to the provisions of Article 12.3 of the Plan.

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) the Bankruptcy Court shall have entered the Confirmation
Order in form satisfactory to the Proponents providing, INTER ALIA, that the
Standby Purchase Commitment is a valid, legal and binding obligation of
Reorganized Hexcel; that all securities to be issued to holders of Claims and
Interests pursuant to the Plan, and all securities issuable upon the exercise of
Rights issued pursuant to the Plan are exempt from registration pursuant to
Section 1145 of the Bankruptcy Code; that all defaults, if any, under the IDRB's
are cured and the IDRB's are Reinstated and tax-exempt to Reorganized Hexcel and
the holders thereof; that all defaults, if any, under the Subordinated
Debentures are cured and the Subordinated Debentures are Reinstated, and such
Order shall have become a Final Order; (ii) Reorganized Hexcel shall have credit
availability under the Exit Financing

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<PAGE>

Facility to provide Reorganized Hexcel with working capital sufficient to meet
its ordinary and peak working capital requirements, as reasonably determined by
the Proponents and the Standby Purchaser; (iii) all conditions to the first
closing under the Standby Purchase Commitment shall have been satisfied or been
waived in accordance with such agreement; and (iv) the Reorganized Hexcel Common
Stock to be issued pursuant to the Plan, including the shares to be issued
pursuant to the Standby Purchase Commitment, shares to be issued to John J. Lee
and shares to be issued upon the exercise of Rights, shall have been listed on
the New York Stock Exchange subject to official notice of issuance.

10.2. EFFECT OF FAILURE OF CONDITIONS. In the event that any of the
conditions specified in Section 10.1 of the Plan has not been satisfied or
waived (in the manner provided in Section 10.3 below) on or before the Effective
Date, the Proponents may, upon notification submitted by the Proponents to the
Bankruptcy Court and counsel for the Creditors' Committee, terminate the Plan.
In the event the Effective Date shall not have occurred within 90 days after
entry of the Confirmation Order, the Plan shall automatically terminate. Upon
termination of the Plan (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

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<PAGE>

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 Proponents may waive conditions to
effectiveness of the Plan set forth in Section 10.1 of the Plan.

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;

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<PAGE>

(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 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

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<PAGE>

(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 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.

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<PAGE>

12.3. EXCULPATION AND RELEASES. 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 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.

Upon the Effective Date, pursuant to Section 1123(b)(3)(A) of the
Bankruptcy Code, any and all claims held by Hexcel against any present or former
officers or directors shall be forever settled, waived, released and discharged,
and will not be retained or enforced by Reorganized Hexcel. Further, to the
extent allowable under applicable bankruptcy law, upon the Effective Date any
and all claims and causes of action, whether direct or derivative, against any
present or former officer or director of Hexcel by any holder of a Claim or
Interest under the Plan shall similarly be forever settled,

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<PAGE>

waived, released and discharged, and not retained or enforced by such holder.

12.4. COMMITTEES. The appointment of the Creditors' Committee shall
terminate on the Effective Date, and the appointment of the Equity Committee
shall terminate on the Second Closing (as that term is defined in the Standby
Purchase Commitment), except as to applications under Sections 330 and 503 of
the Bankruptcy Code and such Committees' objections to such applications and
claims of the Debtor's officers, directors and employees, as to which the
Committees' appointments will terminate immediately after the entry of a Final
Order on 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 Proponents 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.

(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

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<PAGE>

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 Proponents reserve the right to revoke or withdraw the Plan
prior to the Confirmation Date.

(b) If the Proponents revoke or withdraw 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, Reorganized Debtor, the holders of Claims and Equity
Interests, and their respective successors and assigns.

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:

To Hexcel Corporation:

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

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<PAGE>

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.

To the Official Committee of Equity Security Holders:

MARCUS MONTGOMERY WOLFSON P.C.
53 Wall Street
New York, New York 10005
Attn: Peter D. Wolfson, Esq.

12.9. POST-EFFECTIVE DATE PROFESSIONAL FEES. The Reorganized Debtor
may retain and compensate professionals, including Kronish, Lieb, Weiner &
Hellman and Goldberg, Stinnett, Meyers & Davis as its counsel, and Marcus
Montgomery Wolfson P.C. as counsel to the outside directors of the Reorganized
Debtor, 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.
This provision is not intended to and shall not limit the discretion of the
Reorganized Debtor and the directors of the Reorganized Debtor or any of them in
the selection of professionals or impose any obligation of the Reorganized
Debtor to reimburse the cost of professionals retained by any director or group
of directors of the

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<PAGE>

Reorganized Debtor unless approved by the Board of Directors of the Reorganized
Debtor after the Effective Date.

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 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 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 Confirmation Date. 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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<PAGE>

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 Proponents 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. Promptly
after the period during which Reorganized Hexcel may object to Claims after the
Effective Date, Reorganized Hexcel shall serve on the Postconfirmation List and
the Committees and file a certificate of an officer of Reorganized Hexcel
stating that the period has expired and that Reorganized Hexcel has paid the
Claims as to which no written objection has been filed.

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<PAGE>

Dated: November 7, 1994

HEXCEL CORPORATION,
a Delaware corporation

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

KRONISH, LIEB, WEINER & HELLMAN

By: /s/ Robert J. Feinstein
--------------------------------
Robert J. Feinstein, Esq.
1114 Avenue of the Americas
New York, New York 10036
(212) 479-6000

-and-

GOLDBERG, STINNETT, MEYERS & DAVIS
44 Montgomery Street
Suite 2900
San Francisco, California 94104
(415) 362-5045

Attorneys for the Debtor in Possession

THE OFFICIAL COMMITTEE OF EQUITY
SECURITY HOLDERS OF HEXCEL
CORPORATION

By: /s/ Joseph L. Harrosh
-------------------------------
Joseph L. Harrosh
Chairperson

MARCUS MONTGOMERY WOLFSON P.C.

By: /s/ Peter D. Wolfson
-------------------------------
Peter D. Wolfson, Esq.
53 Wall Street
New York, NY 10005-2815
Telephone: (212) 858-5200

Attorneys for The Official Committee of
Equity Security Holders of Hexcel
Corporation

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<PAGE>
EXHIBIT A

SUBSCRIPTION RIGHTS PLAN

RECITAL

This Subscription Rights Plan (this "Plan") is adopted by Hexcel
Corporation ("Hexcel") pursuant to, and as of the Effective Date of, the Plan of
Reorganization proposed by the Debtor and the Official Committee of Equity
Security Holders under Chapter 11 of the Bankruptcy Code, dated October __, 1994
(the "Chapter 11 Plan"), as confirmed by the Bankruptcy Court in Hexcel's
chapter 11 case. Except as otherwise provided herein, capitalized terms used in
this Plan have the meanings assigned to them in the Chapter 11 Plan.

TERMS OF PLAN

1. THE SUBSCRIPTION RIGHTS.

1.1 This Plan authorizes the distribution of 1.21273 rights to
subscribe for additional shares of Reorganized Hexcel Common Stock as described
below ("Subscription Right"), with respect to each share of Hexcel Common Stock,
par value $.01 per share (the "Common Stock"), issued and outstanding as of the
close of business on the Effective Date (the "Record Date"). Each Subscription
Right entitles the holder to purchase one share of Reorganized Hexcel Common
Stock for an aggregate of approximately 8,864,865 shares of Reorganized Hexcel
Common Stock (the "Offered Shares"), subject to rounding as provided herein.
Each stockholder of record on the Record Date (an "Original Holder") shall be
deemed to have received a distribution of such Subscription Rights. Original
Holders and transferees of the Basic Subscription Rights of Original Holders are
referred to herein as "Holders."

1.2 Each Subscription Right entitles the Holder thereof:

1.2.1 to the right (each, a "Basic Subscription Right") to
purchase one Offered Share at a purchase price of
$4.625 per share; plus

1.2.2 in the case of Original Holders, conditioned upon full
exercise of all of an Original Holder's allotted Basic
Subscription Rights, such Original Holder also has the
right to purchase any desired number of Offered Shares

<PAGE>

from the Stockholder Pool at a purchase price of $4.625
per share (the "Oversubscription Rights"), subject to
Proration as provided herein. Each Original Holder who
is eligible to exercise Oversubscription Rights is
referred to herein as an "Eligible Rights Holder."
OVERSUBSCRIPTION RIGHTS ARE NOT TRANSFERABLE AND MAY
NOT BE EXERCISED BY ANY HOLDER OTHER THAN AN ORIGINAL
HOLDER.

The "Oversubscription Pool" consists of all Offered Shares subject to Basic
Subscription Rights that expire unexercised. The "Standby Pool" consists of 25%
of the Oversubscription Pool remaining after the first 108,108 shares of
Reorganized Hexcel Common Stock have been allocated for purchase by John J. Lee
pursuant to the Chapter 11 Plan (the "Designated Shares"). The "Stockholder
Pool" consists of the Oversubscription Pool remaining after excluding the
Standby Pool and the Designated Shares.

2. SUBSCRIPTION PRICE.

The Subscription Price for each share of Reorganized Hexcel Common
Stock is $4.625. The aggregate Subscription Price for any subscription shall be
rounded up to the nearest whole cent.

3. PRORATION.

3.1 The number of shares of Reorganized Hexcel Common Stock issuable
upon the exercise of Basic Subscriptions Rights shall not be subject to
proration.

3.2 If the aggregate number of shares of Reorganized Hexcel Common
Stock subscribed for through the exercise of Oversubscription Rights is more
than the number of shares available in the Stockholder Pool, the available
shares will be apportioned among the Eligible Rights Holders who exercised their
Oversubscription Rights in proportion to the number of Basic Subscription Rights
originally issued by Hexcel to, and exercised by, each through repeated
application of the proration procedure described in the next paragraph, and
subject to rounding as provided in Section 6.2 of this Plan.

Each time the following procedure is applied, the "number of shares of
Reorganized Hexcel Common Stock remaining in

<PAGE>

the Stockholder Pool" shall mean the number of shares in the Stockholder Pool
not apportioned by prior applications of the procedures described in this
paragraph. The number of shares of Reorganized Hexcel Common Stock remaining in
the Stockholder Pool shall be apportioned among all those Eligible Rights
Holders who have not yet been apportioned (through previous applications of this
procedure) the full number of shares subscribed for by them in their respective
exercises of Oversubscription Rights. Apportionment among them shall be based
on the ratio of the number of Basic Subscription Rights originally issued by
Hexcel to, and exercised by, each; provided, that if the number of shares so
apportioned to any Eligible Rights Holder exceeds the number of shares
subscribed for by that Eligible Rights Holder's exercise of Oversubscription
Rights, then the excess shall not be apportioned, and that Eligible Rights
Holder shall thereafter not be apportioned any additional shares should there be
further applications of this procedure. This procedure shall be repeated until
either (i) all of the shares in the Stockholder Pool shall have been apportioned
and there are no shares left in the Stockholder Pool for further apportionment,
or (ii) a sufficient number of shares has been apportioned to all Eligible
Rights Holders to satisfy all of their exercised Oversubscription Rights,
whichever occurs first.

4. SUBSCRIPTION PERIOD.

The Subscription Rights will be exercisable only during the period
(the "Subscription Period") commencing 15 days after the Effective Date and
expiring at 5:00 P.M., Eastern Standard Time, on the first Business Day that
occurs not less than 45 days after the Effective Date (the "Subscription Rights
Expiration Date"). After the Subscription Rights Expiration Date, unexercised
Subscription Rights will be null and void. Hexcel shall not be obligated to
honor any purported exercise of Subscription Rights received after the
Subscription Rights Expiration Date, regardless of when the documents relating
to such exercise were sent, except pursuant to the Guaranteed Delivery
Procedures described below.

5. DISTRIBUTION OF CERTIFICATES.

5.1 As soon as practicable after the Effective Date, but not later
than 15 days thereafter, Hexcel shall distribute to Original Holders
transferable certificates ("Subscription Rights Certificates") in the form
attached to and governed by this Plan, representing the Subscription Rights
issued to Original Holders

<PAGE>

pursuant to this Plan.

5.2 As soon as practicable after the Subscription Rights Expiration
Date, Hexcel shall distribute to Holders who have duly exercised their
Subscription Rights stock certificates representing that number of shares of
Reorganized Hexcel Common Stock subscribed for and to be issued in accordance
with the terms of this Plan.

5.3 Subscription Rights Certificates shall be executed on behalf of
Hexcel by its Chairman, Vice Chairman, Chief Executive Officer or President,
under its corporate seal reproduced thereon attested by its Secretary or an
Assistant Secretary. The signature of any of these officers on the certificate
may be manual or facsimile.

6. NO FRACTIONAL REORGANIZED HEXCEL COMMON STOCK.

6.1 The number of Basic Subscription Rights issuable to any Holder
will be rounded to the nearest whole number, with .50 Basic Subscription Right
being rounded up to the next whole Basic Subscription Right.

6.2 No fractional shares of Reorganized Hexcel Common Stock shall be
issued. The number of shares of Reorganized Hexcel Common Stock issuable to any
Holder pursuant to the exercise of Oversubscription Rights will be rounded down
to the next lowest whole number of shares.

6.3 No Subscription Rights may be divided in such a way as to permit
the holder to receive a greater number of shares of Reorganized Hexcel Common
Stock than the number to which such Subscription Rights entitles its Holder,
except that a depositary, bank, trust company, or securities broker or dealer
holding shares of Common Stock on the Record Date for more than one beneficial
owner may, upon proper showing to the Subscription Agent, exchange its
Subscription Rights Certificate to obtain Subscription Rights Certificates for
each beneficial owner on the Record Date.

4
<PAGE>

7. SUBSCRIPTION AND OTHER AGENTS.

7.1 Hexcel shall appoint an agent to act in administering the
Subscription Rights (the "Subscription Agent") under this Plan. Hexcel may also
appoint an escrow agent for the receipt of funds on exercise of Subscription
Rights and a transfer agent for the registration and transfer of the
Subscription Rights and Reorganized Hexcel Common Stock. The terms of Hexcel's
agreements with such agents, regarding the form of certificates,
countersignatures, procedures for assignment or exercise, or the like, shall be
deemed adopted by Hexcel as part of this Plan.

7.2 All questions concerning the Subscription Rights will be
determined by Hexcel (or the Subscription Agent, as permitted below), whose
determinations will be final and binding. Hexcel 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 Subscription
Right. The Subscription Agent may exercise all the rights of Hexcel under this
Plan, including determination of the timeliness, validity, form and eligibility
of any exercise of Subscription Rights, calculation of shares of Reorganized
Hexcel Common Stock subscribed for, calculation of any required proration and
any other actions required for the orderly distribution of the Subscription
Rights and Reorganized Hexcel Common Stock. Subscriptions will not be deemed to
have been received or accepted until all irregularities have been waived or
cured within such time as Hexcel or the Subscription Agent 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 Rights Certificates or incur any liability for
failure to give such notification.

8. RESERVATION OF REORGANIZED HEXCEL COMMON STOCK.

Hexcel shall at all times reserve and hold available for issuance the
number of shares of Reorganized Hexcel Common Stock required to be issued
pursuant to the Subscription Rights.

<PAGE>

9. EXERCISE OF SUBSCRIPTION RIGHTS.

9.1 ONCE A HOLDER HAS EXERCISED THE SUBSCRIPTION RIGHTS IN THE MANNER
PROVIDED BELOW, THE SUBSCRIPTION IS IRREVOCABLE.

9.2 Subscription Rights may be exercised by delivering to the
Subscription Agent during the Subscription Period, the properly completed and
executed Subscription Rights Certificate, with any required signature
guarantees, together with payment in full of the aggregate Subscription Price
for all shares subscribed for pursuant to the Subscription Rights (whether
through the exercise of Basic Subscription Rights or the Oversubscription
Rights). 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 the
Subscription Agent or the Escrow Agent, as set forth in the Instructions, or (b)
wire transfer of funds to the account specified for such purpose designated in
the Subscription Rights Certificates. The Subscription Price will be deemed to
have been received by the Subscription Agent only upon (i) clearance of any
uncertified check, (ii) receipt by the Subscription Agent or Escrow 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 account
designated in the Subscription Rights 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 WHO WISH TO PAY THE SUBSCRIPTION
PRICE BY MEANS OF UNCERTIFIED PERSONAL CHECK ARE URGED TO MAKE PAYMENT
SUFFICIENTLY IN ADVANCE OF THE SUBSCRIPTION RIGHTS 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.

9.3 The Subscription Agent may elect to treat subscriptions
accompanied by payment of an insufficient amount as a subscription for the
number of shares of Reorganized Hexcel Common Stock whose Subscription Price is
paid by the amount received. Payments in an amount greater than the aggregate
Subscription Price required by the stated Basic Subscription and
Oversubscription shall be treated as subscriptions for the amounts stated on the
Subscription Rights Certificate only; excess amounts shall be refunded in due
course after the Subscription Rights Expiration Date.

6
<PAGE>

9.4 The permitted methods of delivery and the address to which
Subscription Rights Certificates and payment of the Subscription Price should be
delivered shall be set forth in the Instructions which will be delivered with
the Subscription Rights Certificates.

9.5 If a Holder wishes to exercise Subscription Rights, but time will
not permit such Holder to cause the Subscription Rights Certificate to reach the
Subscription Agent on or prior to the Subscription Rights Expiration Date, such
Subscription Rights may nevertheless be exercised if all of the following
conditions (the "Guaranteed Delivery Procedures") are met:

9.5.1 such Holder has caused payment in full of the
aggregate Subscription Price for all shares being
subscribed for pursuant to the Basic Subscription
Rights or Oversubscription Rights to be received
(in the manner set forth above) by the
Subscription Agent on or prior to the Subscription
Rights Expiration Date;

9.5.2 the Subscription Agent receives, on or prior to
the Subscription Rights 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 Holder, the number of Rights
represented by the Subscription Rights Certificate
or Subscription Rights Certificates held by such
exercising Holder, the number of shares being
subscribed for pursuant to the Subscription
Rights, and guaranteeing the delivery to the
Subscription Agent

<PAGE>

of any Subscription Rights Certificate evidencing
such Subscription Rights within five days
following the date of the Notice of Guaranteed
Delivery; and

9.5.3 the properly completed Subscription Rights
Certificate evidencing the Subscription Rights
being exercised, with any required signature
guarantees, is received by the Subscription Agent
within five 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, as permitted by the Subscription Agent
and set forth in the Instructions.

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

9.7 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 Subscription Rights. If the beneficial owner so instructs, the record holder
of such Subscription Right should complete Subscription Rights Certificates and
submit them to the Subscription Agent with the proper payment. In addition,
beneficial owners of Common Stock or Subscription 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.

9.8 The Instructions should be read carefully and followed in detail.
DO NOT SEND SUBSCRIPTION CERTIFICATES TO HEXCEL CORPORATION.

<PAGE>

THE METHOD OF DELIVERY OF SUBSCRIPTION RIGHTS CERTIFICATES AND
PAYMENT OF THE SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE
ELECTION AND RISK OF THE HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT
SUCH CERTIFICATES AND PAYMENTS BE SENT BY 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 SUBSCRIPTION RIGHTS EXPIRATION DATE. BECAUSE
UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR,
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.

10. METHOD OF TRANSFERRING RIGHTS.

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

10.2 Holders wishing to transfer all or a portion of their Basic
Subscription Rights (but not fractional Basic Subscription Rights) should allow
a sufficient amount of time prior to the Subscription Rights Expiration Date for
(i) the transfer instructions to be received and processed by the Subscription
Agent, (ii) a new Subscription Rights Certificate to be issued and transmitted
to the transferee or transferees with respect to transferred Basic Subscription
Rights, and to the Holder with respect to retained Basic Subscription Rights, if
any, and (iii) the Basic Subscription 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 Rights Certificates are not received in
time for exercise prior to the Subscription Rights Expiration Date.

<PAGE>

10.3 Except for the fees charged by the Subscription Agent, the
transfer agent and the Escrow Agent, if any (all of 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 Subscription Rights will be for the account of the Holder, and
none of such commissions, fees or expenses will be paid by Hexcel or the
Subscription Agent.

11. AMENDMENTS TO PLAN.

Hexcel reserves the right to amend the terms, procedures for
subscription, form of Subscription Rights Certificate and other provisions of
this Plan prior to the distribution of the Subscription Rights Certificates,
provided, that such amendment shall not affect the number of shares of
Reorganized Hexcel Common Stock purchasable hereunder by the Holders or reduce
the Subscription Period below 30 days.

<PAGE>

EXHIBIT A TO SUBSCRIPTION RIGHTS PLAN
PLAN OF REORGANIZATION

SERIAL NO. _________

HEXCEL CORPORATION

SUBSCRIPTION RIGHTS CERTIFICATE

[***Name and Address of holder] Number of Basic
Subscription Rights:
____________________

This certifies that the above-named person, or registered assigns, is
the registered holder of _________________________________________________ Basic
Subscription Rights to purchase Common Stock, par value $.01 per share, of
Hexcel Corporation (the "CORPORATION"), subject to the terms, provisions and
conditions of the Subscription Rights Plan of the Corporation (the "RIGHTS
PLAN"), which are hereby incorporated herein by reference and made a part
hereof. Except as otherwise provided herein, capitalized terms used herein have
the meanings assigned to them in the Rights Plan.

Pursuant to the Corporation's Plan of Reorganization confirmed by the
United States Bankruptcy Court for the Northern District of California on
________ __, 199_, each stockholder has been granted Subscription Rights to
purchase additional shares of Common Stock as set forth in the Rights Plan.
Reference is made to the Rights Plan and the Corporation's Disclosure Statement
dated _________ __, 199_ ("DISCLOSURE STATEMENT"), for a more complete
description of the Corporation, the Subscription Rights and the Common Stock
purchasable hereunder.

This Subscription Rights Certificate shall not be valid or obligatory
for any purpose unless and until it shall have been countersigned by the
Subscription Rights Agent.

Witness the facsimile signature of the proper officers of the
Corporation and its corporate seal.

Dated: __________, 199_
[Seal]

ATTEST: Hexcel Corporation

_________________________ By:______________________________
Secretary

Countersigned:

[***Subscription Agent]

By:_______________________

<PAGE>

FOR YOUR SUBSCRIPTION TO BE EFFECTIVE, A COMPLETED SUBSCRIPTION CERTIFICATE MUST
BE RECEIVED BY *** ________________________ (THE "SUBSCRIPTION AGENT") AT ITS
ADDRESS BELOW NO LATER THAN 5:00 P.M. EASTERN STANDARD TIME ON ________ __, 199_
ACCOMPANIED BY PAYMENT TO [*** BANK], AS ESCROW AGENT FOR THE CORPORATION, IN
THE AMOUNT OF THE TOTAL OF THE SUBSCRIPTION PRICE FOR THE NUMBER OF SHARES OF
COMMON STOCK SUBSCRIBED FOR THROUGH THE EXERCISE OF BASIC SUBSCRIPTION RIGHTS
AND THE OVERSUBSCRIPTION RIGHTS. SEE INSTRUCTIONS FOR PERMITTED MEANS OF
PAYMENT.

ITEM 1. BASIC SUBSCRIPTION. COMPLETE ITEMS A AND B BELOW.

The undersigned desires to purchase, and hereby irrevocably subscribes for, the
number of shares of Common Stock indicated below, at the price of $4.625 per
share:

A. Each Basic Subscription Right entitles the holder to purchase one share
of Common Stock at a Subscription Price of $4.625 per share. You can exercise
all or any portion of the number of Basic Subscription Rights held by you as
indicated on the face of the Subscription Rights Certificate, provided that you
may not exercise a fractional Basic Subscription Right.

NUMBER OF BASIC SUBSCRIPTION RIGHTS EXERCISED:

TO EXERCISE ALL OF THE BASIC SUBSCRIPTION RIGHTS REPRESENTED BY THE SUBSCRIPTION
RIGHTS CERTIFICATE, CHECK BOX (1).

TO EXERCISE LESS THAN ALL OF THE BASIC SUBSCRIPTION RIGHTS REPRESENTED BY THE
SUBSCRIPTION RIGHTS CERTIFICATE, CHECK BOX (2) AND FILL IN THE NUMBER OF SHARES
FOR WHICH YOU WISH TO SUBSCRIBE.

(1) / / I wish to exercise all of my Basic Subscription Rights
at $4.625 per share.

(2) / / I wish to exercise my Basic Subscription Rights to
subscribe for the following number of shares: _______________________________
(must be a whole number not exceeding the total number of
Basic Subscription Rights represented by this certificate)

B. Compute the BASIC subscription price:

_________________________ x $4.625 = $__________________________
No. of shares subscribed Total Price
for (no fractions) (round fraction to next
highest whole cent)

2
<PAGE>

ITEM 2. OVERSUBSCRIPTION

NOTE: YOU ARE ONLY ELIGIBLE TO EXERCISE OVERSUBSCRIPTION RIGHTS IF YOU ARE AN
ELIGIBLE RIGHTS HOLDER UNDER THE RIGHTS PLAN (THAT IS, IF YOU WERE A RECORD
HOLDER OF COMMON STOCK AS OF THE CLOSE OF BUSINESS ON THE EFFECTIVE DATE UNDER
THE CORPORATION'S PLAN OF REORGANIZATION WHO RECEIVED SUBSCRIPTION RIGHTS
DIRECTLY FROM THE CORPORATION PURSUANT TO SUCH PLAN AND IF YOU ARE EXERCISING
ALL OF THE BASIC SUBSCRIPTION RIGHTS WHICH WERE ISSUED TO YOU PURSUANT TO SUCH
PLAN).

In addition to shares subscribed for by exercise of the Basic Subscription
Rights, the undersigned desires to purchase, if available, and hereby
irrevocably subscribes for, the number of shares of Common Stock indicated below
through the exercise of Oversubscription Rights. The actual number of shares of
Common Stock available for Oversubscriptions depends on the number of Basic
Subscription Rights exercised by all holders thereof and other factors, and is
subject to proration as set forth in the Rights Plan. The undersigned
understands that the Total Price shown below must be paid with this
subscription, and that any excess payment resulting from proration will be
refunded.

___________________ x $4.625 = $____________
No. of shares Total Price
(no fractions) (round fraction to next
highest whole cent)

PAYMENT TO [*** BANK AS ESCROW AGENT FOR THE CORPORATION] IN THE
AMOUNT OF THE TOTAL PURCHASE PRICE FOR THE SHARES SUBSCRIBED FOR BY
THE EXERCISE OF BASIC SUBSCRIPTION RIGHTS AND THE OVERSUBSCRIPTION
RIGHTS MUST ACCOMPANY THIS SUBSCRIPTION.

IMPORTANT NOTE: NO SUBSCRIPTION WILL BE ACCEPTED WITHOUT PAYMENT IN
THE FULL AMOUNT OF THE PURCHASE PRICE DUE IN CONNECTION WITH THE
EXERCISE OF BOTH THE BASIC SUBSCRIPTION RIGHTS AND THE
OVERSUBSCRIPTION RIGHTS. PAYMENT IN AMOUNTS INSUFFICIENT TO COVER THE
STATED SUBSCRIPTIONS WILL BE TREATED AS SUBSCRIPTIONS FOR THE NUMBER
OF SHARES PURCHASABLE BY SUCH LESSER AMOUNT. PAYMENT IN AMOUNTS
GREATER THAN REQUIRED BY THE STATED SUBSCRIPTIONS WILL BE TREATED AS
PAYMENT FOR THE STATED SUBSCRIPTIONS ONLY, AND THE EXCESS PAYMENT WILL
BE REFUNDED.

Each holder of Subscription Rights, by signing below, certifies that he, she or
it has been provided with a copy of the Plan and the Disclosure Statement.

Dated: __________, 199_ _________________________
Print Name of Holder

_________________________
Authorized Signature

<PAGE>

Note: The signature must correspond with the name
as written and the name must be that of the
beneficial owner.

Guaranteed by:

Note: If shares of Common Stock are to be delivered to a person other than the
one in whose name this certificate is issued, the signature must be guaranteed
by a bank or trust company having an office or correspondent in the United
States, a member of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc.

If Common Stock is to be issued in a different name, please complete the
following:

_________________________________
Name for Registration

_________________________________
Mailing Address

_________________________________
City State Zip Code

* * * * * * * * * *

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned owner of the Subscription Rights
represented by this Subscription Rights Certificate hereby sells, assigns and
transfers unto the Assignee, ______________________________, having an address
at _______________________________________________________ _________________
_________________________________________ all of the Basic Subscription Rights
of the undersigned represented by this Subscription Rights Certificate and does
hereby irrevocably constitute and appoint_____________________________________
Attorney to transfer said rights on the books of Hexcel Corporation, a Delaware
corporation, maintained for such purpose, with full power of substitution in the
premises.

Dated: ________________________________________
Print Name of Holder

________________________________________
Authorized Signature

Note: The signature must correspond with the
name as written and the name must be that of the
beneficial owner.

Guaranteed by:

<PAGE>

Note: The signature must be guaranteed by a bank or trust company having an
office or correspondent in the United States, a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc.

<PAGE>

GENERAL INSTRUCTIONS

The following Instructions should be read carefully and followed in detail.
DO NOT SEND SUBSCRIPTION RIGHTS CERTIFICATES TO HEXCEL CORPORATION.

INSTRUCTIONS FOR BANKS, BROKERS AND OTHER HOLDERS OF RECORD ONLY.

1. If you are the holder of record, but not the beneficial owner, of
any of the shares for which you are listed as the record holder,
you should have received Subscription Rights in the names of the
beneficial owners of which you notified the Corporation. You
should forward such Subcription Rights, as well as a copy of the
Plan and Disclosure Statement, to such beneficial owners.

2. No fees or commissions or other remuneration will be payable to
any broker in connection with the solicitation of subscriptions
from beneficial owners. Upon written request, the Corporation
will reimburse you for customary mailing and handling expenses
incurred in forwarding the Subscription Rights Certificate and
accompanying solicitation packages to your clients, not in excess
of proxy solicitation rates or reimbursement approved by the New
York Stock Exchange.

3. If you have any question regarding this Subscription Right or the
procedures for its transmittal to beneficial owners, or if you
need additional copies of the Plan and the Disclosure statement,
please contact:

***SUBSCRIPTION AGENT
[ADDRESS]

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL DEEM YOU,
OR ANY OTHER PERSON, THE AGENT OF THE CORPORATION OR THE SUBSCRIPTION
AGENT, OR AUTHORIZE YOU OR ANY PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENTS ON BEHALF OF THE CORPORATION OR THE SUBSCRIPTION AGENT WITH
RESPECT TO THE PLAN, THE SUBSCRIPTION RIGHTS OR THE COMMON STOCK, EXCEPT
FOR THE STATEMENTS CONTAINED IN THE PLAN AND DISCLOSURE STATEMENT AS
APPROVED BY THE UNITED STATES BANKRUPTCY COURT.

6
<PAGE>

INSTRUCTIONS FOR BENEFICIAL OWNERS AND TRANSFEREES ONLY.

If you are a beneficial owner, or the transferee, of the Subscription
Rights represented by this Subscription Rights Certificate, you must complete
this Subscription Rights Certificate and it must be received by the Subscription
Agent, properly completed with a check in the amount of the total subscription
price (in connection with the exercise of the Basic Subscription Rights and the
Oversubscription Rights, if any), at the following address on or after
***_____________, 199_ and no later than 5:00 p.m EST on ***________, 199_.

***SUBSCRIPTION AGENT
[ADDRESS]

PAYMENT: 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
[***wire transfer instructions to be inserted]. The Subscription Price will be
deemed to have been received by the Subscription Agent only upon (i) clearance
of any uncertified check, (ii) 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 at ***________________.

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. 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 SUBSCRIPTION
RIGHTS WHO WISH TO PAY THE SUBSCRIPTION PRICE BY MEANS OF UNCERTIFIED PERSONAL
CHECK ARE URGED TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF THE SUBSCRIPTION
RIGHTS 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.

IMPORTANT NOTE: Neither the Corporation nor the Subscription Agent
can be responsible for Subscriptions Rights not received on or prior to 5:00
p.m. EST on the Subscription Rights Expiration Date, whether lost, stolen or
delayed. The Rights Plan provides for GUARANTEED DELIVERY PROCEDURES by
delivery through a bank, broker or other eligible institution. Please refer to
the Rights Plan.

Any questions or requests for assistance concerning the method of
exercising Subscription Rights or requests for additional copies of the Rights
Plan, the Instructions or the Guaranteed Delivery Procedures for late
subscriptions should be directed to the Subscription Agent at (***) ________.

<PAGE>
Writers Direct Dial: (201)912-
EXHIBIT B
[LOGO]

October 24, 1994

Board of Directors
of Hexcel Corporation
5794 West Las Positas Boulevard
Pleasanton, CA 94588

The Official Committee
of Equity Security Holders
of Hexcel Corporation
c/o Peter D. Wolfson, Esq.
Marcus Montgomery Wolfson P.C.
53 Wall Street
New York, New York 10005

Re: Standby Purchase Commitment (the "Standby
Purchase Commitment") to Purchase Common Stock of Hexcel Corporation

Gentlemen:

Hexcel Corporation ("Hexcel") and The Official Committee of Equity
Security Holders of Hexcel Corporation (the "Equity Committee") have each agreed
to support a Plan of Reorganization for Hexcel (the "Plan"), in connection with
which Plan Hexcel will offer transferrable rights (the "Rights") to its existing
stockholders to subscribe for and purchase an aggregate of 8,864,865 shares of
common stock of Hexcel at a price of $4.625 per share. The Plan will be in the
form of Exhibit A hereto with such changes therein as may be agreed to by Mutual
Series Fund Inc. ("Mutual" or "Mutual Series"). In addition:

1. The Plan will provide that Hexcel will issue and sell to Mutual
on the effective date of the Plan (the "Effective Date"), 1,945,946
shares of common stock of Hexcel (the "Minimum Shares") at a price of
$4.625 per share;

2. Mutual will be entitled to a break-up fee of $350,000 payable by
Hexcel to Mutual and reimbursement of expenses, all as set forth in
Exhibit B hereto;

51 John F. Kennedy Parkway * Short Hills, N. J. 07078

<PAGE>

3. Any proposal on substantially the same terms contemplated by this
Standby Purchase Commitment shall be required to be of a value of at
least $5.125 per share in order to be supported by Hexcel or the
Equity Committee; and

4. The Plan will provide corporate governance provisions in
accordance with the terms set forth in Exhibit C hereto.

The Rights to be distributed to each existing Hexcel stockholder will
be distributed to such stockholder on the basis of 1.21273 rights per existing
outstanding share of Hexcel common stock, and will be transferable to the extent
and in the manner set forth in the Plan. Each right will be exercisable for:

1. One share of common stock of Hexcel ("Offered Shares"), at a
purchase price of $4.625 per Offered Share (the "Basic Subscription
Right"); plus

2. Upon full exercise by a stockholder of all Basic Subscription
Rights distributed to such stockholder, any desired number of
additional Offered Shares in a designated portion of an
"Oversubscription Pool" consisting of all Offered Shares subject to
Basic Subscription Rights that have expired unexercised, at a purchase
price of $4.625 per such Offered Share (the "Oversubscription
Rights").

The Plan will provide that the first 108,108 Offered Shares in the
Oversubscription Pool be sold to John J. Lee at a purchase price of $4.625 per
share. Pursuant to this Standby Purchase Commitment Mutual agrees to purchase,
in addition to the Minimum Shares, 25% of the balance, if any, of the Offered
Shares in the Oversubscription Pool (such 25% being the "Standby Pool"), at a
purchase price of $4.625 per such Offered Share. The remaining Offered Shares
in the Oversubscription Pool shall constitute the "Stockholder Pool". Also
pursuant to this Standby Purchase Agreement, Mutual agrees to purchase any
Offered Shares in the Oversubscription Pool that are not sold upon exercise of
Oversubscription Rights or sold to John J. Lee, at a purchase price of $4.625
per such Offered Share.

2
<PAGE>

Oversubscription Rights will be subject to proration in case the
aggregate number of Offered Shares desired to be purchased pursuant thereto
exceeds the number available in the Stockholder Pool. The Offered Shares in the
Stockholder Pool will be apportioned among the holders of Oversubscription
Rights who exercised their Oversubscription Rights in proportion to the number
of Basic Subscription Rights distributed to and exercised by each through
repeated application of the proration procedure described in the following
paragraph.

Each time the following procedure is applied, the "number of Offered
Shares remaining in the Stockholder Pool" shall mean the number of shares in the
Stockholder Pool not apportioned by prior applications of the procedures
described in this paragraph. The number of Offered Shares remaining in the
Stockholder Pool shall be apportioned among all those holders of
Oversubscription Rights who have not yet been apportioned (through previous
applications of this procedure) the full number of shares subscribed for by them
in their respective exercises of Oversubscription Rights. Apportionment among
them shall be based on the ratio of the number of Basic Subscription Rights
originally issued by Hexcel to, and exercised by, each; provided, that if the
number of shares so apportioned to any holder of Oversubscription Rights,
exceeds the number of shares subscribed for by that holder's exercise of
Oversubscription Rights, then the excess shall not be apportioned, and that
holder shall thereafter not be apportioned any additional shares should there be
further applications of this procedure. This procedure shall be repeated until
either (i) all of the Offered Shares in the Stockholder Pool shall have been
apportioned and there are no Offered Shares left in the Stockholder Pool for
further apportionment, or (ii) a sufficient number of Offered Shares has been
apportioned to all holders of Oversubscription Rights to satisfy all of their
exercised Oversubscription Rights, whichever occurs first. Such distribution or
determination, as the case may be, shall be effected on a date (the "Second
Closing Date") promptly following the period during which the Rights shall be
exercisable.

<PAGE>

Subject to the terms and conditions stated in this Standby Purchase
Commitment, Hexcel and the Equity Committee agree with Mutual as follows:

1. PURCHASE COMMITMENT.

a. AMOUNT.

(1) Standby Purchase. The standby commitment of Mutual is to
purchase (a) the Offered Shares in the Standby Pool and (b) all
of the Offered Shares, if any, that remain in the Stockholder
Pool after all exercised Oversubscription Rights have been fully
satisfied ((a) and (b) being collectively, the "Standby Shares").

(2) TOTAL PURCHASE. The total number of shares of common stock of
Hexcel to be purchased by Mutual (the "Total Shares") will be the
sum of:

i) The Standby Shares; and

ii) The Minimum Shares.

b. PAYMENT. Mutual shall pay for the Total Shares at the rate of $4.625
per share according to the following provisions of this Paragraph 1.b:

(1) Mutual shall pay $9,000,000 for the Minimum Shares (the "Minimum
Purchase Price") at a closing (the "First Closing") to be held
according to Paragraph 8 below;

(2) The aggregate purchase price for the Standby Shares will be paid
at a closing (the "Second Closing") to be held according to
Paragraph 9 below, by cancellation of the same principal amount
of the Advance (as defined below) referenced in Paragraph 2 below
and the principal amount of the Note (as defined below) will be
automatically reduced by the principal amount so cancelled.

2. ADVANCE. Mutual will, upon receipt of a commitment fee equal to $500,000,
advance to Hexcel $41,000,000 in immediately available funds (the
"Advance") at the

4
<PAGE>

First Closing. The Advance shall be evidenced by a promissory note from
Hexcel to the order of Mutual, bearing interest at a rate per annum equal
to the Federal Funds rate as in effect from time to time during the period
from the date Hexcel receives the Advance through (but not including) the
Second Closing Date, and will be secured by a first priority security
interest in the proceeds of the offering of the Rights. The Advance shall
be evidenced by a note in substantially the form annexed hereto as Exhibit
D (the "Note") and Hexcel and Mutual shall enter into a security agreement
in substantially the form annexed hereto as Exhibit E (the "Security
Agreement"). For the purposes of this Standby Purchase Commitment,
"Federal Funds Rate" for any day shall be the offered quote for such day as
reported in The Wall Street Journal or, if such quote is not published for
any reason, as otherwise reasonably determined by Mutual.

3. CONDITIONS. The commitment of Mutual in Paragraph 1.b. to pay for the
Minimum Shares and its commitment to make the advance of $41,000,000
pursuant to Paragraph 2 are subject to the prior satisfaction of the
following conditions on the date the First Closing is to be held (the
"First Closing Date"):

a. CONFIRMATION AND EFFECTIVENESS OF THE PLAN. The bankruptcy court
shall have entered an order confirming the Plan (the "Confirmation
Order") which order has not been stayed and all of the conditions to
the effectiveness of the Plan shall have been met or waived by the
applicable party or parties (and, if waived, such waiver shall have
been consented to by Mutual) at or prior to the close of business in
San Francisco, California on February 28, 1995 (or such later date as
is consented to in writing by Mutual).

b. AGGREGATE INDEBTEDNESS AND OTHER LIABILITIES. On the First Closing
Date, the sum of (i) the indebtedness of Hexcel in the three
categories in Exhibit F hereto indicated with an asterisk, plus (ii)
the indebtedness and liabilities of Hexcel which are included in the
category "Payables & Accruals" in Exhibit F indicated with a double
asterisk to the extent, and only to the extent, that such indebtedness
and liabilities (A) represent estimated environmental liabilities or

<PAGE>

amounts reserved for litigation, adjusted by adding back the amount of
the discount, if any, taken to calculate the present value of such
liabilities or (B) represent accrued interest or the reserve for
liabilities relating to DIC (as defined in the Plan) (but excluding
any other amounts included in the category "Payables & Accruals" such
as, but not limited to, accrued professional fees in connection with
the reorganization, professional fees for financial services, accrued
indebtedness and liabilities owed or relating to employees, accrued
tax liabilities, reserves for write downs of asset values and reserves
for warranties), both (i) and (ii) being determined on a basis
consistent with that used by Hexcel in the preparation of its current
financial statements, PRO FORMA for its reorganization, shall not
exceed $120,000,000 in the aggregate. The long term debt for foreign
subsidiaries and the specific items within the category of "Payables &
Accruals" which are included in making the above determination shall
be, for purposes of the above determination, as set forth in the last
available regularly prepared balance sheet of Hexcel. Satisfaction of
this condition may be established by delivery by Hexcel of a
certificate signed by its chief financial officer, provided that such
certification includes a statement that he has made or caused to be
made an investigation to determine whether there has been any material
adverse change in such amounts computed in the preparation of such
last regularly prepared balance sheet and that he believes there have
been none.

c. NO MATERIAL ADVERSE CHANGE. Hexcel shall not have suffered any
material adverse change in its business, operations, properties,
assets or liabilities (actual or contingent) subsequent to the Balance
Sheet Date (defined in Exhibit G to this letter) through and including
the First Closing Date.

d. HEXCEL'S REPRESENTATIONS AND WARRANTIES. On the First Closing Date,
Hexcel shall have provided Mutual with an instrument duly and validly
executed on its behalf by a senior executive officer thereof
containing the representations and

<PAGE>

warranties set forth in Exhibit G hereto, and shall have agreed to
indemnify and hold harmless Mutual from and against any and all
losses, liabilities, obligations, damages, deficiencies, reasonable
costs and expenses ("Losses") based upon, attributable to or resulting
from:

(1) Any material misrepresentation set forth therein or material
breach of warranty set forth therein, provided notice of the
matter giving rise to such Losses is given during the period of
survival of the representations and warranties as stated in
paragraph 2 of Exhibit G; and

(2) Reversal, material modification or material amendment of the
Confirmation Order, other than a modification or amendment
consented to by Mutual.

e. REGISTRATION RIGHTS AGREEMENT. On the First Closing Date, Hexcel
shall have executed and delivered to Mutual a registration rights
agreement (the "Registration Rights Agreement") in substantially the
form annexed hereto as Exhibit H.

f. HART-SCOTT-RODINO ACT. All applicable waiting periods under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended shall have
expired or been terminated.

g. NORTHROP AGREEMENT. Hexcel shall have entered into an agreement,
reasonably satisfactory to Mutual, with The Northrop Grumman
Corporation ("Northrop") for the sale of its plant in Chandler,
Arizona and the "EMT technology" used at that facility to Northrop for
approximately $30 million, and such transaction shall have closed.

4. REPRESENTATIONS, WARRANTIES, AGREEMENTS AND UNDERSTANDINGS. Mutual
represents, warrants, understands and agrees as follows:

a. In view of its representation in clause c below, all certificates
representing shares of common stock of Hexcel issued to Mutual and
subject to the restriction on transfer described in clause c

<PAGE>

below may be endorsed with an appropriate legend reflecting that
restriction.

b. It is a "Qualified Institutional Buyer" as such term is defined under
Rule 144A promulgated under the Securities Act of 1933, as amended
(the "1933 Act"), and is an investment company registered under the
Investment Company Act of 1940, as amended.

c. Mutual acknowledges that the shares to be acquired by it pursuant
hereto have not been registered for sale under any federal or state
securities laws and that such shares are being offered and sold to
Mutual pursuant to the exemption from registration provided for in
Section 4(2) of the 1933 Act. It intends to purchase Hexcel
securities as contemplated hereby for investment purposes only and not
with a view towards the resale or distribution of such shares. Mutual
shall not sell or transfer the common stock of Hexcel purchased in
accordance with the terms hereof unless such sale or transfer is
pursuant to an effective registration statement under the 1933 Act or
pursuant to an available exemption from such registration.

d. It is duly organized and validly existing under the laws of the State
of Maryland, and has the power and authority to execute this Standby
Purchase Commitment and perform its obligations hereunder.

e. Its execution, delivery and performance of its undertakings contained
in this Standby Purchase Commitment have been duly authorized by all
required corporate or other action.

f. The performance by it of its obligations under this Standby Purchase
Commitment will not violate or breach, or constitute a default under,
any provision of its governing instruments or any contract to which it
is a party or by which any of its properties are bound, nor of any law
or regulation to which it or its properties are subject; and no
consent or approval of any governmental agency is required in
connection with any aspect of such performance.

<PAGE>

g. This Standby Purchase Commitment, when executed and delivered by
Mutual, is Mutual's valid and binding obligation enforceable against
Mutual in accordance with its terms, subject to applicable bankruptcy
and similar laws affecting generally the rights of creditors, and
subject to general equitable principles affecting enforceability.

h. As of the date hereof, Mutual does not own any securities of Hexcel.
Mutual has not been solicited by Hexcel or the Equity Committee to
vote in favor of the Plan.

i. This Standby Purchase Commitment results from an offer to Hexcel by
Mutual and such offer was not solicited by the Equity Committee.

5. COVENANTS. Hexcel and the Equity Committee hereby covenant and agree that:

a. As expeditiously as possible after the date of execution and delivery
of this Standby Purchase Commitment by all the parties hereto (the
"Execution Date"), but in no event later than five business days
thereafter, Hexcel and the Equity Committee will file with the
bankruptcy court a motion (the "Motion") requesting the entry of an
order of the bankruptcy court in form and substance satisfactory to
Mutual and its counsel (i) establishing a requirement that any
proposal on substantially the same terms contemplated by this Standby
Purchase Commitment be of a value of at least $5.125 and (ii)
approving a break-up fee of $350,000 and expense reimbursement for
Mutual (payment of which expense reimbursement will be applied against
any break-up fee payable to Mutual and be limited to $350,000 if any
break-up fee is so payable).

b. Hexcel and the Equity Committee will continue to support the Motion in
the event that Mutual is overbid prior to a hearing thereon.

In addition, the Equity Committee will not object to the reimbursement
provided for in this Standby Purchase Commitment of Mutual's documented expenses
up to $350,000 and, in the event that the First Closing occurs, up to $500,000.

<PAGE>

6. CERTAIN AGREEMENTS.

a. Should Mutual default in its obligations hereunder, Hexcel shall be
entitled to assert a claim for damages, including damages for breach
of contract, resulting therefrom, if any, including, without
limitation, any reasonable expense incurred in connection therewith;
provided however, that any such damages shall not exceed the amount of
the aggregate purchase price for the Total Shares. The Equity
Committee as well as Hexcel shall be entitled to assert any such claim
for damages.

b. Mutual recognizes that Hexcel and the Equity Committee may be required
to modify the Plan to the extent necessary to discharge their
respective fiduciary duties. Hexcel and the Equity Committee
recognize that any material change to the Plan not approved by Mutual
shall result in the condition set forth in paragraph 3.a. not being
satisfied and Mutual being entitled to the reimbursement of its
expenses as provided in Exhibit B hereto and, in addition, may result
in Mutual being entitled to the Break-up Fee provided for in Exhibit B
hereto, but the aggregate of all such payments shall not exceed
$350,000.

