<PAGE>
PRELIMINARY COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
---------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------------
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HEXCEL CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[Hexcel Logo]
HEXCEL CORPORATION
5794 WEST LAS POSITAS BOULEVARD
PLEASANTON, CALIFORNIA 94588
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 1996
---------------------
To the Stockholders of Hexcel Corporation:
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders (the "Annual
Meeting") of Hexcel Corporation, a Delaware corporation ("Hexcel"), will be held
at the Marriott Hotel, 2 Stamford Forum, Stamford, Connecticut, on May 23, 1996
at 11:00 a.m., local time, for the following purposes:
1. To elect 10 individuals (John M.D. Cheesmond, Marshall S. Geller,
Juergen Habermeier, Peter A. Langerman, John J. Lee, Stanley Sherman, George
S. Springer, Joseph T. Sullivan, Hermann Vodicka and Franklin S. Wimer) to
Hexcel's Board of Directors to serve as directors until the next annual
meeting of stockholders and until their successors are duly elected and
qualified;
2. To approve and adopt Hexcel's Restated Certificate of Incorporation,
which incorporates certain amendments to Hexcel's Certificate of
Incorporation;
3. To approve and adopt certain amendments to Hexcel's Bylaws; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
Hexcel's Board of Directors has fixed the close of business on April 19,
1996 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting.
Accordingly, only holders of record of Hexcel common stock at the close of
business on the Record Date shall be entitled to vote at the Annual Meeting,
either in person or by proxy. A list of such stockholders will be available for
inspection at least 10 days prior to the Annual Meeting and will also be
available for inspection at the Annual Meeting.
The enclosed proxy is solicited by Hexcel's Board of Directors. Reference is
made to the attached Proxy Statement for further information with respect to the
business to be transacted at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please complete, sign
and date the enclosed proxy card and return it promptly using the enclosed
pre-addressed, postage-paid return envelope. If you attend the Annual Meeting,
you may vote in person if you wish, even if you have previously returned a proxy
card. Your prompt attention is appreciated.
By order of the Board of Directors
Joseph H. Shaulson
SECRETARY
Dated: April [ ], 1996
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND COMPLETE THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
PRE-ADDRESSED, POSTAGE-PAID RETURN ENVELOPE.
<PAGE>
HEXCEL CORPORATION
5794 WEST LAS POSITAS BOULEVARD
PLEASANTON, CALIFORNIA 94588
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 1996
---------------------
This Proxy Statement is being furnished to the stockholders of Hexcel
Corporation, a Delaware corporation ("Hexcel"), in connection with the
solicitation of proxies by Hexcel's Board of Directors (the "Board of
Directors") for use at an Annual Meeting of Stockholders of Hexcel to be held at
the Marriott Hotel, 2 Stamford Forum, Stamford, Connecticut, on May 23, 1996, at
11:00 a.m., local time (the "Annual Meeting"). At the Annual Meeting,
stockholders will be asked to consider and vote on (i) the election of 10
individuals to the Board of Directors; (ii) the approval and adoption of
Hexcel's Restated Certificate of Incorporation, which incorporates certain
amendments to Hexcel's Certificate of Incorporation (the "Charter Amendments");
(iii) the approval and adoption of certain amendments to Hexcel's Bylaws (the
"Bylaw Amendments"); and (iv) such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
The Board of Directors does not intend to bring any matter before the Annual
Meeting except as specifically indicated in the attached notice, nor does the
Board of Directors know of any matters which anyone else proposes to present for
action at the Annual Meeting. However, if any other matters properly come before
the Annual Meeting, the persons named in the enclosed form of proxy, or their
duly constituted substitutes acting at the Annual Meeting, will be authorized to
vote or otherwise act thereon in accordance with their judgment on such matters.
This Proxy Statement and the accompanying form of proxy are first being
mailed to stockholders of Hexcel on or about April [ ], 1996. The date of this
Proxy Statement is April [ ], 1996.