7. TERMINATION. Notwithstanding anything to the contrary in this Standby
Purchase Commitment, its effectiveness may be terminated and the
transactions it contemplates may be abandoned at any time prior to the
Effective Date under any of the following circumstances:

a. Mutual, Hexcel and the Equity Committee agree in writing to such
termination; or

b. Mutual is not in breach of its obligations hereunder in any material
respect and (i) either Hexcel or the Equity Committee has materially
breached its obligations hereunder, (ii) Mutual elects in a written
notice to terminate by reason of such breach, and (iii) such breach
has remained uncured for more than ten days after Mutual has given
notice of such breach; or

c. Hexcel and the Equity Committee are not in breach of their obligations
hereunder in any material

<PAGE>

respect and (i) Mutual has materially breached its obligations
hereunder, (ii) Hexcel and the Equity Committee jointly elect in a
written notice to terminate by reason of such breach, and (iii) such
breach has remained uncured for more than ten days after Hexcel and
the Equity Committee have jointly given notice of such breach; or

d. Mutual elects in a written notice to terminate by reason of non-
satisfaction of (i) the condition in paragraph 3.a. hereto, or (ii) on
the First Closing Date, any of the other conditions in paragraph 3
hereto; or

e. Mutual elects in a written notice to terminate by reason of the
bankruptcy court not having (i) determined within 25 days after the
Execution Date that the relief requested in the Motion should be
granted subject only to the entry of an appropriate order or (ii)
entered an order (the "Approval Order") in form and substance
satisfactory to Mutual and its counsel granting the relief requested
in the Motion on or prior to the 30th day following the Execution
Date; or

f. Mutual elects in a written notice to terminate by reason that, after
entry of the Approval Order, the Approval Order is reversed, revoked,
voided, modified without Mutual's consent or stayed by an order of a
court of competent jurisdiction.

In the case of 7.d.(i) and 7.e., Mutual can only elect to terminate by
written notice within 10 business days after the occurrence of the event
which gives rise to Mutual's right of termination.

8. FIRST CLOSING. The First Closing shall take place on the Effective Date at
a place designated by Hexcel in a notice delivered to Mutual at least five
business days in advance of the Effective Date. Mutual shall pay the
Advance and the Minimum Purchase Price in immediately available funds
against delivery by Hexcel of one or more certificates representing the
Minimum Shares, the $500,000 commitment fee for the Advance in immediately
available funds and the reimbursement by Hexcel of Mutual's expenses as and
to the extent provided in Exhibit B hereto.

<PAGE>

9. SECOND CLOSING. The Second Closing shall take place as soon as practicable
after the end of the period within which the Rights may be exercised, at
the date, time (which shall be during normal business hours) and place
designated by Hexcel in a notice delivered to Mutual at least five business
days in advance of the date noticed. Payment of the purchase price of the
shares to be purchased at the Second Closing by Mutual, through
cancellation of the same principal amount of the Advance, shall be made
upon payment to Mutual of all unpaid interest on the Advance and Mutual's
expenses, payable by Hexcel pursuant to Exhibit B hereto, not previously
reimbursed at the First Closing.

10. ASSIGNMENT. Mutual may not assign its rights and obligations under this
Standby Purchase Commitment.

11. NOTICES. All notices and other communications concerning the subject
matter of this Standby Purchase Commitment shall be in writing, shall be
given by mail, facsimile transmission or personal delivery, shall be
effective upon receipt by the parties at the following addresses (or to
such other address as a party may have specified by notice given to the
other parties pursuant to this provision):

If to the Equity Committee, to:

The Official Committee of Equity
Security Holders of Hexcel Corporation
c/o Peter D. Wolfson, Esq.
Marcus Montgomery Wolfson P.C.
53 Wall Street
New York, New York 10005-2815
Attention: Peter D. Wolfson, Esq.
Facsimile: (212) 858-5201

With a copy to:

Marcus Montgomery Wolfson P.C.
53 Wall Street
New York, New York 10005-2815
Attention: Peter D. Wolfson, Esq.
Facsimile: (212) 858-5201

<PAGE>

If to Hexcel, to:

Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94588
Attention: Rodney 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

If to Mutual, to:

Mutual Series Fund Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Attention: Peter A. 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.

12. GOVERNING LAW. This Standby Purchase Commitment 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 chapter 11 of title 11 of the United States
Code, as amended (the "Bankruptcy Code").

13. ENTIRE AGREEMENT. This Standby Purchase Commitment represents the entire
understanding of the parties regarding its subject matter and supersedes
all prior offers, agreements and communications regarding that subject
matter, including but not limited to the Stock

<PAGE>

Subscription and Standby Purchase Agreement, dated as of July 27, 1994,
which is superseded in its entirety hereby. Without limitation of the
foregoing, no party hereto has made any representation or warranty to any
other party hereto with respect to the transaction contemplated hereby,
except as set forth in this Standby Purchase Commitment. This Standby
Purchase Commitment can be modified or amended only by a later written
instrument signed by the parties. References to this Standby Purchase
Commitment are deemed to include all Exhibits hereto.

<PAGE>

To confirm the above, we have executed this Standby Purchase
Commitment on and as of the date appearing on the first page.

Very truly yours,

MUTUAL SERIES FUND INC.

By: /s/ Peter A. Langerman
-----------------------------------
Peter A. Langerman,
Executive Vice President

Consented and Agreed to as of
the date first written above:

HEXCEL CORPORATION

By: /s/ Robert D. Krumme
------------------------------
Robert D. Krumme,
Vice Chairman

THE OFFICIAL COMMITTEE OF EQUITY
SECURITY HOLDERS OF HEXCEL CORPORATION

By: /s/ Joseph L. Harrosh
------------------------------
Joseph L. Harrosh,
Chairman

<PAGE>
TABLE OF CONTENTS

PAGE

Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Representations, Warranties, Agreements and Understandings . . . . . . . . . 7
Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
First Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Second Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Standby Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Representations, Warranties, Agreements and Understandings . . . . . . . . . 7
Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
First Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Second Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

EXHIBITS

EXHIBIT A - FORM OF PLAN
EXHIBIT B - REIMBURSEMENT OF EXPENSES, BREAK-UP FEE AND OVERBID
EXHIBIT C - HEXCEL CORPORATION JOINT PLAN
EXHIBIT D - FORM OF NOTE
EXHIBIT E - FORM OF SECURITY AGREEMENT
EXHIBIT F - CONSOLIDATED 1994 REVISED BUSINESS PLAN
EXHIBIT G - REPRESENTATIONS AND WARRANTIES
EXHIBIT H - FORM OF REGISTRATION RIGHTS AGREEMENT

<PAGE>

EXHIBIT A

FORM OF PLAN

FILED SEPARATELY

A-1

<PAGE>

EXHIBIT B

REIMBURSEMENT OF EXPENSES,
BREAK-UP FEE AND OVERBID

All capitalized terms in this exhibit
have the same meanings as in the Standby
Purchase Commitment to which this exhibit is attached.

1. Subject to paragraph 4 of this Exhibit B, Hexcel shall reimburse
Mutual for all of Mutual's out-of-pocket costs and expenses (including the
reasonable fees and expenses of Mutual's counsel, accountants, investment
bankers and other professional persons), payable at the First Closing and
thereafter as incurred or on the termination of the Standby Purchase Commitment,
(i) in connection with the negotiation, documentation and implementation of this
Standby Purchase Commitment, the Registration Rights Agreement, the Security
Agreement and the Stock Subscription and Standby Purchase Agreement, dated as of
July 27, 1994, between Hexcel and Mutual, and the transactions contemplated
thereby, including, without limitation, the out-of-pocket costs and expenses of
Mutual 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 (including, without limitation, discovery undertaken in Hexcel's
bankruptcy case) commenced or asserted in Hexcel's bankruptcy case; PROVIDED,
HOWEVER, that (i) in the event that the Standby Purchase Agreement is terminated
(whether or not the Break-up Fee is payable), Hexcel's aggregate obligation to
reimburse Mutual for expenses hereunder and to pay the Break-up Fee shall not
exceed $350,000, and (ii) Hexcel shall not be required to reimburse Mutual for
any expenses hereunder (and Mutual shall reimburse Hexcel for any amounts paid
by it to Mutual) if this Standby Purchase Commitment is terminated by Hexcel and
the Equity Committee jointly pursuant to Section 7.c. thereof.

2. For the purposes of this Standby Purchase Commitment,
"Acquisition Transaction" means (i) any business combination involving Hexcel or
either Hexcel S.A.(a Belgian corporation) or Hexcel S.A. (a French corporation)
(each, a "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

B-1

<PAGE>

of assets of Hexcel and/or its subsidiaries for $40,000,000 or more in a single
transaction or series of related transactions, excluding in the case of (A) and
(B) the sale to Northrop of Hexcel's plant in Chandler, Arizona and the "EMT
technology" used at that facility and the sale of Hexcel's domestic and European
resins business, 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
existing holders of Hexcel's common stock PRO RATA.

3. In the event that Hexcel or the Equity Committee 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 will produce a result more
favorable to Hexcel than the result of proceeding with this Standby Purchase
Commitment, the Board of Directors or appropriate committee thereof may withdraw
its approval or recommendation of this Standby Purchase Commitment, approve or
recommend any such other proposal, enter into an agreement with respect to such
other proposal or terminate this Standby Purchase Commitment, and in each case
shall provide Mutual with immediate notice thereof. Any termination of this
Standby Purchase Commitment pursuant to this paragraph 3 shall be deemed an
Acquisition Transaction.

4. Whether or not the First Closing is consummated, Hexcel and the
Equity Committee acknowledge and agree that Mutual has made a substantial
investment of management time and incurred substantial out-of-pocket expenses in
connection with the negotiation and execution of this Standby Purchase
Commitment and the effort to consummate the transactions contemplated hereby and
thereby. If the First Closing is not consummated and an Acquisition Transaction
shall have occurred during the pendency of Hexcel's bankruptcy case, Hexcel
shall immediately pay to Mutual a fee (the "Break-up Fee") equal to the excess
of $350,000 over all amounts theretofore paid to Mutual pursuant to paragraph 1
of this Exhibit B. In the event that Hexcel pays Mutual the Break-up Fee,
Hexcel shall not be required to make any additional payment pursuant to
paragraph 1; PROVIDED, HOWEVER, that no Break-up Fee or expense reimbursement
shall be payable if Mutual is in

B-2

<PAGE>

material breach of this Standby Purchase Commitment at the date of any such
termination, or Mutual, Hexcel and the Equity Committee mutually agree in
writing to such termination pursuant to paragraph 7.a of the Standby Purchase
Commitment.

5. Upon the occurrence of an Acquisition Transaction, Mutual shall
provide written notice to Hexcel of Mutual'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 Mutual the Break-up Fee by wire transfer of immediately available funds
to an account or accounts designated by Mutual. Until Hexcel's obligation to
pay the Break-up Fee is fully and indefeasibly discharged, Mutual's claim for
the Break-up Fee shall be treated as an allowed administrative claim in Hexcel's
bankruptcy case pursuant to Section 503(b) of the Bankruptcy Code entitled to
priority under Section 507(a)(1) of the Bankruptcy Code.

B-3

<PAGE>

EXHIBIT C

HEXCEL CORPORATION

JOINT PLAN

CORPORATE GOVERNANCE AND MANAGEMENT COMPROMISE POSITION

September 26, 1994

1. INITIAL BOARD OF DIRECTORS.

To be comprised of three Equity Committee nominees, two Mutual Series
nominees, three nominees mutually acceptable to the Equity Committee and Mutual
Series and the new Chief Executive Officer of Hexcel commencing with his
employment by Hexcel. If Mutual Series owns more than 50% of the outstanding
common stock of Hexcel upon consummation of the rights offering, Mutual Series
will designate one additional director. If Mutual Series owns less than 25% of
the outstanding common stock of Hexcel upon consummation of the rights offering,
the directors nominated by the Equity Committee, together with the directors
nominated by mutual agreement of the Equity Committee and Mutual Series, will
select one additional director. The new Board of Directors will select (with
the approvals of at least two of the nominees of the Equity Committee) one of
the directors as initial Chairman. The initial Board of Directors of Hexcel
shall hold office until the first post-consummation annual meeting of
stockholders of Hexcel, and until such directors' successors shall be elected
and qualified.

2. INTERIM MANAGEMENT.

Pending selection of a new Chief Executive Officer mutually acceptable
to the Equity Committee and Mutual Series, Lee will continue as Chief Executive
Officer of Hexcel. Pending effectiveness of the plan, Lee will continue as
Chairman and David Glatstein will continue as Vice Chairman of the Board of
Directors and Robert Witt will continue to serve as a consultant with his
principal points of contact with Hexcel being David Glatstein and Frank Wimer.
The search for a new Chief Executive Officer will begin immediately using an
executive search firm retained by Hexcel but selected by mutual agreement of the
Equity Committee and Mutual Series. The contract with the

C-1

<PAGE>

executive search firm shall provide that all communications with the search firm
will be conducted solely with the Equity Committee and Mutual Series jointly and
not on an ex parte basis with either party. The selection of the new Chief
Executive Officer will be made by mutual agreement of (i) the Equity Committee
and Mutual Series, if selected prior to the effective date of the plan or (ii)
the board designees of the Equity Committee and the board designees of Mutual
Series, if selected after the effective date of the plan.

3. LEE CONTINUATION CONDITION.

When the new Chief Executive Officer takes office, Lee will resign as
an officer of Hexcel and will be retained as a consultant by Hexcel for
strategic planning, reporting to the Chief Executive Officer and Board of
Directors of Hexcel under a two year agreement, subject to termination at the
end of the first year by resolution of the Board of Directors delivered to Lee
not earlier than 60 days and not later than 30 days prior to the end of the
first year.

4. LEE COMPENSATION AND EQUITY.

A. Base compensation (salary and fees) of $180,000 per year
during the first year, $230,000 during the second year, plus the same
benefits provided to him in his interim employment agreement approved
by the Bankruptcy Court.

B. Appropriate bonus opportunity determined by the Board of
Directors based upon attainment of the goals established by the Board
of Directors.

C. Stock options for approximately .625% of Hexcel's fully
diluted common stock (without giving effect to the conversion of the
7% Convertible Subordinated Debentures due 2011) at a price equal to
the average of the daily average prices of the stock for the 20
trading days beginning 30 calendar days following expiration of the
rights offering. Such options will vest in equal monthly installments
over the two-year term of the consulting agreement, subject to being
fully vested upon any early termination thereof (other than for cause
or voluntary resignation) and will be exercisable until the later of
three years following the date of grant (i.e., the

C-2

<PAGE>

effective date of the plan) or one year after expiration of the
consulting agreement.

D. Commitment and right to purchase $500,000 of common stock at
rights offering price, upon consummation of the rights offering. The
shares to be purchased shall be a first call on the Oversubscription
Pool, if any, reducing Mutual Series and the stockholders' respective
shares therein on a pro rata basis, and thereafter from authorized
shares of Hexcel and over and above the shares to be sold in the
rights offering.

E. Subject to approval of the current Board of Directors,
Hexcel intends to apply to the court for authority to pay a success
bonus of up to $500,000 to John Lee upon consummation of the Plan as
well as bonuses to other employees. It is understood that the Equity
Committee has no commitment to support any such application, and
reserves the right to object to such application.

5. STOCKHOLDERS' MEETING.

First post-consummation annual meeting of stockholders to be held not
earlier than nine months after the effective date of the plan unless otherwise
agreed by the board designees of Mutual Series and the Equity Committee.
Reorganized Hexcel's bylaws shall provide for the right of any stockholder(s)
holding in excess of 25% of the reorganized Hexcel's common stock to call a
special meeting, including one at which directors may be elected, at any time
after nine months following the effective date of the plan.

C-3

<PAGE>
EXHIBIT D

FORM OF NOTE

SECURED PROMISSORY NOTE

New York, New York $_______
[Date]

FOR VALUE RECEIVED, the undersigned, HEXCEL CORPORATION (the "Maker"),
promises to pay to the order of _____________, or its assigns (the "Lender"),
the principal amount of_________($_______), subject to reduction as provided
in Paragraph 1.b.(2) of the Standby Purchase Commitment, dated October __, 1994,
issued by the Lender to, and accepted by, the Maker, and The Official Committee
of Equity Security Holders of Hexcel Corporation (the "Standby Purchase
Commitment"), in lawful money of the United States of America, with interest on
the unpaid balance at the Federal Funds rate as in effect from time to time (the
"Interest Rate").

Principal and interest on this Note shall be payable on the earlier to
occur of (i) the Second Closing under the Standby Purchase Commitment or (ii) 60
days after the date hereof. The Federal Funds rate for any day shall be the
offered quotation for Federal Funds for such day as reported in The Wall Street
Journal or if said quotation is not published for any reason, as otherwise
reasonably determined by the Lender.

If the Maker fails to make any payment when due under this Note, then
the entire unpaid balance hereof shall thereafter bear interest at a rate which
is two per cent (2%) in excess of the Interest Rate until such amount in default
is paid in full (before and after judgment).

The Maker shall have the unqualified right to pay all or a portion of
the principal amount of this Note at any time and from time to time. Interest
accrued upon any amount prepaid shall be paid therewith at the time of
prepayment.

D-1

<PAGE>

The Maker waives presentment, demand for payment, protest, notice of
dishonor and all other notices and demands of any kind hereunder, and agrees to
reimburse and indemnify the Lender for all costs and expenses incurred by the
Lender in collecting payment, including attorneys' fees and costs.

Payment of the principal amount of, and interest upon, this Note is
secured pursuant to a Security Agreement of even date herewith by the Maker in
favor of the Lender. The benefit of such security and the Security Agreement
shall inure to the Lender's successors and assigns. This Note, and the benefit
of the Security Agreement may be negotiated, assigned and transferred by the
Lender without restriction, and the Maker, upon notice of such negotiation,
assignment or transfer, shall treat the assignee as the Lender for all purposes
hereunder.

This Note shall be governed by and interpreted in accordance with the
law of the State of New York applicable to instruments executed and to be
performed entirely in that State.

IN WITNESS WHEREOF, the Maker has executed this Note on and as of the
date set forth above.

HEXCEL CORPORATION

By: _________________________
Name:
Title:

D-2

<PAGE>

EXHIBIT E

FORM OF SECURITY AGREEMENT

This SECURITY AGREEMENT, dated ___________________, 1994, is made by
Hexcel Corporation, a Delaware corporation (the "Grantor"), in favor of Mutual
Series Fund Inc. (the "Secured Party").

Recitals

The United States Bankruptcy Court for the Northern District of
California confirmed Grantor's Plan of Reorganization (the "Plan") under Chapter
11 of the United States Bankruptcy Code on _______________ , 1994. Pursuant to
the Plan, (i) on the Effective Date, pursuant to the Standby Purchase
Commitment, dated October _________________________, 1994, the Grantor
has received a loan from the Secured Party and the Secured Party has loaned to
the Grantor $41,000,000 in the aggregate, evidenced by a Secured Promissory Note
(the "Note"), and (ii) Grantor is commencing a rights offering to its existing
Stockholders to subscribe for and purchase an aggregate of $41 million of common
stock of Hexcel (the "Rights Offering"). This Security Agreement is the
security agreement entered into pursuant to the Note and secures payment of the
Note in accordance with its terms.

Terms of Agreement

NOW, THEREFORE, in consideration of, and in order to induce the
Secured Party to make, the loan evidenced by the Note, the Grantor hereby agrees
with the Secured Party as follows:

Section 1. GRANT OF SECURITY. The Grantor hereby assigns and pledges
to the Secured Party, and hereby grants to the Secured Party a security interest
in, all of the Grantor's right, title and interest in and to the proceeds of the
Rights Offering, including without limitation all amounts deposited with the
financial institution selected by the Grantor to act as depository with respect
to the Rights Offering (the "Bank"), including all interest and any other
proceeds arising thereon, all replacements and substitutions thereof, and all
proceeds of the foregoing (the "Collateral"); PROVIDED, HOWEVER, Collateral
shall not include the amounts paid by holders of Subscription Rights

E-1

<PAGE>

which, under the terms of the Rights Plan (as defined in the Plan) are required
to be returned to such holders.

Section 2. SECURITY FOR OBLIGATIONS. This Security Agreement secures
the payment of all obligations of the Grantor now or hereafter existing under
the Note, whether for principal, interest or otherwise, and all obligations of
the Grantor now or hereafter existing to Secured Party under this Security
Agreement (all such obligations of the Grantor being the "Obligations").

Section 3. BANK ACKNOWLEDGMENT. The Bank has executed this Security
Agreement to acknowledge that it will hold all amounts received as the
depository pursuant to that Agreement, dated ______________, 1994, between the
Bank and the Grantor, in a separate account (the "Account") for the benefit of
the Secured Party, that such funds are being held for the account of the Secured
Party and that, upon the conclusion of the Rights Offering, the Bank shall pay
directly to the Secured Party all amounts held in the Account (excluding
amounts, if any, to be returned to holders of subscription rights as provided in
the Rights Plan) for application to the indebtedness evidenced by the Note.

Section 4. REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants as follows:

(a) Grantor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and lawful authority to own, lease and operate its assets, properties and
business and to carry on its business.

(b) Grantor has the full legal right and power and all authority and
approval required to enter into, execute and deliver this Security Agreement,
and to perform fully its obligations under this Security Agreement. This
Security Agreement has been duly executed and delivered and is the valid and
binding obligation of Grantor enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency and similar laws affecting the rights of
creditors and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law). No approval or consent of any foreign, federal, state, county, local or
other governmental or regulatory body, and no approval or consent of any other
person is required in connection with

E-2

<PAGE>

the execution and delivery by Grantor of this Security Agreement and the
consummation and performance by Grantor of the transactions contemplated hereby.

(c) The chief place of business and chief executive office of the
Grantor and the office where the Grantor keeps its records concerning the
Collateral are located at its address at 5794 W. Las Positas Boulevard,
Pleasanton, California 94588.

(d) The Collateral is and will be free and clear of any lien,
security interest, option or other charge or encumbrance by Grantor except for
the security interest created by this Security Agreement. No effective
financing statement against Grantor or other document similar in effect covering
all or any part of the Collateral is on file in any recording office, except
such as may have been filed in favor of the Secured Party relating to this
Security Agreement.

(e) This Security Agreement creates a valid and perfected first
priority security interest in all of Grantor's right, title and interest in and
to the Collateral, securing the payment of the Obligations, and all filings and
other actions necessary or desirable to perfect and protect such security
interest have been duly taken.

(f) No consent of any other person or entity and no authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body which has not been obtained or made is required (i)
for the grant by the Grantor of the security interest granted hereby or for the
execution, delivery or performance of this Security Agreement by the Grantor,
(ii) for the perfection or maintenance of the security interest created hereby
(including the first priority nature of such security interest) or (iii) for the
exercise by the Secured Party of rights provided for in this Security Agreement
or the remedies in respect of the Collateral pursuant to this Security
Agreement.

(g) There are no conditions precedent to the effectiveness of this
Security Agreement that have not been satisfied or waived.

Section 5. FURTHER ASSURANCES. (a) The Grantor agrees that from
time to time, at the expense of the Grantor, the Grantor will promptly execute
and deliver all

E-3

<PAGE>

further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Secured Party may reasonably request, in
order to perfect and protect any pledge, assignment or security interest granted
or purported to be granted hereby or to enable the Secured Party to exercise and
enforce its rights and remedies hereunder with respect to the Collateral,
including execution and filing of additional financing statements in any
jurisdiction where the Collateral may be located or to which Grantor may move
its principal place of business and/or chief executive office.

(b) The Grantor hereby authorizes the Secured Party to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without the signature of the Grantor where
permitted by law. A photocopy or other reproduction of this Security Agreement
or any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.

(c) The Grantor will furnish to the Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Secured Party may
reasonably request.

Section 6. PLACE OF PERFECTION; RECORDS; COLLECTION OF RECEIVABLES.
The Grantor shall keep its chief place of business and chief executive office
and the office where it keeps its records concerning the Collateral, at the
location therefor specified in this Security Agreement or, upon 30 days' prior
written notice to the Secured Party, at any other locations in a jurisdiction
where all actions required to maintain Secured Party's perfected security
interest in the collateral shall have been taken. The Grantor will hold and
preserve such records and will permit representatives of the Secured Party at
any time during normal business hours to inspect and make abstracts from such
records.

Section 7. TRANSFERS AND OTHER LIENS. The Grantor shall not (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, or (ii) create or
permit to exist any lien, security interest, option or other charge or
encumbrance upon or with respect to any of the Collateral, except for the
security interest under this Security Agreement.

E-4

<PAGE>

Section 8. REMEDIES. If any default under the Note shall have
occurred and be continuing and payment to the Secured Party of the funds in the
Account (excluding amounts, if any, to be returned to holders of subscription
rights as provided in the Rights Plan) is not made:

(a) The Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the
Uniform Commercial code in effect in the State of New York at that time (the
"Code") (whether or not the Code applies to the affected Collateral) or the
Uniform Commercial Code applicable to the validity or perfection of the security
interest in the Collateral over which rights on default are asserted. Without
limiting the foregoing, the Secured Party shall be entitled, without notice
except as specified below, to sell the Collateral or any part thereof in one or
more sales, at public or private sale, at any of Secured Party's offices or
elsewhere, for cash, or credit or for future delivery, and upon such other terms
as the Secured Party may deem commercially reasonable. The Grantor agrees that,
to the extent notice of sale shall be required by law, at least ten days' notice
to the Grantor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification. The
Secured Party shall not be obligated to make any sale of the Collateral,
regardless of notice of sale having been given. The Secured Party may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was adjourned.

(b) Any surplus of such cash or cash proceeds held by the Secured
Party and remaining after payment in full of all the Obligations shall be paid
over to the Grantor or to whomsoever may be lawfully entitled to receive such
surplus.

(c) All payments received by the Grantor under or otherwise in
respect of the Collateral shall be received in trust for the benefit of the
Secured Party, shall be segregated from other funds of the Grantor and shall be
forthwith paid over to the Secured Party in the same form as so received (with
any necessary endorsement).

Section 9. INDEMNITY AND EXPENSES. (a) The Grantor agrees to
indemnify the Secured Party from and against any and all claims, losses and
liabilities (including reasonable

E-5

<PAGE>

attorneys' fees) growing out of or resulting from this Security Agreement
(including, without limitation, enforcement of this Security Agreement), except
claims, losses or liabilities resulting from the Secured Party's gross
negligence or willful misconduct.

(b) The Grantor will upon demand pay to the Secured Party the amount
of any and all reasonable expenses, including the reasonable fees and expenses
of its counsel and of any experts and agents, which the Secured Party may incur
in connection with (i) the administration of this Security Agreement, (ii) the
collection of, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of the Secured Party hereunder or
(iv) the failure by the Grantor to perform or observe any of the provisions
hereof.

Section 10. AMENDMENTS; ETC. No amendment or waiver of any provision
of this Security Agreement, and no consent to any departure by the Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

Section 11. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing and mailed,
telecopied, or delivered to it, if to the Grantor, at its addresses at ______
facsimile ( ) _______, Attention: President, and if to the Secured Party, at
its address at 51 John F. Kennedy Parkway, Short Hills, New Jersey 07078,
Attention Peter A. Langerman, or, as to either party, at such other address as
shall be designated by such party in a written notice to the other party. All
such notices and other communications shall be effective when telecopied, with
receipt confirmed and a copy sent by registered mail, and otherwise when
delivered.

Section 12. CONTINUING SECURITY INTEREST; ASSIGNMENT OF NOTE. This
Security Agreement shall create a continuing security interest in the Collateral
and shall (a) remain in full force and effect until the payment in full of the
Obligations and all other amounts payable under this Security Agreement, (b) be
binding upon the Grantor, its successors and assigns, and (c) inure to the
benefit of, and be enforceable by, the Secured Party and its successors,
transferees and assigns. Upon the payment in full of the Obligations, the
security interest granted hereby shall

E-6

<PAGE>

terminate and all rights to the Collateral shall revert to the Grantor. Upon
any such termination, the Secured Party will, at the Grantor's expense, execute
and deliver to the Grantor such documents as the Grantor shall reasonably
request to evidence such termination.

Section 13. GOVERNING LAW; TERMS. This Security Agreement shall be
governed by and construed in accordance with the law of the State of New York,
except to the extent that the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the law of any other jurisdiction. Unless otherwise defined herein
terms used in Article 9 of the code are used herein as therein defined.

IN WITNESS WHEREOF, the Grantor has caused this Security Agreement in
favor of the Secured Party to be duly executed and delivered by its officer
thereunto duly authorized as of the date first written above.

HEXCEL CORPORATION

By: _________________________________
Name:
Title:

ACKNOWLEDGED AND AGREED:

[NAME OF BANK, DEPOSITARY]

By: __________________________________
Name:
Title:

E-7

<PAGE>

EXHIBIT F

HEXCEL CORPORATION AND SUBSIDIARIES
PROJECTED OPENING CONSOLIDATED BALANCE SHEET AS OF JANUARY 1, 1995
($000's Omitted)
(Unaudited)

Pre- Post-
Reorganization Reorganization Reorganization
Balances Adjustments(2) Balances
-------------- -------------- --------------
ASSETS
<S> <C> <C> <C>
Cash $ 19,470(1) ($ 15,068) $ 4,402(1)
Accounts Receivable 61,510 0 61,510

Inventories 47,324 0 47,324
Prepaid Expenses & Other 4,044 0 4,044
--------- --------- --------
Total Current Assets 132,348 (15,068) 117,280

Net Fixed Assets 83,611 0 83,611
Other Noncurrent Assets 20,019 0 20,019
--------- --------- --------

TOTAL ASSETS $235,978 ($ 15,068) $220,910
--------- --------- --------
--------- --------- --------

LIABILITIES & EQUITY

Current Portion -- Long Term Debt $ 8,071(3) $ 3,707(4) $ 11,778*

U.S. Revolving Debt Facility 0 15,448 15,448*

DIP Financing 0(5) 0(5) 0

Payables & Accruals 35,169(7) 17,490(7) 52,659**

Restructuring Accrual 13,613 0 13,613
--------- --------- --------
TOTAL CURRENT LIABILITIES 56,853 36,645 93,498

Long Term Debt 15,015(3) 43,405(4) 58,420*

Long Term Liabilities 22,402 0 22,402
--------- --------- --------

TOTAL LIABILITIES 94,270 80,050 174,320

LIABILITIES SUBJECT TO 141,391 (141,391) 0
COMPROMISE

Common Stock and Paid-in Capital 62,635 50,200(6) 112,835

Accumulated Deficit and (62,318)(8) (3,927)(8) (66,245)
Cumulative Translation Adjustment --------- --------- --------

TOTAL EQUITY 317 46,273 46,590
--------- --------- --------

TOTAL LIABILITIES & EQUITY $235,978 ($ 15,068) $220,910
--------- --------- --------
--------- --------- --------
</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.

F-1

<PAGE>
EXHIBIT G

REPRESENTATIONS AND WARRANTIES TO BE GIVEN
TO MUTUAL BY HEXCEL
ON AND AS OF THE EFFECTIVE DATE

All capitalized terms in this exhibit
have the same meanings as in the Standby
Purchase Commitment to which this exhibit is attached

1. REPRESENTATIONS AND WARRANTIES. On the First Closing Date, Hexcel
will represent and warrant to Mutual under the Standby Purchase
Commitment as follows:

a. Hexcel has been duly organized and is validly existing, in
good standing and doing business as a corporation under the
laws of the State of Delaware, with corporate power and
authority to perform its obligations under the Standby
Purchase Commitment, the Note, the Registration Rights
Agreement and the Security Agreement (the "Operative
Documents").

b. The performance of the Operative Documents by Hexcel and the
consummation by Hexcel of the transactions contemplated
thereby have been duly authorized by all necessary corporate
action of Hexcel, and each of the Operative Documents
constitutes a valid and legally binding instrument of Hexcel
subject to applicable bankruptcy, insolvency and similar
laws affecting the rights of creditors and subject, as to
enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity
or at law).

c. The Rights have been duly authorized by all necessary
corporate action of Hexcel, and when issued in accordance
with such authorization and delivered by Hexcel, will
constitute legal, valid, binding and enforceable obligations
of Hexcel, subject to applicable bankruptcy, insolvency and
similar laws affecting the rights of creditors and subject,
as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding
in equity or at law).

G-1

<PAGE>

d. The Total Shares have been duly authorized, and when issued
and delivered as provided in the Standby Purchase Commitment
will be validly issued and outstanding, fully paid and
nonassessable and free of any preemptive rights.

e. The performance by Hexcel under the Operative Documents, the
consummation by Hexcel of the transactions therein
contemplated and the compliance by Hexcel with the terms
thereof do not and will not conflict with, or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, the corporate charter or bylaws
of Hexcel, or any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which Hexcel
is a party or by which any of its properties or assets are
bound (with such exceptions as would not have a material
adverse effect on the financial condition of Hexcel or
subject Mutual to any liability), or any applicable law,
rule, regulation, judgment, order or decree of government,
governmental instrumentality or court having jurisdiction
over Hexcel or any of its properties or assets; and no
consent, approval, authorization, order, registration or
qualification of or with any such government, governmental
instrumentality or court is required for the valid
authorization, execution, delivery and performance by Hexcel
of the Operative Documents, the issuance of the Rights, the
issuance of the shares upon the exercise of the Rights or
the Minimum Shares to be issued to Mutual in accordance with
the Standby Purchase Commitment, or the consummation by
Hexcel of the other transactions contemplated by the Plan,
except such consents, approvals, authorizations,
registrations or qualifications as may be required under
state securities or "blue sky" laws (or, with respect to the
Registration Rights Agreement, under Federal securities laws
as contemplated therein).

f. The (i) audited consolidated balance sheets of Hexcel and
its 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 (ii)
unaudited consolidated balance sheet of Hexcel and its

G-2

<PAGE>

subsidiaries as at July, 3, 1994 and the related
consolidated statements of income and cash flows for the
period then ended, including the related notes and schedules
thereto, are complete and correct in all material respects,
have been prepared in accordance with generally accepted
accounting principles, and present fairly the consolidated
financial position, results of operations and cash flows of
Hexcel and its subsidiaries as at the dates and for the
periods indicated. The unaudited consolidated balance sheet
of Hexcel and its subsidiaries as at July 3, 1994 and as set
forth in Hexcel's quarterly report on Form 10-Q for the
fiscal quarter ended July 3, 1994 is referred to as the
"Balance Sheet" and June 30, 1994 is referred to as the
"Balance Sheet Date."

g. The disclosure statement relating to the Plan, including the
exhibits thereto, does not (i) contain a misstatement of a
material fact or (ii) omit to state a material fact
necessary in order to make statements contained therein not
misleading.

h. As of their respective dates, Hexcel's Annual Report on Form
10-K for its fiscal year ended December 31, 1993 and its
quarterly reports on Form 10-Q for quarterly periods ending
after that date (collectively, the "SEC Documents") were
complete and correct in all material respects and complied
in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Securities and Exchange (the "SEC")
promulgated thereunder applicable to such SEC Documents.
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.

2. The representations and warranties in paragraph 1 above shall survive
the Second Closing Date for a period of eighteen months.

G-3

<PAGE>
EXHIBIT H

- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------

REGISTRATION RIGHTS AGREEMENT

DATED AS OF _______ __, 1994

BETWEEN

HEXCEL CORPORATION

AND

MUTUAL SERIES FUND INC.

- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------

<PAGE>
EXHIBIT H

TABLE OF CONTENTS

PAGE

ARTICLE I

DEFINITIONS . . . . . . . . . . . . . . H-1
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . H-1

ARTICLE II

REGISTRATION RIGHTS . . . . . . . . . . . . H-3
Section 2.1. Registration upon Request. . . . . . . . . . . . . . . . . . H-3
Section 2.2. Piggyback Registration . . . . . . . . . . . . . . . . . . . H-4
Section 2.3. Registration Procedures. . . . . . . . . . . . . . . . . . . H-6
Section 2.4. Preparation; Reasonable Investigation. . . . . . . . . . . . H-15
Section 2.5. Indemnification. . . . . . . . . . . . . . . . . . . . . . . H-15
Section 2.6. Contribution . . . . . . . . . . . . . . . . . . . . . . . . H-18
Section 2.7. Nominees of Beneficial Owners. . . . . . . . . . . . . . . . H-19
Section 2.8. Restrictions on Sale of Securities by
the Company and Others . . . . . . . . . . . . . . . . H-20

ARTICLE III

OTHER TRANSFERS . . . . . . . . . . . . . H-20
Section 3.1. Removal of Restrictive Legends . . . . . . . . . . . . . . . H-20

ARTICLE IV

MISCELLANEOUS. . . . . . . . . . . . . . H-21
Section 4.1. Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . H-21
Section 4.2. Submission to Jurisdiction; Consent to
Service of Process . . . . . . . . . . . . . . . . . . H-21
Section 4.3. Specific Enforcement; Other Remedies . . . . . . . . . . . . H-21
Section 4.4. Severability . . . . . . . . . . . . . . . . . . . . . . . . H-22
Section 4.5. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . H-22
Section 4.6. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . H-23
Section 4.7. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . H-23
Section 4.8. Descriptive Headings; References . . . . . . . . . . . . . . H-23
Section 4.9. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . H-23
Section 4.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . H-23
Section 4.11. Supplementary Provisions . . . . . . . . . . . . . . . . . . .H-24

H-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 Standby Purchase
Commitment dated October __, 1994 (the "Standby Purchase Commitment"), 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 Standby Purchase
Commitment, 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 Standby
Purchase Commitment, including the exhibits thereto.

(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 Securities and Exchange Commission
(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 connection with "blue sky" qualifications, including
any

H-1

<PAGE>

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) the Total Shares and
(ii) any other securities issued or issuable with respect to the Total 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 1933 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 1933 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 1933 Act nor qualification (or any similar filing) under
any state securities or "blue sky" law then in effect, or (iv) such securities
shall have ceased to be outstanding.

(d) "Person" means any individual, corporation,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, governmental body or other entity.

H-2

<PAGE>

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
date of the Second Closing and ending on the earlier of (x) the fifth
anniversary thereof 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 1933 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 1933
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
Standby Shares on the Second Closing Date for an aggregate purchase price of at
least $21,000,000, 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 1933 Act; PROVIDED,
HOWEVER, that a Demand Registration shall be deemed to have 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

H-3

<PAGE>

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 any of its equity securities under the 1933 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 1933 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:

(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

H-4

<PAGE>

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;

(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

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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
securities proposed to be sold by a holder the exercise of whose
demand registration rights required the filing of the registration
statement, (C) THIRD, the Registrable Securities held by Mutual
requested to be included in such registration, (D) FOURTH, the
Registrable Securities held by other holders of Registrable Securities
requested to be included in such registration, pro rata, based on the
respective number of Registrable Securities requested to be included
in such registration by such holders and (E) FIFTH, 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
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 1933 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:

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<PAGE>

(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 and
to comply with the provisions of the 1933 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 1933 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 1933 Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents, as such seller or

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<PAGE>

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 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

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<PAGE>

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 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 1933 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 1933 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

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<PAGE>

all material respects with law and so that such prospectus, as amended
or supplemented, shall comply with law;

(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 1933
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 referenced in paragraph 4.a. of the Standby Purchase
Commitment.

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.

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

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<PAGE>

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 1933
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 of the Company 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 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)

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<PAGE>

the Board of Directors of the Company 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 1933 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 1933 Act, as such seller may reasonably request in order to
facilitate the sale or disposition of such Registrable Securities.

(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

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<PAGE>

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 1933
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 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;

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<PAGE>

(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 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

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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 1933 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, to conduct
a reasonable investigation within the meaning of the 1933 Act.

Section 2.5. INDEMNIFICATION. (a) In the event of any
registration of any securities of the Company under the 1933 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 1933 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 1933 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

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<PAGE>

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 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 1933 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

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<PAGE>

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.

(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

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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 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 1933 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

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<PAGE>

to the aggregate losses, liabilities, claims, damages and expenses, of the
nature contemplated by such indemnity agreement, incurred by 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 1933
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 1933 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 1933 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 nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election, be treated as the
seller for purposes of any

H-19

<PAGE>

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 1933 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 Form 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) and not to enter into
any agreements requiring it to file during such period a registration statement
for any such sale by a securityholder.

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 1933
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
referenced in paragraph 4.a. of the Standby Purchase Commitment.

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<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.

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 Standby
Purchase Commitment 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 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.

H-21

<PAGE>

(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

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

H-22

<PAGE>

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, except that Section 4.11 cannot be
amended to adversely affect John J. Lee without his consent.

Section 4STE 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 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

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<PAGE>

contrary in this Agreement, the Company shall have no obligation to furnish
information or provide notices to any holder of Registrable Securities (other
than Mutual) unless the Company shall have received a copy of such agreement
from such holder.

Section 4.11. SUPPLEMENTARY PROVISIONS. Upon the sale of 108,108
shares of Hexcel common stock to John J. Lee ("Lee") pursuant to the Plan and
Lee's execution and delivery to Mutual and the Company of his agreement to be
bound by the terms of this Agreement:

(a) such shares shall be deemed to be Registrable Securities for
all purposes of this Agreement;

(b) Clause (C) of paragraph (ii) of Section 2.2(a) shall be
amended as follows:

"(C) THIRD, the Registrable Securities held by Mutual
and by Lee requested to be included in such
registration, PRO RATA, based on their respective
number of Registrable Securities requested to be
included in such registration by such holders";

(c) Lee shall be deemed a holder of Registrable Securities who
has agreed to be bound by this Agreement as provided in
Section 4.10 and a "subsequent holder" of Registrable
Securities for the purpose of Section 4.10, and shall be
entitled as such a holder to participate in Piggyback
Registrations as provided in Section 2.2 of this Agreement,
to receive the information and notices provided for therein;
and

(d) notwithstanding anything else in the Agreement to the
contrary, with respect to any Demand Registration, Lee shall
be entitled to have such number of his Registrable
Securities registered as part of such Demand Registration as
may be agreed to by Mutual, but in any event Lee shall be
entitled to have included in such Demand Registration at
least the same percentage of his remaining Registrable
Securities as the percentage of Mutual's remaining
Registrable Securities which are being included in such
Demand Registration.

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<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:

H-25

<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
____________, 199__ 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 initial number of directors has been set at nine.

2) The proportion of shares required to change the number of
directors within the authorized range has been lowered from
75% to a majority

<PAGE>

of the voting power of the Corporation.

3) Section 6.2(a), which provided for classification of the
directors, has been deleted.

4) Section 6.3 has been amended to provide that a director may
be removed from office without cause by the affirmative vote
of a majority of the voting power of the Corporation.

4) Section 6.5, which required a demand by a stockholder in
order to vote for directors by a written ballot, has been
deleted.

5) Section 8, which required a supermajority vote for certain
business combinations and other transactions, has been
deleted.

6) 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.

7) The provisions of 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

<PAGE>

Incorporation and to adopt any cumulative voting provisions,
have been deleted.

8) The Series A Junior Participating Preferred, 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 41,500,000 authorized
shares, consisting of 1,500,000 shares of Preferred Stock without par value and
40,000,000 shares of Common Stock with par value of $.01 per share. The
Corporation shall not issue nonvoting equity securities; PROVIDED, HOWEVER, that
any series of Preferred Stock having the right, voting separately as a class, to
elect any directors of the Corporation if and when dividends payable on such
shares of Preferred Stock shall have been in arrears and unpaid for a specified
period of time shall not be deemed nonvoting equity securities.

<PAGE>

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 __________, 199__ .

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

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 41,500,000, consisting of 1,500,000 shares of
Preferred Stock without par value (hereinafter in this Certificate called the
"Preferred Stock"), and 40,000,000 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. Notwithstanding anything to the
contrary contained herein, the Corporation shall not issue nonvoting equity
securities; PROVIDED, HOWEVER, that any series of Preferred Stock designated
pursuant to Section 5 hereof as having the right, voting separately as a class,
to elect any directors of the Corporation if and when dividends payable on such
shares of Preferred Stock shall have been in arrears and unpaid for a specified
period of time (such directors to be in addition to the number of directors
constituting the Board of Directors immediately prior to the accrual of such
right) shall not be nonvoting equity securities for purposes of this Section 4.

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

<PAGE>

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 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 eight
(8) nor more than fifteen (15). The initial number of directors is fixed at
nine (9). Commencing after the first annual meeting of the stockholders of the
Corporation held after the adoption of this Restated Certificate of
Incorporation, 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 outstanding shares authorized
to vote, provided that the number of directors may be changed earlier only to
the extent and as provided in the By-Laws.

6.2 PREFERRED STOCK TERMS. Notwithstanding 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.

6.3 REMOVAL OF DIRECTORS. Except as provided in Subsection 6.2
hereof, a director may be removed from office at

<PAGE>

any time, with or without cause, and only by the affirmative vote of the holders
of a majority of the outstanding 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 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 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 directors, 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 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 Chief Executive
Officer, 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, or by any stockholder or
stockholders holding in the aggregate in excess of 25% of the outstanding common
stock of the Corporation, and for any purpose or purposes; provided, however,
that no such meeting may be held for the purpose of election or removal without
cause of directors, and no amendment

<PAGE>

of this Certificate of Incorporation or of the By-laws of the Corporation which
would have the effect of modifying or permitting the circumvention of this
proviso may be adopted, earlier than the expiration of the nine month period
after the adoption of this Restated Certificate of Incorporation (except as
authorized by Section 5 of the By-laws of the Corporation). 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 holders 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
outstanding shares authorized to vote; 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, 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 majority of the outstanding shares authorized to vote.

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.

<PAGE>

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
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

<PAGE>

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 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

<PAGE>

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.

(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

<PAGE>

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.

<PAGE>
EXHIBIT D

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. . . . . . . . . . . . . . . . . 3
7. Voting . . . . . . . . . . . . . . . . . . . . . . . . . 3
8. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
9. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . 4
10. Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
17. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
18. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
19. Time and Place of Meetings and Telephone Meetings. . . . . . . . . . . 8
20. Call . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
21. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
22. Meeting Without Regular Call and Notice. . . . . . . . . . . . . . . . 9
23. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . 9
24. Quorum and Required Vote . . . . . . . . . . . . . . . . . . . . . . . 9
25. Committee Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 9
26. Interested Directors . . . . . . . . . . . . . . . . . . . . . . . . . 9

<PAGE>

- - -------------------------------------------------------------------------------
SECTION SUBJECT PAGE
- - -------------------------------------------------------------------------------

27. Honorary Advisors to the Board . . . . . . . . . . . . . . . . . . . .10
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
32. Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
33. Chairman of the Board. . . . . . . . . . . . . . . . . . . . . . . . .12
34. Chief Executive Officer. . . . . . . . . . . . . . . . . . . . . . . .12
35. President and Vice Presidents. . . . . . . . . . . . . . . . . . . . .12
36. Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(a) Record of Corporate Proceedings . . . . . . . . . . . . . . . . .12
(b) Record of Shares. . . . . . . . . . . . . . . . . . . . . . . . .13
(c) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
(d) Additional Powers and Duties. . . . . . . . . . . . . . . . . . .13
37. Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
38. Other Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

39. Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
40. Transfers of Shares of Capital Stock . . . . . . . . . . . . . . . . .13
41. Registered Shareholders. . . . . . . . . . . . . . . . . . . . . . . .14
42. Lost or Destroyed Certificates . . . . . . . . . . . . . . . . . . . .14
43. Record Date and Closing of Stock Books . . . . . . . . . . . . . . . .14
44. Transfer Agents and Registrars . . . . . . . . . . . . . . . . . . . .14

AMENDMENTS

45. Adoption of Amendments . . . . . . . . . . . . . . . . . . . . . . . .15
46. Record of Amendments . . . . . . . . . . . . . . . . . . . . . . . . .15

CORPORATE SEAL

47. Form of Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

<PAGE>

- - -------------------------------------------------------------------------------
SECTION SUBJECT PAGE
- - -------------------------------------------------------------------------------

MISCELLANEOUS

48. Checks, Drafts, Etc. . . . . . . . . . . . . . . . . . . . . . . . . .15
49. Contracts, Etc.; How Executed. . . . . . . . . . . . . . . . . . . . .15
50. Representation of Shares of Other Corporations . . . . . . . . . . . .16
51. Inspection of By-Laws. . . . . . . . . . . . . . . . . . . . . . . . .16
52. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
53. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
54. Construction and Definitions . . . . . . . . . . . . . . . . . . . . .16

<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, provided, however, that
the first annual meeting of stockholders following adoption of these By-laws
shall be held not earlier than nine months after the Effective Date of the
Corporation's Plan of Reorganization pursuant to which these By-laws are adopted
and to which these By-laws are an exhibit ("Plan of Reorganization"), unless
otherwise determined by mutual agreement of the two or three (as the case may
be) members of the Board designated by the Standby Purchaser (the "Standby
Purchaser Directors"), on the one hand, and the three members of the Board
designated by the Equity Committee (the "Equity Committee Directors"), on the
other hand (as all such capitalized terms are defined in the Plan of
Reorganization). At such annual 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

(1)

<PAGE>

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 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 may be called
at any time by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer, 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 these By-
Laws of the Corporation, include the power to call such meetings, or by any
stockholder or stockholders holding in the aggregate in excess of 25% of the
outstanding common stock of the Corporation, and for any purpose or purposes,
provided, however, that no such meeting may be held for the purpose of election
or removal without cause of directors earlier than the expiration of the nine
month period after the Effective Date unless otherwise determined by mutual
agreement of the Standby Purchaser Directors, on the one hand, and the Equity
Committee Directors, on the other hand. 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

(2)

<PAGE>

Chief Executive Officer, 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 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. The holders of a majority of the outstanding shares entitled
to vote, represented in person or by proxy, constitute 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 the holders 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 holders 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,

(3)

<PAGE>

may be adjourned by the vote of the holders of a majority of the shares
represented at the meeting.

9. ACTION BY CONSENT WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of the outstanding shares having
not less thatn the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all holders of shares entitled to vote
thereon were present and voting. Prompt notice of the taking of any such action
shall be given to those stockholders who did not consent in writing.

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.

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

(4)

<PAGE>

Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation by
such date as is required by Delaware law and 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 be 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.

DIRECTORS

12. POWERS. Subject to limitations of the Certificate of Incorporation,
of these 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 these 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, or under the ultimate direction of, 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 these 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 these 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

(5)

<PAGE>

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 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 eight
(8) nor more than fifteen (15). Commencing on the date of the first annual
meeting held after the Effective Date of the Plan of Reorganization, 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 outstanding shares authorized to vote thereon;
prior to that time the number of directors shall be changed to ten (10) if and
only as required by the Plan of Reorganization.

(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, which number shall be automatically increased to
ten (10) to the extent required by the Plan of Reorganization.

14. ELECTION, TERM OF OFFICE AND VACANCIES.

(a) Directors shall hold office until the annual meeting next
following their election and until their successors are respectively elected and
qualified; subject, however, to prior resignation, death or removal as provided
in these By-laws or applicable law. Any director may resign at any time in
writing to that effect delivered to the Secretary, to be effective upon its
acceptance or at the time specified in writing.

(6)

<PAGE>

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 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) 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 such class or series and the rights, preferences,
privileges and restrictions granted to and imposed on the holders of such
designated Preferred Stock.

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,
with or without cause, and only by the affirmative vote of the holders of a
majority of the outstanding 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 Chief Executive Officer, 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 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

(7)

<PAGE>

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.

If a new Chief Executive Officer has not succeeded John J. Lee before
the Effective Date of the Plan of Reorganization, a special committee, which
shall consist of the Standby Purchaser Directors and of the Equity Committee
Directors, shall be authorized to appoint such a Chief Executive Officer by
mutual agreement of such Directors.

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, the 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

(8)

<PAGE>

to the directors who were not present at the time of the adjournment.

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
(9)

<PAGE>

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, 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

(10)

<PAGE>

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, 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 a Chief Executive Officer, 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, the 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 the 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 the Chief Executive Officer and may
fix the salaries of other employees of

(11)

<PAGE>

the Corporation including the other officers. If the Board does not fix the
salaries of the other officers, the Chief Executive 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 these By-Laws. In the absence or disability of
the Chief Executive Officer, the Chairman of the Board shall perform all the
duties of the 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, the 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 the
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 the 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 these 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 these 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

(12)

<PAGE>

Secretary shall keep at the principal executive office of the Corporation a
share register showing the names of the stockholders 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 the
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 the 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 the 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, the 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 Corporation shall not be bound to
recognize any equitable or other

(13)

<PAGE>

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 the holders of a majority of the
outstanding shares of the Corporation

(14)

<PAGE>

authorized to vote; 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 the holders of a majority of the
outstanding shares of the Corporation authorized to vote.

46. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law is adopted,
it shall be copied in the 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. 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, the 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
Corporation. The authority herein granted to said officers to vote

(15)

<PAGE>

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.

(16)

<PAGE>

EXHIBIT E

REGISTRATION RIGHTS AGREEMENT FOR AFFILIATES

REGISTRATION RIGHTS AGREEMENT FOR AFFILIATES (this "Agreement") dated as of
_______, 199_ by HEXCEL CORPORATION, a Delaware corporation (the "Company"), for
the benefit of certain present and future holders of its equity securities who
qualify as Eligible Holders (as defined below).

RECITALS:

On December 6, 1993, the Company filed a voluntary petition commencing a
Chapter 11 reorganization case under the Bankruptcy Reform Act of 1978, as
amended (Title 11, United States Code), in the United States Bankruptcy Court
for the Northern District of California ("Bankruptcy Court").

On _______________, 199_ the Bankruptcy Court confirmed the Debtor's Plan
of Reorganization proposed by the Company and the Official Committee of Equity
Security Holders of the Company (the "Plan"). In connection with the Plan, the
Company is entering into this Agreement to provide the Holders with the
registration rights set forth herein on the terms and conditions of this
Agreement.

The parties therefore agree as follows:

1. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms shall have the meanings set forth below:

1.1 AFFILIATE. With respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, control, or is
controlled by, or is under common control with, such Person.

1.2 BANKRUPTCY COURT. As defined in the recitals of this Agreement.

1.3 COMMISSION. The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.

1.4 BENEFICIAL OWNER (OR BENEFICIALLY OWNED). As defined under Rule
13d-3 under the Exchange Act.

1.5 COMPANY. Hexcel, or any successor thereto by merger,
consolidation or otherwise, on and after the Effective Date.

1.6 DAMAGES. As defined in Section 9.1.

<PAGE>

1.7 EFFECTIVE DATE. As defined in the Plan.

1.8 EFFECTIVE PERIOD. As defined in Section 2 of this Agreement.

1.9 ELECTING ELIGIBLE HOLDER. With respect to any registration
related to a Registration Offering, an Eligible Holder who duly elects, pursuant
to Section 3.1, to have all or a portion of his Registrable Securities
registered by the Company in connection with such offering; provided that if
none of that Eligible Holder's Registrable Securities are registered in
connection with that Registration Offering, such Eligible Holder shall not be
deemed to be an Electing Eligible Holder with respect to such registration.

1.10 ELIGIBLE HOLDER. As of any time, a Person who beneficially owns
Registrable Securities as of such time and who meets both of the following
criteria: (a) on the Effective Date, such Person either (i) was a director or an
"executive officer" (as such term is defined in Rule 405 under the Securities
Act) of the Company, or (ii) beneficially owned at least 10% of the issued and
outstanding shares of Reorganized Hexcel Common Stock (without giving effect to
the distribution of any subscription rights under the Plan), and (b) as of such
time, such Person either (i) is a director or an "executive officer" (as such
term is defined in Rule 405 under the Securities Act) of the Company, or (ii)
beneficially owns 10% or more of the outstanding Voting Securities of the
Company. In determining who is an Eligible Holder, the Company may rely on
filings made pursuant to the Exchange Act and available for public inspection
including, but not limited to, information contained in forms filed pursuant to
Rule 13d under the Exchange Act.

1.11 EXCHANGE ACT. The Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any similar federal statute.

1.12 MUTUAL SERIES. Mutual Series Fund Inc., a Maryland corporation.

1.13 MUTUAL SERIES REGISTRATION RIGHTS AGREEMENT. That certain
Registration Rights Agreement, dated as of the Effective Date, between the
Company and Mutual Series.

1.14 NOTIFICATION TIME. As defined in Section 3.1 of this Agreement.

1.15 PERSON. A corporation, an association, a partnership, a limited
liability company, an organization, a

<PAGE>

business, an individual, a governmental or political subdivision thereof or a
governmental agency.

1.16 PLAN. As defined in the recitals of this Agreement.

1.17 REGISTRABLE SECURITIES. The shares of Reorganized Hexcel Common
Stock acquired by Eligible Holders directly from the Company pursuant to the
Plan, or upon the exercise of rights issued pursuant to the Plan, and any other
securities received in exchange for or distributed with respect to such
securities as stock dividends, stock splits or otherwise. As to any particular
Registrable Securities, once issued, such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been sold pursuant to Rule 144 (or any successor
provision) under the Securities Act or otherwise, or (c) they shall have ceased
to be outstanding.

1.18 REGISTRATION EXPENSES. All expenses incurred by the Company in
complying with Section 3.1, including, without limitation, all registration and
filing fees, printing expenses, expenses of complying with securities or blue
sky laws, including fees and disbursements of counsel for the Company and
counsel for any underwriters of the offering, all fees and disbursements of
counsel for the Company and any accountants' fees and expenses incident to or
required by any such registration, but excluding fees and disbursements of
counsel representing Electing Eligible Holders.

1.19 REGISTRATION OFFERING. As defined in Section 3.1.

1.20 REORGANIZED HEXCEL COMMON STOCK. The common stock, par value
$.01 per share of the Company to be issued by the Company on and after the
Effective Date.

1.21 SECURITIES ACT. The Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. References to a particular section
of the Securities Act of 1933 shall include a reference to the comparable
section, if any, of any such similar federal statute.

1.22 SELLING EXPENSES. All underwriting fees and commissions and any
transfer or similar taxes to be incurred by any seller of Registrable Securities
and all fees and disbursements of counsel for any such seller.

1.23 SUPPLEMENTAL SUSPENSION PERIOD. As defined in Section 4.

<PAGE>

1.24 SUSPENSION PERIOD. As defined in Section 4.

1.25 VOTING SECURITIES. Shares of Reorganized Hexcel Common Stock or
other equity securities of the Company having the power to vote in each election
of directors of the Company.

2. EFFECTIVE PERIOD.

This Agreement shall be effective for the period commencing on the
Effective Date and ending on the earlier of (a) the third anniversary of the
Effective Date, and (b) the first date on which there are no Registrable
Securities (the "Effective Period").

3. REGISTRATION RIGHTS

3.1 If at any time prior to the expiration of the Effective Period
the Company proposes 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
(a "Registration Offering"), the Company shall at such time (the "Notification
Time") give prompt written notice to the Eligible Holders of its intention to do
so. Upon the written request of any Eligible Holder, which request shall be
made within 30 days after the date of such notice and shall specify the number
of Registrable Securities sought to be included in such Registration Offering,
the Company shall use its reasonable efforts to include in the registration
under the Securities Act all Registrable Securities that the Company has been so
requested to register by such Eligible Holder; PROVIDED, HOWEVER, that each
Eligible Holder shall, as a condition of registration of his or her Registrable
Securities pursuant to this Section 3.1, agree to be bound by all the terms of
this Agreement including, but not limited to, the provisions in respect of
indemnification set forth in Section 9, by executing and delivering to the
Company a copy of Schedule A to this Agreement.

3.2 Notwithstanding anything herein to the contrary, if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason or for no
reason not to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to the Eligible
Holders and, thereupon (a) in the case of a determination not to register, shall
be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from any obligation of the Company to
pay the Registration Expenses in connection therewith), and (b) in the case of
a determination to delay registering, shall be permitted to delay registering
any

<PAGE>

Registrable Securities, for the same period as the delay in registering such
other securities.

3.3 If the managing underwriter of a Registration Offering shall
advise the Company or the Person pursuant to whose request the Company has filed
such Registration Offering that, in the judgment of such managing underwriter,
the inclusion in any registration statement pursuant to Section 3.1 of some or
all of the Registrable Securities sought to be registered by Persons other than
the Company, Mutual Series or any other Person exercising demand registration
rights granted by the Company creates a substantial risk that the proceeds or
price per share or other unit the Company, Mutual Series or such other Persons
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 Registration Offering shall inform the Company or the Person
pursuant to whose request the Company has filed such Registration Offering of
its opinion that the number of securities requested to be included in such
registration would materially affect its ability to effect such offering, 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 in the following order of priority: (a)
FIRST, the securities which the Company, Mutual Series and any other Person
exercising demand registration rights granted by the Company proposes to sell,
(b) SECOND, the securities, if any, held by other Persons entitled to exercise
and have the benefit of registration rights under the Mutual Series Registration
Rights Agreement, which they have duly requested to have included in such
registration pursuant to the Mutual Series Registration Rights Agreement, and
(c) THIRD, the securities proposed to be sold by any other Person duly
exercising registration rights granted to it including, but not limited to, the
Registrable Securities held by Electing Eligible Holders which they have
requested to have included in such registration, PRO RATA, based on the number
of securities of the Company which each of such Persons has duly requested to
have registered; PROVIDED, HOWEVER, that the number of securities of each of the
Persons described in clause (a) and the Persons described in clause (b) to be
included, if all such securities cannot be included, shall be determined based
on their agreements with the Company or as they may otherwise agree.

3.4 If the managing underwriter of a Registration Offering shall
advise the Company 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

<PAGE>

the offering of such securities originally intended to be so included, then the
Company shall promptly advise the Eligible Holders thereof and may require, by
written notice to the Eligible Holders accompanying such advice, that such
different Registrable Securities be excluded from such offering to the extent
the inclusion thereof could adversely affect such offering.

3.5 The Company shall not be obligated to effect any registration of
Registrable Securities under Section 3.1 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).

3.6 The Company shall pay all Registration Expenses in connection
with the registration of Registrable Securities pursuant to Section 3.1. All
Selling Expenses in connection with any registration of Registrable Securities
pursuant to Section 3.1 shall be borne by the Electing Eligible Holders in such
proportions upon which they may agree; PROVIDED, HOWEVER, that if the Electing
Eligible Holders cannot otherwise agree, they shall bear such expenses (other
than their individual counsel fees which shall be borne by each of them
directly) in direct proportion to the number of Registrable Securities that they
are seeking to have registered.

4. SUSPENSION OF REGISTRATION.

The Company may suspend the effectiveness of any registration statement or,
without suspending such effectiveness, instruct the Electing Eligible Holders
that no sales of Registrable Securities included in such registration statement
may be made if, in the Company's reasonable judgment, (i) such registration
would (a) interfere in a material respect with any pending or anticipated
merger, acquisition or divestiture involving the Company or any of its
subsidiaries, or (b) materially and adversely impact any material financing
activities of the Company or any of its subsidiaries, (ii) financial statements
required to be included or incorporated in such registration statement have not
been prepared or are otherwise unavailable, or (iii) the Company would be
required to disclose any actions taken or proposed to be taken by the Company,
which disclosure would have a material adverse effect on the Company or on such
actions, by providing the Electing Eligible Holders with written notice of such
suspension and the reasons therefor. The period during which any such
suspension shall be required by the Company is referred to as the "Suspension
Period." The Company shall use its reasonable efforts to provide such notice a
reasonable number of days prior to the commencement of a Suspension Period,
provided that in any event the Company shall

<PAGE>

provide such notice no later than the commencement of such Suspension Period.
In addition, the Company shall not be required to keep any registration
statement effective, or may without suspending such effectiveness instruct the
Electing Eligible Holders not to sell Registrable Securities included in such
registration statement, during any period during which the Company is
instructed, directed, ordered or otherwise requested by any governmental agency
or self-regulatory organization to stop or suspend such trading or sales
("Supplemental Suspension Period"). The Company shall give prompt written
notice to the Electing Eligible Holders of the termination of any Suspension
Period or Supplemental Suspension Period.

5. REGISTRATION PROCEDURES.

5.1 If and whenever the Company is required to use reasonable efforts
in good faith to include Registrable Securities in a Registration Offering as
provided in Section 3.1, the Company will as promptly as practicable under the
circumstances:

(a) promptly furnish to the Electing Eligible Holders 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 contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any other
prospectus filed in accordance with Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as the Electing Eligible Holders may reasonably request;

(b) immediately notify the Electing Eligible Holders, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits 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 under which they were
made, and at the request of the Electing Eligible Holders promptly prepare and
furnish to the Electing Eligible Holders 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 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;

<PAGE>

(c) furnish to the Electing Eligible Holders at least two
business days prior to the filing thereof a copy of any amendment or supplement
to such registration statement or prospectus;

(d) otherwise use reasonable efforts in good faith to comply
with all applicable rules and regulations of the Commission;

(e) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement;

(f) use its best efforts to list all Registrable Securities
covered by such registration statement on the principal securities exchange on
which Registrable Securities of the type covered by such registration statement
are then listed;

(g) notify Electing Eligible Holders as to the filing of the
registration statement and of all amendments or supplements thereto filed prior
to the effective date of said registration statement;

(h) notify Electing Eligible Holders promptly after the Company
shall receive notice thereof of the time when said registration statement became
effective or when any amendment or supplement to any prospectus forming a part
of said registration statement has been filed;

(i) notify Electing Eligible Holders promptly of any request by
the Commission for the amendment or supplementation of such registration
statement or prospectus or for additional information;

(j) provide each Electing Eligible Holder with a copy, addressed
to such Electing Eligible Holder, of any accountants "cold comfort" letter
furnished to any other stockholder of the Company participating in such
registration statement; and

(k) advise Electing Eligible Holders promptly after the Company
shall receive notice or obtain knowledge thereof of the issuance of any stop
order by the Commission suspending the effectiveness of any such registration
statement or amendment thereto or the initiation or threatening of any
proceeding for that purpose, and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal promptly if such stop
order should be issued.

5.2 FURNISH INFORMATION. The Company may require the Electing
Eligible Holders to furnish the Company, and the

<PAGE>

Electing Eligible Holders shall so furnish, such information regarding the
Electing Eligible Holders and the distribution of the Registrable Securities as
the Company may from time to time reasonably request in writing for inclusion in
the registration statement and as shall be required by law or by the Commission
in connection therewith.

5.3 DISCONTINUANCE. The Electing Eligible Holders agree that upon
receipt by them of any notice from the Company of the happening of any event of
the kind described in Section 5.1(e) or of any Suspension Period or Supplemental
Suspension Period pursuant to Section 4, the Electing Eligible Holders will
forthwith discontinue the Electing Eligible Holders' disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until the Electing Eligible Holders' receipt, as the case may be, of
the copies of the supplemented or amended prospectus contemplated by Section
5.1(e) or notice of the termination of such Suspension Period or Supplemental
Suspension Period. If so directed by the Company, the Electing Eligible Holders
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in the Electing Eligible Holders' possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice of an event described in Section 5.1(e).

6. UNDERWRITING AGREEMENT.

If the Company enters into an underwriting agreement with the underwriters
for a Registration Offering, the Electing Eligible Holders participating in such
Registration Offering shall be parties to such underwriting agreement and shall
be required to make such representations and warranties to and agreements with
the Company and the underwriters as are customarily contained in underwriting
agreements of this type, including, without limitation, representations,
warranties and agreements, including indemnities, regarding the Electing
Eligible Holders, the Registrable Securities and the Electing Eligible Holders'
intended method or methods of distribution and any other representation required
by law.

7. HOLDBACK AGREEMENTS.

The Electing Eligible Holders agree, if so required by the managing
underwriter, not to effect any public sale or distribution of any Registrable
Securities during the seven days prior to the date on which any underwritten
registration pursuant to Section 3.1 becomes effective and the 180 days
thereafter, except as part of such underwritten registration or to the extent
that any of the Electing Eligible Holders is prohibited by applicable law from
agreeing to withhold Registrable Securities

<PAGE>

from sale or is acting in its capacity as an investment adviser.

8. PREPARATION; REASONABLE INVESTIGATION.

In connection with the preparation and filing of each registration
statement under the Securities Act pursuant to this Agreement, the Company shall
give the Electing Eligible Holders, the underwriters, if any, and their
respective counsel and accountants, the opportunity to consult with the Company
with respect to the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, will give each of them 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 certified its financial
statements as shall be necessary, to conduct a reasonable investigation within
the meaning of the Securities Act.

9. INDEMNIFICATION.

9.1 INDEMNIFICATION BY THE COMPANY. In the event of any registration
of any securities of the Company under the Securities Act in which Registrable
Securities of Electing Eligible Holders are included pursuant to Section 3.1,
the Company shall, and it hereby does, indemnify and hold harmless the Electing
Eligible Holders whose Registrable Securities are included in such registration
and their directors, officers, Affiliates or agents, 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 (collectively, the "INDEMNIFIED
PARTIES"), against any losses, claims, damages or liabilities (collectively, the
"Damages") to which the Indemnified Parties may become subject under the
Securities Act or otherwise, insofar as such Damages (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities are
registered under the Securities Act, and preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading, and the Company will reimburse each of the Indemnified Parties for
any legal or any other expenses reasonably incurred by it, as incurred, in
connection with investigating or defending any such Damages, action or
proceeding; PROVIDED, HOWEVER, that the Company shall not be liable in any such
case to the extent that any such Damages (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or

<PAGE>

alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of any of the Indemnified Parties specifically stating
that it is for use in the preparation thereof; and PROVIDED FURTHER, that the
Company shall not be liable to any of the Indemnified Parties, in any such case
to the extent that any such Damages (or action or proceeding in respect thereof)
or expense arises out of such Indemnified Party's failure to send or give a copy
of the final prospectus, as the same may be then supplemented or amended, to the
Person asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus and copies of such final prospectus were
delivered to such Indemnified Party prior to the written confirmation of the
sale of Registrable Securities to such Person asserting an untrue statement or
alleged untrue statement or omission or alleged omission. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Parties and shall survive the transfer of such
securities by the Indemnified Parties.

9.2 INDEMNIFICATION BY THE ELECTING ELIGIBLE HOLDERS. In the event
of any registration of any securities of the Company under the Securities Act in
which Registrable Securities of Electing Eligible Holders are included pursuant
to Section 3.1, each Electing Eligible Holder whose Registrable Securities are
included in such registration shall indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 9.1) the Company, each
director of the Company, each officer of the Company and each other Person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act, and each other Person (including but not limited to other Electing
Eligible Holders) whose securities are included in such registration, with
respect to any statement or alleged statement in or omission or alleged omission
contained in any registration statement under which such securities are
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, 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 through an instrument duly executed by such
Electing Eligible Holder for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any such
director, officer or

<PAGE>

controlling person and shall survive the transfer of such securities by such
Electing Eligible Holder.

9.3 CONTRIBUTION. If for any reason the foregoing indemnity is
unavailable under either Section 9.1 or 9.2, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such Damages (a) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other, or (b) if the allocation provided by subdivision (a) above
is not permitted by applicable law or provides a lesser sum to the indemnified
party than is appropriate to reflect not only the relative benefits received by
the indemnifying party on the one hand and the indemnified party on the other
but also the relative fault of the indemnifying party and the indemnified party
as well as any other relevant equitable considerations, then in such proportion
as is appropriate to reflect the relative fault of the indemnifying party and
the indemnified party as well as any other equitable considerations.
Notwithstanding the foregoing, neither party shall be required to contribute any
amount in excess of the amount the indemnifying party would have been required
to pay to an indemnified party if the indemnity under Section 9 was available.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

9.4 NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 9, such
indemnified party will, 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, PROVIDED that the failure of an indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 9, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No

<PAGE>

indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation.

9.5 INDEMNIFICATION PAYMENTS. The indemnification or contribution
required by this Section 9 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or Damages incurred.

10. AMENDMENTS.

This Agreement may not be amended, modified or terminated except by the
written agreement of the Company and the Persons who are Eligible Holders at the
time of such amendment, modification or termination.

11. CONSTRUCTION WITH MUTUAL SERIES REGISTRATION RIGHTS AGREEMENT.

Anything in this Agreement to the contrary notwithstanding, the Company
shall not be required by this Agreement to take any action that may constitute a
breach of, or conflict with, any of the provisions of the Mutual Series
Registration Rights Agreement. To the extent any provision of this Agreement
may be construed to violate any provision of the Mutual Series Registration
Rights Agreement, this Agreement shall be deemed amended to delete such
provision.

12. NOMINEES FOR BENEFICIAL OWNERS.

If any Registrable Securities are held by a nominee for the benefit of an
Eligible Holder, the Eligible Holder beneficially owning such Registrable
Securities may, at its election, be treated as the holder of such Registrable
Securities for purposes of any request or other action by any holder or holders
of Registrable Securities pursuant to this Agreement or any determination of any
number or percentage of shares of Registrable Securities held by any holder or
holders of Registrable Securities contemplated by this Agreement provided that
the Company receives notice of such election from the Eligible Holder and
assurances reasonably satisfactory to the Company of such Eligible Holder's
beneficial ownership of such Registrable Securities (which may, in the Company's
discretion, consist of a written acknowledgment of such beneficial ownership
from the nominee).

<PAGE>

13. NOTICES.

All communications provided for hereunder shall be in writing and sent by
first-class mail and (a) if addressed to the Company, at 5794 W. Las Positas
Blvd., Pleasanton, California 94588, Attention: General Counsel, with a copy to
Kronish, Lieb, Weiner & Hellman, 1114 Avenue of the Americas, New York, New
York, 10036, Attention: Chet F. Lipton, or at such other address, or to the
attention of such other officer, as the Company shall have furnished in writing
to the Eligible Holders, or (b) if to any of the Eligible Holders, to such
address of such Eligible Holder as shall be shown on the record books of the
Company.

14. BINDING NATURE; ASSIGNMENT.

This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the Company and its respective successors and assigns and by the
Eligible Holders. The rights of the Eligible Holders hereunder are not
assignable without the prior written consent of the Company.

15. DESCRIPTIVE HEADINGS.

The descriptive headings of the several sections and paragraphs of this
Agreement are inserted for convenience of reference only and shall not limit or
otherwise affect the meaning of any provisions hereof.

16. GOVERNING LAW.

This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of New York.

17. COUNTERPARTS.

This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.

IN WITNESS WHEREOF, the Company has duly executed this Agreement, all as of
the date first written above.

HEXCEL CORPORATION

By:_______________________
Name:__________________
Title:_________________

<PAGE>

SCHEDULE A

ELIGIBLE HOLDERS SIGNATURE PAGE

Intending to be bound by the Registration Rights Agreement dated
_____________, 199_ by Hexcel Corporation for the benefit of the Persons who
qualify as Eligible Holders thereunder, the undersigned directly or by its duly
authorized officer has executed this signature page:

Name; Address for Notices Signature

___________________________ ___________________
By:________________________
___________________________ Name:______________
___________________________ Title:_____________
Facsimile:_________________

<PAGE>

--------------------------------------------------

ASSET PURCHASE AGREEMENT

DATED AS OF NOVEMBER 3, 1994

BETWEEN

HEXCEL CORPORATION

AND

NORTHROP GRUMMAN CORPORATION

--------------------------------------------------

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<PAGE>

TABLE OF CONTENTS

PAGE

1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 Assets to be Conveyed. . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Transfer of Possession . . . . . . . . . . . . . . . . . . . . . . 14

3. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Fixed Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Payment at Closing . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Contingent Purchase Price. . . . . . . . . . . . . . . . . . . . . 16
3.3.1 Payment . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3.2 Quarterly Production and Sales Reports. . . . . . . . . . 18
3.4 Transition Insurance . . . . . . . . . . . . . . . . . . . . . . . 19

4. Assumption of Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 20
4.1 Liabilities Assumed by Northrop. . . . . . . . . . . . . . . . . . 20
4.2 Liabilities Not Assumed By Northrop. . . . . . . . . . . . . . . . 21

5. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

6. Hexcel Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Non-Assignable Contracts . . . . . . . . . . . . . . . . . . . . . 22
6.2 Amendments of Contracts. . . . . . . . . . . . . . . . . . . . . . 23
6.3 Assumption of Contracts. . . . . . . . . . . . . . . . . . . . . . 24
6.4 Rejection of Contracts . . . . . . . . . . . . . . . . . . . . . . 24

7. Representations and Warranties of Hexcel . . . . . . . . . . . . . . . . 25
7.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . 25
7.2 Authorization of Transaction Agreements. . . . . . . . . . . . . . 25
7.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Real and Personal Property . . . . . . . . . . . . . . . . . . . . 26
7.5 [Intentionally Blank]. . . . . . . . . . . . . . . . . . . . . . . 27
7.6 Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.7 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.8 Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.9 Contracts and Commitments. . . . . . . . . . . . . . . . . . . . . 28
7.10 Product Warranties and Claims . . . . . . . . . . . . . . . . . . 32
7.11 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.12 Problems With Suppliers and Customers . . . . . . . . . . . . . . 32
7.13 Absence of Certain Business Practices . . . . . . . . . . . . . . 32
7.14 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . 33
7.15 Non-Hexcel Owned Items. . . . . . . . . . . . . . . . . . . . . . 33
7.16 Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.17 Clearances. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.18 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 34
7.18.1 Base Technology. . . . . . . . . . . . . . . . . . . . . 34
7.18.2 EMT Technology . . . . . . . . . . . . . . . . . . . . . 35
7.19 No Government Funding . . . . . . . . . . . . . . . . . . . . . . 35

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<PAGE>

7.20 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.21 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . 37
7.22 Environmental Protection. . . . . . . . . . . . . . . . . . . . . 37
7.23 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.24 Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . . . 38
7.25 Necessary Property; "Cradle to Grave" Capability. . . . . . . . . 38
7.26 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.27 Consignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.28 No Misrepresentations . . . . . . . . . . . . . . . . . . . . . . 39

8. Representations and Warranties of Northrop . . . . . . . . . . . . . . . 39
8.1 Organization and Good Standing; Authorization. . . . . . . . . . . 39
8.2 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.4 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.5 Investigation by Northrop. . . . . . . . . . . . . . . . . . . . . 41
8.6 No Misrepresentations. . . . . . . . . . . . . . . . . . . . . . . 41

9. Certain Understandings and Agreements of the Parties . . . . . . . . . . 41
9.1 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 41
9.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.2.1 Prior to Closing. . . . . . . . . . . . . . . . . . . . . 42
9.2.2 After the Closing Date. . . . . . . . . . . . . . . . . . 42
9.3 Employees; Operation of Chandler Facility. . . . . . . . . . . . . 43
9.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5 Fulfillment of Conditions Precedent. . . . . . . . . . . . . . . . 44
9.6 Rights to Use Intellectual Property. . . . . . . . . . . . . . . . 45
9.7 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.8 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.9 Damage or Destruction. . . . . . . . . . . . . . . . . . . . . . . 46
9.10 Notice of Developments. . . . . . . . . . . . . . . . . . . . . . 46
9.11 Environmental Assessment. . . . . . . . . . . . . . . . . . . . . 47
9.12 Purchase Orders . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.13 Bankruptcy Matters. . . . . . . . . . . . . . . . . . . . . . . . 47
9.14 Hexcel Technical Services . . . . . . . . . . . . . . . . . . . . 48
9.15 HRP Machines and Other Assets . . . . . . . . . . . . . . . . . . 49
9.16 Base Technology Carve-Out Items . . . . . . . . . . . . . . . . . 49
9.17 Title and Title Insurance . . . . . . . . . . . . . . . . . . . . 50
9.18 Conveyance of Title to Real Property. . . . . . . . . . . . . . . 50
9.19 Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.19.1 Hexcel Release of Northrop . . . . . . . . . . . . . . . 50
9.19.2 Northrop Release of Hexcel . . . . . . . . . . . . . . . 50
9.19.3 Waiver of Civil Code Section 1542. . . . . . . . . . . . 51
9.19.4 Releases Contingent Upon Closing . . . . . . . . . . . . 51
9.19.5 No Reliance on Other Party . . . . . . . . . . . . . . . 51
9.20 Payment of Expenses. . . . . . . . . . . . . . . . . . . . . . . 51
9.21 Advance Agreement and August 4 Agreement . . . . . . . . . . . . 51
9.22 Comanche Contract; Bids. . . . . . . . . . . . . . . . . . . . . 51
9.23 Product Warranties . . . . . . . . . . . . . . . . . . . . . . . 52
9.24 Honeycomb Core Materials . . . . . . . . . . . . . . . . . . . . 52
9.25 Ceramic Honeycomb. . . . . . . . . . . . . . . . . . . . . . . . 52
9.26 CECORE Machine . . . . . . . . . . . . . . . . . . . . . . . . . 53

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<PAGE>

9.27 Confidentiality and/or Secrecy Agreements. . . . . . . . . . . . 53
9.28 Purchase Orders. . . . . . . . . . . . . . . . . . . . . . . . . 54

10. Indemnification by Northrop and Hexcel. . . . . . . . . . . . . . . . . 54
10.1 Indemnification by Northrop . . . . . . . . . . . . . . . . . . . 54
10.2 Indemnification by Hexcel . . . . . . . . . . . . . . . . . . . . 55
10.2.1 Indemnification. . . . . . . . . . . . . . . . . . . . . 55
10.3 Notice of Asserted Liability. . . . . . . . . . . . . . . . . . . 55
10.4 Opportunity to Defend . . . . . . . . . . . . . . . . . . . . . . 55
10.5 Limitations on Liability. . . . . . . . . . . . . . . . . . . . . 56
10.6 Right of Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . 57

11. Conditions to Obligations of Each Party . . . . . . . . . . . . . . . . 58
11.1 Conditions to Obligations of Hexcel and Northrop. . . . . . . . . 58
11.2 Conditions to Obligations of Northrop . . . . . . . . . . . . . . 59
11.3 Conditions to Obligations of Hexcel . . . . . . . . . . . . . . . 62

12. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . 64

13. Covenant Not to Compete; Non-Solicitation; No Hire. . . . . . . . . . . 65
13.1 Northrop Covenant . . . . . . . . . . . . . . . . . . . . . . . . 65
13.2 Hexcel Covenant.. . . . . . . . . . . . . . . . . . . . . . . . . 66
13.3 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

14. Supply Agreement, Facility Agreement and Services Agreement.. . . . . . 66

15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
15.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 67
15.2 Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . 67
15.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
15.4 Third Party Beneficiaries; Benefits;
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
15.5 Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . 69
15.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 69
15.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 69
15.8 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
15.9 Exclusivity.. . . . . . . . . . . . . . . . . . . . . . . . . . . 69
15.10 Complete Agreement . . . . . . . . . . . . . . . . . . . . . . . 71
15.11 Modifications, Amendments and Waivers. . . . . . . . . . . . . . 71
15.12 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . 71
15.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 71
15.14 Expenses of Transactions . . . . . . . . . . . . . . . . . . . . 72
15.15 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . 72
15.16 Subsequent Delivery of Schedule 7.15.. . . . . . . . . . . . . . 72

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<PAGE>

SCHEDULES

Schedule A - Base License Agreement

Schedule B - Description of Base Technology

Schedule C - [Intentionally deleted]

Schedule D - Description of Chandler Business

Schedule E - EMT Technology

Schedule F - Specified Contracts

Schedule 2.1(a) Owned Real Property
Schedule 2.1(b) Inventory
Schedule 2.1(c) Equipment and Fixtures
Schedule 2.1(i) Excepted Books and Records
Schedule 2.2(c) Hexcel Claims
Schedule 2.2(e) Excluded Assets
Schedule 3 Dispute Resolution
Schedule 3.1 [Intentionally deleted]
Schedule 3.2 Procedure to Close Out Contracts
Schedule 3.4 Representative Parts
Schedule 4.1 Assumed Agreements
Schedule 7.3 Required Consents (Hexcel)
Schedule 7.4 Liens
Schedule 7.4(d) Non-Chandler Facility Assets
Schedule 7.8 Suppliers
Schedule 7.9(a).1 Contracts
Schedule 7.9(a).2 Defaults Under Contracts
Schedule 7.9(a).3 Contracts Requiring Base Technology
Independent of EMT Technology
Schedule 7.9(a).4 Restrictions on Transferability of Contracts
Schedule 7.9(b) Estimates to Complete
Schedule 7.9(c) Bids
Schedule 7.9(d) Bid Pricing Data
Schedule 7.9(e) Adverse Circumstances Regarding Bids
Schedule 7.9(f) Investigations
Schedule 7.9(g) Claims Regarding Contracts
Schedule 7.9(h) Compliance/No Suspension
Schedule 7.10 Product Warranties
Schedule 7.11 Litigation and Proceedings
Schedule 7.12 Suppliers
Schedule 7.15 Non-Hexcel Owned Property
Schedule 7.16 Backlog
Schedule 7.17.1 Security Clearances
Schedule 7.17.2 Termination of Security Clearances
Schedule 7.18.1 Base Technology Limitations

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Schedule 7.18.2 EMT Technology Limitations
Schedule 7.19 Government Funding
Schedule 7.20 Employees
Schedule 7.20(d) Chandler Facility Employees
Schedule 7.21 Violations of Applicable Laws
Schedule 7.22 Environmental Violations
Schedule 7.24 Powers of Attorney
Schedule 7.25 Excluded Necessary Property
Schedule 7.26 Insurance Policies
Schedule 7.27 Consignment
Schedule 8.2 Required Consents (Northrop)
Schedule 9.15 Leaseback Assets
Schedule 9.17 Title Insurance
Schedule 13.1 Restricted Products

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<PAGE>

EXHIBITS

Exhibit 1 - EMT License

Exhibit 2 - Equipment Lease

Exhibit 3 - Opinion of Hexcel's Counsel

Exhibit 4 - Opinion of Northrop's Counsel

Exhibit 5 - Supply Agreement

Exhibit 6 - Services Agreement

Exhibit 7 - Facility Agreement

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<PAGE>

ASSET PURCHASE AGREEMENT

AGREEMENT, dated as of November 3, 1994, between HEXCEL CORPORATION,
a Delaware corporation having an office at 5794 W. Las Positas Boulevard,
Pleasanton, California 94588 ("Hexcel"), and NORTHROP GRUMMAN CORPORATION, a
Delaware corporation having an office at 1840 Century Park East, Los Angeles,
California 90067 ("Northrop").

RECITALS:

A. In June 1983, Northrop and Hexcel entered into a Memorandum of
Agreement ("MOA") which sets forth certain understandings of the parties with
respect to the B-2 Program. Pursuant to the MOA, for an initial period Hexcel
agreed to provide up to all of Northrop's requirements for certain products,
and, for the period after December 31, 1987, up to fifty percent (50%) of
Northrop's requirements for those products. Hexcel also agreed to provide all
facilities, equipment and personnel necessary to perform its obligations as
contemplated under the MOA.

B. In anticipation of its obligations as set forth in the MOA, Hexcel
undertook the construction of the Chandler Facility, which was completed and
became operational in 1988.

C. Due to the curtailment of the B-2 Program by the U.S. Government,
the manufacturing capability at the Chandler Facility was not being fully
utilized. As a result, Hexcel submitted a Request for Equitable Adjustment
("REA") to Northrop in 1991 in an effort to recover certain costs incurred by
Hexcel. In January 1993, Northrop rejected the REA.

D. Hexcel is currently a debtor and a debtor-in-possession in a case
filed in December 1993 under Chapter 11 of the Bankruptcy Code in the Bankruptcy
Court entitled IN RE HEXCEL CORPORATION, a Delaware corporation, debtor, Bk.
No. 93-48535-T.

E. Hexcel has advised Northrop that Hexcel is no longer able to operate
the Chandler Business profitably without a special allocation of cost and
accelerated depreciation of assets. The cognizant Defense Contract Audit Agency
office has advised Northrop that such costs would be unallowable.

F. Northrop and Hexcel agree that it would be in the best interests of
the parties for Northrop (i) to acquire and/or obtain rights to certain assets
and intellectual property used by Hexcel to develop and produce the required
products, (ii) to acquire the EMT Technology and (iii) to settle certain issues
related to the rights and obligations of the parties under the MOA and Hexcel's
REA.

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G. Based on the foregoing, Hexcel desires to sell to Northrop, and
Northrop desires to acquire from Hexcel, certain assets on the terms and
conditions set forth in this Agreement. In addition, effective upon the closing
under this Agreement, Hexcel and Northrop will enter into certain separate
license agreements with respect to certain technology and certain other
agreements, as more fully described herein.

H. Hexcel and Northrop acknowledge that in order for Northrop to
receive the full benefit of the transactions contemplated herein, Hexcel will
provide Northrop, among other things, except as specifically provided herein,
all the rights, agreements and property used by Hexcel from "cradle to grave" to
develop and produce the products necessary for the Northrop Contract and the
Assumed Agreements and will provide Northrop with the services provided for
herein.

NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties contained in this Agreement, the parties agree as
follows:

1. DEFINITIONS.

The following terms, as used herein, have the following
meanings:

"ACQUIRED BUSINESS" has the meaning assigned to that term
in Section 13.1.

"ACQUISITION PROPOSAL" has the meaning assigned to that term
in Section 15.9.

"ADVANCE AGREEMENT" means the Agreement between Northrop and
Hexcel dated July 15, 1994, pursuant to which Hexcel is obligated to provide
certain parts to Northrop.

"ADVANCE AGREEMENT AMOUNTS" means that portion of amounts paid by
Northrop to Hexcel under the Advance Agreement on or prior to the Closing Date
that are in excess of the actual labor and material costs incurred by Hexcel
relating to such payments.

"AFFILIATES" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such other Person, but shall not mean, and in no manner shall be
limited by or construed under, Section 101(a) of the Bankruptcy Code.

"AGREEMENT" means this Asset Purchase Agreement, including all
exhibits and schedules hereto, as it may from time to time be amended and in
force.

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<PAGE>

"APPLICABLE LAW" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Body applicable to such Person or any
of its Affiliates or any of their respective properties, assets, officers,
directors, employees, consultants or agents (in connection with such officer's,
director's, employee's, consultant's or agent's activities on behalf of such
Person or any of its Affiliates).

"ASSETS" has the meaning assigned to that term in
Section 2.1.

"ASSUMED AGREEMENTS" has the meaning assigned to that term in
Section 4.1.

"ASSUMED LIABILITIES" has the meaning assigned to that term in
Section 4.1.

"AUGUST 4 AGREEMENT" means the Agreement dated August 4, 1994
between Northrop and Hexcel pursuant to which Hexcel is obligated to provide
certain parts to Northrop.

"B-2 AIRCRAFT" means the low observable bomber aircraft with the
designation "B-2" for which Northrop is the prime contractor for the United
States Department of Defense.

"B-2 CONTRACT" means the current Contract(s) which require Northrop
to deliver twenty-one (21) B-2 Aircraft and related spare parts and services to
the United States Department of Defense.

"B-2 PROGRAM" means the program for the design, development,
manufacture and support of the B-2 Aircraft.

"BANKRUPTCY CASE" means Hexcel's reorganization proceeding under the
Bankruptcy Code in Case No. 93-48535-T before the Bankruptcy Court.

"BANKRUPTCY CODE" means Title 11 of the United States Code, as
amended from time to time.

"BANKRUPTCY COURT" means the United States Bankruptcy Court for the
Northern District of California.

"BANKRUPTCY COURT ORDERS" means one or more orders of the Bankruptcy
Court under Sections 363 or 365 of the Bankruptcy Code based on the Findings of
Fact that (i) approve the execution, delivery and performance by Hexcel of the
Transaction Agreements, including without limitation the sale of the Assets to
Northrop pursuant to this Agreement, (ii) approve the sale of the Assets to
Northrop pursuant to this Agreement free and clear

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<PAGE>

of any Liens and Rights of Others, except as provided in SCHEDULE 7.4,
(iii) approve the assumption and assignment by Hexcel and the assignability and
assignment by Hexcel to Northrop of any Contract provided for hereunder and
provide that neither the filing of the petition under Chapter 11 of the
Bankruptcy Code by Hexcel nor the assumption nor the assignment of any of the
foregoing will give rise to termination of or any right to terminate any of the
foregoing, (iv) provide that any default or breach of condition in the
performance of the obligations of Hexcel under the Northrop Contract (other than
CAS violations or defective pricing issues) or any Assumed Agreement (other than
any default described in Section 365(b)(2) of the Bankruptcy Code) can be and
shall be cured by Hexcel as of the Closing, and, provided that all such defaults
are cured as of the Closing, no defaults or breaches of condition existing prior
to or as of the Closing under each of the foregoing shall give rise to
termination of or any right to terminate any of the foregoing, (v) approve the
performance by Hexcel of the Northrop Contract in accordance with this Agreement
and the Northrop Contract, and (vi) retain jurisdiction over any claims asserted
against the Assets, the Chandler Business, or Northrop by creditors of Hexcel or
others having a claim against Hexcel, the Assets, the Base Technology or the
Chandler Business.

"BANKRUPTCY PERIOD" means the period commencing on the date hereof
and expiring on the Effective Date.

"BANKRUPTCY RULES" means the Federal Rules of Bankruptcy Procedure,
as amended from time to time, and any Local Rules of the Bankruptcy Court.

"BASE LICENSE" means that certain non-exclusive, non-transferable
license agreement, to be entered into on the Closing Date in the form of
SCHEDULE A hereto, pursuant to which Hexcel will license the Base Technology to
Northrop in accordance with the restrictions set forth therein.

"BASE TECHNOLOGY" means the Intellectual Property that enables the
manufacture of honeycomb core and foam materials (and the intermediates required
to assemble the end articles other than fabrics) designated by the trade names
HRP[Registered Trademark], HRP Flex[Registered Trademark], HRH-327[Registered
Trademark], HFT[Registered Trademark], HRH-10[Registered Trademark], CECORE,
"K" FOAM and "TPH" as and to the extent set forth on SCHEDULE B, including, but
not limited to, certain processes, trade secrets, computer codes, etc. relating
to core machining, thermoforming, splicing and stabilization (and supporting
processes) that allow one to convert the honeycomb into sub-assemblies all as
set forth on SCHEDULE B.

"BASE TECHNOLOGY CARVE-OUT ITEMS" means the products to be produced
and services to be provided by Hexcel after the Closing Date to Northrop in the
manner set forth in the Supply Agreement.

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<PAGE>

"BID" means any quotation, bid or proposal made by Hexcel that if
accepted or awarded would lead to a contract with the U.S. Government or any
other Person for the design, manufacture and sale of products or the provision
of services by the Chandler Business.

"BUSINESS DAYS" means each Monday, Tuesday, Wednesday, Thursday and
Friday, which is not a day on which banking institutions in New York, New York,
or San Francisco, California, are authorized or obligated by law, governmental
decree, or executive order, to be closed.

"CHANDLER BUSINESS" means the business conducted by Hexcel prior to
the date hereof, as described on SCHEDULE D hereto.

"CHANDLER FACILITY" has the meaning assigned to that term in
Section 2.1(a).

"CLOSING" means the closing of the purchase and sale of the Assets
pursuant to this Agreement.

"CLOSING DATE" means the date of the Closing determined as set forth
in Section 5.

"CLOSING DATE INVENTORY" has the meaning assigned to that term in
Section 3.2(b).

"CLOSING DATE PAYMENT" has the meaning assigned to that term in
Section 3.2(a).

"CODE" means the Internal Revenue Code of 1986, as amended.

"COMANCHE AIRCRAFT" means RAH-66 helicopters and variants thereof.

"COMANCHE CONTRACT" means the current contract(s) which require the
delivery by Hexcel to The Boeing Company of certain goods and services for the
production of the Comanche Aircraft.

"CONFIDENTIALITY AGREEMENT" means the confidentiality letter, dated
August 3, 1994, from Hexcel to Northrop with respect to the materials and
information furnished by Hexcel to Northrop in connection with a potential
transaction between the parties.

"CONFIDENTIAL PROPRIETARY INFORMATION" means confidential
scientific, business or financial information which (a) is not publicly known or
available from other sources who are not under a confidentiality obligation to
the source of the information, (b) has not been known or made available by the

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<PAGE>

source of the information to others without a confidentiality obligation, (c) is
not already known or available to the receiving party without a confidentiality
obligation and (d) is not required to be disclosed by law.

"CONTINGENT PURCHASE PRICE" has the meaning assigned to that term in
Section 3.3.

"CONTRACT" means (i) any agreement, contract, note, loan, evidence
of indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, license, lease,
instrument, obligation or commitment to which Hexcel is a party or is bound and
which relates to the Chandler Business or the Assets, whether oral or written,
(ii) any Government Contract, and (iii) any Bid.

"COVENANT PERIOD" has the meaning assigned to that term in
Section 13.1.

"DAMAGES" means any loss, liability, claim, damage, expense
(including, without limitation, costs of investigation and defense and
reasonable attorneys' fees and expenses) or diminution of value.

"EFFECTIVE DATE" means the effective date of any plan of
reorganization for Hexcel which is confirmed by the Bankruptcy Court.

"EMT LICENSE" means that certain license agreement, to be entered
into on the Closing Date in the form of EXHIBIT 1 hereto, pursuant to which
Northrop will license the EMT Technology to Hexcel.

"EMT TECHNOLOGY" means the Intellectual Property that enables the
design, fabrication, testing and analysis of electromagnetically tailored
materials and assemblies that are used to attenuate, alter, control and/or
absorb electromagnetic energy in its various forms, from direct current through
visible frequencies, including, without limitation, as set forth on Schedule E
hereto. Hexcel's (i) graphite technologies, (ii) aluminum technologies and
(iii) composites technologies when not altered through the addition of magnetic
or ohmic additives, shall not be considered to be EMT Technology.

"ENVIRONMENTAL REPRESENTATIONS" means the representations of Hexcel
with respect to environmental protection set forth in Section 7.22.

"ENVIRONMENTAL STUDY" has the meaning assigned to that term in
Section 9.11.

"EQUIPMENT LEASE" has the meaning assigned to that term in
Section 9.15.

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<PAGE>

"EQUIPMENT AND FIXTURES" has the meaning assigned to that term in
Section 2.1(c).

"EQUIPMENT AND FIXTURES LEASES" means any and all leases of the
Equipment and Fixtures to Hexcel as lessee, the rights in which are to be
assigned or otherwise conveyed (or are required to be assigned or otherwise
conveyed) to Northrop hereunder, including but not limited to those described on
SCHEDULE 2.1(c) and SCHEDULE 7.9(a).1.

"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended.

"ESTIMATED INVENTORY AMOUNT" has the meaning assigned to that term
in Section 3.2.

"EXCLUDED ASSETS" has the meaning assigned to that term in
Section 2.2.

"EXCLUDED CONFIDENTIAL INFORMATION" has the meaning assigned to that
term in Section 9.7.

"FACILITY AGREEMENT" has the meaning assigned to that term in
Section 14.

"FEDERAL ACQUISITION REGULATION" means Part 48 of the Code of
Federal Regulations.

"FINAL BANKRUPTCY COURT ORDER" means an order or a judgment which
has not been reversed or stayed and as to which (i) the time to appeal or seek
review, rehearing or certiorari has expired and (ii) no appeal or petition for
review, rehearing or certiorari is pending.

"FINAL INVENTORY AMOUNT" has the meaning assigned to that term in
Section 3.2(c).

"FINDINGS OF FACT" means, with respect to a Bankruptcy Court Order,
findings of fact to the effect that (i) there is adequate assurance of future
performance by each of Northrop and Hexcel of each of their obligations under
this Agreement, the Assumed Agreements, the License Agreements, and any other
Transaction Agreement, (ii) Northrop does not assume or succeed to any
liabilities or obligations of Hexcel except as specifically provided for in this
Agreement, (iii) this Agreement and any other Transaction Agreement to which
Hexcel is a party is binding on any successor to Hexcel, including without
limitation a trustee appointed for Hexcel pursuant to Chapters 7 or 11 of the
Bankruptcy Code, (iv) the notice and opportunity for hearing given in connection
with the Bankruptcy Court Order complied with Applicable Law and was appropriate
under the particular circumstances, and (v) Northrop has negotiated and agreed
to the

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<PAGE>

sale contemplated herein and intends to consummate the purchase in good faith
and for valid and reasonable business purposes.

"FIXED PURCHASE PRICE" has the meaning assigned to that term in
Section 3.1.

"FTC" means the Federal Trade Commission.

"GAAP" means generally accepted accounting principles in the
United States.

"GOVERNMENTAL BODY" means any domestic or foreign national, state or
municipal or other local government or multi-national body (including, without
limitation, the European Union), any subdivision, agency, commission, or
authority thereof, or any quasi-governmental or private body exercising any
regulatory or taxing authority thereunder.

"GOVERNMENT CONTRACT" means any prime contract, subcontract, teaming
agreement or arrangement, joint venture, basic ordering agreement, letter
contract, purchase order, delivery order, Bid, change order, arrangement or
other commitment of any kind relating to the Chandler Business between Hexcel
and (i) the U.S. Government, or (ii) any prime contractor or subcontractor of
the U.S. Government.

"GOVERNMENT CONTRACT NOVATION" means, with respect to a Government
Contract, an instrument reasonably satisfactory in form and substance to
Northrop, Hexcel and the Governmental Body or other Person to such Government
Contract pursuant to which all of Hexcel's rights, claims, benefits and
Liabilities thereunder shall have been validly conveyed, transferred, assigned
and novated to Northrop by all parties thereto, to the extent permitted under
applicable Federal Acquisition Regulation.

"HEXCEL INTELLECTUAL PROPERTY" means all Intellectual Property which
is used by Hexcel or any of its subsidiaries or Affiliates in connection with
any of their business activities other than the EMT Technology.

"HEXCEL TRADE NAMES" has the meaning assigned to that term in
Section 2.2(b).

"HIRED EMPLOYEES" has the meaning assigned to that term in
Section 9.3(a).

"HRP MACHINES" means the machines used to fabricate "HRP" and "HRP
Flex" honeycomb from supplied prepreg and adhesive materials set forth on
SCHEDULE 9.15.

"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the related regulations and published interpretations.

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<PAGE>

"INDUSTRIAL SECURITY MANUAL" means the Industrial Security Manual
for Safeguarding Classified Information and all supplements thereto published by
the United States Department of Defense (DoD 5220.22-M) prescribing the specific
requirements, restrictions, and other safeguards necessary in the interest of
national security for the safeguarding of classified information.

"INTELLECTUAL PROPERTY" means any and all patents, patent
applications, patent licenses, copyrights, copyright applications, trademarks
and trade names, trade secrets, service marks, service mark registrations,
trademark registrations applied for, databases, technical information,
specifications, standards, processes, process parameters, process control,
inventions, trade secrets, computer programs, formulas, patterns, drawings,
blueprints, manufacturing layouts, quality control methods, prototypes,
breadboards, models, shop aids, compilations, devices, manuals, methods,
techniques, any similar rights, claims, choses in action, or know-how associated
therewith, and any embodiment thereof, including, but not limited to, current
and historic records, research and development projects (IRAD, MPE, etc.) and
marketing materials.

"INVENTORY" has the meaning assigned to that term in Section 2.1(b).

"KNOWLEDGE" means the actual knowledge of Persons after such Persons
have made reasonable and appropriate inquiry with respect to the matter at
issue.

"LEGAL PROCEEDING" means any judicial, administrative, or arbitral
actions, suits, proceedings (public or private), claims or governmental
proceedings.

"LIABILITY" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, unsecured, joint or several, due or to
become due, vested or unvested, executory, determined, determinable or otherwise
and whether or not the same is required to be accrued on the financial
statements of such Person.

"LICENSE AGREEMENTS" means the Base License, the EMT License, and
any other licenses being assigned or sublicensed to Northrop under this
Agreement or any other Transaction Agreement.

"LIENS" means any encumbrance whether by consensual security
interest or operation of law that attaches to any Asset.

"MILITARY APPLICATIONS" means applications, uses or developments
embodied in any product, intermediate product or service principally sold to or
used by any foreign or domestic

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military body or organization, or principally used in any programs sponsored by
or for any military body or organization.

"MILITARY/GOVERNMENT APPLICATIONS" shall mean applications, uses or
developments embodied in any product, intermediate product or service
principally sold or used by any domestic or foreign government, military body or
organization, or principally used in any program sponsored by or for any such
government, military body or organization.

"MOA" has the meaning assigned to that term in Recital A.

"NON-MILITARY/GOVERNMENT APPLICATIONS" shall mean all applications
other than Military/Government Applications.

"NORTHROP CONTRACT" means all contracts for goods and services
relating to the B-2 Program pursuant to which Hexcel is seller and Northrop (but
not its Affiliates) is buyer.

"OUTSIDE DATE" means 11:59 p.m. (PST) on January 16, 1995.

"OWNED REAL PROPERTY" has the meaning assigned to that term in
Section 2.1(a).

"PERMITS" shall mean all licenses, permits, franchises, approvals,
authorizations, consents, or orders of, of filings with, any Governmental Body,
or any other Person, necessary or desirable for the past, present or anticipated
conduct of, or relating to the operations of, the Chandler Business.

"PERMITTED LIENS" has the meaning assigned to that term in
Section 7.4.

"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, trust, association, unincorporated
organization, other entity or Governmental Body.

"PPE BOOK VALUE" has the meaning assigned to that term in
Section 7.4(c).

"PRIME GOVERNMENT CONTRACT" means any Government Contract under
which Hexcel is the prime contractor.

"PROPERTY TAXES" means all real, personal and intangible property
taxes with respect to the Assets.

"QUARTERLY PRODUCTION AND SALES REPORT" has the meaning assigned to
that term in Section 3.3.2.

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"RECONFIGURATION" or "RECONFIGURED" means a change in the
specifications for the application of EMT Technology to the B-2 Aircraft
resulting from a change in the specifications for the B-2 Aircraft provided by
the U.S. Government. A change in the specifications for the application of EMT
Technology to the B-2 Aircraft that is made to meet the current B-2 Contract
specifications is not a Reconfiguration. Despite the foregoing, if the
specification in the B-2 Contract for the B-2 Aircraft is not changed by the
U.S. Government, but Northrop replaces all fixed edges or all moveable surfaces
that utilize the EMT Technology with products utilizing such EMT Technology
applied by an alternative design and process (e.g. products made with the
process described in U.S. patent application serial no. 859,097), such change
shall be a Reconfiguration.

"REFERENCE RATE" means the interest rate publicly announced by Bank
of America National Trust and Savings Association from time to time as its
"reference rate" for domestic commercial loans.

"RESPONSIBLE CONTRACTING OFFICER" means, with respect to any Prime
Government Contract, the person identified as such with respect thereto in
Section 42.1202(a) of the Federal Acquisition Regulation, Part 48 of the Code of
Federal Regulations.

"RETAINED EMPLOYEES" has the meaning assigned to that term in
Section 9.3(c).

"RETAINED LIABILITIES" has the meaning assigned to that term in
Section 4.2.

"RIGHTS OF OTHERS" means, as to any property in which a Person has
an interest, (i) any legal or equitable claim or other right or interest (other
than a Lien) in or to that same property, which claim, right or interest is held
by any other Person, and (ii) any option or right held by any other Person to
acquire any such claim, right or interest, including a Lien.

"SERVICES AGREEMENT" has the meaning assigned to that term in
Section 14.

"SETTLEMENT DATE" has the meaning assigned to that term in
Section 3.1(d).

"SETTLEMENT STATEMENT" has the meaning assigned to that term in
Section 3.1(d).

"SPECIFIED CONTRACTS" means the Contracts set forth on SCHEDULE F
hereto (but shall exclude any Bid and the Comanche Contract).

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"STRUCTURAL CORE" has the meaning assigned to that term in
Section 13.1.

"SUPPLIERS" has the meaning assigned to that term in Section 7.8.

"SUPPLY AGREEMENT" has the meaning assigned to that term in
Section 14.

"TRANSACTION AGREEMENTS" means, collectively, this Agreement, the
License Agreements, the Supply Agreement, the Services Agreement, the Facility
Agreement, the Equipment Lease and any agreements contemplated herein or
therein.

"TRANSITION INSURANCE" has the meaning assigned to that term in
Section 3.4.

"U.S. GOVERNMENT" means the United States Government including any
agencies, commissions, branches, instrumentalities and departments thereof.

2. PURCHASE AND SALE.

2.1 ASSETS TO BE CONVEYED. On the terms and subject to the conditions
set forth in this Agreement, on the Closing Date, Hexcel shall convey, transfer,
assign, sell, and deliver to Northrop and Northrop shall acquire, accept and
purchase all of Hexcel's right, title and interest in and to the assets, proper-
ties, rights and claims currently used or held in the Chandler Business
(collectively, the "ASSETS"), subject to the Assumed Liabilities; including, but
not limited to, the following:

(a) the owned real property described in SCHEDULE 2.1(A) hereto,
together with all buildings, fixtures and improvements located thereon or
attached thereto and all leases, subleases, franchises, licenses, permits,
easements and rights-of-way which are appurtenant to such property (collec-
tively, the "OWNED REAL PROPERTY", and sometimes referred to herein as the
"CHANDLER FACILITY");

(b) the inventory of Hexcel used in the Chandler Business, wherever
located, including but not limited to all inventories of raw materials, work in
process, finished goods, drums, containers, packaging materials, parts,
accessories, supplies and other similar items of Hexcel which exist on the
Closing Date including, but not limited to, those described on SCHEDULE 2.1(B)
hereto as of the date indicated thereon, the amounts of which will change until
the Closing Date (collectively, the "INVENTORY");

(c) all of the machinery, equipment, tooling, special tooling,
dies, jigs, molds, shop aids, spare parts, office equipment, software,
furniture, furnishings, fixtures,

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test equipment, machine programs and instruments used in the Chandler Business
and any Intellectual Property necessary to utilize the foregoing, wherever
located, and any leases relating thereto, including but not limited to those
described on SCHEDULE 2.1(C) hereto (collectively, the "EQUIPMENT AND FIX-
TURES"), and any and all rights of Hexcel as lessee under any Equipment and
Fixtures Leases;

(d) the HRP Machines and the Leaseback Assets;

(e) all rights of Hexcel under express or implied warranties with
respect to the Assets;

(f) Hexcel's EMT Technology;

(g) the Assumed Agreements;

(h) all permits, approvals, franchises and licenses held by Hexcel
which are used to operate the Chandler Business which can be transferred to or
assumed by Northrop; and

(i) all books and records relating to the Chandler Business,
including, but not limited to, all accounting material, production, engineering
and maintenance records, research and development files, contract administration
files, credit records, lists of customers, lists of suppliers and vendors,
marketing and business sytems materials, order lists, sales, market and product
development plans, training materials, studies, reports and other data and
information on whatever media, bid files for the Northrop Contract and the
Assumed Agreements, or copies thereof where it is appropriate for Hexcel to
retain the originals, except those items listed on SCHEDULE 2.1(i).

2.2 EXCLUDED ASSETS. Notwithstanding anything contained in Section 2.1
hereof to the contrary, Hexcel is not selling, and Northrop is not purchasing,
pursuant to this Agreement, any of Hexcel's right, title or interest in or to
any other asset other than the Assets, including, without limitation, the fol-
lowing, all of which shall be retained by Hexcel (collectively, the "EXCLUDED
ASSETS"):

(a) any cash, cash equivalents, accounts receivable, notes
receivable and intercompany receivables of Hexcel associated with the Chandler
Business;

(b) subject to the license thereof provided for herein, the name,
trade name, trademark and service mark "Hexcel" and the Hexcel logo, "HRH-327,"
"HRH-10," "HFT," "HRP," "Flex Core," "Flex," "Hexcelite," "HRP Flex," "Cecore,"
"TPH," "K-Foam," and any and all variants of such names (the "Hexcel Trade
Names");

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(d) subject to the Base License, any of the Hexcel Intellectual
Property;

(e) those certain assets relating to the Chandler Business that are
currently or were previously located at the Chandler Facility as set forth on
SCHEDULE 2.2(e); and

(f) those certain assets relating to the Chandler Business which
are not located at the Chandler Facility and that are not set forth on
SCHEDULE 9.15.

2.3 TRANSFER OF POSSESSION. At the Closing, subject to Section 9.15
hereof, Hexcel, through its officers, agents and employees, will put Northrop
into full possession of the Assets to be transferred hereunder.

3. PURCHASE PRICE.

3.1 FIXED PURCHASE PRICE.

The fixed purchase price for the Assets shall be Thirty Million
Dollars ($30,000,000.00), plus (i) the Final Inventory Amount, and (ii) the
amount of the Assumed Liabilities (collectively, the "Fixed Purchase Price").
The Fixed Purchase Price shall be allocated among the Assets in a manner
mutually agreed to in writing by the parties hereto within thirty (30) days
after the date hereof. Each of the parties agrees to report this transaction for
federal and state tax purposes in accordance with such allocation of the Fixed
Purchase Price. In the event of any disagreement between the parties with
respect to the allocation, the dispute resolution provisions of SCHEDULE 3 shall
apply.

3.2 PAYMENT AT CLOSING.

(a) Approximately ten (10) days prior to the Closing, Hexcel and
Northrop shall mutually agree upon an estimate of the amount of Inventory as of
the Closing Date based upon a review of Hexcel's records. Based on such esti-
mate, the parties shall prepare an inventory report valuing the Inventory at the
lower of cost or market for each individual size, type and classification (the
"Estimated Inventory Amount"). Cost of Inventory shall be (i) the actual invoice
prices paid plus (ii) any reasonable internal handling costs plus, (iii) for
finished goods and work in process ("WIP"), the cost of each item included
therein as in Hexcel's books in accordance with GAAP, and the standard profit
allocable thereto based upon Hexcel's past practices, which profit shall in no
event exceed nine and one-half percent (9.5%) of the total of the other costs.

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(b) At the Closing, Northrop shall pay by federal funds wire
transfer to an account designated in writing by Hexcel an amount (collectively,
the "Closing Date Payment") equal to: (i) the sum of (A) Thirty Million Dollars
($30,000,000.00) and (B) the Estimated Inventory Amount, (ii) less (X) Advance
Agreement Amounts and (Y) the Transition Insurance; PROVIDED, HOWEVER, that the
Closing Date Payment shall be adjusted as follows: the following items shall be
apportioned between the parties, and the Closing Date Payment shall be adjusted
to reflect such apportionment, as of the day immediately preceding the Closing
Date, so that all obligations occurring before such date shall be obligations of
Hexcel, and all obligations occurring after such date shall be obligations of
Northrop: (1) service charges for water, sewage, gas, utility, electricity, oil
and other similar services provided by third parties to the Chandler Facility
and (2) real estate taxes, assessments and sewer rents (on the basis of the year
for which assessed). In the event the parties cannot agree upon the amount of
such adjustment, for purposes of determining the Closing Date Payment, the
parties shall use the average of the two amounts proposed by the parties. Such
disagreement with respect to the adjustment, shall be resolved pursuant to the
dispute resolution provisions of SCHEDULE 3.

(c) As of the Closing Date, Northrop and Hexcel shall mutually
conduct a physical count of the Inventory (the "Closing Date Inventory").

(d) As soon as practicable following the Closing but in no event
later than thirty (30) days following the Closing, Hexcel and Northrop shall
mutually prepare, or cause to be prepared in a mutually acceptable manner, a
statement (the "Settlement Statement") setting forth the value of the Inventory
on the Closing Date (valued in the manner set forth in paragraph (a) above)
based upon the Closing Date Inventory (the "Final Inventory Amount").

(e) The settlement of the transactions relating to Inventory shall
take place within ten (10) days following completion of the Settlement Statement
(the "SETTLEMENT DATE"). On the Settlement Date, Northrop shall pay to Hexcel
the excess, if any, of the Final Inventory Amount over the Estimated Inventory
Amount or Hexcel shall pay to Northrop the excess, if any, of the Estimated
Inventory Amount over the Final Inventory Amount. In the event of any
disagreement between the parties with respect to the settlement of the
transactions contemplated in this SECTION 3.2, the dispute resolution provisions
of SCHEDULE 3 shall apply.

(f) Five (5) days prior to the Closing Date, Northrop and Hexcel
shall mutually agree to the Advance Agreement Amounts. If they cannot so agree,
the parties shall use the average of the amounts proposed by the parties for
purposes of

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determining the Closing Date Payment. Such disagreement shall be resolved
pursuant to the dispute resolutions provisions of SCHEDULE 3.

3.3 CONTINGENT PURCHASE PRICE.

3.3.1 PAYMENT. In consideration for the sale of the EMT Technology
hereunder, and only in the event EMT Technology is applied by Northrop (or any
affiliate of Northrop, or any sublicensee or assignee of the EMT Technology) in
the manufacture of products provided for herein, Northrop shall pay to Hexcel,
in addition to the Fixed Purchase Price, an amount based SOLELY upon the parts
(i.e., the subassemblies) which utilize the EMT Technology (the "CONTINGENT
PURCHASE PRICE"), determined as follows:

(a) With respect to parts to be manufactured under the B-2
Contract, in the event of Reconfiguration of the B-2 Aircraft thereunder, if
such parts utilize EMT Technology, Northrop shall pay Hexcel an amount equal to
four percent (4%) of the sum of (i) the net cost of such parts (total cost of
block dimensions following trimming at the saw, less taxes, shipping and
insurance) plus (ii) five percent (5%) of such net cost (representing an agreed
amount of profit). For example, which example will apply to the provisions
below, in the event the net cost of a part is equal to $100, the amount paid by
Northrop to Hexcel with respect to such part shall be equal to .04 X ($100 X
1.05) which equals $4.20. Such payments of Contingent Purchase Price shall only
be payable to Hexcel if an order for such Reconfiguration is received by
Northrop prior to the twelfth (12th) anniversary of the Closing Date.

(b) With respect to any B-2 Aircraft in excess of the twenty-one
(21) B-2 Aircraft to be manufactured under the B-2 Contract (an "Additional B-2
Contract"), in the event parts manufactured thereunder relate to:

(i) B-2 Aircraft which are not Reconfigured, if such parts
utilize EMT Technology, Northrop shall pay Hexcel an amount equal
to six percent (6%) of the sum of (1) the net cost of such parts
(total cost of block dimensions following trimming at the saw,
less taxes, shipping and insurance) plus (ii) five percent (5%) of
such net cost (representing an agreed amount of profit). In no
event shall the foregoing result in a payment to Hexcel equal to
less than $100 per cubic foot of honeycomb core which utilizes the
EMT Technology;

(ii) Reconfigured B-2 Aircraft, if such parts utilize EMT
Technology, Northrop shall pay Hexcel an amount equal to four
percent (4%) of the sum of the (i) net cost of such parts (total
cost of block dimensions following trimming at the saw, less taxes,
shipping and insurance)

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plus (ii) five percent (5%) of such net cost (representing an agreed
amount of profit).

Such payments of Contingent Purchase Price provided for in
paragraphs (i) and (ii) above shall only be payable to Hexcel if
such Additional B-2 Contract is entered into prior to the
twelfth (12th) anniversary of the Closing Date.

(c) With respect to any parts to be manufactured hereafter under
any Assumed Agreements, no Contingent Purchase Price shall be payable. With
respect to any Assumed Agreements which are modified hereafter or new agreements
that are entered into with respect thereto (collectively, the "Modified Assumed
Agreements") to provide for the manufacture of an amount of parts that utilize
EMT Technology in excess of the amount contemplated under the Assumed Agreement
as of the Closing Date, if such parts utilize EMT Technology, Northrop shall pay
Hexcel an amount equal to four percent (4%) of the sum of (i) the net cost of
such parts (total cost of block dimensions following trimming of the saw, less
taxes, shipping and insurance) plus (ii) five percent (5%) of such net cost
(representing an agreed amount of profit). Such payments of Contingent Purchase
Price shall only be payable to Hexcel if such Modified Assumed Agreement is
effective prior to the twelfth (12th) anniversary of the Closing Date.

(d) With respect to any parts produced by Northrop that utilize EMT
Technology other than as described in paragraphs (a), (b) and (c) above, in the
event (i) the sale of parts is for Military/Government Applications, Northrop
shall pay Hexcel an amount equal to four percent (4%) of the sum of (A) the net
cost of such parts (total cost (if applicable, of block dimensions following
trimming at the saw) less taxes, shipping and insurance) plus (B) five percent
(5%) of such net cost (representing an agreed amount of profit), or (ii) the
sale is of parts for Non-Military/Government Applications," Northrop shall pay
Hexcel an amount equal to four percent (4%) of the net sales price of such parts
(total sales price, net of taxes, shipping and insurance) derived by Northrop
from sales of such parts. However, such payments of Contingent Purchase Price
shall only be payable to Hexcel if contracts relating to such production are
entered into prior to the twelfth (12th) anniversary of the Closing Date.

(e) Subject to paragraph (h) below, payments of Contingent Purchase
Price provided for hereunder shall only accrue to Hexcel upon shipment by
Northrop of parts from a manufacturing location for its ultimate use as opposed
to shipment or transfer for further services. Despite the foregoing, if such
part is manufactured pursuant to a customer order which requires Northrop to
store the part in inventory and Northrop is paid by the customer with respect
thereto, then the

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payment of Contingent Purchase Price shall be payable to Hexcel once the part is
placed in inventory.

(f) In the event any part that utilizes EMT Technology which is
subject to the payment of Contingent Purchase Price hereunder is incorporated
into any other part or product that utilizes EMT Technology which is also
subject to the payment of Contingent Purchase Price, no payment of Contingent
Purchase Price shall be payable with respect to the incorporated part. By way of
example of the foregoing, if Northrop manufactures an adhesive which, but for
the provisions hereof, would be subject to payment of Contingent Purchase Price,
and such adhesive is then incorporated into a part or product manufactured by
Northrop such as Structural Core, the sale of which gives rise to the payment of
Contingent Purchase Price, Contingent Purchase Price shall not be payable with
respect to the amount allocable to such adhesive (I.E., Contingent Purchase
Price is only payable with respect to the part or product into which the
adhesive has been incorporated).

(g) The parties acknowledge and agree that no payments of
Contingent Purchase Price shall be payable with respect to the completion,
modification, production of spare parts, or any other matter relating to
Northrop's obligations with respect to existing agreements or orders to produce
aircraft under the B-2 Contract except as provided in paragraph (a) above.

(h) The Contingent Purchase Price shall be payable on a quarterly
basis, within 45 days after the end of each calendar quarter.

(i) Any dispute between the parties relating to the payment of
Contingent Purchase Price shall be resolved pursuant to the dispute resolution
provisions set forth in SCHEDULE 3 hereto.

(j) For purposes of this Section 3.3, cost shall be determined in
accordance with standard government accounting practices.

3.3.2 QUARTERLY PRODUCTION AND SALES REPORTS. To the extent any
amount of Contingent Purchase Price becomes payable as a result of the
manufacture and/or sale of products in a calendar quarter, within 45 days after
the end of such calendar quarter, Northrop shall prepare and deliver to Hexcel a
report with respect to the production and/or sale of such product (the
"QUARTERLY PRODUCTION AND SALES REPORT"). Hexcel and its authorized
representatives shall be entitled to review the Quarterly Production and Sales
Report, and the books, records and work papers of Northrop used to prepare it.
If Hexcel disagrees with any item in the Quarterly Production and Sales Report,
within thirty (30) days after Hexcel has been afforded the opportunity to review
Northrop's books, records and work papers

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directly relevant thereto (and provided Hexcel has requested such review in
writing within thirty (30) days of receipt of the Quarterly Production and Sales
Report), Hexcel shall notify Northrop in writing of such disagreement (stating
the reasons therefor in reasonable detail), and Northrop and Hexcel shall
attempt to resolve such disagreement. Despite the foregoing, Northrop shall not
be required to allow Hexcel to directly review information on Northrop's rates,
however, should Hexcel require a review thereof for the purposes provided for
herein, Northrop shall afford Hexcel's independent certified public accountants
the opportunity to review such rates so long as such accountants agree in
writing in advance not to reveal such rates in any way to Hexcel. If Hexcel
fails to provide such notice to Northrop within such period, the payment of the
Contingent Purchase Price for such quarter shall be the final amount determined
in accordance with such delivered Quarterly Production and Sales Report and
shall be binding on Hexcel and paid as set forth herein. If, after the
expiration of such time period, Northrop itself determines that additional
amounts are owing to Hexcel, Northrop shall still be obligated to make such
payment to Hexcel. If Hexcel and Northrop are unable to resolve any disagreement
over a Quarterly Production and Sales Report with respect to which Hexcel has
provided Northrop timely notice, then such disagreement shall be resolved
pursuant to the dispute resolution provisions of SCHEDULE 3. If any disagreement
is decided adversely to Northrop, any amounts determined to be due from Northrop
to Hexcel shall bear interest from the date such amount was due at the Reference
Rate.

3.4 TRANSITION INSURANCE. At the Closing, Northrop shall withhold from
the Fixed Purchase Price an amount equal to Two Million Five Hundred Thousand
Dollars ($2,500,000.00) (the "Transition Insurance Amount") and shall retain the
Transition Insurance Amount, subject to the following conditions:

(a) If Northrop shall have a claim for indemnification hereunder
prior to the release of the Transition Insurance Amount as contemplated
hereinafter, that portion of the Transition Insurance Amount reasonably believed
by Northrop to be necessary to satisfy such claim (if applicable, to the extent
such amount is in excess of the unused portion of the $250,000 amount provided
for in Section 10.5(b) herein) shall be retained by Northrop as security for
Hexcel's indemnification obligations hereunder pending resolution of such claim.
If any matter is decided adversely to Northrop, any amounts so retained by
Northrop and determined to be due from Northrop to Hexcel shall bear interest
from the date such amount was due at the Reference Rate.

(b) As to that portion of the Transition Insurance Amount equal to
One Million Five Hundred Thousand Dollars ($1,500,000.00), such sum shall be
paid to Hexcel by Northrop once Northrop has produced to its reasonable satis-
faction the

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representative sample of parts set forth on SCHEDULE 3.4 using the Assets and
the Base License and Northrop determines such parts meet all applicable
"acceptance test procedures", consistent with past practices with respect to
such parts. As to the parts listed thereon which were previously manufactured
for what is now Northrop's wholly-owned subsidiary, Vought Aircraft Company,
such requirements shall only exist if Northrop makes the relevant tooling
available to Hexcel on a timely basis.

(c) As to that portion of the Transition Insurance Amount equal to
One Million Dollars ($1,000,000.00), such amount shall be paid to Hexcel by
Northrop after the systems provided for in the Services Agreement are
transferred by Hexcel to Northrop or the function duplicated for Northrop's use
are available to Northrop on a basis reasonably satisfactory to Northrop and, as
to any systems that are to be sublicensed to Northrop, Northrop is reasonably
satisfied as to its use thereof.
(d) Northrop's rights hereunder shall not be deemed to limit in any
manner whatsoever any other right of Northrop to assert claims against Hexcel as
contemplated hereunder or under any other Transaction Agreement, it being
acknowledged and agreed by the parties that this Section 3.4 is in addition to
and not exclusive of any such other right.

(e) Northrop agrees to act diligently and in good faith with
respect to achieving the objectives contemplated in paragraphs (b) and (c)
above.

4. ASSUMPTION OF LIABILITIES.

4.1 LIABILITIES ASSUMED BY NORTHROP. Subject to Section 4.2 hereof and
Hexcel's representations and warranties and indemnification obligations
hereunder, at the Closing, Northrop shall assume, and Northrop agrees that after
the Closing it shall pay when due and discharge, and it shall indemnify, defend
and protect Hexcel and hold Hexcel harmless with respect to the following
(collectively, the "ASSUMED LIABILITIES"): (i) subject to any requirement of
consent or Government Contract Novation, the liabilities and obligations of
Hexcel under each Contract assumed by Northrop listed on SCHEDULE 4.1 hereto,
such other of the Contracts that are designated in a writing by Northrop that is
delivered to Hexcel not later than ten (10) days prior to the hearing before the
Bankruptcy Court in which Hexcel seeks to obtain the Bankruptcy Court Order and
such other Contracts entered into by Hexcel after the date hereof that Northrop
agrees in writing to assume if the Closing occurs (collectively, the "ASSUMED
AGREEMENTS"), and (ii) Northrop's PRO RATA portion of any items to be
apportioned between the parties to determine the Closing Date Payment.

4.2 LIABILITIES NOT ASSUMED BY NORTHROP. Northrop shall not be deemed
by anything contained in this Agreement to have

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assumed, and Hexcel hereby agrees to indemnify, defend and protect Northrop and
hold it harmless with respect to, any and all liabilities associated with Hexcel
or the Chandler Business which are not specifically assumed by Northrop pursuant
to Section 4.1, including, without limitation, the following (collectively, the
"RETAINED LIABILITIES"):

(a) any Liability of Hexcel to any Person the existence of which
constitutes a breach of any covenant, agreement, representation or warranty of
Hexcel contained in this Agreement;

(b) any Liability of Hexcel for any federal, state or local income
or franchise taxes, Property Taxes or other taxes of any kind or description
except Northrop's PRO RATA portion of any Property Taxes with respect to its
ownership of any of the Owned Real Property after the Closing Date;

(c) any Liability or obligation with respect to or arising in
connection with or as a result of the employment or termination of employment by
Hexcel, or in connection with the operation of the Chandler Business by Hexcel
prior to the Closing Date, of any individual, including, without limitation,
salaries, payroll taxes, withholding taxes, disability pay, severance pay,
deferred and incentive compensation, and any accrued or other Liability for
contributions or payments in respect of service during any period through the
Closing Date under any employee benefit plan (as defined in Section 3(3) of
ERISA), or other employee benefit or compensation plan maintained, entered into,
established or contributed to by Hexcel or any other trade or business (whether
or not incorporated) which as of any date of determination would be treated as a
single employer together with Hexcel under Section 414 of the Code), including,
without limitation, any such Liability or obligation in respect of any
beneficiary or dependent of any individual employed or formerly employed by
Hexcel or in connection with the operation of the Chandler Business;

(d) any Liabilities or obligations (contingent or otherwise) of
Hexcel arising out of any threatened or pending litigation with respect to
claims which arose prior to the Closing Date, whether or not disclosed to
Northrop;

(e) any Liabilities, obligations or damages to Persons or property
arising out of products sold or services rendered by Hexcel prior to the Closing
Date, except Liabilities relating to the quality or performance of products sold
or services rendered by Hexcel to Northrop (but not Northrop's Affiliates), all
of which shall be deemed to be permanently waived and forgiven by Northrop upon
consummation of the Closing;

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(f) any Liabilities, obligations or commitments arising out of or
relating to a violation by Hexcel of any Applicable Laws prior to the Closing
Date;

(g) any Liability whether presently in existence or arising
hereafter in respect of accounts payable (except those created by Northrop after
the Closing relating or allocable to the Chandler Business), and

(h) any Liability relating to the information provided in
Schedules 7.9(a).2, 7.9(e), 7.9(f), 7.9(g), 7.9(h) and 7.11.

5. CLOSING.

The Closing shall take place at the offices of Sheppard, Mullin,
Richter & Hampton, or at any other place as the parties may agree upon, at
10:00 a.m. Los Angeles time two (2) Business Days after all conditions to the
parties' obligations hereunder have been satisfied or waived, as the case may be
(including, without limitation, the expiration or termination of the waiting
period under the HSR Act and the Final Bankruptcy Court Order shall have been
received and all conditions set forth in Section 11.1(a) shall have been
satisfied), but in no event earlier than January 2, 1995.

6. HEXCEL CONTRACTS.

6.1 NON-ASSIGNABLE CONTRACTS.

(a) Anything in this Agreement to the contrary notwithstanding,
this Agreement shall not constitute an agreement to assign any Asset or any
claim or right or any benefit arising thereunder or resulting therefrom if an
attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach or other contravention thereof, be ineffective with
respect to any party thereto or in any way adversely affect the rights of
Northrop or Hexcel thereunder.

(b) With respect to any Assumed Agreement or any claim, right or
benefit arising thereunder or resulting therefrom, Hexcel and Northrop will use
their best efforts to obtain the written consent or Government Contract Novation
of the other parties to such Assumed Agreement for the assignment or novation
thereof to Northrop pursuant hereto, or written confirmation from such parties
reasonably satisfactory in form and substance to Northrop and Hexcel that such
consent is not required. As soon as practicable following the date hereof, with
respect to each Government Contract that is to be an Assumed Agreement to which
Hexcel is a party, Hexcel shall either obtain written confirmation reasonably
satisfactory in form and substance to Northrop and Hexcel that novation of such
Government Contract is not required or submit to the cognizant Responsible
Contracting

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Officer a written request that the U.S. Government enter into a Government
Contract Novation with Northrop with respect to such Government Contract that is
to be an Assumed Agreement. In this regard, Hexcel shall take all actions
required or customary under the Federal Acquisition Regulation. Except as
provided in the immediately preceding sentence, in no event shall Hexcel or
Northrop be obligated to pay any money to the U.S. Government or any other
Person or to offer or grant other financial or other accommodation to the
U.S. Government or any other Person in connection with obtaining any Government
Contract Novation or any such consent or waiver.

(c) If such consent, waiver or confirmation is not obtained with
respect to any Contract that is to be an Assumed Agreement, Hexcel and Northrop
will cooperate in an arrangement reasonably satisfactory to Northrop and Hexcel
under which Northrop would obtain, to the extent practicable, the claims, rights
and benefits and assume the corresponding obligations thereunder in accordance
with this Agreement, including subcontracting, sub-licensing or sub-leasing to
Northrop, or under which Hexcel would enforce for the benefit of Northrop, with
Northrop assuming Hexcel's obligations, any and all claims, rights and benefits
of Hexcel against a third party thereto. Hexcel will promptly pay to Northrop
when received all monies received by Hexcel under any such Assumed Agreement or
any claim right or benefit arising thereunder not transferred pursuant to this
Section 6.1(c). Despite the foregoing, obtaining the appropriate consents or
novations shall remain a condition to Closing.

(d) No instrument the U.S. Government or any other Person requires
Hexcel and/or Northrop to execute in connection with any novation or assignment
contemplated by this Section 6.1 (including, without limitation, a novation
agreement as contemplated by Federal Acquisition Regulation 42.1204) shall alter
the provisions of this Agreement concerning the allocation of Liabilities
between Northrop and Hexcel.

6.2 AMENDMENTS OF CONTRACTS. Hexcel agrees to cooperate with Northrop
in the negotiation of any amendments or supplements, to be effective upon the
Closing, to the Contracts as may from time to time be requested by Northrop.
Northrop shall have no liability or obligation to Hexcel arising out of any
negotiations under this Section 6.2 with respect to a Contract not assumed by
Hexcel pursuant to Section 6.3.

6.3 ASSUMPTION OF CONTRACTS. Hexcel agrees that it will assume (within
the meaning of such term under Section 365 of the Bankruptcy Code) this
Agreement and all other Transaction Agreements as part of any reorganization of
Hexcel under the Bankruptcy Code or as part of a Bankruptcy Court Order, the
Assumed Agreements, the Northrop Contract and such other Contracts as may be
requested by Northrop not later than ten (10)

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days prior to the hearing before the Bankruptcy Court in which Hexcel seeks to
obtain the Bankruptcy Court Order, with such assumption to be effective upon the
Closing, subject (if so specified by Northrop in its request) to amendment
satisfactory to Northrop (pursuant to Section 6.2) prior to the Closing of any
such Contracts so specified by Northrop. Hexcel agrees to provide Northrop with
notice of such hearing at least twenty (20) days prior to the date of such
hearing. Hexcel further agrees that it will not assume prior to the Closing any
Contract that has not been requested by Northrop as aforesaid or for which no
amendment satisfactory to Northrop has been entered into prior to the Closing.
In the event that Northrop specifies that certain Contracts be assumed as of the
Closing subject to amendment satisfactory to Northrop, then Northrop agrees to
promptly undertake, and diligently pursue with all commercially reasonable
efforts, good faith negotiations for amendments to such Contracts or for other
arrangements respecting the subject matter of such Contracts as may be mutually
satisfactory to Northrop and the lessors or obligees under such Contracts;
PROVIDED, that failure of Northrop to acquiesce in any amendment or arrangement
shall not be deemed in and of itself to be proof of a failure to so negotiate in
good faith. Northrop shall have no liability or obligation to Hexcel or any
third party except with respect to the Assumed Agreements.

6.4 REJECTION OF CONTRACTS. Hexcel agrees that it will reject (within
the meaning of Section 365 of the United States Bankruptcy Code) such of the
Contracts as may be requested by Northrop not later than the Closing (including
without limitation any Bids and the Comanche Contract), with such rejection to
be effective upon the Closing. Northrop shall be entitled to make minor
modifications to such request through the date of confirmation of a plan of
reorganization, to the extent that such minor modifications do not prejudice the
timely filing by Hexcel of necessary applications and other papers with the
Bankruptcy Court and the Contract has not been subject to a final order
providing for the assumption of such Contract. Northrop shall have no liability
or obligation to Hexcel or any third party with respect to any Contract rejected
by Hexcel or arising out of any request by Northrop under this Section 6.4 and
Hexcel shall indemnify Northrop for any Damages Northrop may incur with respect
thereto.

7. REPRESENTATIONS AND WARRANTIES OF HEXCEL.

Hexcel hereby represents and warrants to Northrop as follows:

7.1 ORGANIZATION AND GOOD STANDING. Hexcel (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (b) has the corporate power and authority to conduct the Chandler
Business as it is now conducted by it and to own, lease or operate the Assets
and

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(c) is qualified to do business in the State of Arizona and in each jurisdiction
where such qualification is required, except jurisdictions in which the failure
to qualify to do business will have no material adverse effect on the financial
condition or operations of Hexcel.

7.2 AUTHORIZATION OF TRANSACTION AGREEMENTS. Subject to the requisite
Bankruptcy Court approval, Hexcel has the requisite corporate power and
authority to execute and deliver this Agreement and each Transaction Agreement
to which it is or will become a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution, delivery, and performance of this Agreement and each Transaction
Agreement, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized and approved by all necessary corporate and
stockholder action on the part of Hexcel, and no other corporate proceedings on
the part of Hexcel are necessary to authorize this Agreement or any Transaction
Agreement to which it is or will become a party, or to consummate the
transactions contemplated hereby and thereby. This Agreement and each
Transaction Agreement to which it is or will become a party has been or will be
duly executed and delivered by Hexcel and constitute, or when executed and
delivered will constitute, legal, valid and binding obligations of Hexcel,
enforceable against Hexcel in accordance with their respective terms.

7.3 NO CONFLICTS. Neither the execution and delivery of the Transaction
Agreements by Hexcel, nor the consummation of the transactions contemplated
thereby, will (i) conflict with or result in a violation of any of the terms of
the certificate of incorporation or by-laws of Hexcel, (ii) require Hexcel to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Body except (a) as required by the Bankruptcy
Code, the Bankruptcy Rules and the orders of the Bankruptcy Court, (b) the HSR
Act, (c) as set forth on SCHEDULE 7.3, and (d) those which if not obtained could
not, in the aggregate, reasonably have a material adverse effect on the
consummation of the transactions contemplated by the Transaction Agreements, the
Assets or the conduct by Northrop of the Chandler Business, (iii) result in a
breach, constitute a default or give rise to any right of termination, amendment
or cancellation (other than a right on the part of Hexcel), under any agreement
related to the Chandler Business to which Hexcel is a party except (x) as
disclosed in SCHEDULE 7.3 and (y) those which, in the aggregate, could not
reasonably have a material adverse effect on the consummation of the
transactions contemplated by the Transaction Agreements, the Assets or the
conduct by Northrop of the Chandler Business, or (iv) violate any statute,
regulation, rule, judgment, order, decree, stipulation or injunction of any
Governmental Body to which Hexcel is subject, other than those which, in the
aggregate, could not reasonably have a material adverse effect on the
consummation of

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the transactions contemplated by the Transaction Agreements, the Assets or the
conduct by Northrop of the Chandler Business.

7.4 REAL AND PERSONAL PROPERTY.

(a) Except with respect to such property leased to Hexcel pursuant
to the Equipment and Fixtures Leases and except as set forth in SCHEDULE 7.4,
Hexcel has good and marketable title to the personal property included in the
Assets free and clear of any Liens, and there are no outstanding options or
rights of first refusal to purchase any of the Assets or any interest therein.
The Equipment and Fixtures included among the Assets are in good operating
condition, normal wear and tear excepted, and have been maintained in accordance
with normal industry practice. At the Closing, Hexcel shall transfer good title
to all Assets that are personal property free and clear of all Liens, except as
provided in SCHEDULE 7.4, and except for such Equipment and Fixtures which, in
the aggregate, are not material in value.

(b) SCHEDULE 2.1(a) sets forth a complete and current list and
description of the Owned Real Property. With respect to the Owned Real Property:

(i) Hexcel has good, marketable and insurable title in fee
simple to the parcel of the Owned Real Property, free and clear of any
Lien, encumbrances, easement, covenant, or other restriction, except for:
(A) taxes, charges and installments of special assessments not yet
delinquent; (B) recorded easements, covenants, and other restrictions set
forth in SCHEDULE 9.17; (C) liens, encumbrances and other title
exceptions disclosed in SCHEDULE 9.17; and (D) such other matters that
could not reasonably have an adverse effect on the value or utility of
the Owned Real Property to Northrop in the operation of the Chandler
Business (except as to such items which are to be removed on or prior to
the Closing as provided elsewhere herein, the "Permitted Liens");

(ii) Hexcel has all material easements and rights, including
easements for power lines, water lines, roadways and other access,
necessary to conduct the Chandler Business, and enjoys peaceful and
undisturbed possession of the Owned Real Property. The Owned Real
Property or the occupancy or operation thereof does not constitute a
nuisance or material violation of any Applicable Law or of any building,
zoning or other ordinance, code or regulation or any private or public
covenant or restriction, and no notice from any Governmental Body or
other person has been served claiming any violation of any such
Applicable Law, ordinance, code, regulation, covenant or restriction with
respect to the Owned Real Property, or requiring material

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work, repairs, construction, alterations or installations on or in
connection therewith.

(iii) there are no (A) pending or threatened condemnation
proceedings relating to the Owned Real Property or (B) pending or, to the
Knowledge of Hexcel, threatened litigation or administrative actions
relating to the Owned Real Property;

(iv) all buildings, fixtures and improvements located on the
Owned Real Property are in good condition and repair and are suitable for
the current use and application thereof, normal wear and tear excepted;

(v) except as disclosed on SCHEDULE 7.4, there are no leases,
subleases, licenses, concessions, or other agreements, written or oral,
granting to any party or parties the right of use or occupancy of any
portion of the Owned Real Property;

(vi) there are no outstanding options or rights of first
refusal to purchase the Owned Real Property, or any portion thereof or
interest therein; and

(vii) there are no parties (other than Hexcel) in possession
of the Owned Real Property.

(c) Hexcel's book value of plant, property and equipment (the
"PPE Book Value") included in the Assets as of July 31, 1994 was at least
Seventeen Million Dollars ($17,000,000.00), and as of the Closing will be such
amount less depreciation from such date through the Closing Date.

(d) The Leaseback Assets are the only assets used in the Chandler
Business that are not located at the Chandler Facility and that are not readily
available from vendors for purchase or use on an immediate basis in the
configuration in which they are used by Hexcel. SCHEDULE 7.4(d) sets forth a
listing of assets other than the Leaseback Assets that are used in the Chandler
Business that are not located at the Chandler Facility.

7.5 [INTENTIONALLY BLANK].

7.6 FACILITY. The Owned Real Property has received all required
approvals of any Governmental Body (including without limitation Permits and a
certificate of occupancy of the Owned Real Property) required in connection with
the operation thereof and have been operated and maintained in accordance with
Applicable Laws. The Owned Real Property is supplied with utilities (including,
without limitation, water, sewage, disposal, electricity, gas and telephone) and
other services

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necessary for the operation of such facility as currently operated.

7.7 INVENTORY. The Inventory consists of raw materials, work in
process, and finished goods acquired or produced by Hexcel in the ordinary
course of business for use in the Chandler Business. All work in process and
finished goods included in the Inventory and all raw material supplied by Hexcel
are merchantable and fit for the purpose for which they were procured or
manufactured. To Hexcel's Knowledge, all raw materials supplied by third parties
are in all material respects merchantable and fit for the purpose for which it
was procured or manufactured.

7.8 SUPPLIERS. Set forth on SCHEDULE 7.8 is a complete list of all
suppliers (including Hexcel) of services and products of any kind or nature to
the Chandler Business ("Suppliers"), including an itemized list of the products
and services sold or provided by each such Supplier to the Chandler Business.

7.9 CONTRACTS AND COMMITMENTS.

(a) GENERAL.

(i) SCHEDULE 7.9(a).1 contains a complete and correct list of
all Contracts used to operate or performed by the Chandler Business. None of the
Contracts which are fixed price contracts provide for progress payments to be
made in connection therewith. Except as set forth on SCHEDULE 7.9(a).2 and for
any Bids, each of the Contracts is valid and in full force and effect and there
is no claim, default or claim of default or basis therefor, or event which, with
the passage of time, could reasonably be expected to result in a claim or
default or give rise to any right of any termination, cancellation, acceleration
or amendment or other claim by any party to any of the Contracts the result of
which would have a material adverse effect on the relevant Contract. Except for
the Northrop Contract or as set forth in SCHEDULE 7.9(a).3, none of the Assumed
Agreements require the use of Base Technology other than in conjunction with EMT
Technology. True and complete copies of the Contracts have previously been
delivered or made available to Northrop and, except as set forth on
SCHEDULE 7.9(a).4, all such agreements are assignable by Hexcel to Northrop
pursuant to the Transaction Agreements without the consent of any other Person.

(ii) Except to the extent caused by Northrop's rates exceeding
those of Hexcel, the costs which Northrop will incur in completing the Specified
Contracts will not exceed the "estimates to complete," as is more fully set
forth on SCHEDULE 7.9(b), and the customer shall be obligated to pay Northrop
the amounts set forth as "estimates to complete" pursuant to the terms of such
contracts.

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(iii) Except as disclosed on SCHEDULE 7.9(c), Hexcel has not
submitted any Bid relating to the Chandler Business that is currently
outstanding and unexpired. SCHEDULE 7.9(c) identifies each Bid by number and
the party to which such Bid was made, the proposed price and Hexcel's current
assessment of profit or loss at completion for each such Bid. Hexcel makes no
representation or warranty as to the ability of Northrop to perform any such Bid
at a profit. Each such Bid relates solely to the Chandler Business. All Bids
listed on SCHEDULE 7.9(c) were submitted in the ordinary course of business.

(iv) Except as set forth on SCHEDULE 7.9(d), (A) all cost and
pricing data submitted in connection with each Contract (other than a Bid) was
current, accurate and complete when the price thereof was negotiated, and (B)
all cost and pricing data submitted in connection with each Bid was current,
accurate and complete when such data was submitted.

(v) Except as set forth on SCHEDULE 7.9(e), (A) Hexcel has
complied in all material respects with all material terms and conditions of each
Contract, including all clauses, provisions and requirements incorporated
expressly, by reference or by operation of law, therein; (B) Hexcel has complied
in all material respects with all requirements of all Applicable Laws or
agreements pertaining to each Contract; (C) all representations and
certifications executed, acknowledged or set forth in or pertaining to each of
the Contracts were complete and correct in all material respects as of their
effective date, and Hexcel has complied in all material respects with all such
representations and certifications; (D) neither the U.S. Government nor any
prime contractor, subcontractor or other Person has notified Hexcel, either in
writing or, to Hexcel's Knowledge, orally, that Hexcel has breached or violated
any Applicable Law, certification, representation, clause, provision or
requirement pertaining to any of the Contracts; (E) no termination for conven-
ience, termination for default, cure notice or show cause notice is currently in
effect pertaining to any Government Contract; (F) no material cost incurred by
Hexcel pertaining to any of the Contracts has been formally questioned or
challenged, is the subject of any investigation or has been disallowed by the
U.S. Government or any other Person; and (G) no money due to Hexcel pertaining
to any of the Contracts has been withheld or set off, nor has any claim been
made to withhold or set off money (other than normal Government Contract
requirements for cost reimbursable contracts), and Hexcel is entitled to all
progress payments received with respect thereto.

(vi) Except as disclosed on any schedule hereto, no written
statement, representation, certification or warranty made by Hexcel in any
Contract, any exhibit thereto or in any certificate, statement, list, schedule
or other document submitted or furnished to the U.S. Government (or any
contractor or

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subcontractor thereof) or any other Person (A) contained on the date so
furnished or submitted any untrue statement of a material fact, or failed to
state a material fact necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading, or (B) con-
tains on the date hereof any untrue statement of a material fact, or fails to
state a material fact necessary to make the statements contained therein, in
light of the circumstances in which they are made, not misleading, except in the
case of both clauses (A) and (B) any untrue statement or failure to state a
material fact that would not result in any material liability to the Chandler
Business as a result of such untrue statement or failure to state a material
fact.

(vii) Any of the purchase orders that constitute Assumed
Agreements on the Closing Date will have been issued by Hexcel in the ordinary
course of the Chandler Business in accordance with past practices and none of
the products delivered with respect thereto shall be included in the Closing
Date Inventory, except to the extent previously paid for by Hexcel.

(b) GOVERNMENT CONTRACTS.

(i) Except as set forth on SCHEDULE 7.9(f), with respect to
the Chandler Business; (A) to Hexcel's Knowledge, neither Hexcel nor any of its
directors, officers, employees, consultants or agents is (or during the last
three years has been) under administrative, civil or criminal investigation, or
indictment by any Governmental Body, or any audit or investigation with respect
to any alleged irregularity, misstatement or omission arising under or relating
to any Government Contract; and (B) during the last three years, Hexcel has not
conducted or initiated any internal investigation or made a voluntary disclosure
to the U.S. Government with respect to any alleged irregularity, misstatement or
omission arising under or relating to any Government Contract. There exists no
irregularity, misstatement or omission arising under or relating to any
Government Contract that has led to any of the consequences set forth in
clause (A) or (B) of the immediately preceding sentence or any other damage,
penalty assessment, recoupment of payment or disallowance of cost.

(ii) Except as set forth on SCHEDULE 7.9(g), there exist, to
Hexcel's Knowledge, no material disputes between Hexcel and the U.S. Government
under the Contract Disputes Act or any other Federal statute or between Hexcel
and any prime contractor, subcontractor or vendor arising under or relating to
any Government Contract. Except as set forth on SCHEDULE 7.9(g), Hexcel has no
interest in any pending or, to the Knowledge of Hexcel, potential claim against
the U.S. Government or any prime contractor, subcontractor or vendor arising
under or relating to any Government Contract. SCHEDULE 7.9(g) lists each
Government Contract that is currently under audit (other than routine audits

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conducted in the ordinary course of business) by the U.S. Government or any
other Person that is a party to such Government Contract.

(iii) Except as set forth on SCHEDULE 7.9(h), neither Hexcel
nor any of its operations has ever been debarred or suspended from participation
in the award of contracts with the United States Department of Defense or any
other Governmental Body. Except as set forth on SCHEDULE 7.9(h), there exist no
facts or circumstances that would warrant the institution of suspension or
debarment proceedings or the finding of nonresponsibility or ineligibility on
the part of Hexcel with respect to the Chandler Business, or any director or
officer of Hexcel in respect of the Chandler Business. No payment has been made
by Hexcel, or by any person on behalf of Hexcel, in connection with any
Government Contract in violation of applicable procurement laws or regulations
or in violation of, or requiring disclosure pursuant to, the Foreign Corrupt
Practices Act. Except as set forth on SCHEDULE 7.9(h), with respect to each
Government Contract, Hexcel's cost accounting and procurement systems are in
compliance in all material respects with all Applicable Laws.

(iv) All material test and inspection results Hexcel has
provided to the U.S. Government or to any other Person of any article designed,
engineered or manufactured in the Chandler Business were complete and correct in
all material respects as of the date so provided. Hexcel has provided all
material test and inspection results to the U.S. Government or to any other
Person as required by Applicable Law and the terms of any Government Contract.

(v) All cost and pricing data submitted in connection with
each Government Contract (other than a Bid or with respect to modification of a
Government Contract) was current, accurate and complete when the price thereof
was negotiated and none of the Government Contracts is, or was negotiated, in
violation of any "truth-in-negotiations" or "defective pricing" laws, rules or
regulations to which it is subject, including, but not limited to, the Federal
Property and Administrative Services Act, the Armed Services Procurement Act,
the Truth in Negotiations Act, the False Claims Act and the Federal Acquisition
Regulation.

7.10 PRODUCT WARRANTIES AND CLAIMS. SCHEDULE 7.10 sets forth the
product warranties and guarantees extended by Hexcel relating to the quality of
hardware or material currently in effect with respect to the Chandler Business.
Hexcel shall be responsible for any such product warranties and guarantees
extended by it except for those under the Northrop Contract. All products
heretofore sold or leased by Hexcel complied, and all products included in the
Inventory as of the Closing will comply, with all warranties applicable thereto.
Hexcel has not received during the last five years any notice of any material
(either

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individually or in the aggregate) claim of any such defect. Hexcel has received
no complaint, outside the ordinary course of business, to the effect that
(i) goods sold or leased by Hexcel failed to meet appropriate quality standards
or (ii) Hexcel failed to meet its obligations to service any product sold or
leased by Hexcel, all with respect to the Chandler Business.

7.11 LITIGATION. There are no actions, suits, claims or proceedings
pending before any court, Governmental Body or arbitration tribunal or, to the
Knowledge of Hexcel, threatened against Hexcel (i) seeking to prevent, enjoin,
restrain or delay the consummation of the transactions contemplated by the
Transaction Agreements, or (ii) questioning the validity or legality of the
Transaction Agreements or the transactions contemplated thereby. SCHEDULE 7.11
sets forth each instance in which Hexcel is a party or, to the Knowledge of
Hexcel, is threatened to be made a party to any complaint, action, suit,
proceeding, hearing or investigation relating to the Chandler Business in any
court or Governmental Body or before any arbitrator.

7.12 PROBLEMS WITH SUPPLIERS AND CUSTOMERS. Except as otherwise
provided in SCHEDULE 7.12 (and except with respect to Northrop, as to which no
representation under this Section 7.12 is made), the relationships of Hexcel
with its Suppliers and customers of the Chandler Business are satisfactory and
no such customer or Supplier has canceled or otherwise terminated, or to the
Knowledge of Hexcel, threatened to cancel or otherwise terminate, its
relationship with Hexcel, or to decrease its services to Hexcel or its usage of
the services of Hexcel, which increase or decrease would have a material adverse
affect on the Chandler Business taken as a whole. Hexcel has no direct or
indirect interest in any Supplier or customer of Hexcel with respect to the
Chandler Business except as disclosed in SCHEDULE 7.12. To the Knowledge of
Hexcel, none of the Suppliers is unable to supply the products or services
supplied by them to the Chandler Business in order to meet the specifications
provided with respect thereto.

7.13 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Hexcel nor any
director or officer of Hexcel, nor any manager of any Hexcel facility, nor, to
the Knowledge of Hexcel, any other employee or agent of Hexcel, nor, to the
Knowledge of Hexcel, any other person acting on their behalf, has, directly or
indirectly, within the past five years given or agreed to give any gift or
similar benefit to any customer, supplier, governmental employee, or other
person who is or may be in a position to help or hinder the Chandler Business
(or assist Hexcel in connection with any actual or proposed transaction relating
to the Chandler Business) which (i) might subject Hexcel to any damages or
penalty in any civil, criminal or governmental proceeding, (ii) if not given in
the past, might have had an adverse effect on the Assets or operations of the
Chandler Business, (iii) if not continued in

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the future, might adversely effect the Chandler Business or its prospects or
which might subject Hexcel to suit or penalty of any private or governmental
litigation or proceeding, (iv) is or was for any other purposes described in
Section 162(c) of the Code, or (v) is or was for the establishment or
maintenance of any concealed fund or concealed bank account.

7.14 NO UNDISCLOSED LIABILITIES. Hexcel, with respect to the Chandler
Business, has no material Liability (whether or not such Liabilities would be
required to be reflected on a balance sheet prepared in accordance with GAAP),
except for (i) Liabilities incurred in the operation of the Chandler Business
since DECEMBER 31, 1993 in the ordinary course of business, consistent with past
practice, (ii) Liabilities which are disclosed in a schedule hereto, or
(iii) Liabilities which are by the terms of this Agreement not required to be
disclosed in this Agreement, and which would not, individually or in the
aggregate, result in a material adverse effect on the Chandler Business.

7.15 NON-HEXCEL OWNED ITEMS. SCHEDULE 7.15, which is to be provided
after the date hereof, will include by Contract a description or inventory
number for all personal property, equipment and fixtures loaned, built or
otherwise furnished to Hexcel by any Person, for which title vests in such
Person by operation of the title vesting provision of the relevant Contract, or
inventory held in place by Hexcel for such Person that (i) relate to the
Chandler Business, (ii) are or were used in the conduct of the Chandler Business
and (iii) are or should be in the possession of Hexcel ("Non-Hexcel Owned
Items") and identifies each Contract to which each such item relates. All Non-
Hexcel Owned Items are in a good state of maintenance and repair (except for
ordinary wear and tear), have been regularly and appropriately maintained and
repaired in accordance with all contractual, legal and regulatory requirements
and shall be in the possession of Hexcel at the Closing. Hexcel has complied in
all material respects with all of its obligations relating to the Non-Hexcel
Owned Items, and upon the return thereof to the owner in the condition thereof
on the date hereof, would have no liability to such Person with respect thereto.
Northrop will incur no Liability to any Person as a result of Hexcel's failure
to keep records, or maintain or possess property furnished to Hexcel by or on
behalf of such Person.

7.16 BACKLOG.

(a) SCHEDULE 7.16 sets forth, with respect to each Assumed
Agreement having unfilled backlog as of August 31, 1994, the backlog of Hexcel
thereunder as of such date. With respect to each such Assumed Agreement, Hexcel
has disclosed in writing to Northrop the name of each customer (except where
precluded for security reasons), the dollar amount of backlog, whether the
customer has the right to terminate the Assumed Agreement for convenience, a
brief description of the products and services to

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be provided, the proposed delivery dates therefor and any unexercised valid and
subsisting options giving a brief description of the options and the Assumed
Agreement to which they relate.

(b) Except as set forth in SCHEDULE 7.16, all of the Assumed
Agreements constituting the backlog of Hexcel as it relates to the Chandler
Business (i) were entered into in the ordinary course of business at usual and
customary mark-ups at the time entered into, (ii) would be capable of
performance in accordance with the terms and conditions of each such Assumed
Agreement by Hexcel without loss, if it retained the Assets to be transferred
and the Assumed Liabilities to be assumed hereunder, and made the planned
capital expenditures therefor, (iii) are the subject of valid and binding
written agreements enforceable in accordance with their respective terms, and
(iv) Hexcel has received no indication that any of such orders will be cancelled
or materially altered.

7.17 CLEARANCES. Except as may be prohibited by the Industrial Security
Manual, SCHEDULE 7.17.1 sets forth all facility and personnel security
clearances held by Hexcel and all personnel security clearances held by any
officer, director, employee, consultant or agent thereof relating to the Assets
or the Chandler Business. Hexcel represents and warrants that such security
clearances, if transferred to Northrop, are sufficient to allow Northrop to
conduct the Chandler Business as now conducted by Hexcel, and that, except as
disclosed in SCHEDULE 7.17.2, Hexcel has no Knowledge of any proposed or
threatened termination of any personnel or facility security clearance (whether
or not such clearance is collateral or special access, and whether or not such
clearance is listed on SCHEDULE 7.17.1).

7.18 INTELLECTUAL PROPERTY.

7.18.1 BASE TECHNOLOGY. To the Knowledge of Hexcel, except as set
forth on SCHEDULE 7.18.1, Hexcel is the sole and exclusive owner of all right,
title and interest in and to the Base Technology. Hexcel is licensing its rights
to the Base Technology in the manner set forth in the Base License. Except as
disclosed on SCHEDULE 7.18.1, all of the Base Technology is owned free and clear
of all assignments, licenses, sublicenses, and Liens, including claims of
employees, former employees or independent contractors of Hexcel, and the use of
any of the Base Technology does not violate or infringe upon any Rights of
Others or any other rights held by Hexcel. Those items of Base Technology
legended as "proprietary" in Schedule B are Hexcel's Confidential Proprietary
Information and, to the Knowledge of Hexcel, (i) Hexcel has maintained the
confidentiality thereof, and (ii) none of those items is in the public domain.
Except as disclosed on SCHEDULE 7.18.1, no claims have been asserted by any
Person to use the Base Technology. Except as disclosed on

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SCHEDULE 7.18.1, no proceedings have been instituted or notices or claims
received by Hexcel that Hexcel's use of the Base Technology infringes upon or
otherwise violates any rights of a third party in or to the Base Technology and,
to Hexcel's Knowledge, no such proceedings are threatened against Hexcel.

7.18.2 EMT TECHNOLOGY. Except as set forth on SCHEDULE 7.18.2,
(i) Hexcel is the sole and exclusive owner of all right, title and interest in
and to the EMT Technology, and (ii) Hexcel is conveying to Northrop its full
right, title and interest in and to the EMT Technology. Except as disclosed on
SCHEDULE 7.18.2, all of the EMT Technology is owned free and clear of all
assignments, licenses, sublicenses, and Liens, including claims of employees,
former employees or independent contractors of Hexcel, and the use of any of the
EMT Technology in the Chandler Business does not violate or infringe upon any
Rights of Others or any other rights held by Hexcel. Except for any patents, the
EMT Technology is Hexcel's Confidential Proprietary Information, Hexcel has
maintained the confidentiality of the EMT Technology, no other Person has any
proprietary rights or claims whatsoever in any of the EMT Technology, and none
of the EMT Technology is in the public domain. No claims have been asserted by
any Person to use the EMT Technology and there is no valid basis for such claim.
No proceedings have been instituted or notices or claims received by Hexcel that
Hexcel's use of the EMT Technology infringes upon or otherwise violates any
rights of a third party in or to the EMT Technology and, to Hexcel's Knowledge,
no such proceedings are threatened against Hexcel.

7.19 NO GOVERNMENT FUNDING. Except as set forth on SCHEDULE 7.19, all
of the EMT Technology and all of the Base Technology licensed by Hexcel pursuant
to the Base License was developed without direct or indirect payment,
reimbursement, funding or other financial contribution of any kind whatsoever
from any Governmental Body.

7.20 EMPLOYEES.

(a) SCHEDULE 7.20 (i) lists the names of all the Hired Employees
(as hereafter defined), and (ii) indicates whether transfer of such employees to
Northrop requires authorization from a labor organization or from any competent
authority. Hexcel previously provided in writing to Northrop the current
salaries or wages of each of the Hired Employees. Hexcel has no Knowledge of any
organizational effort, presently being made or threatened by or on behalf of any
labor union with respect to the Hired Employees. Employment of all persons
employed by Hexcel in the Chandler Business is terminable at will, to the extent
permitted under Arizona law. Hexcel, with respect to the Chandler Business, has
complied with all Applicable Laws, rules and regulations governing payment of
minimum wages and overtime rates and the withholding and payment

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of taxes from compensation of employees. SCHEDULE 7.20 lists all the collective
bargaining agreements covering employees who perform services for the Chandler
Business, copies of which Hexcel has delivered and made available to Northrop.

(b) Except as set forth on SCHEDULE 7.20, with respect to the
Chandler Business, (i) Hexcel is not engaged in any unfair labor practice or
unlawful employment practice; (ii) there is no unfair labor practice charge or
complaint against Hexcel pending or, to Hexcel's Knowledge, threatened, nor is
there any grievance or any arbitration proceeding arising out of or under any
collective bargaining agreement pending against Hexcel, and, to the Knowledge of
Hexcel no basis for any such charge, complaint or grievance exists; (iii) there
is no labor strike, slowdown or work stoppage pending, or, to the Knowledge of
Hexcel threatened against Hexcel; (iv) Hexcel has not experienced any work
stoppages or been a party to any proceedings before the National Labor Relations
Board involving any significant issues or been a party to any pending
arbitration arising out of, or under any collective bargaining agreement; and
(v) there is no charge or complaint pending, or to the Knowledge of Hexcel,
threatened against Hexcel before the Equal Employment Opportunity Commission,
the Office of Federal Contract Compliance Programs or the Department of Labor or
any federal, state or local agency of similar jurisdiction.

(c) The Hired Employees set forth on SCHEDULE 7.20 constitute
employees with sufficient skills to enable Northrop to operate the Chandler
Business at the Chandler Facility in the manner generally conducted by Hexcel
during the last year. Such Hired Employees in the aggregate have substantial
experience with and knowledge of such of the following matters as is consistent
with their respective positions: the Chandler Business, the Assets, the Base
Technology, the EMT Technology, and all related systems, processes, applications
and operations. There are no employees of Hexcel with substantial knowledge of
the Chandler Business who are necessary to conduct the Chandler Business at the
Chandler Facility who are not included in SCHEDULE 7.20.

(d) SCHEDULE 7.20(d) sets forth a complete and accurate list of all
employees who were employed on a full-time basis (other than Hired Employees) by
Hexcel with respect to the Chandler Business at the Chandler Facility since
December 31, 1990 who are still employed by Hexcel as of the date hereof.

7.21 COMPLIANCE WITH LAW. Except as provided in SCHEDULE 7.21, Hexcel
has conducted its operation of the Chandler Business in accordance with all
Applicable Laws, regulations or other requirements of any Governmental Body
having jurisdiction over Hexcel, including without limitation all such
Applicable Laws, regulations and requirements relating to consumer protection,
health, pollution or protection of the environment and occupational safety
matters, except where the failure so to

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comply would not individually or in the aggregate have a material adverse effect
on the Chandler Business. Hexcel has not received any notification from any
Governmental Body of any asserted present or past failure by Hexcel to comply
with any such Applicable Laws, rules or regulations in connection with the
Chandler Business except for matters which have been resolved or are disclosed
on SCHEDULE 7.21 hereto. Hexcel has all licenses, permits, orders or approvals
from Governmental Bodies required for the conduct of its Chandler Business as
presently conducted, except where the failure to have such licenses, permits,
orders or approvals would not individually or in the aggregate have a material
adverse effect on the Chandler Business, taken as a whole. Except as set forth
in SCHEDULE 7.21, Hexcel has not received any written notification of any
threatened suspension or cancellation of any of such licenses, permits, orders
or approvals, and, to Hexcel's Knowledge, Hexcel has no reason to believe that
any such licenses, permits, orders or approvals will not be renewed before
expiration by the applicable Governmental Body. No claim has been made, is
pending or, to the Knowledge of Hexcel, has been threatened to revoke any of
such licenses, permits, orders or approvals or to declare them invalid in any
material respect.

7.22 ENVIRONMENTAL PROTECTION. Except as set forth on SCHEDULE 7.22,
Hexcel has obtained all permits, licenses and other authorizations which are
required for operation of the Chandler Business under all Applicable Laws,
regulations and other requirements of Governmental Bodies relating to pollution
or protection of the environment, including releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic material or waste,
except where the failure to have such permits, licenses and other authorizations
would not individually or in the aggregate have a material adverse effect on the
Chandler Business, taken as a whole. Except as set forth on SCHEDULE 7.22,
Hexcel is in compliance with all terms and conditions of the required Permits,
licenses and authorizations, and is also in compliance with all other
limitations, restrictions, schedules and timetables contained in those laws or
contained in any Applicable Law, except where the failure so to comply would not
individually or in the aggregate have a material adverse effect on the Chandler
Business, taken as a whole. Except as set forth on SCHEDULE 7.22, Hexcel has not
received any notice of any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with the conduct of the Chandler Business as currently conducted or
prevent continued compliance, or which may give rise to any common law or legal
Liability, or otherwise form the basis of any claim, action, suit, proceedings,
hearing or investigation against Northrop, based on or related to the
manufacture,

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processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, or hazardous or toxic material or
waste, in each case related to the conduct of the Chandler Business.

7.23 NO BROKERS. Hexcel has not engaged or committed to pay any fees or
commissions to any broker, finder or similar agent with respect to the
transactions contemplated by the Transaction Agreements.

7.24 POWERS OF ATTORNEY. Except as set forth on SCHEDULE 7.24, there
are no outstanding powers of attorney executed on behalf of Hexcel with respect
to the Chandler Business which could affect Northrop after the Closing.

7.25 NECESSARY PROPERTY; "CRADLE TO GRAVE" CAPABILITY. Except for
certain of the assets set forth on Schedule 2.2(e), the (a) Assets, (b) rights
granted to Northrop under the Base License, (c) services and materials to be
provided by Hexcel under the Supply Agreement and Services Agreement and
(d) rights otherwise granted to Northrop hereunder, include all of the rights,
agreements and property currently used by Hexcel to develop and produce the
products and services purchased by Northrop and its Affiliates from Hexcel under
the Northrop Contract and to produce the products and services required under
the Assumed Agreements from the purchasing or production of raw materials
through the completion of the finished product ("cradle to grave"). Except as
set forth on SCHEDULE 7.25, the Assets (other than Inventory) include all of
such items constituting the assets that were used by Hexcel in the Chandler
Business within the last twenty-four (24) months. Schedule 2.2(e) includes all
of those assets which are not related to the Chandler Business that have been
either moved from the Chandler Facility within the last twenty-four (24) months,
or such assets that will be moved from the Chandler Facility prior to the
Closing Date.

7.26 INSURANCE. SCHEDULE 7.26 sets forth a list of all insurance
policies providing coverage with respect to the Chandler Business for current
policy periods, setting forth the insurers, the type and amount of coverage, the
expiration dates, the annual premium, the deductible and the amount of the
deductible remaining unsatisfied. Except as set forth on SCHEDULE 7.26, all such
policies are valid, enforceable and in full force and effect, all premiums with
respect thereto are currently paid up in full, no notice of cancellation or
termination has been received with respect to any of such policies, and such
policies provide adequate coverage and limits for the operations, properties and
assets of the Chandler Business.

A. CONSIGNMENT. Except as set forth on SCHEDULE 7.27 hereto, in
connection with the Chandler Business, Hexcel does not

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hold any materials on consignment and does not have title to any materials in
the possession of others.

7.28 NO MISREPRESENTATIONS. No written representation or warranty of
Hexcel and no statement or certificate furnished or to be furnished by or on
behalf of Hexcel or any of its directors, officers, employees, or agents to
Northrop or any of its agents pursuant to this Agreement or any other document
contemplated or required hereby or thereby in connection with the transactions
contemplated herein or therein contains or will contain any untrue statement of
a material fact necessary to make the statements contained herein or therein not
misleading. All schedules, certificates, affidavits, documents and instruments
furnished, or to be furnished, by Hexcel or any of its directors, officers or
employees in connection with this Agreement, or any other transaction
contemplated by this Agreement, are and will be true and complete in all
material respects, and neither this Agreement nor any schedule, certificate,
affidavit, document or instrument furnished or to be furnished by Hexcel or any
of its directors, officers or employees in connection with this Agreement, or
any other transaction contemplated by this Agreement, contains or will contain
any untrue statement of a material fact or omits or shall omit to state any
material fact necessary in order to make the statements included herein or
therein not misleading.

8. REPRESENTATIONS AND WARRANTIES OF NORTHROP.

8.1 ORGANIZATION AND GOOD STANDING; AUTHORIZATION. Northrop 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
enter into the Transaction Agreements and all other agreements and instruments
to be executed by it in connection with the sale of the Assets to it, and to
consummate the transactions contemplated thereby. Northrop has the requisite
corporate power and authority to execute and deliver this Agreement and each
Transaction Agreement to which it is or will become a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery, and performance of
this Agreement and each Transaction Agreement, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized and
approved by all necessary corporate action on the part of Northrop, and no other
corporate proceedings on the part of Northrop are necessary to authorize this
Agreement or any Transaction Agreement to which it is or will become a party, or
to consummate the transactions contemplated hereby and thereby. This Agreement
and each Transaction Agreement to which it is or will become a party has been or
will be duly executed and delivered by Northrop and constitute, and when
executed and delivered this Agreement and all Transaction Agreements will
constitute, legal, valid and binding obligations

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of Northrop, enforceable against Northrop in accordance with their respective
terms.

8.2 NO CONFLICTS. Neither the execution and delivery of the Transaction
Agreements by Northrop, nor the consummation of the transactions contemplated
thereby, will (i) conflict with or result in a violation of any of the terms of
the certificate of incorporation or by-laws of Northrop, (ii) require Northrop
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Body except (a) as required by the
Bankruptcy Code, the Bankruptcy Rules and the of the Bankruptcy Court Orders,
(b) the HSR Act, (c) as set forth on SCHEDULE 8.2, and (d) those which if not
obtained could not reasonably have a material adverse effect on Northrop or the
consummation of the transactions contemplated by the Transactions Agreements,
(iii) result in a breach under any material agreement to which Northrop is a
party, which would have a material adverse effect on the business of Northrop,
or (iv) violate any statute, regulation, rule, judgment, order, decree,
stipulation or injunction of any Governmental Body to which Northrop is subject,
other than those which, in the aggregate, could not reasonably have a material
adverse effect on the consummation of the transactions contemplated by the
Transaction Agreements or on the business of Northrop.

8.3 LITIGATION. There are no actions, suits, claims or proceedings
pending before any court, Governmental Body or arbitration tribunal or, to the
Knowledge of Northrop, threatened against Northrop (i) seeking to prevent,
enjoin, restrain or delay the consummation of the transactions contemplated by
the Transaction Agreements, or (ii) questioning the validity or legality of the
Transaction Agreements or the transactions contemplated thereby.

8.4 NO BROKERS. Northrop has not engaged or committed to pay any fees
or commissions to any broker, finder or similar agent with respect to the
transactions contemplated by the Transaction Agreements.

8.5 INVESTIGATION BY NORTHROP. Northrop acknowledges that (i) it has
made such investigation into the Assets and has been offered the opportunity to
ask such questions of appropriate officers of Hexcel relating to the Assets, as
it deems appropriate to enter into the Transaction Agreements, and (ii) except
for the specific representations and warranties contained in Section 7, it is
not relying on any representation or warranty by Hexcel or any other Person in
entering into the Transaction Agreements (and will not rely on any other repre-
sentation or warranty in effecting the Closing). The foregoing shall not limit
Northrop's rights and remedies provided for herein in any way.

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8.6 NO MISREPRESENTATIONS. No written representation or warranty of
Northrop and no statement or certificate furnished or to be furnished by or on
behalf of Northrop or any of its directors, officers, employees, or agents to
Northrop or any of its agents pursuant to this Agreement or any other document
contemplated or required hereby or thereby in connection with the transactions
contemplated herein or therein contains or will contain any untrue statement of
a material fact necessary to make the statements contained herein or therein not
misleading. All schedules, certificates, affidavits, documents and instruments
furnished, or to be furnished, by Northrop or any of its directors, officers or
employees in connection with this Agreement, or any other transaction
contemplated by this Agreement, are and will be true and complete in all
material respects, and neither this Agreement nor any schedule, certificate,
affidavit, document or instrument furnished or to be furnished by Northrop or
any of its directors, officers or employees in connection with this Agreement,
or any other transaction contemplated by this Agreement, contains or will
contain any untrue statement of a material fact or omits or shall omit to state
any material fact necessary in order to make the statements included herein or
therein not misleading.

9. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.

9.1 CONDUCT OF BUSINESS. From the date hereof through the Closing Date,
Hexcel shall conduct the Chandler Business in accordance with prior practice and
in the ordinary course of business and, without limiting the generality of the
foregoing, with respect to the Assets, Hexcel shall maintain the Inventory in
the ordinary course of business and Hexcel shall not (except with the prior
written consent of Northrop): (i) mortgage, pledge or encumber any of the
Assets, except liens for taxes not delinquent, other liens arising in the
ordinary course of business and liens which can be removed on or prior to the
Closing Date; (ii) materially amend, modify or terminate any Assumed Agreement
other than in the ordinary course of business or consistent with past practice;
(iii) increase the compensation payable to any of the Hired Employees other than
routine increases made in the ordinary course of business consistent with past
practice; (iv) dispose of or permit to lapse any right to the use of any EMT
Technology or the Base Technology; (v) loan or advance any amount to, or sell,
transfer, or lease any properties or assets (tangible or intangible) to, or
enter into any agreement or arrangement with, any of the Hired Employees; (vi)
dispose of any Non-Hexcel Owned Items including, but not limited to, any
tooling; or (vii) except as provided in SCHEDULE 2.2(e), move or cause to be
moved any Assets.

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9.2 ACCESS.

9.2.1 PRIOR TO CLOSING. Between the date hereof and the Closing
Date; (i) authorized representatives of Northrop shall have reasonable access,
under the supervision of a Hexcel representative, to the Chandler Facility and
other facilities where the Chandler Business is conducted upon one (1) business
day's prior notice and (ii) Northrop shall have the right to discuss the
Chandler Business with the Hired Employees. Until the Closing Date, Northrop
shall, and shall cause its representatives to, (i) keep confidential all
information relating to the Chandler Business and the Assets obtained by
Northrop and its authorized representatives from Hexcel pursuant to this
Section 9.2.1 or otherwise in connection with the transactions contemplated by
the Transaction Agreements, other than such information as is generally known to
the public (other than as the result of disclosure by Northrop or its
representatives or affiliates), and (ii) not use any such information for any
purpose other than in connection with such transactions. In the event that the
Closing does not occur, Northrop shall, and shall cause its representatives to,
return to Hexcel all information relating to the Chandler Business and the
Assets obtained by Northrop and such representatives in connection with the
transactions contemplated by the Transaction Agreements, and maintain the
confidentiality of all proprietary or confidential information with respect to
the Chandler Business that Northrop may have received. Notwithstanding anything
contained herein to the contrary, this Section 9.2.1 shall not apply to any
information obtained by Northrop pursuant to the Northrop Contract, and
Northrop's confidentiality obligation with respect thereto shall be governed by
such agreement.

9.2.2 AFTER THE CLOSING DATE. Hexcel shall have the right for a
period of seven (7) years following the Closing Date to have reasonable access
to and the opportunity to obtain copies of those books, records and accounts,
correspondence, production records, employment records and other similar
information as may be transferred to Northrop by Hexcel in connection with the
transactions contemplated by the Transaction Agreements for the limited purposes
of concluding its involvement in the Chandler Business or in connection with any
Legal Proceeding involving the Chandler Business; PROVIDED, HOWEVER, that
nothing herein shall obligate Northrop to retain such records for a period
inconsistent with its standard record retention policies. Northrop shall have
the right for a period of seven (7) years following the Closing Date to have
reasonable access to, and the opportunity to obtain copies of, those books,
records and accounts, correspondence, production records, employment records and
other similar information which are retained by Hexcel to the extent that any of
the foregoing relate to the Assets or the Chandler Business for use only in
connection with any Legal Proceeding to which Northrop is or is likely to be a
party.

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9.3 EMPLOYEES; OPERATION OF CHANDLER FACILITY.

(a) Northrop shall offer employment which commences immediately
following the Closing to all of the employees whose names are set forth on
SCHEDULE 7.20 hereto (the "HIRED EMPLOYEES") on terms at least comparable to
those under which they are currently employed by Hexcel. On the Closing Date,
Hexcel shall release all Hired Employees who accept employment with Northrop
from any further employment obligations with Hexcel, subject to the provisions
of Section 9.3(e). Hexcel shall on the Closing Date pay the Hired Employees all
amounts due them through such date, including, but not limited to, any amounts
relating to accrued vacation and pursuant to Hexcel's retention plan. For the
purposes hereof, if the benefits under any vacation, disability, severance,
insurance, pension, retirement or other similar plan or program of Northrop is
based on an employee's years of service with Northrop (or its subsidiaries),
then, for purposes of determining the eligibility for and vesting of (but not,
in the case of any pension, 401(k) or similar plan, the amount of) benefits to
which a Hired Employee is entitled under such plan or program, such Hired
Employee's years of service with Hexcel shall be counted toward his or her years
of service with Northrop (or its subsidiaries).

(b) Subject to the immediately following sentence, in the event a
Hired Employee declines employment with Northrop as provided above and is not
replaced pursuant to the provisions of Section 11.2(l), Hexcel shall use its
best efforts to make available the services of such employee to Northrop at
Hexcel's actual cost for purposes of (i) production at the Chandler Facility and
(ii) training of a replacement employee. In the event such employee is
unavailable for any reason, is terminated by Hexcel or terminates employment
with Hexcel, Hexcel shall make available another of its employees for such
purpose until such time as Northrop has available an employee to fill the
relevant position and Hexcel has trained such employee.

(c) In the case of any employee of Hexcel at the Chandler Facility
who does not become an employee of Northrop as contemplated hereunder, Hexcel
shall offer such employee a position equivalent to such employee's current
position (the "Retained Employee") at an alternative Hexcel facility which is
located a reasonable commuting distance from the Chandler Facility. Such
position shall be on comparable terms and conditions (including, without
limitation, compensation and benefits).

(d) Northrop shall continue to operate the Chandler Facility for a
period of at least ninety (90) days after the Closing Date.

(e) After the Closing, the Hired Employees' obligations to Hexcel
pursuant to any agreement between Hexcel

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and the Hired Employees shall be limited to such employees' assignment of
technology to Hexcel by such employee or obligations with respect to or
otherwise relating to the Hexcel Intellectual Property other than the Base
Technology (except as permitted under the Base License).

(f) Simultaneously with the Closing, Hexcel shall deliver to
Northrop any and all employee records relating to the Hired Employees so long as
Hexcel has received such an employee's authorization with respect thereto.

(g) If, after the Closing, it is determined that any employees of
Hexcel were omitted from the list of Hired Employees set forth on SCHEDULE 7.20
and such employees should have been included thereon, at Northrop's option,
Hexcel and Northrop agree that Northrop may hire such employee, Hexcel agrees to
release such employee in the same manner contemplated herein, and such employee
shall otherwise be considered a Hired Employee for purposes hereof.

9.4 CONSENTS. Hexcel and Northrop shall each use all reasonable efforts
to obtain prior to the Closing Date all licenses, permits, consents, approvals,
authorizations, qualifications, and orders of governmental authorities and
parties to Contracts as are necessary to be obtained for the consummation of the
transactions contemplated hereby other than those which, if not obtained, would
not, in the aggregate, have a material adverse effect on any of the parties to
the Transaction Agreements or the transactions consummated thereby.

9.5 FULFILLMENT OF CONDITIONS PRECEDENT. Hexcel and Northrop shall each
use all reasonable efforts to cause each of the conditions to the consummation
of the transactions contemplated hereby applicable to it to be fulfilled as soon
as practicable after the date hereof.

9.6 RIGHTS TO USE INTELLECTUAL PROPERTY.

(a) Hexcel covenants and agrees with Northrop that Hexcel shall not
at any time after the Closing Date use any EMT Technology except as provided in
the EMT License. Hexcel further agrees that any breach or threatened breach by
it of any provision of this Section 9.6 shall entitle Northrop, in addition to
any other legal or equitable remedies available to it, to apply to any court of
competent jurisdiction to enjoin such breach or threatened breach without
posting any bond or other security.

(b) To enable Northrop to operate the Chandler Business after the
Closing, Hexcel hereby licenses to Northrop on a perpetual, royalty-free basis,
the use of the Hexcel Trade Names for (i) the B-2 Contract, (ii) the Assumed
Agreements and (iii) any contract for the same or similar products or services

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as provided for in (i) and (ii) for the same customer or its Affiliates. In the
case of clause (iii) of the immediately preceding sentence, Northrop agrees that
in conjunction with such use, Northrop shall provide notice of Hexcel's
ownership of the Hexcel Trade Names.

(c) Hexcel covenants and agrees that it will not now or in the
future assert in any manner, nor will it do anything, either directly or
indirectly, or aid or assist any other Party to do anything, either directly or
indirectly, to assert, that the EMT Technology or any modifications, improve-
ments or enhancements made thereto by Northrop violates or infringes upon
Hexcel's rights in (i) the Materials and Hexcel's graphite technologies,
aluminum technologies and composites technologies or (ii) in the case of other
Hexcel Intellectual Property, so long as with respect to any products produced
with any modifications, improvements or enhancements made to the EMT Technology
by Northrop, the ultimate purchaser of such product would not have purchased
such product but for the application of EMT Technology.

9.7 CONFIDENTIALITY. Northrop agrees that, regardless of whether the
transactions contemplated by the Transaction Agreements are consummated,
Northrop, its directors, officers, employers, representatives and agents shall
remain bound by the terms and conditions of the Confidentiality Agreement; PRO-
VIDED, HOWEVER, in the event that the transactions contemplated by the
Transaction Agreements are consummated, the terms of the Confidentiality
Agreement shall not apply to Northrop to the extent that such agreement relates
to the Chandler Business, the EMT Technology or the Base Technology (except as
provided in the Base License); PROVIDED FURTHER, HOWEVER, the foregoing and the
following clause shall not be deemed to affect the confidentiality provisions
contained in the EMT License and the Base License. Northrop acknowledges that
included within the documents and records of the Chandler Business that will be
turned over to Northrop on the Closing Date may be information relating to
Excluded Assets and Hexcel Intellectual Property (other than Base Technology)
("EXCLUDED CONFIDENTIAL INFORMATION"). Northrop agrees that (except as
authorized in writing by Hexcel or required pursuant to legal or administrative
process after notice to Hexcel with an opportunity to oppose, at Hexcel's
expense) Northrop shall not, and shall not suffer or permit, any of its
subsidiaries or Affiliates or any of its or their officers, directors,
employees, agents or representatives to use, reveal, divulge or make known to
any Person, any Excluded Confidential Information. Northrop agrees that if after
the Closing Date it shall discover any Excluded Confidential Information in its
possession or in the possession of any of its representatives, subsidiaries or
Affiliates, it shall forthwith deliver the same to Hexcel (except with respect
to any information relating to the Base Technology). Northrop further agrees
that any breach or threatened breach by it of any provision of this Section 9.7
shall entitle Hexcel, in addition

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to any other legal or equitable remedies available to it, to apply to any court
of competent jurisdiction to enjoin such breach or threatened breach without
posting any bond or other security.

9.8 HSR ACT. If applicable, as promptly as practicable, after the
execution hereof, Hexcel and Northrop shall make any and all filings required to
be made under the HSR Act. Hexcel and Northrop shall furnish each other such
necessary information and reasonable assistance as the other may request in
connection with the preparation of their necessary filings or submissions under
the provisions of the HSR Act. Except as otherwise provided for herein, each of
the parties shall bear its costs of complying with the requirements of the
HSR Act.

9.9 DAMAGE OR DESTRUCTION. Until the Closing, all risks of loss or
damage to the Assets shall be borne by Hexcel and, after the Closing, shall be
borne by Northrop. If any of the Assets material to the Chandler Business taken
as a whole shall be damaged or destroyed by fire or other cause prior to the
Closing, Hexcel shall immediately notify Northrop and furnish Northrop with a
written statement identifying the Assets and the amount of insurance, if any,
payable on account thereof. In the event of such damage or destruction, Northrop
may elect to (a) terminate this Agreement, (b) to require that Hexcel use such
insurance proceeds to restore or replace such Assets to their condition on the
date of this Agreement or (c) to accept such Assets in their destroyed or
damaged condition in which event any insurance proceeds payable to Hexcel with
respect to such Assets shall be assigned to Northrop.

9.10 NOTICE OF DEVELOPMENTS. Hexcel will give prompt written notice to
Northrop of any material development affecting the Assets or the Chandler
Business. Each party will give prompt written notice to the other of any
material development affecting the ability of the parties to consummate the
transactions contemplated by this Agreement.

9.11 ENVIRONMENTAL ASSESSMENT. Between the date hereof and the Closing
Date, Northrop shall be entitled to (i) conduct an environmental investigation
using any consultants as may be selected by Northrop (collectively, the
"Consultants"), which may include a Phase I, Phase II and other appropriate
investigations (collectively, the "Environmental Study"), in each case, to
determine the environmental status of the Chandler Business with respect to past
and present practices. Hexcel shall provide or cause to be provided to Northrop,
the Consultants and Northrop's other representatives, access, upon reasonable
notice, to the offices, properties (including for the purposes of testing),
facilities and books and records of the Chandler Business; and (to the extent
relevant to the Environmental Study) Hexcel shall furnish or cause to be
furnished to Northrop, the Consultants and such representatives, the data and
information such person may

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reasonably request including, but not limited to, environmental audits,
assessments, reports and comparable documents prepared by Hexcel (or consultants
retained on its behalf) and relating to the Chandler Business; and Hexcel shall
instruct its employees, attorneys, consultants, representatives and agents to
cooperate with Northrop, its Consultants and such representatives in connection
with the Environmental Study.

9.12 PURCHASE ORDERS. At the Closing, Hexcel shall assign and deliver
to Northrop, and Northrop shall assume, all unfilled purchase orders outstanding
as of the Closing Date which were extended by Hexcel in the ordinary course of
business consistent with past practice with respect to the Northrop Contract and
the Assumed Agreements.

9.13 BANKRUPTCY MATTERS.

(a) Hexcel shall promptly prepare and file an appropriate
application to the Bankruptcy Court to seek approval of the transactions
contemplated in this Agreement. In particular, Hexcel shall apply to the
Bankruptcy Court for authority to sell, for authority to assign, and for
authority to assume and assign pursuant to Sections 363 and/or 365 of the
Bankruptcy Code, for such other relief as is appropriate, and shall apply to the
Bankruptcy Court for issuance of the Bankruptcy Court Orders and the Findings of
Fact.

(b) Hexcel shall provide to Northrop's counsel drafts of all
applications, notices of application and forms of orders and forms of findings
of fact and conclusions of law and shall cooperate with Northrop's counsel in
connection with the provisions thereof. Such documents shall be provided to
Northrop so that Northrop and its counsel shall have adequate time to review and
comment upon such documents, and such documents shall reflect all reasonable
comments of Northrop and its counsel thereto.

(c) Subject to the provisions of Section 9.13(e), in the event that
Northrop is outbid in the Bankruptcy Case with respect to the sale of the
Assets, Hexcel shall reimburse Northrop for all of Northrop's costs and expenses
(including the actual fees and expenses of Northrop's counsel, accountants,
investment bankers, and other professional persons), whether or not this
Agreement is terminated, which expenses arise from or are incurred in connection
with the negotiation, documentation and implementation of this Agreement and the
Bankruptcy Court's approval thereof, including all costs and expenses of
Northrop in connection with its due diligence investigation of the Chandler
Business and the Assets to be purchased. Any claim for reimbursement under this
section shall be paid by Hexcel within ten (10) days after receipt by Hexcel of
an invoice from Northrop therefor. Such claim shall be treated as allowed
administrative expense in the case under Section 503(b) of the Bankruptcy Code

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and entitled to priority under Section 507(a)(1) of the Bankruptcy Code.

(d) Subject to the provisions of Section 9.13(e), in the event that
the Assets are sold to a person other than Northrop pursuant to a Bankruptcy
Court Order entered in the Bankruptcy Case approving such sale (except if
Northrop shall have theretofore terminated this Agreement), Hexcel shall, in
addition to the provisions of paragraph (c) above, pay to Northrop from the
proceeds of such sale an upset fee in the sum of Five Hundred Thousand Dollars
($500,000.00) ("Upset Fee"). The Upset Fee shall be paid in consideration of
Northrop's time and effort in investigating and negotiating the purchase of the
Assets pursuant to this Agreement and the transactions contemplated hereby,
which the parties hereto agree to be a reasonable dollar estimate and reflection
of such time and effort. Payment of the Upset Fee is conditional upon Northrop
being outbid in Hexcel's Bankruptcy Case for the sale of the Assets.

(e) Hexcel's obligations under Sections 9.13(c) and (d) are subject
to receipt by Hexcel of an order from the Bankruptcy Court in the Bankruptcy
Case approving such provisions.

9.14 HEXCEL TECHNICAL SERVICES.

(a) After the Closing, Hexcel agrees to provide such technical
services (which are not of the type provided for in the Supply Agreement),
including the provision of its employees to assist Northrop in using the Assets
and the Base Technology, as reasonably requested by Northrop from time to time.
Such services will be free of charge pursuant to the terms of the Services
Agreement. Hexcel's obligation to provide the technical services free of charge
shall terminate twelve (12) months after Northrop becomes obligated to pay
Hexcel any portion of the Transition Insurance Amount then remaining (other than
any portion to be retained by Northrop pursuant to Section 3.4(a)), at which
time, Hexcel shall provide such services on a time and materials basis pursuant
to purchase orders issued by Northrop.

(b) To the extent any of the systems to be provided by Hexcel under
the Services Agreement are licensed from third parties, Hexcel agrees to provide
the use of such systems to Northrop at no charge for six (6) months after the
Closing. Thereafter, if Northrop desires the use of such systems, Hexcel shall
provide the use of such systems to Northrop at a charge equal to any incremental
cost to Hexcel charged by the relevant vendor resulting from Northrop's use of
the systems.

9.15 HRP MACHINES AND OTHER ASSETS.

(a) Title to the HRP Machines and certain other assets owned by
Hexcel that are located at Hexcel facilities

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other than the Chandler Facility that are set forth on SCHEDULE 9.15 (the
"Leaseback Assets") shall be transferred to Northrop in the manner contemplated
herein effective as of the Closing. Simultaneously with the Closing, Northrop
will lease the Leaseback Assets to Hexcel on terms and conditions provided for
in the Equipment Lease in the form of EXHIBIT 2 hereto (the "Equipment Lease").
Upon termination of the Equipment Lease, Hexcel shall return the Leaseback
Assets to Northrop and Northrop shall have full use of the Leaseback Assets
without any obligation to Hexcel with respect to such Leaseback Assets.

(b) Pursuant to the terms of the Supply Agreement, Hexcel agrees to
supply Northrop with the products and services provided using the Leaseback
Assets at most favored customer rates (except rates used in special
circumstances) on a timely basis and, subject to the provisions of Section 9.16,
to meet all of Northrop's requirements in connection therewith. Hexcel further
agrees to train Northrop personnel to utilize the Leaseback Assets for all
necessary purposes, as reasonably requested by Northrop from time to time, which
may be as often as quarterly.

9.16 BASE TECHNOLOGY CARVE-OUT ITEMS. Northrop agrees to purchase from
Hexcel pursuant to the terms of the Supply Agreement Northrop's requirements for
items and services set forth on a schedule thereto (the "Base Technology Carve-
Out Items") subject to the following limitations: (1) Northrop's obligation to
purchase shall only commence six months after the Closing Date although Northrop
may so purchase prior to the end of that time period; (2) Northrop may at any
time during the term of the Supply Agreement on a periodic basis manufacture so
much of the Base Technology Carve-Out Items or provided the services called for
therein as Northrop determines in its reasonable discretion is necessary to
assure itself that it has the capacity to manufacture those items or provide
such services; (3) such obligation shall terminate if Hexcel ceases to do
business, (4) such items and services will be purchased at most favored customer
rates (except rates used in special circumstances), and (5) subject to the
foregoing and the terms of the Supply Agreement, Hexcel shall meet all of
Northrop's requirements for such items.

9.17 TITLE AND TITLE INSURANCE. At the Closing, Hexcel shall deliver to
Northrop for the Owned Real Property an American Land Title Association ("ALTA")
owner's policy extended coverage form of title insurance (together with an ALTA
Survey) and the endorsements listed on SCHEDULE 9.17 in form and substance
satisfactory to Northrop (an "Owned Real Property Title Policy"), with liability
in a face amount equal to the value assigned to the Owned Real Property pursuant
to the allocation provided for in Section 3.1, insuring fee simple title to each
such parcel in Northrop subject only to Permitted Liens.

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9.18 CONVEYANCE OF TITLE TO REAL PROPERTY. At the Closing, Hexcel shall
convey fee title to the Owned Real Property to Northrop by a limited warranty
deed or deeds, and shall have issued the Owned Real Property Title Policy, free
and clear of all Liens except for Permitted Liens and any other exceptions to
title permitted here.

9.19 RELEASES.

9.19.1 HEXCEL RELEASE OF NORTHROP. Subject to the Closing, except
for (i) the obligations created or provided for in the Transaction Agreements
(or any agreement contemplated thereunder), (ii) the obligations of Northrop and
its wholly-owned subsidiaries to pay for services performed or products
delivered by Hexcel prior to the Closing Date, (iii) the obligations incurred
after the Closing Date by Northrop or its wholly-owned subsidiaries under any
contract which remains effective after the Closing Date, Hexcel hereby (on its
own behalf and on behalf of its Affiliates, successors and assigns) irrevocably
generally releases Northrop and its subsidiaries, successors, assigns, officers,
directors, agents, attorneys, employees and Affiliates from any and all claims,
demands, liabilities, suits, cross-complaints, debts, damages, offsets and
assertions of any kind or nature whatsoever, including, but not limited to, any
such claims under the Northrop Contract.

9.19.2 NORTHROP RELEASE OF HEXCEL. Subject to the Closing,
Northrop hereby (on its own behalf and on behalf of its Affiliates, successors
and assigns) (i) irrevocably specifically releases Hexcel and its subsidiaries,
officers, directors, agents, attorneys, employees and Affiliates from any and
all claims, demands, liabilities, suits, cross-complaints, debts, damages,
offsets and assertions of any kind or nature whatsoever, which relate
exclusively to Hexcel's continuing obligation to produce parts for Northrop (and
any previous failure to do so) pursuant to the Northrop Contract and Hexcel's
warranty obligations to Northrop with respect to any parts produced thereunder,
and (ii) agrees to withdraw the claim Northrop (but not its Affiliates) filed in
the Bankruptcy Case.

9.19.3 WAIVER OF CIVIL CODE SECTION 1542. Hexcel and Northrop, and
each of its respective Affiliates, specifically waive the benefits and
provisions of Section 1542 of the California Civil Code or any similar statute
in any state that provides as follows:

"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR."

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9.19.4 RELEASES CONTINGENT UPON CLOSING. The releases granted
hereby are contingent in their entirety upon the Closing.

9.19.5 NO RELIANCE ON OTHER PARTY. Hexcel and Northrop hereby
acknowledge and agree that in providing the releases in this Section 9.19, they
have conducted such investigations as they have deemed necessary and
appropriate, and except as provided for herein or in any other Transaction
Agreement, they have not relied on any other representations of the parties. As
a result of the foregoing, any facts discovered subsequent hereto shall not be
grounds for rescission of the releases provided for in this Section 9.19.

9.20 PAYMENT OF EXPENSES. Hexcel shall be responsible for the payment
of (i) all documentary transfer taxes and other fees payable upon recordation of
the limited warranty deeds; (ii) all expenses incurred in connection with
obtaining the Owned Real Property Title Policy including, without limitation,
the surveys and the cost of title searches and other local land recording fees;
and (iii) all escrow fees.

9.21 ADVANCE AGREEMENT AND AUGUST 4 AGREEMENT. Hexcel and Northrop
acknowledge and agree that the Advance Agreement and August 4 Agreement shall
remain in full force and effect through the Closing Date or the prior
termination of this Agreement and Hexcel shall continue to produce and deliver
products to Northrop on a timely basis through such date as contemplated
therein.

9.22 COMANCHE CONTRACT; BIDS. Northrop and Hexcel agree to cooperate
with each other with respect to (i) all discussions and negotiations with The
Boeing Company as to matters relating to the Comanche Contract, and (ii) the
modification or rejection of any outstanding Bid.

9.23 PRODUCT WARRANTIES. In the event Hexcel requires the use of any
Assets sold to Northrop hereunder in fulfilling Hexcel's product warranties and
guarantees extended with respect to the Chandler Business, Northrop agrees to
subcontract with Hexcel to perform such work on a basis which does not interfere
with Northrop's use of the Assets, and Hexcel shall reimburse Northrop pursuant
to the terms of a subcontract to be negotiated between the parties on
commercially reasonable terms.

9.24 HONEYCOMB CORE MATERIALS. The parties recognize that the
composition of matter and related Intellectual Property for honeycomb core in
its natural, unmodified form designated by the trade names HRP Flex, HRP Hex,
HRH-327, HFT, HRH-10, CECORE and TPH as set forth in Schedule B (collectively,
the "Materials") might otherwise be considered EMT Technology. Despite the
foregoing, the parties hereby agree that such Materials shall be considered Base
Technology, and that, notwithstanding anything in this Agreement, Hexcel may
make, use and sell the Materials in

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any cell size and/or density for any purpose, except that it may not alter
the Materials by the addition of ohmic or magnetic additives (except as
permitted under the EMT License). As provided for in the Base License, Northrop
shall only be entitled to make, have made (except as provided in the Base
License), use and sell the Materials so long as, in addition to altering the
cell size or density of the relevant products should Northrop choose to do so,
or making other changes with respect thereto, Northrop incorporates EMT
Technology in conjunction therewith. Hexcel and Northrop further agree that any
breach or threatened breach by it of the foregoing provisions shall entitle the
other party, in addition to any other legal or equitable remedies available to
it, to apply to any court of competent jurisdiction to enjoin such breach or
threatened breach without positing any bond or other security.

9.25 CERAMIC HONEYCOMB. Hexcel agrees to use its good faith best
efforts to obtain the consent of all interested Persons to allow Northrop to
obtain a license to use Hexcel's patent no. 5,078,818 (the "Hexcel Ceramic
Patent") and data related thereto and once such consent or approval is obtained,
Hexcel hereby agrees to amend the Base License to include the Hexcel Ceramic
Patent and related data in the Base Technology licensed to Northrop thereunder
as it relates to non-oxide ceramic compositions of matter. In the event Hexcel
is unable to obtain the consent to license Northrop the Hexcel Ceramic Patent as
set forth above prior to the Closing or in the event the patent to be applied
for pursuant to the provisions of Section 11.2(p) covering ceramic honeycomb
with controllable ohmic loss properties is objected to by a Person or is disal-
lowed by the United States Patent and Trademark Office solely based upon the
prior art in the Hexcel Ceramic Patent, Hexcel agrees to include ceramic
honeycomb as one of the items to be supplied to Northrop pursuant to the Supply
Agreement, PROVIDED, HOWEVER, upon receipt of the above-referenced consent and
the referenced patent is issued, the parties agree to amend the Supply Agreement
to delete ceramic honeycomb as one of the items to be supplied thereunder.

9.26 CECORE MACHINE. During the three (3) year period following the
Closing Date, Hexcel shall, upon the written request of Northrop, lease to
Northrop a CECORE TM Machine of mutually agreed upon design ("Machine) for use
in connection with manufacturing the materials designated by the trade name
"CECORE." Upon such request, the parties shall enter into a lease upon mutually
agreeable terms which shall include the following provisions:

(a) The aggregate amount of lease payments during the first year of
the lease term will be no more than the actual out-of-pocket costs incurred by
Hexcel in constructing the Machine (with such costs being evidenced by
appropriate documentation) and such payment shall be due in twelve (12) equal

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monthly installments commencing upon delivery of the Machine to Northrop;

(b) The amount of the annual lease payments thereafter shall be at
an annual rate equal to 10% of the amount paid pursuant to paragraph (a) above,
which payments shall be made on a monthly basis;

(c) The lease shall be terminable by Northrop at any time after the
first year upon ninety (90) days prior written notice;

(d) Hexcel shall retain title to the Machine;

(e) Northrop shall own any improvements to the Machine;

(f) In the event Hexcel shall be liquidated under the Bankruptcy
Code, sell substantially all of its assets or desire to sell the Machine,
Northrop shall have the option to purchase the Machine for $1.00; and

(g) Northrop shall maintain as confidential, in accordance with the
terms of the Base License, any Intellectual Property owned by Hexcel used in the
construction and/or the operation of the Machine.

9.27 CONFIDENTIALITY AND/OR SECRECY AGREEMENTS. Following the
Closing, upon Northrop's written request, Hexcel agrees to take such steps that
are reasonably necessary in order to make available to Northrop any
"Confidentiality and/or Secrecy Agreements" (a list of which has been previously
provided in writing to Northrop) that are not Assumed Agreements and, if so
requested, Hexcel shall use its best efforts to obtain consent of the relevant
party and if so obtained, shall assign any such agreement to Northrop. Once such
Confidentiality and/or Secrecy Agreement is appropriately assigned to Northrop,
Hexcel shall provide to Northrop all records, (including bid files) related
thereto, to the extent such records relate to the Chandler Business, except if
such records relate solely to Base Technology and except for any pricing data
with respect to Structural Core.

9.28 PURCHASE ORDERS. Immediately prior to the Closing, Hexcel shall
provide to Northrop copies of all purchase orders issued by Hexcel's Chandler
Facility to other businesses and facilities owned by Hexcel ("Internal Purchase
Orders"). Northrop shall be entitled to designate those Internal Purchase Orders
that it wants converted to purchase orders to be treated as if issued by
Northrop to such of Hexcel's facilities or businesses. Hexcel agrees to perform
pursuant to the terms of any such converted Internal Purchase Orders. Hexcel
hereby agrees from the date hereof to the Closing Date to continue to issue
Internal Purchase Orders and purchase orders to third party

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vendors to enable the Chandler Business to operate in its normal course and to
provide sufficient materials on the Closing Date in order to enable Northrop to
meet the delivery dates provided for in the master operating schedule agreed to
by Hexcel and Northrop with respect to the Northrop Contract.

10. INDEMNIFICATION BY NORTHROP AND HEXCEL.

10.1 INDEMNIFICATION BY NORTHROP. Northrop shall indemnify and hold
harmless Hexcel, each Affiliate, successor (if any), officer, director,
controlling person, employee and agent of Hexcel from and against, and shall
reimburse Hexcel for, any Damages arising from or in connection with:

(a) any inaccuracies in any of the representations and warranties
of Northrop in any Transaction Agreement or in any certificate delivered by
Northrop pursuant to any Transaction Agreement, or any actions, omissions or
state of facts inconsistent with any such representation or warranty;

(b) any failure by Northrop to perform or comply with any agreement
made by it under any Transaction Agreements;

(c) any failure by Northrop to perform any obligations or
Liabilities under the Assumed Agreements except in the event Northrop would have
been indemnified by Hexcel under any Transaction Agreement for such obligation
or Liability or Damages result in any way from Hexcel's action or inaction; or

(d) any claim made by a Hired Employee relating to his or her
employment relationship with Northrop after the Closing Date so long as such
claim is not based upon any of Hexcel's actions or inactions prior to the
Closing Date, other than if such claim against Hexcel relates to the employee
files delivered to Northrop hereunder, but then only to the extent such claim so
relates.

10.2 INDEMNIFICATION BY HEXCEL.

10.2.1 INDEMNIFICATION. Hexcel shall indemnify and hold harmless
Northrop, each Affiliate, successor (if any), officer, director, controlling
person, employee and agent of Northrop, from and against, and shall reimburse
Northrop for, any Damages arising from or in connection with:

(a) any inaccuracies in any of the representations and
warranties of Hexcel in any Transaction Agreement or in any certificates
delivered by Hexcel pursuant to any Transaction Agreement, or any actions,
omissions or state of facts inconsistent with any such representation or
warranty;

(b) any failure by Hexcel to perform or comply with any
agreement made by it under any Transaction Agreement; or

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10.3 NOTICE OF ASSERTED LIABILITY. Promptly after receipt by an
indemnified party of notice of any demand, claim or circumstances which, with
the lapse of time, would give rise to a claim or the commencement (or threatened
commencement) of any action, proceeding or investigation (an "Asserted
Liability") that may result in Damages, the party receiving such notice (the
"Indemnitee") shall give notice thereof to the other party (the "Indemnitor").
The notice shall describe the Asserted Liability in reasonable detail and shall
indicate the amount (estimated, if necessary) of the Damages that have been or
may be suffered by Indemnitee. The failure so to notify the Indemnitor shall not
relieve it of any liability that it may have to Indemnitee except to the extent
that Indemnitor demonstrates that the defense of such action is materially
prejudiced thereby.

10.4 OPPORTUNITY TO DEFEND. Indemnitor may elect to compromise or
defend, at its own expense and by its own counsel, any Asserted Liability;
PROVIDED, HOWEVER, that Indemnitor may not compromise or settle any Asserted
Liability without the consent of Indemnitee unless such compromise or settlement
requires no more than a monetary payment for which Indemnitee and any other
indemnifiable parties hereunder are fully indemnified or involves other matters
not binding upon Indemnitee or such other indemnifiable parties. If Indemnitor
elects to compromise or defend such Asserted Liability, it shall within thirty
(30) days (or sooner, if the nature of the Asserted Liability so requires)
notify Indemnitee of its intent to do so with counsel reasonably satisfactory to
Indemnitee, and Indemnitee shall cooperate in the compromise of, or defense
against, such Asserted Liability. If Indemnitor so elects, Indemnitor shall be
obligated to defend such Asserted Liability until either (a) Indemnitor and
Indemnitee agree otherwise or (b) a court of competent jurisdiction determines
that Indemnitor does not have an obligation to indemnify Indemnitee. If
Indemnitor elects not to compromise or defend any Asserted Liability, fails to
notify Indemnitee of its election as provided herein or contests its obligation
to indemnify Indemnitee, Indemnitee may pay, compromise or defend such Asserted
Liability in respect of any Asserted Liability for which Indemnitor may have an
indemnification obligation hereunder, without prejudice to any right it may have
hereunder. The party which elects to compromise or defend any Asserted Liability
pursuant to the foregoing provision shall control the matter subject to such
provisions. In any event, once Indemnitor elects to defend any Asserted
Liability, Indemnitee may participate, at its own expense from that point in
time, in the defense of any Asserted Liability. If either party chooses to
defend or participate in the defense of any Asserted Liability, it shall have
the right to receive from the other party, subject to any restriction of
Applicable Law or that may be necessary to preserve the privilege of attorney-
client communications, any books, records or other

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documents within such other party's control that are necessary or appropriate
for such defense.

10.5 LIMITATIONS ON LIABILITY.

(a) Except as specifically provided for in the Transaction
Agreements, Northrop's sole and exclusive remedy against Hexcel for any breach
of a representation, warranty or covenant, or for the failure of Hexcel to
perform or comply with any agreement made by it under any of the Transaction
Agreements, and Hexcel's sole and exclusive remedy against Northrop for any
breach of a representation, warranty or covenant, or for the failure of Northrop
to comply with any agreement made by it under any of the Transaction Agreements,
shall be a claim for indemnification made pursuant to and subject to the terms
and conditions of Section 10.

(b) All representations and warranties made by Hexcel and Northrop
herein, in any other Transaction Agreements, or in any instruments or documents
furnished in connection herewith or therewith shall survive the Closing without
limit, subject to the expiration of any applicable statutes of limitations
relating to any claim with respect thereto. Notwithstanding anything in this
Agreement to the contrary, except as to claims relating to the Supply Agreement,
the Equipment Lease, Services Agreement or Facility Agreement, neither party
hereto shall be entitled to receive, nor shall the other party be obligated to
pay, any amount of the indemnity obligations otherwise payable by such party to
the other for any individual claim of (i) less than $2,500, and (ii) until the
aggregate amount of all claims (other than claims of third parties relating to
the Retained Liabilities) shall have reached $250,000, whereupon the entire
amount in excess of $250,000 shall be payable under this Section 10.

(c) Neither party shall be liable to the other for any punitive,
consequential or other special damages; PROVIDED, HOWEVER, that nothing herein
shall prevent or limit Northrop or Hexcel from recovering any fines, penalties
or multiple Damages awarded or assessed by any court or Governmental Body with
respect to any Assumed Agreements; PROVIDED, FURTHER, the foregoing shall not
limit in any manner whatsoever either party's indemnification obligation
hereunder for any Damages asserted by a third party, unless otherwise provided
for in the Transaction Agreements.

(d) If any legal action is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.

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(e) Hexcel and Northrop each hereby acknowledges that the breach of
material terms contained herein (whether or not specifically designated as such)
would cause irreparable damage and substantial prejudice to Hexcel and Northrop,
as the case may be. Accordingly, notwithstanding any other provision hereof,
Hexcel and Northrop agree that, in the event of any such breach hereunder which
gives rise to a claim under this Section 10, each party shall have, in addition
to its legal remedies, the right to injunctive relief, as permitted by law, to
prevent the violation of its obligations hereunder.

10.6 RIGHT OF SET-OFF. In order to secure payment of any claim of
Northrop against Hexcel arising under the Transaction Agreements (other than the
Supply Agreement or the Services Agreement), Northrop shall have the right to
set-off payments which may be payable with respect to the Contingent Purchase
Price or the Transition Insurance otherwise due Hexcel. If Northrop has a
reasonable basis to believe that such a claim exists against Hexcel, Northrop
may defer making any of the above-referenced payments, up to the amount of
Northrop's claim, until resolution of such claim. Despite the foregoing and not-
withstanding Section 3.4(a), Northrop may only defer such a payment with respect
to a claim based upon a CAS violation if Northrop has received written notice
asserting such a claim from a Governmental Body and Northrop has not previously
otherwise held back sufficient funds to cover the claim. If any matter is
subsequently decided adversely to Northrop, any amounts determined to be due
from Northrop to Hexcel shall bear interest from the date such amount was due at
the Reference Rate.

11. CONDITIONS TO OBLIGATIONS OF EACH PARTY.

11.1 CONDITIONS TO OBLIGATIONS OF HEXCEL AND NORTHROP. The parties'
obligations to effect the Closing shall be subject to the satisfaction, or
waiver thereof, at or before the Closing Date of the following conditions:

(a) The Bankruptcy Court Orders shall have been entered with
respect to Hexcel and shall be final and (i) no order staying the transactions
contemplated by this Agreement shall then be in effect; (ii) all conditions and
directions contained in the Bankruptcy Court Orders shall have been complied
with to the extent necessary such that the Bankruptcy Court Orders are, and will
remain, effective without any material modification thereto assuming continued
compliance with the provisions thereof; and (iii) the Bankruptcy Court Orders
shall not modify in any respect the terms and conditions of this Agreement or
the transactions contemplated hereby other than such changes in terms and
conditions as may be reasonably acceptable to Northrop.

(b) The parties shall have entered into each of the Transaction
Agreements, including, without limitation, the

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License Agreements, Equipment Lease, Supply Agreement, Facility Agreement and
Services Agreement and any other agreements contemplated hereby.

(c) No action or proceeding shall have been instituted before or by
any court or Governmental Body and remain pending before any court or
Governmental Body seeking to enjoin, restrain or prohibit, and no order or
directive shall have been issued by any court or Governmental Body which
enjoins, restrains or prohibits the consummation of the transactions
contemplated by the Transaction Agreements by Hexcel or Northrop.

(d) To the extent applicable, all necessary filings under the HSR
Act shall have been effected, all necessary approvals in connection therewith
shall have been obtained, and all applicable periods waiting shall have elapsed.

(e) As to existing open purchase orders, subject to receiving all
appropriate documentation, Northrop shall have paid all invoices that are dated
more than ten (10) days prior to the Closing Date.

(f) As to purchase order nos. 501776U, 501878U3, 501878U4, 703009E,
402502U8, 501878U1, Northrop and Hexcel shall have resolved any issues with
respect to the related termination invoices and payment shall be made to the
appropriate party, except in the event such resolution is subject to customer
approval.

(g) The parties shall have entered into an escrow agreement with a
mutually selected escrowholder in order to effect the transfer of the Owned Real
Property.

11.2 CONDITIONS TO OBLIGATIONS OF NORTHROP. The obligation of Northrop
to consummate the transactions contemplated hereby shall be subject to the
fulfillment, or waiver thereof, at the Closing Date, of the following additional
conditions:

(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Hexcel contained in this Agreement or in any other certificate or
document delivered to Northrop pursuant hereto shall be true and correct in all
material respects on the Closing Date with the same effect as if made on the
Closing Date, and at the Closing Hexcel shall have delivered to Northrop a
certificate to such effect signed by the Chairman of the Board, the Chief
Executive Officer, any Vice-Chairman, the President or any Vice President of
Hexcel.

(b) HEXCEL'S PERFORMANCE. Each of the obligations of Hexcel to be
performed by it on or before the Closing date pursuant to the terms of this
Agreement shall have been performed in all material respects on or before the
Closing Date and at the Closing Hexcel shall have delivered to Northrop a
certificate to

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such effect signed by the Chairman of the Board, the Chief Executive Officer,
any Vice-Chairman, the President or any Vice President of Hexcel.

(c) AUTHORITY. All actions required to be taken by, or on the part
of, Hexcel to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Board of Directors of Hexcel.

(d) OPINION OF HEXCEL'S COUNSEL. Northrop shall have been
furnished at the Closing with an opinion of Hexcel's counsel, dated the Closing
Date, addressed to Northrop, substantially in the form of EXHIBIT 3 hereto.

(e) ADDITIONAL CLOSING DOCUMENTS OF HEXCEL. Northrop shall have
received at the Closing the following documents, dated the Closing Date:

(i) A copy of the certificate of incorporation of Hexcel duly
certified as of a recent date by the Secretary of State of Delaware, and
a certificate dated as of a recent date, executed by the appropriate
officials of the States of Delaware, Arizona and California as to the
good standing of Hexcel;

(ii) Copies, certified by the Secretary or an Assistant Secretary
of Hexcel of resolutions of the Board of Directors of Hexcel authorizing
the execution, delivery and performance of the Transaction Agreements and
the consummation of the transaction contemplated hereby;

(iii) A list of all Hired Employees, the date each such employee
commenced work there at and copies of the employment eligibility
verification (U.S. Form I-9) and any documentation obtained by Hexcel to
verify the information therein;

(iv) Such deeds of conveyance, bills of sale, patent assignments
in recordable form and other instruments of sale, transfer, conveyance,
assignment and delivery covering the Assets or any part thereof as
Northrop may reasonably require to assure the effective sale, transfer,
conveyance, assignment and delivery to it of the Assets required to be
transferred to Northrop under this Agreement;

(v) The Title Policy;

(vi) Subject to any legal restrictions, a list of customers of the
Chandler Business during the last three (3) years which list shall
contain a contact person and a telephone number for each such customer;
and

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(vii) Such other documents as Northrop may reasonably request.

(f) LICENSES, PERMITS AND CONSENTS. Northrop shall have received
evidence, in form and substance reasonably satisfactory to it, that all
licenses, permits, security clearances, consents, approvals, authorizations,
qualifications and orders of Governmental Bodies and Persons pertaining to the
Assets or Assumed Agreements as are necessary for the operation of the Chandler
Business as currently conducted and the consummation of the transactions
contemplated hereby (including without limitation, the licenses, permits,
consents, approvals, authorizations, qualifications and orders set forth in
Section 7.3) have been obtained, other than those which, if not obtained, would
not, in the aggregate, have a material and adverse effect on the transactions
contemplated hereby or on the Assets or Northrop.

(g) NO PROCEEDINGS OR LITIGATION. There shall not be threatened,
instituted or pending any proceeding by or before any court or Governmental Body
requesting or looking toward an order, judgment or decree which (i) restrains or
prohibits the consummation of the transactions contemplated hereby, (ii) would
have a material adverse effect on Northrop's ability to exercise control over or
manage the Chandler Business taken after the Closing, or (iii) would have a
material adverse effect on the Chandler Business taken as a whole.

(h) HSR ACT. The waiting period under the HSR Act shall have
expired or been terminated.

(i) MATERIAL CHANGES. There shall have been no material adverse
change in the Assets or in the financial condition, results of operations or
business of the Chandler Business since January 1, 1993 (other than with respect
to matters arising under the Bankruptcy Case). Hexcel shall not have suffered
any loss (whether or not insured) by reason of physical damages caused by fire,
earthquake, flood, wind, accident or other calamity or Act of God which,
individually or in the aggregate, materially and adversely affects the value of
the Assets. For the purposes of this Agreement, a "material adverse change"
shall include, without limitation, any development or discovery of any material
contingent or other liability not disclosed in the schedules hereto which might
materially adversely affect the Assets, business, properties, assets or
relations with customers, suppliers, distributors or employees of Hexcel that
relates to the Chandler Business.

(j) APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions and other documents delivered to Northrop
under this Agreement shall be satisfactory in all reasonable respects to
Northrop and its counsel.

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(k) DUE DILIGENCE. Prior to the Closing Date, Northrop shall have
completed its due diligence relating to the Assets, financial condition, results
of operations, business and prospects of the Chandler Business and, in each
case, Northrop shall be satisfied, in its reasonable discretion, that the
representations and warranties contained herein are accurate in all material
respects.

(l) KEY EMPLOYEES. On the Closing Date, Northrop shall have
entered into mutually acceptable employment relationships with the Hired
Employees, but in the event such a Hired Employee declines employment with
Northrop, Hexcel may provide to Northrop a substitute employee of Hexcel
reasonably acceptable to Northrop.

(m) REJECTION OF CONTRACTS. Hexcel shall have satisfied its
obligations under Section 6.4 and 9.22.

(n) PPE BOOK VALUE. As of the Closing, the PPE Book Value shall be
no less than Seventeen Million Dollars ($17,000,000.00) less any depreciation
accrued between July 31, 1994 and the Closing Date.

(o) SECURITY CLEARANCES. Northrop has received such security
clearances as are necessary to operate the Chandler Facility and the Chandler
Business.

(p) EMT DISCLOSURES. As to the five (5) EMT Technology disclosures
set forth on SCHEDULE E hereto, Hexcel shall have caused patent applications to
be submitted to the United States Patent and Trademark Office and the
out-of-pocket expense of preparation and prosecution thereof and filing fees
related thereto shall be reimbursed to Hexcel by Northrop.

(q) LIENS. Hexcel shall have removed all liens on the Assets other
than those set forth on SCHEDULE 7.4 hereto, except those that are designated on
such schedule to be removed on or prior to the Closing.

(r) HEXCEL CERAMIC PATENT. Hexcel shall have used its good faith
best efforts to obtain the consent of all interested Persons to allow Northrop
to obtain a license to use the Hexcel Ceramic Patent and data related thereto.

(s) FACILITY AGREEMENT. Hexcel shall have implemented the
provisions of the Facility Agreement, including, but not limited to, erecting
appropriate fences, etc.

(t) SCHEDULE 7.15. The parties shall have reached agreement with
respect to the contents of Schedule 7.15.

(u) PURCHASE ORDERS. Northrop shall be reasonably satisfied that
(i) the Internal Purchase Orders and purchase

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orders to third party vendors that are outstanding as of the Closing Date which
are to be assumed by Northrop and (ii) the Inventory, are sufficient to enable
Northrop to meet the delivery dates provided for in the master operating
schedule previously agreed to by Hexcel and Northrop with respect to the
Northrop Contract.

(v) SUPPLY AGREEMENT. Hexcel shall have provided to Northrop
Schedule B to the Supply Agreement in a form reasonably satisfactory to
Northrop. In addition, as to any products to be supplied by Hexcel to Northrop
pursuant to the Supply Agreement, in the event Hexcel does not supply that
product to any other party, Northrop and Hexcel shall have reached agreement as
to the price of the product for calendar year 1995.

11.3 CONDITIONS TO OBLIGATIONS OF HEXCEL. The obligation of Hexcel to
consummate the transactions contemplated hereby shall be subject to the
fulfillment, or waiver thereof, at the Closing Date, of the following additional
conditions:

(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Northrop contained in this Agreement or in any document delivered
pursuant thereto shall be true and correct in all material respects on the
Closing Date with the same effect as if made on the Closing Date, and at the
Closing Northrop shall have delivered to Hexcel a certificate to such effect,
signed by the President or any Vice President of Northrop.

(b) PERFORMANCE OF COVENANTS. Each of the obligations of Northrop
to be performed on or before the Closing Date pursuant to the terms of this
Agreement shall have been duly performed in all material respects on or before
the Closing Date, and at the Closing Northrop shall have delivered to Hexcel a
certificate to such effect signed by the President or any Vice President of
Northrop.

(c) PAYMENT OF PURCHASE PRICE. Northrop shall have paid the
Closing Date Payment to Hexcel at the Closing pursuant to Section 3.2 hereof.

(d) AUTHORITY. All actions required to be taken by, or on the part
of, Northrop to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Board of Directors of Northrop.

(e) OPINION OF NORTHROP'S COUNSEL. Hexcel shall have been
furnished with an opinion of Northrop's counsel, dated as of the Closing Date,
addressed to Hexcel, substantially in the form of EXHIBIT 4 hereto.

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(f) ADDITIONAL CLOSING DOCUMENTS OF NORTHROP. Hexcel shall have
received at the Closing the following documents, each dated the Closing Date:

(i) A copy of the certificate of incorporation of Northrop duly
certified as of a recent date by the Secretary of State of Delaware, and a
certificate dated as of a recent date, executed by the Secretary of State of
Delaware, as to the good standing of Northrop;

(ii) Copies certified by the Secretary or an Assistant Secretary
of Northrop, of resolutions of the Board of Directors of Northrop authorizing
the execution and delivery of the Transaction Agreements and the consummation of
the transactions contemplated hereby;

(iii) Such instruments and agreements as Hexcel may reasonably
require to assure the effective assumption of the Assumed Liabilities by
Northrop; and

(iv) Such other documents as Hexcel may reasonably request.

12. TERMINATION.

12.1 TERMINATION. This Agreement may be terminated in a writing at any
time prior to the Closing:

(a) By mutual agreement of Hexcel and Northrop;

(b) By either Hexcel or Northrop if the Closing shall not have
taken place on or before the Outside Date by reason of the failure of any
Closing conditions under Section 11 hereof, provided that neither party
may terminate this Agreement pursuant to this clause if the failure
results primarily from such party's breach of a representation or
warranty or its failure to fulfill any of its respective obligations
under this Agreement shall have been the reason that the Closing Date
shall not have occurred on or before such date;

(c) By either Hexcel or Northrop, if there shall be any law, rule
or regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if any judgment, injunction,
order or decree enjoining Hexcel or Northrop from consummating such
transactions is entered and such judgment, injunction, order or decree
shall become final and nonappealable; or

(d) By either Hexcel or Northrop, if: (i) any of the material
representations or warranties of the other party contained herein or in
any Schedule attached hereto shall prove to be inaccurate or untrue in
any material

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respect; or (ii) any material obligation, term or condition to be
performed, kept or observed by such other party hereunder has not been
performed, kept or observed in any material respect at or prior to the
time specified in this Agreement.

12.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 12.1 hereof, this Agreement (other than the
provisions of this section and Section 9.7, Section 15.9 and Section 15.14
hereof) shall forthwith become void and have no effect, without any further
liability on the part of any party, except that if one of the parties has
theretofore materially breached any of its obligations under this Agreement and
such breach resulted in the termination, such party shall reimburse to the non-
breaching party the documented expenses incurred by the non-breaching party in
connection with the negotiation, execution and delivery of this Agreement.

13. COVENANT NOT TO COMPETE; NON-SOLICITATION; NO HIRE.

13.1 NORTHROP COVENANT. Northrop agrees that, in the event that the
sale of the Assets to Northrop contemplated hereby is consummated, then for a
period of five years after the Closing Date (the "Covenant Period"), Northrop
shall not, directly or indirectly, without the express written consent of
Hexcel, (A) engage in the manufacture or sale of structural honeycomb core,
whether or not such core involves the use of the Base Technology ("Structural
Core"), except if the manufacture or sale is permitted under the Base License,
(B) engage in the sale of the products set forth on Schedule 13.1 (which
products have been more fully described in documents delivered by Hexcel simul-
taneously with the execution of this Agreement), except if the manufacture or
sale is permitted under the Base License, or (C) induce, invite, solicit or
attempt to induce, invite or solicit any Retained Employee who is employed by
Hexcel as of the Closing Date and is not subsequently terminated by Hexcel, to
leave the employ of Hexcel; PROVIDED, HOWEVER, general advertisement for
employees shall not be considered solicitation for purposes hereof; PROVIDED
FURTHER, HOWEVER, the provisions hereof shall not be so construed as to prevent
Northrop from acquiring, by way of merger, purchase of stock, acquisition of
assets or any other transaction, any other entity or Person or their assets (the
"Acquired Business") that is engaged in the manufacture or sale of Structural
Core provided that (X) if at the time of such acquisition, the revenue from the
sale of Structural Core by the Acquired Business represents less than thirty
percent (30%) of the Acquired Business's gross revenues for the immediately
preceding twelve (12) months, Northrop, but only through the Acquired Business,
shall be entitled to manufacture or sell Structural Core during the Covenant
Period or (Y) in the event that the sale of such Structural Core by the Acquired
Business represents an amount equal to or greater than

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thirty percent (30%) of the Acquired Business's gross revenues for the
immediately preceding twelve (12) months, Northrop either divests itself of the
portion of the Acquired Business producing such revenues within one year from
the date of acquisition or ceases such activities by such date. With respect to
any Acquired Business, Northrop agrees that (i) employees of the Acquired
Business will not be permitted access to the Base Technology, (ii)
communications with Northrop personnel familiar with and having access to
documents and other data relating to the Base Technology shall be prohibited,
(iii) other similar measures will be instituted to prevent release or
commingling of such Base Technology with the business and operations of the
Acquired Business and (iv) the Base Technology will not be used in the Acquired
Business. Northrop and Hexcel hereby recognize that the foregoing provisions
shall in no way prevent Northrop from manufacturing or selling anything (other
than Structural Core) using its current assets or technologies or prevent
Northrop in any way from competing with Hexcel other than with the Structural
Core. In addition, Northrop agrees that throughout the Covenant Period it will
not use the Assets or the Base Technology to compete with Hexcel's existing
uncured prepreg products except that Northrop can produce such prepreg products
as intermediates to assemblies and for purposes relating to EMT Technology.

13.2 HEXCEL COVENANT. Hexcel agrees that, in the event that the sale of
the Assets to Northrop contemplated hereby is consummated, then during the
Covenant Period, Hexcel shall not, directly or indirectly, without the express
written consent of Northrop, use (a) the Materials except as provided for in
Section 9.24, or (b) any Hexcel Intellectual Property owned by Hexcel now or in
the future that enables the design, fabrication, testing and analysis of
electromagnetically tailored materials and assemblies that are used to
attenuate, alter, control and/or absorb electromagnetic energy in its various
forms, from direct current through visible frequencies for Military Applications
if, but for the application of such Intellectual Property, the ultimate
purchaser would not have purchased the relevant product; PROVIDED, HOWEVER,
Hexcel shall be permitted to use, make or sell oxide ceramics in any form. In
addition, during the Covenant Period, Hexcel will not (and will cause its
officers, directors, Affiliates, agents and representatives not to) directly or
indirectly solicit any Hired Employee to terminate his or her employment with
Northrop PROVIDED, HOWEVER, general advertisement for employees shall not be
considered solicitation for purposes hereof, nor, during the term of the
Facility Agreement, shall Hexcel, under any circumstances, hire any Hired
Employee.

13.3 GENERALLY. If any provision of this Section 13 is held to be
invalid or unenforceable in any jurisdiction for any reason, such determination
shall not affect the validity or enforceability of such provision in any other
jurisdiction.

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14. SUPPLY AGREEMENT, FACILITY AGREEMENT AND SERVICES AGREEMENT.

At the Closing, the parties shall enter into a certain (a) supply
agreement in the form of EXHIBIT 5 hereto (the "SUPPLY AGREEMENT"), pursuant to
which Hexcel shall agree to supply to Northrop, and Northrop shall agree to
purchase, certain of its requirements for products and services as contemplated
in Sections 9.15 and 9.16 hereof, (b) services agreement in the form of an
EXHIBIT 6 to be attached hereto prior to the Closing which shall be mutually
agreed to by the parties (the "SERVICES AGREEMENT"), pursuant to which Hexcel
shall agree to provide Northrop with certain services with respect to the
operation of the Chandler Facility and the technical services contemplated in
Section 9.14 hereof and (c) facility agreement in the form of an EXHIBIT 7 to be
attached hereto prior to the Closing which shall be mutually agreed to by the
parties (the "FACILITY AGREEMENT"), pursuant to which Northrop will permit
Hexcel access to the Chandler Facility and the use of certain equipment thereat.

15. MISCELLANEOUS.

15.1 FURTHER ASSURANCES. At any time and from time to time after the
Closing Date, each of Hexcel and Northrop agrees to, without further
consideration, do, execute, acknowledge and deliver all such further acts,
deeds, instruments of sale, transfers, conveyances, assignments and deliveries,
consents, assurances, powers of attorney, as may reasonably be required to
transfer to Northrop all right, title and interest in and to the Assets, to put
Northrop in possession or control of the Assets, to assure and confirm the
assumption by Northrop of the Assumed Liabilities, and otherwise in order to
carry out the purposes and intent of this Agreement. In the event any Assets
relating to the Chandler Business are discovered subsequent to the Closing,
Hexcel shall immediately take such steps as are necessary to transfer such
Assets to Northrop at no cost to Northrop. In the event Northrop or Hexcel
hereafter discovers that any employees of Hexcel who are not Hired Employees are
necessary to enable Northrop to operate the Chandler Business, Hexcel agrees to
make available to Northrop the services of such employees and that, if Northrop
so desires and the employee agrees, such employees may become employees of
Northrop. In the event any assets are transferred to Northrop which, subsequent
to the Closing, are determined not to constitute Assets relating to the Chandler
Business, Northrop shall immediately take such steps as are necessary to
transfer such assets to Hexcel.

15.2 BINDING OBLIGATIONS. This Agreement is a legal, valid and binding
obligation of Hexcel subject only to the final approval of the Bankruptcy Court.
Upon receipt of the Final Bankruptcy Court Order, this Agreement will constitute
the legal, valid and binding obligation of Hexcel enforceable against Hexcel in
accordance with its terms.

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15.3 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given (i) if delivered
personally or sent by facsimile transmission (confirmed electronically), on the
date given, (ii) if delivered by an overnight express mail service, on the date
of delivery, or (iii) if by certified or registered mail, postage prepaid,
return receipt requested, five (5) days after mailing, to the parties, their
successors in interest or their permitted assignees at the following addresses
or at such other addresses as the parties may designate by written notice in the
manner aforesaid:

If to Hexcel: Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94588
Attention: Rodney P. Jenks, Esq.
Facsimile: (510) 734-8611

with copy to:

Kronish, Lieb, Weiner & Hellman
1114 Avenue of the Americas
New York, New York 10036
Attention: Ralph J. Sutcliffe, Esq.
Facsimile: (212) 479-6275

If to Northrop:

Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90007
Attention: Albert F. Myers,
Vice President
Facsimile: (310) 201-3023

with copy to:

Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90067
Attention: Richard R. Molleur,
Corporate Vice President
and General Counsel
Facsimile: (310) 201-3378

15.4 THIRD PARTY BENEFICIARIES; BENEFITS; ASSIGNMENT. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective permitted assignees or successors in interest including a trustee
appointed pursuant to Chapter 7 or Chapter 11 of the Bankruptcy Code. Nothing
herein expressed or implied is intended to confer upon any Person, other than
the parties hereto and their respective permitted assignees, any rights,
obligations or liabilities under or by reason of this

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Agreement. The respective rights and obligations of either party hereto shall
not be assignable by such party without the prior written consent of the other
party, except that either party without such consent may assign its rights under
this Agreement to (x) any wholly-owned subsidiary of such party; or (y) any
successor in the event of a merger, reorganization, business consolidation, sale
of all or substantially all its assets, liquidation or dissolution or, in the
case of Northrop, the transfer of the B-2 Contract or an Additional B-2
Contract, provided that any such assignee hereunder must execute and deliver to
such other party hereto prior to the effectiveness of the assignment an
agreement reasonably satisfactory in form and substance to such other party
under which such assignee assumes and agrees to perform and discharge all of the
obligations and liabilities of the assigning party or the relevant obligations
and liabilities relating to the assignment, but any such permitted assignment
shall not relieve the assigning party of its obligations hereunder.

15.5 JURISDICTION. The parties agree that, during the Bankruptcy
Period, the Bankruptcy Court shall have exclusive jurisdiction to resolve any
controversy or claim arising out of or relating to this Agreement, or the breach
hereof. The parties further agree that, after the Bankruptcy Period, any action
or proceeding with respect to such controversy or claim shall be brought against
any of the parties in the courts of the State of California in
Los Angeles County or, if it has or can acquire subject matter jurisdiction, in
the United States District Court for the Central District of California, and
each of the parties hereby consents to the personal jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein.

15.6 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York applicable to
contracts made and to be performed wholly in that State.

15.7 COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute but one and the same instrument.

15.8 PUBLICITY. Hexcel and Northrop agree that press releases and other
announcements to be made by either of them prior to the Closing with respect to
the transactions contemplated hereby shall be subject to mutual agreement,
provided that at either party's request Hexcel and Northrop shall release a
press release reasonably acceptable to both parties following the execution of
this Agreement. Notwithstanding the foregoing, each of the parties hereto
(i) may respond to inquiries relating to the Transaction Agreements and the
transactions contemplated thereby by the press, securities analysts, employees
or

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customers, and (ii) may make such disclosure as, in its judgment, is required by
or is advisable in light of any applicable law or rules of any stock exchange,
without any notice to, or further consent of the other party.

15.9 EXCLUSIVITY.

(a) During the period from the date of this Agreement to the
Closing or the termination of this Agreement, Hexcel shall not, nor shall it
authorize any officer, director, or employee of or any investment banker,
attorney or other advisor, representative or agent of Hexcel to, directly or
indirectly solicit or initiate any discussions with, provide any information to
or negotiate with any Person other than Northrop (any such solicitations,
discussions, furnishing of information or negotiations being referred to as
"Alternative Negotiations" and any such Person other than Northrop being
referred to as an "Alternative Purchaser"), concerning any merger,
consolidation, sale of significant or substantial assets or similar transaction
relating to the Chandler Business and the Assets (any such transaction being
referred to herein as an "Acquisition Proposal").

(b) Notwithstanding the foregoing, Hexcel shall be permitted
to undertake Alternative Negotiations with Northrop's consent or if the Board of
Directors of Hexcel believes in good faith in the exercise of its fiduciary
duties, after due inquiry and investigation, consideration of all relevant
factors and consultation with counsel, that such Alternative Negotiations have a
reasonable possibility (as determined pursuant to paragraph (c) below) of
resulting in an Acquisition Proposal more favorable to Hexcel than the
transactions contemplated herein.

(c) In determining whether Alternative Negotiations have a
reasonable possibility of resulting in an Acquisition Proposal more favorable
than that contemplated herein, it shall be conclusively presumed that such
Acquisition Proposal shall not be so favorable, and Hexcel agrees that it shall
not undertake Alternative Negotiations, unless the Alternative Purchaser (i)
demonstrates that it has the financial ability (based on, among other things,
its most recent financial statements, operating history and relationships with
creditors and potential sources of financing) to consummate the Acquisition
Proposal, (ii) agrees to assume the Northrop Contract, and (iii) proposes to
consummate the Acquisition Proposal for Thirty-Five Million Dollars
($35,000,000.00) or more in a single transaction or series of related
transactions.

(d) Hexcel shall immediately notify Northrop in writing if it
proposes to engage in Alternative Negotiations or if it receives any Acquisition
Proposal or request for information about Hexcel with respect to an Acquisition
Proposal. Prior

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to engaging in Alternative Negotiations, Hexcel shall deliver to Northrop an
officers' certificate certifying that the Board of Directors of Hexcel has
determined that the Alternative Purchaser and the Acquisition Proposal satisfy
the criteria set forth in paragraph (c) above.

(e) In the event Hexcel undertakes Acquisition Negotiations
and terminates this Agreement, Hexcel shall (i) pay to Northrop a break-up fee
in the sum of Five Hundred Thousand Dollars ($500,000.00) in consideration of
Northrop's time and effort in investigating and negotiating the purchase of the
Assets pursuant to this Agreement and the transactions contemplated thereby,
which the parties hereto agree to be a reasonable dollar estimate and reflection
of such time and effort, and (ii) reimburse Northrop for all of Northrop's
reasonable costs and expenses (including the actual fees and expenses of
Northrop's counsel, accountants, investment bankers, and other professional
persons), which expenses arise from or are incurred in connection herewith,
including without limitation all costs and expenses of Northrop in connection
with the preparation and negotiation of the Transaction Agreements, and
Northrop's due diligence investigation of the Chandler Business and the Assets.
Any claim for payment under this section shall be paid by Hexcel within ten (10)
days after receipt by Hexcel of an invoice from Northrop therefor. Such claim
shall be treated as an allowed administrative expense in the Bankruptcy Case
under Section 503(b) of the Bankruptcy Code and entitled to priority under
Section 507(a)(1) of the Bankruptcy Code. Hexcel's obligations under
Sections 15.9(a) and (e) are subject to receipt by Hexcel of an order from a
Bankruptcy Court with respect thereto.

15.10 COMPLETE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the other Transaction Agreements and the documents delivered or to be
delivered pursuant to this Agreement and the other Transaction Agreements
contain, or will contain, the entire agreement between the parties hereto with
respect to the transactions contemplated herein and shall supersede all prior
oral and written negotiations, commitments, understandings and agreements with
respect to the same subject matter. For purposes of the representations and
warranties provided for herein, any information disclosed on any Schedule shall
be deemed to be a disclosure with respect to any other Schedule.

15.11 MODIFICATIONS, AMENDMENTS AND WAIVERS. This Agreement may be
amended only by written agreement of the parties hereto. From time to time prior
to the Closing Date, Hexcel shall promptly supplement or amend any schedules
hereto with respect to any matter hereafter arising which would have been
required to be set forth or described in such a schedule which is necessary to
correct any information in a schedule which has become inaccurate. No such
supplement or amendment pursuant to this Section 15.11 shall have any effect for
the purpose of

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determining Hexcel's satisfaction of any of the conditions set forth in
Section 11.2 hereof, must be reasonably approved of by Northrop and shall not be
deemed to modify any representation or warranty of Hexcel.

15.12 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

15.13 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.

15.14 EXPENSES OF TRANSACTIONS. Hexcel shall be responsible for paying
(i) all sales, use and value added taxes arising out of the transfer of the
Assets to Northrop pursuant to the terms of this Agreement, (ii) the costs of
transfer, documentary, recording, notarial, registration, stamp and other
similar taxes, fees and expenses (including but not limited to all applicable
stock transfer, real estate transfer or gains taxes), and any penalties,
interest or other additions to such taxes, (iii) the cost of title insurance for
the Owned Real Property in connection with the transfer of the Owned Real
Property being transferred to Northrop pursuant hereto. Except for the foregoing
and as set forth in Sections 9.13(c), 9.13(d), 12.2 and 15.9, all other fees,
costs and expenses incurred by Northrop or Hexcel in connection with the trans-
actions contemplated by this Agreement shall be borne by the party incurring
them.

15.15 DISPUTE RESOLUTION. The parties acknowledge and agree that the
dispute resolution provisions set forth in SCHEDULE 3 shall apply only to those
matters specifically referred to hereunder, and that the parties shall have all
other remedies at law or in equity otherwise available to them for other
disputes.

15.16 SUBSEQUENT DELIVERY OF SCHEDULE 7.15. The parties have elected to
defer delivery of SCHEDULE 7.15 for a period of up to thirty (30) calendar days
following the date hereof. Upon agreement with respect to the contents of such
schedule, it shall

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be deemed to have been delivered as of the date of this Agreement.

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed in its corporate name by a duly authorized officer
thereof, all as of the date first above written.

HEXCEL CORPORATION

By: __________________________

Name: ________________________

Title: _______________________

NORTHROP GRUMMAN CORPORATION

By: ____________________________

Name: __________________________

Title: _________________________

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SCHEDULE A

BASE LICENSE AGREEMENT

THIS AGREEMENT is made as of ___________________, 1995, by and between
HEXCEL CORPORATION ("Licensor"), a Delaware corporation, debtor and debtor-in-
possession under Chapter 11 of the Bankruptcy Code, with an office at 5794 W.
Las Positas Boulevard, Pleasanton, California 34588 and NORTHROP GRUMMAN
CORPORATION ("Licensee"), a Delaware corporation with an office at 1840 Century
Park East, Los Angeles, California 90067.

W I T N E S S E T H :

WHEREAS, Licensor is the owner of the Base Technology (as defined
below);

WHEREAS, Licensee desires to obtain from Licensor a non-exclusive
license of and to the Base Technology to make, have made, use and sell the
Licensed Products (as defined below) in accordance with the terms and conditions
set forth herein; and

WHEREAS, pursuant to a certain Asset Purchase Agreement, dated as of
November 3, 1994, between Licensor and Licensee (the "Asset Purchase
Agreement"), Licensor is obligated to grant to Licensee those certain rights
embodied in this Agreement on a royalty-free basis and in accordance with the
terms and conditions contained herein;

NOW, THEREFORE, in consideration of the premises, agreements,
covenants and conditions contained herein, the parties hereto hereby agree as
follows:

1. DEFINITIONS.

The following terms shall have the meaning assigned to them below when
used in this Agreement.

1.1 "BASE TECHNOLOGY" means the Intellectual Property described on
SCHEDULE B hereto.

1.2 "CONFIDENTIAL PROPRIETARY INFORMATION" means the confidential
scientific, business or financial information related to the Base Technology
which (a) is not publicly known or available from other sources who are not
under a confidentiality obligation to the source of the information, (b) has not
been made available by Licensor to others without a confidentiality obligation,
(c) is not already known or available to the receiving party without a
confidentiality obligation, and (d) is not required to be disclosed by law.
Except for any patents,

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those items of Base Technology which constitute Confidential Proprietary
Information are legended as "proprietary" on SCHEDULE B hereto.

1.3 "LICENSED PRODUCT(S)" means any product which utilizes or
incorporates the Base Technology (a) for use on a B-2 Contract, any contract in
the B-2 Program, or any of the Assumed Agreements, (b) in conjunction with the
application of EMT Technology, for any purpose whatsoever provided that but for
the application of EMT Technology the ultimate purchaser of such product would
not have purchased the product, (c) in the case of the Base Technology related
to Licensor's end articles designated by the tradename "K" Foam, for any use
whatsoever, or (d) as provided for in Section 9.16 of the Asset Purchase
Agreement.

1.4 "MILITARY APPLICATIONS" means applications, uses or developments
embodied in any product, intermediate product or service principally sold to or
used by any foreign or domestic military body or organization, or principally
used in any program sponsored by or for any military body or organization.

1.5 "PATENT RIGHTS" means any and all patent applications and patents
listed on SCHEDULE B hereto, together with all other patents that have been
issued or which may be issued in the future therefrom, including, without
limitation, certificates of invention and any and all divisions, continuations,
continuations-in-part, reissues, renewals, extensions or additions of or to such
patent applications and patent and any foreign counterparts thereof.

2. USE OF DEFINED TERMS.

Any capitalized term not otherwise defined herein shall have the
meaning set forth for such term in the Asset Purchase Agreement or any other
Transaction Agreement.

3. GRANT.

(a) Subject to any restrictions of Applicable Law, Licensor hereby
grants to Licensee, and Licensee hereby accepts from Licensor, a perpetual,
irrevocable, non-exclusive, non-transferrable, royalty-free license of and to
the Base Technology to make, have made (subject to the limitations set forth in
Section 3(b) below), use and sell only the Licensed Products. Notwithstanding
the foregoing, Licensee shall only be entitled to make, have made (as limited
below), use and sell the Materials so long as, in addition to altering the cell
size and/or density of the relevant product should Licensee choose to do so or
making other changes with respect thereto, Licensee utilizes EMT Technology in
conjunction therewith. Except for the transfer of the EMT Technology pursuant to
the Asset Purchase Agreement, Licensor grants hereby no other rights whatsoever
to Licensee to use any other Intellectual Property utilized by Licensor, whether

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currently existing or developed or acquired in the future, including, without
limitation, any technology which performs the same or similar functions as Base
Technology. Licensee shall have no rights to any modifications, improvements or
enhancements of the Base Technology made by Licensor.

(b) Licensee shall not have the right to sublicense its rights under
this Agreement until any of the following shall have occurred at which time
Licensee may only sublicense (on a royalty-free basis) its rights hereunder with
respect to the Base Technology designated as Non-Chandler Base Technology on
SCHEDULE B hereto ("Non-Chandler Base Technology"): (i) Licensor ceases to manu-
facture honeycomb core using any Base Technology; or (ii) Licensee shall have
(A) exercised a Partial Termination Right (as defined in the Supply Agreement)
(and, in such event, Licensee may sublicense its rights hereunder to the extent
necessary to permit a third party to manufacture the Products (as defined in the
Supply Agreement) and/or perform the Services (as defined in the Supply
Agreement) as to which such Partial Termination Right has been exercised), (B)
exercised its rights to purchase Products and/or Services from third parties
upon the occurrence of a Force Majeure Event (as defined in the Supply
Agreement), or (C) terminated the Supply Agreement in its entirety as provided
in the Supply Agreement. In the event that Licensee shall obtain the right
pursuant to this Section 3 to sublicense the Non-Chandler Base Technology (a
"Sublicense"), Licensee may grant a Sublicense to any person or entity, subject
to the provisions of Section 4 hereof.

4. SUBLICENSING

4.1 In the event Licensee is entitled to sublicense the Non-Chandler
Base Technology hereunder, Licensee shall notify Licensor of each Sublicense
granted to a third party within ten (10) Business Days after such Sublicense is
granted. Such notice shall include the name and address of such third party.

4.2 As a condition to Licensee granting a Sublicense, Licensee shall
enter into a written sublicense agreement with the proposed sublicensee (the
"Sublicensee"). Such sublicense agreement shall include, without limitation,
provisions which provide in substance that:

(a) Sublicensee shall acknowledge that Licensor owns the
Confidential Proprietary Information;

(b) Sublicensee shall be bound by the same duties,
responsibilities and liabilities imposed upon Licensee pursuant to this
Agreement, and Licensor shall be entitled to enforce its rights hereunder
directly against Sublicensee;

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unauthorized use or disclosure of the Non-Chandler Base Technology by any party
and shall cooperate fully with Licensor with respect to any steps Licensor may
take concerning such infringement, misappropriation or unauthorized use or
disclosure;

(d) Sublicensee shall use the Sublicense solely for the purposes
of producing Licensed Products and any Products and Services (each as defined in
the Supply Agreement and as to which the right of sublicense may apply under
Paragraph 3(b)(ii) hereof) for Licensee; and

(e) Sublicensee may not assign, transfer or further sublicense
the Non-Chandler Base Technology.

5. INTELLECTUAL PROPERTY.

5.1 Licensor shall bear the cost of patent expenses in the
prosecution and maintenance of the Patent Rights portion of the Base Technology.

5.2 In the event that Licensor refuses to institute a suit that
Licensee feels is reasonably required in order to protect the value of the
license granted hereunder, Licensee shall have the right to institute such suit
at its own expense in its own name. In such event, Licensor shall cooperate
fully with Licensee at Licensee's expense.

5.3 Any recovery obtained by either party as the result of any
infringement proceeding, by settlement or otherwise, shall be the property of
the party instituting suit.

6. IMPROVEMENTS.

Licensee shall have the right to modify, improve and enhance the Base
Technology, and any such modification, improvement or enhancement, but not the
underlying Base Technology, shall become the exclusive property of Licensee, and
Licensor shall not have any rights with respect thereto.

7. INDEMNIFICATION.

7.1 Licensee hereby agrees to indemnify and hold Licensor harmless
from any and all claims, actions, suits, liabilities, judgments, and expenses,
in law or in equity, arising out of or resulting from (a) any claim relating to
any product which is manufactured or produced by Licensee utilizing or
incorporating the Base Technology except to the extent such claim is subject to
Licensor's indemnification obligation in Section 7.2 below, (b) any breach by
Licensee of its representations, warranties or obligations under this Agreement
or (c) any breach by a Sublicensee of the representations, warranties or
obligations under this Agreement to which Sublicensee is bound pursuant to the
terms of the Sublicense.

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7.2 Licensor hereby agrees to indemnify and hold Licensee harmless
from any and all claims, actions, suits, liabilities, judgments, and expenses,
in law or in equity, arising out of or resulting from any breach by Licensor of
its representations, warranties or obligations under this Agreement and claims
based upon infringement of Rights of Others or the misappropriation of trade
secrets resulting from the use of the Base Technology in accordance with the
terms of the Base License (collectively, the "Claims"). Moreover, Licensor
hereby further agrees, at its sole expense, to defend Licensee against any and
all such Claims that may be brought against Licensee, including the payment of
all reasonable attorneys' fees and costs incurred in connection with such
defense. Licensor shall control such defense with counsel of its choice, but
shall not settle any Claim without the consent of Licensee, which consent shall
not be unreasonably withheld. Licensee shall provide reasonable cooperation to
Licensor with respect thereto. As used in this Section 7, "Licensee" shall also
include the officers, directors, agents and employees of Licensee and its
Affiliates and, if applicable, Sublicensee.

7.3 In respect of any Claim by a third party against Licensee as to
which Licensee is entitled to indemnification by Licensor under this Section 7,
Licensee shall give prompt written notice of such indemnification obligation to
Licensor, stating the nature, basis and an estimate of the amount thereof (to
the extent possible); provided, that failure of Licensee to give Licensor prompt
notice as provided herein shall not relieve Licensor of any of its obligations
hereunder except to the extent that Licensor demonstrates that the defense of
such action is materially prejudiced thereby. Thereafter, Licensor shall have
the right at its election to take over the defense or settlement of such Claim
at its own expense by giving prompt written notice to the Licensee; PROVIDED,
HOWEVER, that Licensor may not compromise or settle any such Claim without the
consent of Licensee unless such compromise or settlement requires no more than a
monetary payment for which Licensee is fully indemnified or involves other
matters not binding upon Licensee. If Licensor so elects, Licensor shall be
obligated to defend such Claim until either (i) Licensor and Licensee agree
otherwise, or (ii) it is determined that Licensor does not have an obligation to
indemnify Licensee. If Licensor does not give such notice or does not proceed
diligently so to defend such Claim within thirty (30) days after receipt of the
notice of such Claim (or sooner, if the nature of the Claim so requires),
Licensor shall be bound by any defense or settlement that Licensee may make
(without prejudice to any right Licensee may have hereunder) as to such Claim
and shall reimburse Licensee for its losses and expenses related to the defense
or settlement of such Claim. In the event Licensor assumes the defense of any
matter, Licensor shall assume all past and future responsibility for defending
such matter, including reimbursing Licensee for all prior reasonable expenses
incurred in connection therewith. Licensee shall, at its option

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and expense, have the right to participate in the defense of any such Claim
defended by Licensor and in settlement discussions.

8. DURATION.

This Agreement shall remain in effect in perpetuity; provided,
however, that any rights or obligations arising under the Patent Rights shall
expire upon the expiration of such Patent Rights.

9. CONFIDENTIALITY

9.1 All Confidential Proprietary Information disclosed under this
Agreement will be disclosed in confidence and shall remain proprietary to
Licensor. Licensee shall not disclose, nor permit to be disclosed by any of its
sublicensees, agents or employees, the Confidential Proprietary Information to
any other person or entity or use the Confidential Proprietary Information for
Licensee's or any other person's or entity's benefit other than as permitted by
this Agreement.

9.2 Licensee shall take such precautions, contractual or otherwise,
as shall be reasonably calculated to keep confidential the Confidential
Proprietary Information and to prevent the unauthorized disclosure of the
Confidential Proprietary Information. With respect to the Confidential
Proprietary Information, Licensee shall utilize the standard of care which
Licensee uses to protect its own proprietary information of the same type but is
no case less than a reasonable standard of care. Disclosures of the Confidential
Proprietary Information to employees or agents of Licensee shall be made only to
the extent required for the effective use of the Base Technology. In the event
Licensee acquires an Acquired Business, Licensee agrees to follow the procedures
with respect to such Acquired Business set forth in Section 13.1 of the Asset
Purchase Agreement.

10. REPRESENTATIONS AND WARRANTIES.

10.1 Licensor represents and warrants that, except as set forth on
SCHEDULE 7.18.1 hereto, it is the owner of the entire right, title and interest
in and to the Base Technology.

10.2 Each of Licensor and Licensee represents and warrants that it has
the right to enter into this Agreement and that as to itself there are no
outstanding assignments, grants, licenses, encumbrances, obligations or
agreements, either written, oral or implied, inconsistent with this Agreement.

10.3 Each of Licensor and Licensee represents and warrants that, upon
execution and delivery, this Agreement will constitute the legal, valid and
binding obligation of each of Licensor and Licensee, enforceable against each of
them in accordance with its terms.

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11. REMEDIES UPON BREACH. Licensee hereby acknowledges that the breach of
material terms contained herein (whether or not specifically designated as such)
would cause irreparable damage and substantial prejudice to Licensor.
Accordingly, Licensee agrees that, in the event of such breach or threatened
breach hereunder, Licensor shall have, in addition to its legal remedies, the
right to injunctive relief, as permitted by law, to prevent the violation of
Licensee's obligations hereunder. However, in no event shall Licensor have the
right to terminate this Agreement.

12. MISCELLANEOUS.

12.1 ENTIRE AGREEMENT; CONFLICT WITH ASSET PURCHASE AGREEMENT. Except
as set forth in the Asset Purchase Agreement, this Agreement embodies all of the
understandings and obligations between the parties with respect to the subject
matter hereof, and supersedes all prior agreements and understandings, written
or oral, relating thereto. Notwithstanding the foregoing, in the event any terms
or provisions of this Agreement should be in conflict with any terms or provi-
sions of the Asset Purchase Agreement, the Asset Purchase Agreement shall
govern.

12.2 COVENANT. Hexcel covenants and agrees that it will not, now or
in the future, assert in any manner, nor will it do anything, either directly or
indirectly, or aid or assist any other Party to do anything, either directly or
indirectly, to assert, that any modifications, improvements or enhancements made
to the Base Technology by Northrop violates or infringes upon Hexcel's rights to
its Structural Core.

12.3 AMENDMENT. No amendment or modification of this Agreement shall
be valid or binding upon the parties unless made in writing and signed on behalf
of each of the parties by their representative duly authorized officers.

12.4 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law. Should any provision of this Agreement be invalid under the
applicable law, such invalidity shall not affect any other provision of this
Agreement but the remainder hereof shall be effective as though such invalid
provision had not been contained herein.

12.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contract
made and to be performed in said state and the parties hereby submit to the
jurisdiction of the state courts of, and the federal district courts located
within, the State of California for such purposes.

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12.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties, their legal representatives, successors and
assigns.

12.7 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given (i) if delivered
personally or sent by facsimile transmission (confirmed electronically), on the
date given, (ii) if delivered by an overnight express mail service on the date
of delivery, or (iii) if by certified or registered mail, postage prepaid,
return receipt requested, five (5) days after mailing, to the parties, their
successors in interest or their permitted assignees at the following addresses
or at such other addresses as the parties may designate by written notice in the
manner aforesaid:

If to Hexcel: Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94588
Attention: Rodney P. Jenks, Esq.
Facsimile: (510) 734-8611

with copy to:

Kronish, Lieb, Weiner & Hellman
1114 Avenue of the Americas
New York, New York 10036
Attention: Ralph J. Sutcliffe, Esq.
Facsimile: (212) 479-6275

If to Northrop:

Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90007
Attention: Albert F. Myers,
Vice President
Facsimile: (310) 201-3023

with copy to:

Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90067
Attention: Richard R. Molleur,
Corporate Vice President
and General Counsel
Facsimile: (310) 201-3378

12.8 ASSIGNMENT. Neither this Agreement nor any of the rights granted
by Licensor hereunder may be assigned or otherwise transferred by Licensee
without the express written consent of Licensor prior to such assignment except
that Licensee may assign

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its rights under this Agreement without Licensor's consent to (x) any wholly-
owned subsidiary of Licensee, or (y) any successor in the event of a merger,
reorganization, business consolidation, sale of all or substantially all its
assets, liquidation or dissolution or the transfer of the B-2 Contract or an
Additional B-2 Contract, provided that any such assignee hereunder must execute
and deliver to Licensor prior to the effectiveness of the assignment an
agreement reasonably satisfactory in form and substance to Licensor under which
such assignee assumes and agrees to perform and discharge all of the obligations
and liabilities of Licensee or the relevant obligations and liabilities relating
to the assignment. Any such assignee shall be subject to the confidentiality
provisions herein. Any assignment or transfer made by Licensee in violation of
this provision shall be deemed null and void.

12.9 HEADINGS. Any headings used in this Agreement are for reference
only, are without substantive meaning and content of any kind whatsoever and do
not form part of this Agreement, nor in any way affect its interpretation.

12.10 WAIVER. None of the provisions of this Agreement shall be
considered waived by any party unless such waiver is given expressly and in
writing to the other party. The failure of a party to insist upon strict
performance of any of the terms and conditions hereof, or failure or delay to
exercise any rights provided herein or by law, shall not be deemed a waiver of
any rights or either party.

12.11 SCHEDULES. All schedules attached hereto, either as originally
existing or as the same may from time to time be supplemented, modified or
amended, are incorporated herein by this reference.

12.12 ATTORNEYS' FEES. In the event of any dispute arising out of the
subject matter of this Agreement, the prevailing party shall recover, in
addition to any other damages assessed, its reasonable attorneys' fees and court
costs incurred in litigating or otherwise settling or resolving such dispute.
In construing this Agreement, none of the parties hereto shall have any term or
provision construed against such party solely by reason of such party having
drafted the same.

12.13 TAXES. All taxes imposed as a result of the performance of the
parties hereunder shall be borne and paid by the party required to do so by
applicable law or treaty.

12.14 INDEPENDENT CONTRACTOR. The parties hereto understand and agree
that this Agreement does not make them an agent or legal representative of each
other for any purpose whatsoever. Neither party hereto is granted, by this
Agreement or otherwise, any right or authority to assume or create any
obligation or responsibility, express or implied, on behalf of or

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in the name of the other party hereto, or to bind the other party hereto in any
manner whatsoever. Both parties expressly acknowledge that Licensee is an
independent contractor with respect to Licensor and that the parties hereto are
not partners, joint venturers, employees or agents.

12.15 EXCUSED NON-PERFORMANCE. Anything contained in this Agreement
to the contrary notwithstanding, the obligations of the parties hereto shall be
subject to all laws, both present and future, of any government having juris-
diction over any of the parties hereto, and to orders, regulations, directions,
or requests of any such government, or any department, agency, or court thereof,
and to war, acts of public enemies, strikes or other labor disturbances, fires,
floods, acts of God, or any causes of like or different kind beyond the control
of the parties, not caused by the fault or negligence of the party asserting
this provision. The parties hereto shall be excused from any failure to perform
any obligation hereunder to the extent such failure is not the result of the
fault or negligence of the party asserting this provision and is caused by any
such law, order, regulation, directions, request or contingency.

12.16 COUNTERPARTS. This Agreement and any amendments, waivers,
consents or supplements may be executed in counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.

12.17 FURTHER ASSURANCES. The parties agree to execute, acknowledge
and deliver all such further instruments, and to do all such other acts, as may
be necessary or appro-

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priate, in order to carry out the intent and purpose of this Agreement.

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

"LICENSOR"

HEXCEL CORPORATION

By ___________________________________
Name:
Title:

"LICENSEE"

NORTHROP GRUMMAN CORPORATION

By ___________________________________
Name:
Title:

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EXHIBIT 1

EMT LICENSE AGREEMENT

THIS AGREEMENT is made as of ________________, 1995, by and between
HEXCEL CORPORATION ("Licensee"), a Delaware corporation, debtor and debtor-in-
possession under Chapter 11 of the Bankruptcy Code, with an office at 5794 W.
Las Positas Boulevard, Pleasanton, California 34588 and NORTHROP GRUMMAN
CORPORATION ("Licensor"), a Delaware corporation with an office at 1840 Century
Park East, Los Angeles, California 90067.

W I T N E S S E T H :

WHEREAS, pursuant to the terms of that certain Asset Purchase
Agreement, dated as of November 3, 1994, between Licensor and Licensee (the
"Asset Purchase Agreement"), Licensee has transferred all right, title and
interest in and to the EMT Technology (as defined below);

WHEREAS, Licensee desires to obtain from Licensor a non-exclusive
license of and to the EMT Technology to make, use and sell the Licensed Products
(as defined below) in accordance with the terms and conditions set forth herein;
and

WHEREAS, pursuant to the Asset Purchase Agreement, Licensor is
obligated to grant to Licensee those certain rights embodied in this Agreement
on a royalty-free basis and in accordance with the terms and conditions
contained herein;

NOW, THEREFORE, in consideration of the premises, agreements,
covenants and conditions contained herein, the parties hereto hereby agree as
follows:

1. DEFINITIONS.

The following terms shall have the meaning assigned to them below when
used in this Agreement.

1.1 "CONFIDENTIAL PROPRIETARY INFORMATION" means the confidential
scientific, business or financial information related to the EMT Technology
which a. is not publicly known or available from other sources who are not under
a confidentiality obligation to the source of the information, b. has not been
known or made available by Licensor to others without a confidentiality
obligation; and c. is not required to be disclosed by law. Except for any
patents, the Confidential Proprietary Information is set forth on SCHEDULE E
hereto.

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1.2 "EMT TECHNOLOGY" means the Intellectual Property that enables the
design, fabrication, testing and analysis of electromagnetically tailored
materials and assemblies that are used to attenuate, alter, control and/or
absorb electromagnetic energy in its various forms, from direct current through
visible frequencies, including, without limitation, as set forth on SCHEDULE E
hereto, which was acquired by Licensor from Licensee pursuant to the Asset
Purchase Agreement.

1.3 "LICENSED PRODUCT(S)" means any product or intermediate product
that is produced by Licensee using the EMT Technology for ultimate use or
application in products designed, developed, manufactured or contracted for Non-
Military Applications.

1.5 "NON-MILITARY APPLICATIONS" means all applications other than
Military Applications.

1.6 "PATENT RIGHTS" means any and all patent applications and patents
included in the EMT Technology, together with all other patents that have been
issued or which may be issued in the future therefrom, including, without
limitation, certificates of invention and any and all divisions, continuations,
continuations-in-part, reissues, renewals, extensions or additions of or to such
patent applications and patents and any foreign counterparts thereof.

2. USE OF DEFINED TERMS.

Any capitalized term not otherwise defined herein shall have the
meaning set forth for such term in the Asset Purchase Agreement.

3. GRANT.

Subject to any restrictions of Applicable Law, Licensor hereby grants
to Licensee, and Licensee hereby accepts from Licensor, a perpetual,
irrevocable, non-exclusive, non-transferrable, royalty-free license of and to
the EMT Technology (a) to make, use and sell the Licensed Products and (b) to
use the EMT Technology to the extent necessary to complete that certain
subcontract (a copy of which has been made available for Licensor's review) by
and between Hexcel and General Electric relating to General Electric's prime
contract no. F33615-91-C-3202, but not any modifications or follow-on contracts
with respect thereto. Licensor grants hereby no other rights whatsoever to
Licensee to use any other Intellectual Property utilized by Licensor, whether
currently existing or developed or

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acquired in the future, including, without limitation, any technology which
performs the same or similar functions as EMT Technology. Licensee shall have no
right to sublicense its interest in the EMT Technology. Licensee shall have no
rights to any modifications, improvements or enhancements of the EMT Technology
made by Licensor.

4. INTELLECTUAL PROPERTY.

4.1 Licensor shall bear the cost of patent expenses in the
prosecution and maintenance of the Patent Rights portion of the EMT Technology.

4.2 In the event that Licensor refuses to institute a suit that
Licensee feels is reasonably required in order to protect the value of the
license granted hereunder, Licensee shall have the right to institute such suit
at its own expense in its own name. In such event, Licensor shall cooperate
fully with Licensee at Licensee's expense.

4.3 Any recovery obtained by either party as the result of any
infringement proceeding, by settlement or otherwise, shall be the property of
the party instituting suit.

5. IMPROVEMENTS. Licensee shall have the right to modify, improve and enhance
the EMT Technology, and any such modification, improvement or enhancement, but
not the underlying EMT Technology, shall become the exclusive property of
Licensee, and Licensor shall not have any rights with respect thereto.

6. INDEMNIFICATION.

6.1 Licensee hereby agrees to indemnify and hold Licensor harmless
from any and all claims, actions, suits, liabilities, judgments, and expenses,
in law or in equity, relating to (a) any product which is manufactured or
produced by Licensee utilizing or incorporating the EMT Technology,
(b) Licensee's representations, warranties or obligations under this Agreement
and (c) claims based upon an assertion that the EMT Technology that is utilized
or incorporated in a product which is manufactured or produced by Licensor or
the EMT Technology (by itself) infringes on the Rights of Others or the
misappropriation of trade secrets relating thereto (collectively, the "Claims").
Moreover, Licensee hereby further agrees, at its sole expense, to defend
Licensor against any and all such Claims that may be brought against Licensor,
including the payment of all attorneys' fees and costs incurred in connection
with such defense; PROVIDED, HOWEVER, in the event the settlement or other final
determination of a Claim results in a payment to Licensor, Licensee shall be
entitled to the reimbursement of its reasonable out-of-pocket expenses to the
extent of such payment. Licensee shall control such defense with counsel of its
choice, but shall not settle any Claim without the consent of Licensor, which
consent shall not be unreasonably withheld. Licensor shall

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provide reasonable cooperation to Licensee with respect thereto. As used in this
Section 6, "Licensor" shall also include the officers, directors, agents and
employees of Licensor and its Affiliates.

6.2 In respect of any Claim against Licensor as to which Licensor is
entitled to indemnification by Licensee under this Section 6, Licensor shall
give prompt written notice of such indemnification obligation to Licensee,
stating the nature, basis and an estimate of the amount thereof (to the extent
possible); provided, that failure of Licensor to give Licensee prompt notice as
provided herein shall not relieve Licensee of any of its obligations hereunder
except to the extent that Licensee demonstrates that the defense of such action
is materially prejudiced thereby. Thereafter, Licensee shall have the right at
its election to take over the defense or settlement of such Claim at its own
expense by giving prompt written notice to Licensor; PROVIDED, HOWEVER, that
Licensee may not compromise or settle any such Claim without the consent of
Licensor unless such compromise or settlement requires no more than a monetary
payment for which Licensor is fully indemnified or involves other matters not
binding upon Licensor. If Licensee so elects, Licensee shall be obligated to
defend such Claim until either (i) Licensor and Licensee agree otherwise, or
(ii) it is determined that Licensee does not have an obligation to indemnify
Licensor. If Licensee does not give such notice or does not proceed diligently
so to defend such Claim within thirty (30) days after receipt of the notice of
such Claim (or sooner, if the nature of the Claim so requires), Licensee shall
be bound by any defense or settlement that Licensor may make (without prejudice
to any right Licensor may have hereunder) as to such Claim and shall reimburse
Licensor for its losses and expenses related to the defense or settlement of
such Claim. In the event Licensee assumes the defense of any matter, Licensee
shall assume all past and future responsibility for defending such matter,
including reimbursing Licensor for all prior reasonable expenses incurred in
connection therewith. Licensor shall, at its option and expense, have the right
to participate in the defense of any such Claim defended by Licensee and in
settlement discussions.

6.3 The obligations under this Section 6 shall remain in effect after
the expiration or termination of this Agreement, even though all of the other
provisions of this Agreement have terminated.

7. DURATION.

This Agreement shall remain in effect in perpetuity; provided,
however, that any rights or obligations arising under the Patent Rights shall
expire upon the expiration of such Patent Rights.

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8. TERMINATION.

8.1 Upon any material breach by Licensee under this Agreement,
Licensor may terminate this Agreement by sixty (60) days' notice to Licensee,
specifying the material breach, default or other defect. The termination will
become effective at the end of the sixty (60) day period unless Licensee cures
the breach during this sixty (60) day period.

8.2 This Agreement may be terminated upon the mutual written
agreement of Licensee and Licensor.

8.3 If this Agreement is terminated under this Section 8, Licensee
shall return all Confidential Proprietary Information and shall cease all
further uses of the EMT Technology for any purpose.

8.4 Notwithstanding any termination of this Agreement, all provisions
regarding confidentiality shall continue in full force and effect without
limitation as to time.

9. CONFIDENTIALITY.

9.1 All Confidential Proprietary Information disclosed or covered
under this Agreement shall remain proprietary to Licensor. Licensee shall not
disclose, nor permit to be disclosed by any of its agents or employees, the
Confidential Proprietary Information to any other person or entity or use the
Confidential Proprietary Information for Licensee's or any other person's or
entity's benefit other than as permitted by this Agreement.

9.2 Licensee shall take such precautions, contractual or otherwise,
as shall be reasonably calculated to keep confidential the Confidential
Proprietary Information and to prevent the unauthorized disclosure of the
Confidential Proprietary Information. With respect to the Confidential
Proprietary Information, Licensee shall utilize the standard of care which
Licensee uses to protect its own proprietary information but in no case less
than a reasonable standard of care. Disclosures of the Confidential Proprietary
Information to employees or agents of Licensee shall be made only to the extent
required for the effective and licensed use of the EMT Technology.

9.3 The obligations under this Section 9 shall remain in effect after
the expiration or termination of this Agreement, even though all of the other
provisions of this Agreement have terminated.

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10. REPRESENTATIONS AND WARRANTIES.

10.1 Each of Licensor and Licensee represents and warrants that it has
the right to enter into this Agreement and as to itself that there are no
outstanding assignments, grants, licenses, encumbrances, obligations or
agreements, either written, oral or implied, inconsistent with this Agreement.

10.2 Each of Licensor and Licensee represents and warrants that, upon
execution and delivery, this Agreement will constitute the legal, valid and
binding obligation of itself, enforceable against each of them in accordance
with its terms.

10.3 The representations and warranties contained in this Section 10
shall remain in effect after the expiration or termination of this Agreement,
even though all of the other provisions of this Agreement have terminated.

11. REMEDIES UPON BREACH.

Licensee hereby acknowledges that the breach of material terms
contained herein (whether or not specifically designated as such) would cause
irreparable damage and substantial prejudice to Licensor. Accordingly, Licensee
agrees that, in the event of any such breach hereunder, Licensor shall have, in
addition to its legal remedies, the right to injunctive relief, as permitted by
law, to prevent the violation of Licensee's obligations hereunder.

12. MISCELLANEOUS.

12.1 ENTIRE AGREEMENT; CONFLICT WITH ASSET PURCHASE
AGREEMENT. Except as set forth in the Asset Purchase Agreement, this Agreement
embodies all of the understandings and obligations between the parties with
respect to the subject matter hereof, and supersedes all prior agreements and
understandings, written or oral, relating thereto. Notwithstanding the
foregoing, in the event any terms or provisions of this Agreement should be in
conflict with any terms or provisions of the Asset Purchase Agreement, the Asset
Purchase Agreement shall govern.

12.2 AMENDMENT. No amendment or modification of this Agreement shall
be valid or binding upon the parties unless made in writing and signed on behalf
of each of the parties by their respective duly authorized officers.

12.3 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law. Should any provision of this Agreement be invalid under
applicable law, such invalidity shall not affect any other provision of this
Agreement but the remainder hereof shall be effective as though such invalid
provision had not been contained herein.

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12.4 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contracts
made and to be performed in said state and the parties hereby submit to the
jurisdiction of the state courts of, and the federal district courts located
within, the State of California for such purposes.

12.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties, their legal representatives, successors and
assigns.

12.6 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given (i) if delivered
personally or sent by facsimile transmission (confirmed electronically), on the
date given, (ii) if delivered by an overnight express mail service on the date
of delivery, or (iii) if by certified or registered mail, postage prepaid,
return receipt requested, five (5) days after mailing, to the parties, their
successors in interest or their permitted assignees at the following addresses
or at such other addresses as the parties may designate by written notice in the
manner aforesaid:

If to Hexcel: Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94588
Attention: Rodney P. Jenks, Esq.
Facsimile: (510) 734-8611

with copy to:

Kronish, Lieb, Weiner & Hellman
1114 Avenue of the Americas
New York, New York 10036
Attention: Ralph J. Sutcliffe, Esq.
Facsimile: (212) 479-6275

If to Northrop:

Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90007
Attention: Albert F. Myers,
Vice President
Facsimile: (310) 201-3023

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with copy to:

Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90067
Attention: Richard R. Molleur,
Corporate Vice President
and General Counsel
Facsimile: (310) 201-3378

12.7 ASSIGNMENT. Neither this Agreement nor any of the rights granted
by Licensor hereunder may be assigned or otherwise transferred by Licensee,
except that Licensee may assign its rights hereunder without Licensor's consent
to (x) any wholly-owned subsidiary of Licensee, (y) the surviving entity in the
event of a merger or reorganization where Licensee is not the surviving party or
(2) the purchaser in the event of a sale of substantially all of Licensee's
assets, provided that any such assignee hereunder must execute and deliver to
Licensor prior to the effectiveness of the assignment and agreement reasonably
satisfactory in form and substance to Licensor under which such assignee assumes
and agrees to perform and discharge all of the obligations and liabilities of
Licensee, but any such permitted assignment shall not relieve Licensee of its
obligations hereunder. Any assignment or transfer made by Licensee in violation
of this provision shall be deemed null and void.

12.8 HEADINGS. Any headings used in this Agreement are for reference
only, are without substantive meaning and content of any kind whatsoever and do
not form part of this Agreement, nor in any way affect its interpretation.

12.9 WAIVER. None of the provisions of this Agreement shall be
considered waived by any party unless such waiver is given expressly and in
writing to the other party. The failure of a party to insist upon strict
performance of any of the terms and conditions hereof, or failure or delay to
exercise any rights provided herein or by law, shall not be deemed a waiver of
any rights of either party.

12.10 SCHEDULES. All schedules attached hereto, either as originally
existing or as the same may from time to time be supplemented, modified or
amended, are incorporated herein by this reference.

12.11 ATTORNEYS' FEES. In the event of any dispute arising out of the
subject matter of this Agreement, the prevailing party shall recover, in
addition to any other damages assessed, its reasonable attorneys' fees and court
costs incurred in litigating or otherwise settling or resolving such dispute.
In construing this Agreement, none of the parties hereto shall have any term or
provision construed against such party solely by reason of such party having
drafted the same.

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<PAGE>

12.12 TAXES. All taxes imposed as a result of the performance of the
parties hereunder shall be borne and paid by the party required to do so by
applicable law or treaty.

12.13 INDEPENDENT CONTRACTOR. The parties hereto understand and agree
that this Agreement does not make them an agent or legal representative of each
other for any purpose whatsoever. Neither party hereto is granted, by this
Agreement or otherwise, any right or authority to assume or create any
obligation or responsibility, express or implied, on behalf of or in the name of
the other party hereto, or to bind the other party hereto in any manner
whatsoever. Both parties expressly acknowledge that Licensee is an independent
contractor with respect to Licensor and that the parties hereto are not
partners, joint venturers, employees or agents.

12.14 EXCUSED NON-PERFORMANCE. Anything contained in this Agreement
to the contrary notwithstanding, the obligations of the parties hereto shall be
subject to all laws, both present and future, of any government having juris-
diction over any of the parties hereto, and to orders, regulations, directions,
or requests of any such government, or any department, agency, or court thereof,
and to war, acts of public enemies, strikes or other labor disturbances, fires,
floods, acts of God, or any causes of like or different kind beyond the control
of the parties, not caused by the fault or negligence of the party asserting
this provision. The parties hereto shall be excused from any failure to perform
any obligation hereunder to the extent such failure is not the result of the
fault or negligence of the party asserting this provision and is caused by any
such law, order, regulation, directions, request or contingency.

12.15 COUNTERPARTS. This Agreement and any amendments, waivers,
consents or supplements may be executed in counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.

12.16 FURTHER ASSURANCES. The parties agree to execute, acknowledge
and deliver all such further instruments,

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and to do all such other acts, as may be necessary or appropriate, in order to
carry out the intent and purpose of this Agreement.

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

"LICENSEE"

HEXCEL CORPORATION

By:___________________________________

Name:_________________________________

Title:________________________________

"LICENSOR"

NORTHROP GRUMMAN CORPORATION

By:___________________________________

Name:_________________________________

Title:________________________________

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EXHIBIT 2

EQUIPMENT LEASE

THIS EQUIPMENT LEASE ("Lease") is made as of ___________________, 1995
between NORTHROP GRUMMAN CORPORATION, a Delaware corporation having an office at
1840 Century Park East, Los Angeles, California 90067 ("Lessor"), and HEXCEL
CORPORATION, a Delaware corporation having an office at 5794 W. Las Positas
Boulevard, Pleasanton, California 94588 ("Lessee").

RECITALS

A. Section 9.15 of that certain Asset Purchase Agreement dated as of
November 3, 1994 by and between Lessor and Lessee (the "APA") contemplates the
execution and delivery by the parties of this Lease (capitalized terms not
otherwise defined herein shall have the meanings set forth in the APA).

B. Lessor desires to lease to Lessee the equipment (the "Equipment")
set forth on Schedule 9.15 to the APA and attached hereto ("Schedule 9.15") and
Lessee desires to lease the Equipment from Lessor.

C. The parties intend that the Equipment shall be used, among other
purposes, for the manufacture of certain products and performance of certain
services by Lessee for Lessor pursuant to the terms of a Supply Agreement to be
entered into between Lessor and Lessee as contemplated in the APA (the "Supply
Agreement").

AGREEMENT

It is therefore agreed between the parties as follows:

1. LEASE OF EQUIPMENT; MANUFACTURE OF PRODUCTS. Subject to the terms and
conditions set forth below, Lessor agrees to lease to Lessee and Lessee agrees
to lease from Lessor the Equipment. Set forth on Schedule 9.15 is a list of each
item of Equipment, the facility of Lessee where such Equipment is located, and
the product that is to be manufactured or service to be performed by Lessee for
Lessor using each such item of

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Equipment (which the parties acknowledge does not limit in any way the
purposes for which Lessee may use the Equipment).

2. TERM. This Lease shall remain in full force and effect until
terminated as provided in Section 11 hereto.

3. RENTAL. Upon execution of this Lease, Lessee shall pay to Lessor as
rent for the use of the Equipment throughout the term of the Lease a one-time
rental payment equal to One Thousand Dollars ($1,000), the receipt and
sufficiency of which are hereby acknowledged by Lessor.

4. OWNERSHIP AND USE.

(a) This Lease constitutes a lease of the Equipment and does not
constitute a sale or the creation of a security interest. The Equipment shall at
all times be the sole and exclusive property of Lessor. Lessee shall have no
rights or property interest therein, except for the right to use same in the
normal operation of the facility maintained by Lessee at the address set forth
beside each item of Equipment in Schedule 9.15. During the first three (3) years
that this Lease shall be in effect, all the Equipment shall be located at the
address indicated on Schedule 9.15 (except for such relocation (i) as
contemplated on Schedule 9.15, or (ii) which is requested by Lessee in writing,
stating the reasons for such request, and consented to by Lessor in writing,
which consent shall not be unreasonably withheld), and thereafter Lessee, upon
ten (10) business days' written notice to Lessor, may relocate the Equipment to
any of Lessee's facilities located in the United States (so long as there then
exists no Event of Default, as hereinafter defined).

(b) The Equipment is and shall remain personal property even if
installed in or attached to real property. Lessor shall be permitted to display
notice of its ownership on each article of Equipment by means of a suitable
stencil, label, or plaque affixed thereto.

(c) Lessee shall keep the Equipment at all times free and clear of
all claims, levies, liens, encumbrances, and process. Lessee shall give Lessor
immediate notice of any such attachment or other judicial process affecting any
article of Equipment leased hereunder.

(d) Lessee shall not pledge, lend, create a security interest in,
sublet, or part with possession of the Equipment or any part thereof or attempt
in any other manner to dispose thereof, or remove the Equipment or any part
thereof, without Lessor's prior written consent.

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(e) Lessee shall cause the Equipment to be operated in accordance
with applicable vendor's or manufacturer's manual of instructions (except to the
extent such Equipment heretofore has been modified by Lessee or hereafter may be
modified, provided that any such modification does not adversely affect the
ability to use such Equipment for the purposes set forth in Schedule 9.15), by
competent and qualified personnel. Lessee will maintain written records of
operations. Lessee shall promptly notify Lessor if any of the Equipment is
lost, stolen, damaged or destroyed, or if any Person sustains an injury or dies
in connection with the operation of the Equipment, and Lessee shall file all
necessary reports required by law or by the insurers of the Equipment.

(f) Lessor shall have, upon reasonable notice, access to and use of
the Equipment during normal business hours to enable Lessor and its employees to
be trained to utilize the Equipment for all necessary purposes, and to inspect
the Equipment, as requested by Lessor from time to time. Lessee will provide all
reasonable assistance, advice, and training required to permit Lessor to use and
operate the Equipment at no cost to Lessor, as requested by Lessor from time to
time (but, if requested by Lessor, no less frequently than quarterly); PROVIDED,
HOWEVER, that Lessor shall reimburse Lessee for the cost of any materials which
may be required in connection with providing such assistance, advice or
training. Subject to the foregoing, and provided Lessee is in compliance with
the terms and conditions hereof and there exists no Event of Default, Lessee
shall have the right to quiet enjoyment of the Equipment during the term hereof.

5. REPAIRS AND REPLACEMENTS. Lessee shall keep the Equipment in good
condition and, at its own cost and expense, make all repairs and replacements
necessary for its preservation. All such repairs and replacements, and records
associated therewith, shall constitute accessions and shall become part of the
Equipment and shall be the exclusive property of Lessor.

6. INSURANCE. Lessee shall insure the Equipment against burglary, theft,
fire, damage, and vandalism in commercially reasonable amounts acceptable to
Lessor and obtain public liability and property damage with minimum limits and
with such insurance companies in accordance with past practice and, at Lessor's
request, shall provide evidence of the required insurance pursuant to this
section. Each damage policy shall provide for payment of all losses directly to
Lessor. Each liability policy shall provide that all losses be paid on behalf of
Lessor. Upon the occurrence of any damage to or destruction of the Equipment
resulting in the payment of any insurance proceeds to Lessor, Lessor shall apply
such proceeds to reimburse Lessee for the cost to repair or replace any

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damaged or destroyed Equipment, PROVIDED, HOWEVER, that (i) such reimbursement
is subject to Lessee providing written evidence satisfactory to Lessor
substantiating (A) the damage to or destruction of the Equipment, and (B) that
the Equipment has been repaired and/or replaced, as the case may be, and is
fully operational, (ii) Lessor shall not be obligated to reimburse Lessee for
any amount in excess of any insurance proceeds received by Lessor as a result of
any damage to or destruction of the Equipment, and (iii) any Equipment so
repaired by Lessee shall remain subject to the terms of this Lease, and any
equipment which replaces any destroyed Equipment shall become subject to this
Lease and shall be deemed to be "Equipment" for all purposes contemplated
herein.

7. RETURN. Upon termination of this Lease, Lessee shall return and
install the Equipment in good condition and in working order, except for
ordinary wear and tear, at Lessee's expense, to Lessor at Lessor's place of
business designated in writing by Lessor either in the Phoenix, Arizona area or
the Los Angeles, California area.

8. TAX BENEFITS. The parties agree that, to the extent available, Lessor
shall have the benefit of the investment tax credit and any other tax benefits
incidental to the ownership of the Equipment, which may be available under the
Internal Revenue Code of 1986, as amended, and any applicable state and local
tax provisions. The parties agree to take positions consistent with the
foregoing on each party's respective tax returns unless advised by counsel in
writing to the contrary.

9. TAXES AND OTHER CHARGES. Lessee shall be liable for and pay, on or
before their respective due dates, (i) all sales taxes, use taxes, privilege
taxes, personal property taxes or other taxes or governmental charges imposed
upon the Equipment or levied against the amount of the lease payment to be paid
under this Lease, and (ii) any fees for licenses, registrations, permits and
other certificates, as may be required for the lawful operation of the
Equipment. If applicable, all certificates of title shall be applied for in
Arizona and any other state where the Equipment may be located from time to time
as contemplated herein and shall be issued in the name of Lessor as the sole
owner of the Equipment, and Lessee shall deliver all such certificates of title
to Lessor and shall pay all expenses in relation thereto.

10. ACTIONS CONSTITUTING DEFAULT. Lessor, at its option, may by written
notice to Lessee (other than with respect to paragraphs (b), (c) and (d) below,
as to which no notice shall be required) declare Lessee in default upon the
occurrence of any of the following (an "Event of Default"):

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(a) failure by Lessee to perform any of its obligations hereunder in
any material respect;

(b) the termination of the Supply Agreement under Paragraph 7(b)(ii)
of the Supply Agreement;

(c) other than with respect to the Bankruptcy Case, Lessee becomes
insolvent or admits in writing its inability to pay its debts as they mature,
any bankruptcy, insolvency, reorganization, or liquidation proceeding or other
proceeding for relief under any bankruptcy law or any law for the relief of
debtors is instituted by or against Lessee, any assignment by Lessee for the
benefit of creditors, or any application by Lessee for, or consent by Lessee to,
the appointment of a receiver or trustee of all or a part of Lessee's property;

(d) Lessee's cessation of business.

11. TERMINATION.

(a) This Lease shall terminate as follows:

(i) At Lessee's option, upon thirty days' written notice to
Lessor;

(ii) At Lessor's option, in the event of a Force Majeure Event
(as defined in the Supply Agreement), the duration of which exceeds eighteen
(18) consecutive months, then upon expiration of such eighteen-month period;

(iii) Upon the occurrence of an Event of Default under Sections
10(a) hereof which has not been cured within twenty (20) business days after
Lessor has provided Lessee written notice thereof, or immediately upon the
occurrence of an Event of Default under Sections 10(b), (c) or (d) hereof,
Lessor shall have the right without further notice or demand to terminate this
Lease, but such termination shall not release Lessee from the payment of damages
sustained by Lessor;
(iv) Upon the exercise by Lessor of a Partial Termination Right
(as defined under the Supply Agreement), this Lease shall terminate with respect
to the Equipment which produces the Product or performs the Service (each as
defined in the Supply Agreement) as to which the Partial Termination Right has
been exercised by Lessor; or

(v) Termination of the Supply Agreement pursuant to Paragraph
5(i) of the Supply Agreement (but only upon the effectiveness of such
termination).

(b) Upon termination of this Lease, in whole or in part (other than
pursuant to subparagraph (a)(v) above, in

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which event Lessor shall take such steps as are necessary to effect the transfer
of ownership to Lessee of the Equipment as to which this Lease shall have
terminated), Lessor shall have the right to repossess the Equipment as to which
this Lease shall have terminated without legal process free of all rights of
Lessee in and to the Equipment, and upon termination Lessee shall not be
entitled to a refund of any portion of the rental paid hereunder. Lessee
authorizes Lessor or Lessor's agents to enter on any premises where the
Equipment is located and repossess and remove the Equipment. Lessee
specifically waives any right of action that Lessee might otherwise have arising
out of such entry, repossession or removal, and releases Lessor from any claim
for trespass or damage caused by reason of such entry, repossession or removal.
Upon termination, Lessee shall reimburse Lessor for all expenses (including the
reasonable fees and expenses of counsel) in connection with the repossession of
the Equipment and the enforcement of Lessor's rights and remedies, together with
interest at the maximum annual rate permitted by law.

12. INDEMNIFICATION AND LIABILITY. Lessee assumes all risk and liability
for the loss of or damage to the Equipment, for the death of or injury to any
person or property of another, and for all other risks and liabilities arising
out of the use, operation, condition, possession or storage of the Equipment.
Nothing in this Lease shall authorize Lessee or any other person to operate any
of the Equipment so as to impose any liability or other obligation on Lessor.
Lessee shall indemnify and hold harmless Lessor, each Affiliate, successor (if
any), officer, director, controlling person, employee and agent of Lessor from
and against, and shall reimburse Lessor for, any Damages arising from or in
connection with (i) the maintenance, use, or operation of the Equipment,
including without limitation, any Damages which may arise in connection with
bodily injury (including death), property damage, damage to the Equipment (after
application of the proceeds of any insurance maintained pursuant to Section 6
hereof) or other liability of any kind whatsoever caused by or arising out of
the maintenance, use or operation of the Equipment, and (ii) any failure by
Lessee to perform or comply with any agreement made by it under this Lease. The
procedures for indemnification set forth in Sections 10.3 and 10.4 of the APA,
and the limitations on liability set forth in Section 10.5 of the APA, shall
apply to claims for indemnification hereunder. The indemnities and assumptions
of risk, liabilities and obligations by Lessee arising out of this Lease during
the term of this Lease shall continue in full force and effect after the
termination of this Lease, regardless of the reason for such termination (but
Lessee shall not be liable for any Damages arising from any use of the Equipment
after the termination of this Lease and the surrender of possession of the
Equipment to Lessor).

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13. FURTHER ASSURANCES. At any time and from time to time after the date
hereof, each of Lessee and Lessor agrees to, without further consideration, do,
execute, acknowledge and deliver all such further documents and instruments, and
do such other things, as may reasonably be required to give effect to the
transactions contemplated hereby (including without limitation filing with any
Governmental Body any financing statements or any other documents which are
requested by Lessor or are otherwise desirable or required under Applicable
Law).

14. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given (i) if delivered
personally or sent by facsimile transmission (confirmed electronically) on the
date given, (ii) if delivered by an overnight express mail service, on the date
of delivery, or (iii) if by certified or registered mail, postage prepaid,
return receipt requested, five (5) days after mailing, to the parties, their
successors in interest or their permitted assignees at the following addresses
or at such other addresses as the parties may designate by written notice in the
manner aforesaid:

If to Lessee: Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94588
Attention: Rodney P. Jenks, Esq.
Facsimile: (510) 734-8611

with copy to:

Kronish, Lieb, Weiner & Hellman
1114 Avenue of the Americas
New York, New York 10036
Attention: Ralph J. Sutcliffe, Esq.
Facsimile: (212) 479-6275

If to Lessor:

Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90007
Attention: Albert F. Myers,
Vice President
Facsimile: (310) 201-3023

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<PAGE>

with copy to:

Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90067
Attention: Richard R. Molleur,
Corporate Vice President
and General Counsel
Facsimile: (310) 201-3378

15. THIRD PARTY BENEFICIARIES; BENEFITS; ASSIGNMENT. This Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted assignees or successors in interest including a trustee appointed
pursuant to Chapter 7 or Chapter 11 of the Bankruptcy Code. Nothing herein
expressed or implied is intended to confer upon any Person, other than the
parties hereto and their respective permitted assignees, any rights, obligations
or liabilities under or by reason of this Lease. The respective rights and
obligations of either party hereto shall not be assignable by such party without
the prior written consent of the other party, except that either party without
such consent may assign its rights under this Lease to (x) any wholly-owned sub-
sidiary of such party; or (y) any successor in the event of a merger,
reorganization, business consolidation, sale of all or substantially all its
assets, liquidation or dissolution or, in the case of Lessor, the transfer of
the B-2 Contract or an Additional B-2 Contract, provided that any such assignee
hereunder must execute and deliver to such other party hereto prior to the
effectiveness of the assignment an agreement reasonably satisfactory in form and
substance to such other party under which such assignee assumes and agrees to
perform and discharge all of the obligations and liabilities of the assigning
party or the relevant obligations and liabilities relating to the assignment,
but any such permitted assignment shall not relieve the assigning party of its
obligations hereunder.

16. REMEDIES CUMULATIVE. The remedies of Lessor shall be cumulative to
the extent permitted by law, and may be exercised partially, concurrently or
separately. The exercise of one remedy shall not be deemed to preclude the
exercise of any other remedy.

17. OBLIGATIONS UNCONDITIONAL. The parties' obligations hereunder shall
be absolute and unconditional under all circumstances, notwithstanding (i) any
setoff, counterclaim, recoupment, defense or other right which any party may
have against the other for any reason whatsoever, (ii) any defect in the title,
condition, operation, fitness for use, damage or

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<PAGE>

destruction of or to the Equipment or any interruption or cessations in use or
possession thereof for any reason whatsoever, or (iii) any insolvency,
bankruptcy, reorganization or similar proceedings instituted by or against
either party hereto.

18. NON-WAIVER. No failure on the part of Lessor to exercise any remedy
or right under this Lease and no delay in the exercise of any such remedy or
right shall operate as a waiver.

19. INJUNCTIVE RELIEF. Lessee and Lessor each hereby acknowledges that
the breach of material terms contained herein (whether or not specifically
designated as such) would cause irreparable damage and substantial prejudice to
Lessee and Lessor, as the case may be. Accordingly, notwithstanding any other
provision hereof, Lessee and Lessor agree that, in the event of any such breach
which gives rise to a claim hereunder, each party shall have, in addition to its
legal remedies, the right to injunctive relief, as permitted by law, to prevent
the violation of its obligations hereunder.

20. JURISDICTION. The parties agree that, during the Bankruptcy Period,
the Bankruptcy Court shall have exclusive jurisdiction to resolve any
controversy or claim arising out of or relating to this Lease, or the breach
hereof. The parties further agree that, after the Bankruptcy Period, any action
or proceeding with respect to such controversy or claim shall be brought against
any of the parties in the courts of the State of California in
Los Angeles County or, if it has or can acquire subject matter jurisdiction, in
the United States District Court for the Central District of California, and
each of the parties hereby consent to the personal jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein.

21. GOVERNING LAW. This Lease shall be governed by, and construed and
enforced in accordance with, the laws of the State of California applicable to
contracts made and to be performed wholly in that State.

22. COUNTERPARTS. This Lease may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute but one and the same instrument.

23. MODIFICATIONS, AMENDMENTS AND WAIVERS. This Lease may be amended only
by written agreement of the parties hereto.

24. SEVERABILITY. Any provision of this Lease which is invalid, illegal
or unenforceable in any jurisdiction shall, as

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<PAGE>

to that jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions hereof in such jurisdiction or rendering that or any other provision
of this Lease invalid, illegal or unenforceable in any other jurisdiction.

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

HEXCEL CORPORATION

BY: ______________________________

NAME: ____________________________

TITLE: ___________________________

NORTHROP GRUMMAN CORPORATION

BY:______________________________

NAME: ____________________________

TITLE: ___________________________

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<PAGE>

EXHIBIT 3

FORM OF OPINION OF
KRONISH, LIEB, WEINER & HELLMAN

__________, 1995

Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90067

Re: Asset Purchase Agreement dated as of
October __, 1994 between Hexcel
CORPORATION AND NORTHROP GRUMMAN CORPORATION

Ladies and Gentlemen:

We have acted as special counsel to Hexcel Corporation, a Delaware
corporation ("Hexcel"), a debtor and debtor-in-possession under Chapter 11 of
the United States Bankruptcy Code, in a case entitled IN RE HEXCEL CORPORATION,
a Delaware corporation, debtor, Bankruptcy Case No. 93-48535-T (the "Case")
pending in the Bankruptcy Court in connection with that certain Asset Purchase
Agreement dated as of October __, 1994, between Northrop Grumman Corporation, a
Delaware corporation ("Northrop") and Hexcel (the "Agreement"). Capitalized
terms used herein and not otherwise defined herein shall have the same meanings
as defined in the Agreement.

In our capacity as special counsel for Hexcel, we have reviewed the
Transaction Agreements and the Contracts and have made such legal and factual
inquiries and examinations as we deemed advisable for purposes of rendering this
opinion. As to factual matters, we have relied upon statements, certificates and
other assurances of public officials and of officers and other representatives
of Hexcel which factual matters have not been independently established or
verified by us. Copies of the certificates of officers of Hexcel on which we
have relied for purposes of this opinion have been provided to you. We have also
assumed the genuineness of all signatures and the legal capacity of all natural
persons, the authenticity of documents submitted to us as originals, the
conformity to the originals of all documents submitted to us as certified, con-
formed or photostatic copies, and the conformity to the final forms of all
drafts submitted to us. We have further assumed

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<PAGE>

Northrop Grumman Corporation
________________, 1995
Page 2

that: (i) all documents referred to herein have been duly authorized, executed
and delivered by the parties thereto other than Hexcel; and (ii) all documents
are enforceable against each of such other parties in accordance with their
respective terms.

Whenever our opinion herein with respect to the existence or absence
of facts or circumstances is indicated to be based on our "knowledge," except as
specifically set forth herein, it is intended to signify that during the course
of our representation of Hexcel, no information has come to our attention which
would give us actual knowledge as of the date hereof that our opinions herein
relating to such facts are or may be incorrect.

On the basis of our inquiries and examinations, and subject to the
qualifications, exceptions, assumptions and limitations contained herein, we are
of the opinion that:

1. Hexcel is a corporation duly incorporated and is validly existing
in good standing under the laws of the State of Delaware.

2. Hexcel is duly qualified to do business as a foreign corporation
in good standing in Arizona, Pennsylvania and Texas, which Hexcel has
represented to us in its officers certificate to be all of the states in which
it owns or leases real property, maintains offices or inventories, or has
employees.

3. Hexcel has full corporate power and authority to conduct its
operations as they are described in its Form 10-K Annual Report for the fiscal
year ended December 31, 1993, and to own or lease, operate and use its
properties and assets.

4. All necessary Bankruptcy Court approvals to enable Hexcel to
execute and deliver the Transaction Agreements, assign the Assumed Agreements
pursuant to the terms of the Transaction Agreements, and perform all of its
obligations under the Transaction Agreements, have been obtained.

5. Hexcel has full corporate power and authority to execute and
deliver the Transaction Agreements and to perform its obligations under such
Transaction Agreements. The execution, delivery and performance of the
Transaction Agreements have been duly authorized by all necessary corporate

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<PAGE>

Northrop Grumman Corporation
________________, 1995
Page 3

action on the part of Hexcel and have been duly executed and delivered by
Hexcel. The Transaction Agreements constitute the legal, valid and binding
agreements of Hexcel and are enforceable against Hexcel in accordance with their
respective terms.

6. The execution, delivery and performance of the Transaction
Agreements by Hexcel, including without limitation, the assignment of the
Assumed Agreements, will not (a) violate any provision of the Certificate of
Incorporation or By-laws, as presently in effect, of Hexcel, (b) to our
knowledge, violate any Applicable Law or any judgment, decree or order of any
court, arbitrator or Governmental Body applicable to Hexcel, or (c) (except
where any consent referred to in the Agreement has not been obtained) violate,
or be in conflict with, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result in the
termination, cancellation or acceleration of, or loss of any benefit to which
Hexcel is entitled under, any Assumed Agreement, or, to our knowledge, any
material agreement known to us to which Hexcel is a party.

7. Except as otherwise disclosed on Schedule 7.3, no consent,
approval or authorization of, or declaration, filing or registration by, Hexcel
with any Governmental Body is required in connection with the execution,
delivery and performance of the Transaction Agreements by Hexcel, except as have
been made or obtained or with respect to which the failure to so make or obtain
would not have a material adverse effect on Hexcel, Northrop or the Chandler
Business.

8. To our knowledge, and except as otherwise disclosed in the
Agreement, Hexcel: (a) has all material licenses, permits, orders or approvals
from Governmental Bodies ("Approvals") required for the conduct of the Chandler
Business, and (b) has not received any notification of any threatened suspension
or cancellation of any Approvals.

9. Except for proceedings before the Bankruptcy Court in connection
with the Case or arising under the Bankruptcy Code, to our knowledge (without
any investigation of the court records having been made), other than as
disclosed in Schedule 7.11, there are no (a) actions, suits, investigations
(either criminal or civil), arbitrations or proceedings ("Proceedings") pending
or threatened against or affecting Hexcel, any Affiliate of Hexcel, any officer
or director of Hexcel, or any of the Assets or any of the Intellectual

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<PAGE>
Northrop Grumman Corporation
________________, 1995
Page 4

Property being transferred pursuant to the Transaction Agreements or licensed
pursuant to the Base License, or (b) Proceedings pending or threatened against
Hexcel, any Affiliate of Hexcel, any of the Assets or any of the Intellectual
Property being transferred pursuant to the Transaction Agreements or licensed
pursuant to the Base License which seek to prevent, enjoin, alter or materially
delay consummation of the Closing or otherwise prevent Hexcel from complying
with the terms and provisions of the Transaction Agreements.

10. Except as disclosed on Schedule 7.9(h), to our knowledge, neither
Hexcel nor any of its operations have ever been debarred or suspended from
participation in the award of contracts with any Governmental Body and no such
action or proceeding is currently pending or threatened.

11. Except as disclosed in Schedule 7.9(a).4, all of the Assumed
Agreements are assignable by Hexcel to Northrop pursuant to the Transaction
Agreements without the consent of any other Person, including without limitation
any Governmental Body.

12. Upon the Closing, Hexcel has sold, transferred and conveyed all
of its right, title and interest in and to the Assets and the Assumed Agreements
free and clear of all Liens that are perfected by financing statements or
otherwise created by filing with a Governmental Body.

13. To our knowledge, except as disclosed in the Transaction
Agreements, none of the Contracts is, or was awarded, in material violation of
any Applicable Law.

14. The Final Bankruptcy Court Order was entered by the Bankruptcy
Court on ________________, 1994 and, to our knowledge, is not subject to any
stay.

15. We are not aware of any facts which in our judgment will affect
in any manner the effectiveness of the Final Bankruptcy Court Order.

The foregoing opinions are subject to the following qualifications,
exceptions, assumptions and limitations:

i. After the date of the Final Bankruptcy Order, the effects of a
subsequent bankruptcy, subsequent insolvency, or subsequent reorganization on
the future obligations of

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<PAGE>

Northrop Grumman Corporation
________________, 1995
Page 5

Hexcel under the Transaction Agreements; it being understood that the
limitations set forth in this paragraph i shall not apply with respect to the
Case.

ii. Limitations of law or equity upon the availability of specific
enforcement, injunctive relief or other equitable remedies.

iii. The effects of equitable principles of general application,
whether considered in a proceeding at law or in equity.

iv. The effects of implied covenants of good faith and fair dealing
and any requirement or requirements that a party seek to enforce its rights only
reasonably, only in circumstances and in a manner in which it is commercially
reasonable to do so, or only in the event of a material breach of a material
covenant.

v. The unenforceability under certain circumstances of contractual
provisions respecting severability; unconscionability; penalties and
forfeitures; attorneys' fees; indemnity or contribution, to the extent contrary
to public policy or providing for indemnification of a party against the
indemnitee's own wrongful or negligent acts; cumulation, election or exclusivity
or non-exclusivity of remedies, or non-waiver of remedies by a failure or delay
of exercise; and waiver or relinquishment of any right to notice, broadly or
vaguely stated rights, unknown future rights, defenses to obligations or rights
granted by law (whether substantive or procedural), where such waiver or
relinquishment is contrary to public policy or otherwise prohibited, limited or
made unenforceable.

This opinion is rendered to you pursuant to Section 11.2(d) of the
Agreement and may not be relied upon by any other Person in any context or by
you in any other context. This opinion may not be quoted or copies hereof
furnished to any other Person without the prior written consent of this firm,
except that you may furnish a copy hereof (i) to your independent auditors and
attorneys, (ii) to any state or federal authority having regulatory jurisdiction
over you, (iii) pursuant to order or legal process of any court or other
Governmental Body and (iv) in connection with any legal action to which you are
a party arising out of the above-described transaction.

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<PAGE>

Northrop Grumman Corporation
________________, 1995
Page 6

We express no opinion, and none should be inferred, as to (i) the
enforceability of the choice of law provisions in the Transaction Agreements, or
(ii) to the extent not explicitly stated herein, the state of title to any
property or the creation, perfection or priority of any lien or security
interest.

Except as specifically indicated herein, the opinions expressed herein
are to be given the same interpretation as such opinions would be given with
respect to a company that is not subject to a Bankruptcy Court proceeding.

We are admitted to practice in the State of New York and express no
opinion as to matters governed by any laws other than the laws of the State of
New York, the General Corporation Law of the State of Delaware and the federal
laws of the United States of America. For purposes of rendering this opinion
with respect to Transaction Agreements that state that they are governed by laws
other than the laws set forth in the previous sentence, we have assumed with
your permission that the internal laws of such state are the same in all
material respects as the internal laws of the State of New York. This opinion is
limited to such laws as they presently exist and to the facts as they presently
exist.

We assume no obligation to revise or supplement this opinion should
the present laws of such jurisdictions be changed by legislative action,
judicial decision or otherwise. This opinion is rendered as of the date hereof,
and we express no opinion as to, and disclaim any undertaking or obligation to
update this opinion in respect of, changes of circumstances or events which
occur subsequent to this date.

Very truly yours,

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<PAGE>

EXHIBIT 4

FORM OF OPINION OF
NORTHROP'S GENERAL COUNSEL

______________, 1995

Hexcel Corporation
5794 West Las Positas Boulevard
Pleasanton, California 94588

Re: ASSET PURCHASE AGREEMENT DATED AS OF OCTOBER __, 1994
BETWEEN HEXCEL CORPORATION AND NORTHROP GRUMMAN CORPORATION

Ladies and Gentlemen:

I am the Corporate Vice President and General Counsel of Northrop
Grumman Corporation, a Delaware corporation ("Northrop"). As such, I am
rendering this opinion in connection with that certain Asset Purchase Agreement
dated as of October __, 1994, between Hexcel Corporation, a Delaware corporation
("Hexcel"), which is a debtor and debtor-in-possession under Chapter 11 of the
United States Bankruptcy Code, in a case entitled IN RE HEXCEL CORPORATION, a
Delaware corporation, debtor, Bankruptcy Case No. 93-48535-T pending in the
Bankruptcy Court, and Northrop (the "Agreement"). Capitalized terms used herein
and not otherwise defined herein shall have the same meanings as defined in the
Agreement.

For the purpose of rendering the opinions set forth below, I have
caused to have reviewed the Transaction Agreements and have made such legal and
factual inquiries and examinations as I deemed advisable for purposes of
rendering this opinion. As to factual matters, I have relied upon statements,
certificates and other assurances of public officials and of officers and other
representatives of Northrop

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<PAGE>

Hexcel Corporation
_________, 1995
Page 2

which factual matters I have not independently established or verified. I have
also assumed the genuineness of all signatures and the legal capacity of all
natural persons, the authenticity of documents submitted to me as originals, the
conformity to the originals of all documents submitted to me as certified, con-
formed or photostatic copies, and the conformity to the final forms of all
drafts submitted to me. I have further assumed that: (i) all documents referred
to herein have been duly authorized, executed and delivered by the parties
thereto other than Northrop; and (ii) all documents are enforceable against each
of such other parties in accordance with their respective terms.

Whenever the opinions herein with respect to the existence or absence
of facts or circumstances is indicated to be based on my "knowledge," except as
specifically set forth herein, it is intended to signify that no information has
come to my attention which would give me actual knowledge as of the date hereof
that the opinions herein relating to such facts are or may be incorrect. Except
to the extent expressly set forth herein, I have not undertaken any independent
investigation to determine the existence or absence of such facts, and no
inference as to my knowledge of the existence or absence of such facts should be
drawn.

On the basis of such inquiries and examinations, and subject to the
qualifications, exceptions, assumptions and limitations contained herein, I am
of the opinion that:

1. Northrop is a corporation duly incorporated and is validly
existing in good standing under the laws of the State of Delaware.

2. Northrop has full corporate power and authority to conduct its
operations as they are presently conducted and to own or lease, operate and use
its properties and assets.

3. Northrop has full corporate power and authority to execute and
deliver the Transaction Agreements and to perform its obligations under such
Transaction Agreements. The

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Hexcel Corporation
_________, 1995
Page 3

execution, delivery and performance of the Transaction Agreements have been duly
authorized by all necessary corporate action on the part of Northrop and have
been duly executed and delivered by Northrop. The Transaction Agreements
constitute the legal, valid and binding agreements of Northrop and are
enforceable against Northrop in accordance with their respective terms.

4. The execution, delivery and performance of the Transaction
Agreements by Northrop will not (a) violate any provision of the Certificate of
Incorporation or By-laws, as presently in effect, of Northrop, (b) to the best
of my knowledge, and except as set forth in Section 8.2 of the Agreement and
Schedule 8.2 thereto, violate any Applicable Law or any judgment, decree or
order of any court, arbitrator or Governmental Body applicable to Northrop, or
(c) to the best of my knowledge violate, or be in conflict with, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination, cancellation or
acceleration of, or loss of any benefit to which Northrop is entitled under, any
material agreement known to me to which Northrop is a party.

5. Except as set forth in Section 8.2 of the Agreement and Schedule
8.2 thereto, no consent, approval or authorization of, or declaration, filing or
registration by, Northrop with any Governmental Body is required in connection
with the execution, delivery and performance of the Transaction Agreements by
Northrop, except as have been made or obtained or with respect to which the
failure to so make or obtain would not have a material adverse effect on
Northrop.

The foregoing opinions are subject to the following qualifications,
exceptions, assumptions and limitations:

i. The effects of bankruptcy, insolvency, fraudulent transfer,
equitable subordination, reorganization, arrangement, moratorium and other laws
relating to or affecting the rights of creditors, whether now or hereafter in
effect.

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Hexcel Corporation
_________, 1995
Page 4

ii. Limitations of law or equity upon the availability of specific
enforcement, injunctive relief or other equitable remedies.

iii. The effects of equitable principles of general application,
whether considered in a proceeding at law or in equity.

v. The unenforceability under certain circumstances of contractual
provisions respecting severability; unconscionability; penalties and
forfeitures; attorneys' fees, to the extent inconsistent with California Civil
Code Section 1717; indemnity or contribution, to the extent contrary to public
policy or providing for indemnification of a party against the indemnitee's own
wrongful or negligent acts; cumulation, election or exclusivity or non-
exclusivity of remedies, or non-waiver of remedies by a failure or delay of
exercise; and waiver or relinquishment of any right to notice, broadly or
vaguely stated rights, unknown future rights, defenses to obligations or rights
granted by law (whether substantive or procedural), where such waiver or
relinquishment is contrary to public policy or otherwise prohibited, limited or
made unenforceable.

vi. No opinion is expressed with respect to the enforceability of any
covenant-not-to-compete contained in any Transaction Agreement.

This opinion is rendered to you pursuant to Section 11.3(e) of the
Agreement and may not be relied upon by any other Person in any context or by
you in any other context. This opinion may not be quoted or copies hereof
furnished to any other Person without Northrop's prior written consent,

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Hexcel Corporation
_________, 1995
Page 5

except that you may furnish a copy hereof (i) to your independent auditors and
attorneys, (ii) to any state or federal authority having regulatory jurisdiction
over you, (iii) pursuant to order or legal process of any court or other
Governmental Body and (iv) in connection with any legal action to which you are
a party arising out of the above-described transaction.

I express no opinion, and none should be inferred, as to the
enforceability of the choice of law provisions in the Transaction Agreements.

This opinion speaks only as of the date hereof and is based solely
upon the existing laws of the State of California, the federal laws of the
United States of America and, for the limited purpose of the opinions contained
in paragraphs 1, 2, and 3 above, the General Corporation Law of Delaware, and I
express no opinion, and none should be inferred, as to any other laws. For
purposes of rendering this opinion, I have assumed with your permission that the
internal laws of the State of New York are the same in all material respects as
the internal laws of the State of California. This opinion is limited to such
laws as they presently exist and to the facts as they presently exist.

I assume no obligation to revise or supplement this opinion should the
present laws of such jurisdictions be changed by legislative action, judicial
decision or otherwise. This opinion is rendered as of the date hereof, and I
express no opinion as to, and disclaim any undertaking or obligation to update
this opinion in respect of, changes of circumstances or events which occur
subsequent to this date.

Very truly yours,

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<PAGE>

EXHIBIT 5

SUPPLY AGREEMENT

THIS SUPPLY AGREEMENT (the "Agreement") is made as of _____________,
1995 between HEXCEL CORPORATION, a Delaware corporation having an office at 5794
W. Las Positas Boulevard, Pleasanton, California 94588 ("Hexcel"), and NORTHROP
GRUMMAN CORPORATION, a Delaware corporation having an office at 1840 Century
Park East, Los Angeles, California 90067 ("Northrop").

RECITALS

WHEREAS, the parties contemplate the execution and delivery of this
Agreement pursuant to that certain Asset Purchase Agreement dated as of November
3, 1994 by and between Northrop and Hexcel (the "APA") (capitalized terms not
otherwise defined herein shall have the meanings set forth in the APA).

NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties contained in this Agreement, the parties agree as
follows:

1. GENERAL. Subject to the terms hereof and Sections 9.15 and 9.16 of
the APA, Northrop agrees to purchase from Hexcel and Hexcel agrees to sell to
Northrop the products (the "Products") and the services (the "Services")
described on SCHEDULE A hereto, as follows:

(a) MANDATORY PURCHASE. Hexcel agrees to supply and perform, as the
case may be, and Northrop agrees to purchase, all Northrop's requirements (but
only to the extent such requirements relate to the B-2 Contract, any Additional
B-2 Contract or any Assumed Agreement) for each Product and Service set forth in
Category I of SCHEDULE A hereto.

(b) OPTIONAL PURCHASE. At Northrop's option, Hexcel shall be
obligated, and Hexcel hereby agrees, to supply and perform, as the case may be,
any Product or Service set forth in Category I and Category II of SCHEDULE A
hereto. In the event Northrop fails to order any Product or Service set forth in
Category II of SCHEDULE A hereto within eighteen (18) months after the date
hereof, such Product or Service shall no longer be deemed included within
Category II, but shall be subject to the provisions of Paragraph 3 hereof.
Nothwithstanding anything to the contrary contained herein, Hexcel's obligation
to supply (i) "K-Foam" shall terminate twelve (12) months after the date hereof
(but such limitation on Hexcel's obligation shall not apply to K-Foam
Intermediates (as defined in SCHEDULE A hereto), it being agreed that Hexcel's
obligation to supply K-Foam Intermediates shall be supplied on the same basis as
any other Product hereunder, and (ii) "Cecore" shall terminate

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<PAGE>

thirty-six (36) months after the date hereof, and thereafter the provisions of
Paragraph 3 shall apply to "K-Foam" and "Cecore."

2. REQUIRED DELIVERY DATES FOR PRODUCTS AND SERVICES; PURCHASE ORDERS.

(a) PURCHASE ORDERS. If Northrop is required to or desires, as the
case may be, to purchase any Product or Service hereunder, Northrop shall issue
and Hexcel agrees to meet its obligations pursuant to separate "Purchase Orders"
(i) with respect to Products and Services purchased hereunder relating to the B-
2 Program, under the terms and conditions set forth in Attachment #1 hereto
(with respect to Products) and Attachment #2 hereto (with respect to Services),
and (ii) with respect to Products and Services purchased hereunder not relating
to the B-2 Program, under such terms and conditions as shall be mutually agreed
to by the parties. For the purposes of this Agreement, Products and Services
shall be deemed "delivered" or "performed" upon acceptance by Northrop pursuant
to the the terms of the relevant Purchase Order.

(b) ROUTINE ORDERS.

(i) B-2 PROGRAM. Subject to subparagraphs (c) and (d) of this
Paragraph 2, Hexcel agrees to provide, and Northrop agrees to purchase,
Northrop's requirements under the B-2 Contract, any Additional B-2 Contract and
any Assumed Agreement for the Products and Services set forth on SCHEDULE A
hereto in accordance with the schedule of setbacks for component products and
services set forth on SCHEDULE B hereto which are necessary to comply with the
master operating schedule previously agreed to by Hexcel and Northrop with
respect to the Northrop Contract (the required date for delivery of each Product
and completion of performance of each Service set forth on SCHEDULE B hereto
being referred to herein as a "B-2 Required Delivery Date").

(ii) OTHER CONTRACTS. Set forth adjacent to each Product and
Service listed on SCHEDULE A hereto is a "Lead Time" with respect to each such
Product and Service. Subject to subparagraphs (c) and (d) below, Hexcel agrees
to deliver each Product and complete performance of each Service on or prior to
a date to be agreed upon by the parties and set forth in a Purchase Order
therefor (in each such case, a "Non-B-2 Required Delivery Date"); PROVIDED,
HOWEVER, that in the absence of such agreement, the Non-B-2 Required Delivery
Date shall be the date which occurs after the date of receipt by Hexcel by
facsimile or hard copy of a Purchase Order plus the Lead Time.

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<PAGE>

(c) URGENT ORDERS. In the event that Northrop determines that it
requires delivery of a Product and/or performance of a Service on an expedited
basis, Hexcel agrees to use its good faith best efforts to comply with any
request by Northrop for such earlier delivery date.

(d) CORRECTIVE ORDERS. If after Hexcel delivers any Product or
performs any Service hereunder, Northrop determines that any such Product or
Service contains any latent defects or deficiencies or otherwise does not
conform to the specifications of the relevant Purchase Order, Hexcel agrees to
undertake such corrective action as Northrop may request on an expedited basis.

(e) FIRST PRIORITY RIGHT. If, prior to delivery by Hexcel of any
honeycomb core assembly to be delivered to Northrop hereunder, such honeycomb
core assembly is damaged or improperly machined or otherwise determined to be
incapable of meeting specifications of the relevant Purchase Order, Hexcel
agrees to so notify Northrop immediately and, immediately after Northrop has
delivered to Hexcel honeycomb core in replacement for such non-conforming
honeycomb core, Northrop shall have first priority over all other contractual
obligations of Hexcel of any kind whatsoever (which first priority shall
require, if necessary, the immediate interruption of the production of any
products or performance of any services pursuant to such other obligations), and
Hexcel shall undertake immediately such Services as are necessary to fulfill
Northrop's Purchase Order relating to such honeycomb core (the "First Priority
Right"). The First Priority Right shall expire upon delivery of such honeycomb
core assembly pursuant to the terms of the relevant Purchase Order.

3. ADDITIONAL PRODUCTS AND SERVICES. In addition to the Products and
Services to be provided by Hexcel hereunder, Hexcel agrees to provide Northrop
with such additional products and services as Northrop may reasonably request
from time to time during the effectiveness of this Agreement and as to which
Hexcel then has available the production or performance capability. Such
products and services shall be manufactured and delivered, or performed, as the
case may be, by Hexcel within such period(s) of time and, subject to Paragraph
4, at such prices, as may be mutually agreed between the parties and are
commercially reasonable.

-3-

<PAGE>

4. MOST FAVORED CUSTOMER.

(a) ROUTINE ORDERS. Hexcel shall provide all Products and Services
on a most favored customer basis (with respect to, without limit, price, rates,
times of delivery and performance, and other material terms and conditions then
applicable between Hexcel (including all divisions of Hexcel) and any of its
other customers). Without limiting the foregoing, Hexcel's pricing to Northrop
shall be as low as the lowest pricing Hexcel charges other customers for
comparable quantities except rates used in special circumstances; PROVIDED,
HOWEVER, that if any Product or Service is not provided to any customer of
Hexcel other than Northrop, such pricing has been agreed to by the parties for
the 1995 calendar year and will be increased annually thereafter in an amount
not to exceed Hexcel's annual increased cost relating thereto. In the event of
any dispute with respect to whether Hexcel is complying or has complied with its
obligations under this Paragraph 4, the dispute resolution provisions of
Schedule 3 to the APA shall apply; PROVIDED, HOWEVER, that Hexcel shall not be
required to allow Northrop to directly review information on Hexcel's rates or
prices; however, should Northrop require a review thereof for the purposes
provided for herein, Hexcel shall afford Northrop's independent certified public
accountants the opportunity to review such rates or prices so long as such
accountants agree in writing in advance not to reveal such rates or prices in
any way to Northrop.

(b) URGENT ORDERS; K-FOAM and CECORE. Notwithstanding the foregoing,
(i) the price for any Product or Service supplied or performed pursuant to
Paragraph 2(c) shall equal the price otherwise provided for herein plus Hexcel's
actual additional cost incurred in connection with supplying such Product or
Service on an expedited basis, plus a profit thereon in accordance with Hexcel's
past practice, which additional price shall only be payable if Hexcel complies
with the delivery date agreed upon pursuant to Paragraph 2(c) hereof, and (ii)
"K-Foam" and "Cecore" shall be supplied at Hexcel's actual cost plus an amount
equal to nine and one-half percent (9-1/2%) of such cost.

5. TERM OF AGREEMENT. This Agreement shall remain in full force and
effect until terminated, in whole or in part, (i) by Northrop upon notice to
Hexcel (the "Termination Notice") at least six (6) months' prior to any such
proposed termination which shall specify an estimated date of such proposed
termination and the Products and/or Services which are proposed to be terminated
(the "Estimated Termination Date"), or (ii) as provided in Paragraph 7 hereof.
Upon receipt of the Termination Notice, Hexcel agrees to provide Northrop
immediately thereafter, on a cost plus fixed fee basis, such

-4-

<PAGE>

services and other assistance as Northrop shall request to enable Northrop to
develop the capability to produce the Products and perform the Services that are
the subject of such termination. The parties acknowledge and agree that the
Estimated Termination Date is only an estimate of the date upon which Northrop
intends to achieve such capability, and if Northrop determines that it requires
additional time to develop such capability, it may extend the Estimated
Termination Date as necessary. Upon the termination of this Agreement pursuant
to subparagraph (i) above, Northrop shall take such steps as are necessary to
effect the transfer to Hexcel of ownership of the Equipment (as defined in the
Equipment Lease) used with respect to such Product or Service which is the
subject of the termination, and the lease of such Equipment pursuant to the
Equipment Lease shall thereupon terminate with respect to such Equipment. In the
event of any termination by Northrop for convenience, Hexcel hereby waives any
claims against Northrop which may result therefrom except with respect to any
outstanding Purchase Orders, which shall be governed by the terms thereof.

6. FORCE MAJEURE. Hexcel shall be relieved of its obligations to deliver
Products or perform Services in accordance with the terms hereof if Hexcel is
unable to comply with the terms hereof as a result of Acts of God, riots, fires,
floods, unusually severe weather, delays from suppliers or any other cause
beyond its control and without fault or negligence on the part of Hexcel, or
strikes or lockouts (each such event, a "Force Majeure Event"); PROVIDED,
HOWEVER, that Northrop shall have the right, while the Force Majeure Event is in
effect, without limit (i) to purchase Products and/or Services from third
parties, and/or (ii) to manufacture the Products and/or perform the Services.
The parties acknowledge and agree that a Force Majeure Event shall not include a
Bankrupcty Event (as defined below).

7. ACTIONS CONSTITUTING DEFAULT; REMEDIES UPON DEFAULT.

(a) EVENTS OF DEFAULT. Northrop, at its option, may declare Hexcel
in default upon the occurrence of any of the following (an "Event of Default"):

(i) failure by Hexcel to deliver any Product or complete the
performance of any Service prior to a B-2 Required Delivery Date or a Non-B-2
Required Delivery Date;

(ii) failure by Hexcel to perform any of its other obligations
hereunder in any material respect, which failure remains uncured after twenty
(20) business days' following notice of such failure (except that, and so long
as Hexcel continues to deliver Products and perform Services as required
hereunder during the pendency of any dispute as

-5-

<PAGE>

hereinafter described, in the event there exists a dispute between the parties
regarding Hexcel's compliance with Paragraph 4 hereof as to which the dispute
resolution provisions of Schedule 3 to the APA have been invoked and such
dispute remains unresolved thereunder, such failure shall not consititute an
Event of Default until a finding under such provisions has been made to the
effect that Hexcel has failed to comply with Paragraph 4 hereof which failure
remains uncured five (5) days after such finding has been made);

(iii) a Force Majeure Event which remains in effect for a period
in excess of eighteen (18) consecutive months, then upon expiration of such
eighteen-month period;

(iv) other than with respect to the Bankruptcy Case, Hexcel
becomes insolvent or admits in writing its inability to pay its debts as they
mature, any bankruptcy, insolvency, reorganization, or liquidation proceeding or
other proceeding for relief under any bankruptcy law or any law for the relief
of debtors is instituted by or against Hexcel, any assignment by Hexcel for the
benefit of creditors, or any application by Hexcel for, or consent by Hexcel to,
the appointment of a receiver or trustee of all or a part of Hexcel's property
(in any such case, a "Bankruptcy Event"); or

(v) Hexcel's cessation of business.

(b) REMEDIES UPON DEFAULT.

(i) INITIAL DELIVERY DATE DEFAULT. Upon the occurrence of an
Event of Default described in Paragraph 7(a)(i) above which remains uncured for
a period of twenty (20) days, (A) if such Event of Default relates to Hexcel's
failure to meet a B-2 Required Delivery Date, Hexcel shall, within five (5) days
after such twenty-day period, pay Northrop, in immediately available funds by
wire transfer or cashier's check, the amount of Five Thousand Dollars ($5,000),
(B) if such Event of Default relates to Hexcel's failure to meet a B-2 Required
Delivery Date, Northrop shall be entitled to a reduction of twenty-five percent
(25%) of the amount payable by Northrop to Hexcel for each Product or Service as
to which the Event of Default shall exist, (C) at Northrop's option, and upon
providing notice to Hexcel simultaneously with the exercise of such option,
Northrop may terminate Northrop's obligation, if any, to purchase, and Hexcel's
obligation to deliver or perform, thereafter any Product or Service as to which
an Event of Default has occurred (I.E., such Product or Service shall be deemed
removed from SCHEDULE A hereto) (the "Partial Termination Right") (and in such
event, the lease of the Equipment (as defined under the Equipment Lease) used to
produce the Product or perform the Service as to which the Partial Termination
Right has been exercised shall terminate as

-6-

<PAGE>

provided in the Equipment Lease); PROVIDED, HOWEVER, that if Hexcel delivers
such Product or Service prior to the exercise of the Partial Termination Right,
Northrop shall not be entitled to exercise the Partial Termination Right with
respect to such Product or Service, and (D) at Northrop's option, Northrop shall
have the right to manufacture or purchase from third parties the Product or
Service as to which the Event of Default has occurred (and in such event, this
Agreement shall remain in full force and effect except for Northrop's
obligation, if any, to purchase such Product or Service). The foregoing remedies
shall be cumulative, and the exercise of any one remedy shall not be deemed to
preclude the exercise of any other remedy. If Hexcel shall fail to pay Northrop
any amount due hereunder, such amount shall bear interest from the date such
amount was due at the Reference Rate, and Hexcel shall reimburse Northrop for
Northrop's costs of collecting any such amount (including reasonable attorneys'
fees).

(ii) ADDITIONAL DELIVERY DATE DEFAULT. If Northrop has exercised
a Partial Termination Right and an Event of Default described in Paragraph
7(a)(i) above shall subsequently occur and remain uncured for a period of twenty
(20) days, then, at any time prior to Hexcel's delivery of the Product or
Service giving rise to such subsequent Event of Default, in addition to the
remedies described in Paragraphs 7(b)(i)(A) (if such Event of Default relates to
Hexcel's failure to meet a B-2 Required Delivery Date), (b)(i)(B) (if such Event
of Default relates to Hexcel's failure to meet a B-2 Required Delivery Date),
(b)(i)(C) and (b)(i)(D) above, if such Event of Default, in Northrop's good
faith judgment, reasonably jeopardizes Northrop's ability to meet its
contractual commitments under the B-2 Program, Northrop may terminate this
Agreement in its entirety and shall simultaneously therewith notify Hexcel of
such termination (and in such event the Equipment Lease shall terminate as
provided in the Equipment Lease).

(iii) EXCLUSIVE REMEDIES FOR DELIVERY DATE DEFAULTS. Northrop's
remedies for an Event of Default under Paragraph 7(a)(i) hereof shall be
exclusively limited to those described in subparagraphs (i) and (ii) above.
Northrop's remedies shall not be limited in any manner whatsoever for any Event
of Default other than an Event of Default described in Paragraph 7(a)(i) hereof.

(iv) OTHER DEFAULTS. Upon the occurrence of an Event of Default
described in Paragraphs 7(a)(ii), (iii), (iv) or (v) above, Northrop shall have
the right, at Northrop's option, to (A) terminate this Agreement in its entirety
(and in such event Northrop shall so notify Hexcel), or (B) exercise Northrop's
Partial Termination Right (and simultaneously with such exercise so notify
Hexcel) with respect to any Product or

-7-

<PAGE>

Service as Northrop shall determine in its sole discretion (and, in such event,
this Agreement shall otherwise remain in full force and effect with respect to
all other Products and Services). The parties acknowledge and agree that the
availability and/or the exercise of the Partial Termination Right under this
subparagraph (iv) shall be in addition to, and shall in no manner limit,
Northrop's right upon the occurrence of an Event of Default under Paragraphs
7(a)(ii), (iii), (iv) or (v) above to terminate this Agreement in its entirety
(except that, if Northrop has exercised a Partial Termination Right it shall not
also declare an Event of Default with respect thereto).

(c) FIRST PRIORITY DURING EVENT OF DEFAULT. Upon the occurrence of
an Event of Default described in Paragraph 7(a)(i) above, Hexcel agrees that
Northrop shall have a First Priority Right with respect to the Product or
Service as to which such Event of Default has occurred. During such time, at
Northrop's option, Hexcel shall provide access to a representative of Northrop
at the Hexcel facility or facilities where such Products are manufactured or
Services performed to ensure that Hexcel is complying with its obligations
hereunder. The First Priority Right shall expire upon delivery of the Product or
completion of performance of the Service as to which the Event of Default has
occurred.

8. INDEMNIFICATION. Subject to Paragraph 7(b)(iii) above and the
provisions of the relevant Purchase Order, Hexcel shall indemnify and hold
harmless Northrop, each Affiliate, successor (if any), officer, director,
controlling person, employee and agent of Northrop from and against, and shall
reimburse Northrop for, any Damages arising from or in connection with any
failure by Hexcel to perform or comply with any agreement made by it under this
Agreement. The procedures for indemnification set forth in Section 10.3 and 10.4
of the APA, and the limitations on liability set forth in Section 10.5 of the
APA, shall apply to claims for indemnification hereunder.

9. FURTHER ASSURANCES. At any time and from time to time after the date
hereof, each of Hexcel and Northrop agrees to, without further consideration,
do, execute, acknowledge and deliver all such further documents and instruments,
and do such other things, as may reasonably be required to give effect to the
transactions contemplated hereby.

10. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given (i) if delivered
personally or sent by facsimile transmission (confirmed electronically) on the
date given, (ii) if delivered by an overnight express mail service, on the date
of delivery, or (iii) if by certified or registered mail,

-8-

<PAGE>

postage prepaid, return receipt requested, five (5) days after mailing, to the
parties, their successors in interest or their permitted assignees at the
following addresses or at such other addresses as the parties may designate by
written notice in the manner aforesaid:

If to Hexcel: Hexcel Corporation
5794 W. Las Positas Boulevard
Pleasanton, California 94588
Attention: Rodney P. Jenks, Esq.
Facsimile: (510) 734-8611

with copy to:

Kronish, Lieb, Weiner & Hellman
1114 Avenue of the Americas
New York, New York 10036
Attention: Ralph J. Sutcliffe, Esq.
Facsimile: (212) 479-6275

If to Northrop:

Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90007
Attention: Albert F. Myers,
Vice President
Facsimile: (310) 201-3023

with copy to:

Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90067
Attention: Richard R. Molleur,
Corporate Vice President
and General Counsel
Facsimile: (310) 201-3378

11. THIRD PARTY BENEFICIARIES; BENEFITS; ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted assignees or successors in interest
including a trustee appointed pursuant to Chapter 7 or Chapter 11 of the
Bankruptcy Code. Nothing herein expressed or implied is intended to confer upon
any Person, other than the parties hereto and their respective permitted
assignees, any rights, obligations or liabilities under or by reason of this
Agreement. The respective rights and obligations of either party hereto shall
not be assignable by such party without the prior written consent of the other
party, except that either party without such consent may assign

-9-

<PAGE>

its rights under this Agreement to (x) any wholly-owned subsidiary of such
party; or (y) any successor in the event of a merger, reorganization, business
consolidation, sale of all or substantially all its assets, liquidation or
dissolution or, in the case of Northrop, the transfer of the B-2 Contract or an
Additional B-2 Contract, provided that any such assignee hereunder must execute
and deliver to such other party hereto prior to the effectiveness of the
assignment an agreement reasonably satisfactory in form and substance to such
other party under which such assignee assumes and agrees to perform and
discharge all of the obligations and liabilities of the assigning party or the
relevant obligations and liabilities relating to the assignment, but any such
permitted assignment shall not relieve the assigning party of its obligations
hereunder.

12. INJUNCTIVE RELIEF. Hexcel and Northrop each hereby acknowledges that
the breach of material terms contained herein (whether or not specifically
designated as such) would cause irreparable damage and substantial prejudice to
Hexcel and Northrop, as the case may be. Accordingly, notwithstanding any other
provision hereof, Hexcel and Northrop agree that, in the event of any such
breach which gives rise to a claim hereunder, each party shall have, in addition
to its legal remedies, the right to injunctive relief, as permitted by law, to
prevent the violation of its obligations hereunder.

13. INDEPENDENT CONTRACTOR. The parties hereto understand and agree that
this Agreement does not make them an agent or legal representative of each other
for any purpose whatsoever. Neither party hereto is granted, by this Agreement
or otherwise, any right or authority to assume or create any obligation or
responsibility, express or implied, on behalf of or in the name of the other
party hereto, or to bind the other party hereto in any manner whatsoever. Both
parties expressly acknowledge that Hexcel is an independent contractor with
respect to Northrop and that the parties hereto are not partners, joint
venturers, employees or agents.

14. REMEDIES CUMULATIVE. The remedies of the parties shall be cumulative
to the extent permitted by law, and may be exercised partially, concurrently or
separately. The exercise of one remedy shall not be deemed to preclude the
exercise of any other remedy. Notwithstanding the foregoing, if Northrop has
exercised a Partial Termination Right, Northrop shall not be entitled to declare
an Event of Default with respect to the event giving rise to such Partial
Termination Right.

15. NON-WAIVER. No failure on the part of any party to exercise any
remedy or right under this Agreement and no delay in the exercise of any such
remedy or right shall operate as a waiver.

-10-

<PAGE>

16. MODIFICATIONS, AMENDMENTS AND WAIVERS. This Agreement may be amended
only by written agreement of the parties hereto.

17. SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.

18. JURISDICTION. The parties agree that, during the Bankruptcy Period,
the Bankruptcy Court shall have exclusive jurisdiction to resolve any
controversy or claim arising out of or related to this Agreement, or the breach
hereof. The parties further agree that, after the Bankruptcy Period, any action
or proceeding with respect to such controversy or claim shall be brought against
any of the parties in the courts of the State of California in Los Angeles
County or, if it has or can acquire subject matter jurisdiction, in the United
States District Court for the Central District of California, and each of the
parties hereby consents to the personal jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid herein.

19. CONFLICTS. The terms and conditions of any Purchase Order shall be in
addition to, and not in lieu of, the provisions of this Agreement. In the event
of any conflict between a Purchase Order and this Agreement, the terms of this
Agreement shall apply.

20. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California applicable to
contracts made and to be performed wholly in that State.

-11-

<PAGE>

21. COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute but one and the same instrument.

IN WITNESS WHEREOF, each of the parties hereto has caused the
Agreement to be signed in its corporate name by duly authorized officer thereof,
all as of the date first above written.

HEXCEL CORPORATION

BY: ______________________________

NAME: ____________________________

TITLE: ___________________________

NORTHROP GRUMMAN CORPORATION

BY:______________________________

NAME: ____________________________

TITLE: ___________________________

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<PAGE>

SCHEDULE A

PRODUCT/SERVICE LEAD TIME*

I. MANDATORY PURCHASE

Hexply 110 8 Weeks

Hexply 108 8 Weeks

Prepreg F161-
108 10 Weeks

Heat Forming 12 Weeks

VA Honeycomb
Processing 10 Weeks

HRH 327
Honeycomb 16 Weeks

HFT Honeycomb 16 Weeks

HRH 10
Honeycomb 16 Weeks

HRP Honeycomb 16 Weeks

HRP Flexcore
Honeycomb 16 Weeks

*Lead Times shall further specify setbacks from required delivery dates to
deliver necessary components meeting the above Lead Times

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<PAGE>

PRODUCT/SERVICE LEAD TIME

II. OPTIONAL PURCHASE

Release Paper 6 Weeks
34"

Skinstick Film 6 Weeks

Glass Cloth 106 8 Weeks

Glass Cloth 108 8 Weeks

Surlyn 1652,
50" 8 MIL 8 Weeks

Diverclean 404
(HP) 8 Weeks

Adhesive Film
AF126-208 8 Weeks

Polyfilm 8 Weeks

Adhesive Film
4081 8 Weeks

Leader Cloth
7781 Weight 8 Weeks

Kraft Paper 48"
Wide 1 lb 8 Weeks

246A Machining
Services 60 Days

NC Milling 15 Weeks

Prepreg F-185 10 Weeks

K-Foam 10 Weeks

K-Foam Resins,
Catalyst, Blowing Agent,
Surfactants,
Etc. ("K-Foam "Intermediates") 10 Weeks

Cecore 10 Weeks

Hexelite 832 2 Weeks

-14-

<PAGE>

SCHEDULE B

[B-2 SETBACK SCHEDULE]

[To be provided prior to Closing]

-15-

<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 third quarter and first three quarters
of 1994 and 1993 were:

PRIMARY NET INCOME (LOSS) PER SHARE AND EQUIVALENT SHARE
- - ------------------------------------------------------------------------------------------------------------------------------
THE QUARTER ENDED THE YEAR-TO-DATE ENDED
----------------------- -----------------------
OCT 2, Sept 30, OCT 2, Sept 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1994 1993 1994 1993
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loss from continuing operations $(15,319) $(45,479) $(25,538) $(50,658)
Loss from discontinued operations (2,620) (9,792) (1,847) (10,406)
Cumulative effect of change in accounting for income taxes -- -- -- 4,500
- - ------------------------------------------------------------------------------------------------------------------------------
Net loss $(17,939) $(55,271) $(27,385) $(56,564)
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 7,310 7,349 7,310 7,333
Weighted average common equivalent shares from stock options -- -- -- --
- - ------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares and equivalent shares 7,310 7,349 7,310 7,333
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
Primary net income (loss) per share and equivalent share from (1):
Continuing operations $ (2.09) $ (6.19) $ (3.50) $ (6.90)
Discontinued operations (0.36) (1.33) (0.25) (1.42)
Cumulative effect of change in accounting for income taxes 0.00 0.00 0.00 0.61
- - ------------------------------------------------------------------------------------------------------------------------------
Primary net loss per share and equivalent share (1) $ (2.45) $ (7.52) $ (3.75) $ (7.71)
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------

FULLY DILUTED NET INCOME (LOSS) PER SHARE AND EQUIVALENT SHARE
- - ------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations $(15,319) $(45,479) $(25,538) $(50,658)
Loss from discontinued operations (2,620) (9,792) (1,847) (10,406)
Cumulative effect of change in accounting for income taxes -- -- -- 4,500
- - ------------------------------------------------------------------------------------------------------------------------------
Net loss (17,939) (55,271) (27,385) (56,564)
Debenture interest and issuance costs 300 306 904 907
- - ------------------------------------------------------------------------------------------------------------------------------
Adjusted net loss $(17,639) $(54,965) $(26,481) $(55,657)
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 7,310 7,349 7,310 7,333
Weighted average common equivalent shares
Stock options -- -- -- --
7% convertible debentures 804 804 804 804
- - ------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares and equivalent shares 8,114 8,153 8,114 8,137
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
Fully diluted net income (loss) per share and equivalent share from (1):
Continuing operations $ (2.09) $ (6.19) $ (3.50) $ (6.90)
Discontinued operations (0.36) (1.33) (0.25) (1.42)
Cumulative effect of change in accounting for income taxes 0.00 0.00 0.00 0.61
- - ------------------------------------------------------------------------------------------------------------------------------
Fully diluted net loss per share and equivalent share (1) $ (2.45) $ (7.52) $ (3.75) $ (7.71)
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) For the third quarter and first three quarters 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>

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-START> JAN-01-1994
<PERIOD-END> OCT-02-1994
<CASH> 1,099
<SECURITIES> 0
<RECEIVABLES> 66,007
<ALLOWANCES> 1,097
<INVENTORY> 48,730
<CURRENT-ASSETS> 130,729
<PP&E> 206,684
<DEPRECIATION> 115,335
<TOTAL-ASSETS> 242,798
<CURRENT-LIABILITIES> 63,729
<BONDS> 100,206
<COMMON> 73
0
0
<OTHER-SE> 20,680
<TOTAL-LIABILITY-AND-EQUITY> 242,798
<SALES> 237,080
<TOTAL-REVENUES> 237,080
<CGS> 199,631
<TOTAL-COSTS> 234,072
<OTHER-EXPENSES> 20,091
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,086
<INCOME-PRETAX> (24,169)
<INCOME-TAX> 1,369
<INCOME-CONTINUING> (25,538)
<DISCONTINUED> (1,847)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,385)
<EPS-PRIMARY> (3.75)
<EPS-DILUTED> (3.75)

</TABLE>