No person has been authorized to give any information or to make any
representation other than those contained in this Proxy Statement in connection
with the solicitation of proxies made hereby and, if given or made, such
information or representation must not be relied upon as having been authorized
by Hexcel or any other person. The delivery of this Proxy Statement shall not
under any circumstances create an implication that there has been no change in
the affairs of Hexcel since the date hereof or that the information herein is
correct as of any time subsequent to the date hereof.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
THE MEETING............................................................... 4
General................................................................. 4
Matters to Be Considered at the Meeting................................. 4
Record Date; Voting at the Meeting...................................... 4
Proxies................................................................. 5
Recommendations of the Board of Directors............................... 5
ELECTION OF DIRECTORS..................................................... 5
Information Regarding the Directors and Director Nominees............... 6
Meetings and Standing Committees of the Board of Directors.............. 8
EXECUTIVE OFFICERS........................................................ 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............ 12
Stock Beneficially Owned by Principal Stockholders...................... 12
Stock Beneficially Owned by Directors, Director Nominees and Officers... 13
EXECUTIVE COMPENSATION.................................................... 14
Summary Compensation Table.............................................. 14
Options................................................................. 15
Deferred Compensation................................................... 16
Employment and Other Agreements......................................... 17
Compensation Committee Report on Executive Compensation................. 19
Compensation Committee Interlocks and Insider Participation............. 21
Compensation of Directors............................................... 22
Performance Graph....................................................... 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 23
Relationships and Related Transactions with Ciba........................ 23
Other Relationships and Related Transactions............................ 30
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934...... 30
THE CHARTER AMENDMENTS.................................................... 30
Increase in Authorized Shares of Preferred Stock........................ 31
Restriction on Non-Voting Equity Securities............................. 31
Number of Directors..................................................... 32
Calling of Special Meetings............................................. 32
Amendments to Bylaws.................................................... 33
Certain Compromises or Arrangements..................................... 33
Elimination of Directors' Liability; Indemnification.................... 33
THE BYLAW AMENDMENTS...................................................... 34
Governance Agreement Amendments......................................... 35
Calling of Special Meetings............................................. 35
Action by Written Consent............................................... 35
Number of Directors..................................................... 35
Amendments to Bylaws.................................................... 35
Other Bylaw Amendments.................................................. 36
INDEPENDENT AUDITORS...................................................... 38
OTHER MATTERS............................................................. 38
STOCKHOLDER PROPOSALS..................................................... 38
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
---
<S> <C>
ANNEX A -- FORM OF RESTATED CERTIFICATE OF INCORPORATION OF HEXCEL TO TAKE
EFFECT IF THE CHARTER AMENDMENTS ARE APPROVED AND ADOPTED BY HEXCEL'S
STOCKHOLDERS............................................................. A-1
ANNEX B -- FORM OF AMENDED AND RESTATED BYLAWS OF HEXCEL TO TAKE EFFECT IF
THE BYLAW AMENDMENTS ARE APPROVED AND ADOPTED BY HEXCEL'S STOCKHOLDERS... B-1
</TABLE>
3
<PAGE>
THE MEETING
GENERAL
This Proxy Statement is being furnished to stockholders of Hexcel in
connection with the solicitation of proxies by the Board of Directors for use at
the Annual Meeting to be held at the Marriott Hotel, 2 Stamford Forum, Stamford,
Connecticut, on May 23, 1996 at 11:00 a.m., and at any adjournment or
postponement thereof. Each copy of this Proxy Statement is accompanied by a form
of proxy for use at the Annual Meeting.
MATTERS TO BE CONSIDERED AT THE MEETING
At the Annual Meeting, holders of Hexcel's common stock, par value $0.01 per
share (the "Common Stock"), will vote upon (i) the election of 10 individuals to
the Board of Directors; (ii) the approval and adoption of the Charter
Amendments; (iii) the approval and adoption of the Bylaw Amendments; and (iv)
such other matters as may properly be brought before the Annual Meeting and any
adjournment or postponement thereof.
RECORD DATE; VOTING AT THE MEETING
The Board of Directors has fixed the close of business on April 19, 1996 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting (the "Record Date"). This Proxy Statement and the
enclosed proxy card are being mailed on or about April [ ], 1996 to the holders
of record of Common Stock as of the close of business on the Record Date. On the
Record Date, there were [ ] shares of Common Stock issued and outstanding
held by [ ] stockholders of record.
The presence, either in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting
will constitute a quorum for purposes of transacting business at the Annual
Meeting.
Approval and adoption of the Charter Amendments and the Bylaw Amendments
requires the affirmative vote of a majority of the outstanding shares of Common
Stock. The election of directors requires a plurality of the votes cast at the
Annual Meeting.
Under the rules of the New York Stock Exchange, brokers who hold shares in
"street name" have the authority to vote on certain matters when they do not
receive instructions from beneficial owners. Brokers that do not receive
instructions are entitled to vote on the election of directors. Under applicable
Delaware law, in determining whether the proposal to elect directors has
received the requisite vote, abstentions and broker non-votes will be
disregarded and will have no effect on the outcome of the vote. With respect to
the proposals to approve and adopt the Charter Amendments and the Bylaw
Amendments, brokers may not vote shares held for customers without specific
instructions from such customers. In determining whether the Charter Amendments
and Bylaw Amendments have received the requisite number of affirmative votes,
abstentions and broker non-votes will be counted and will have the same effect
as votes against the proposals.
Under the terms of a Governance Agreement dated as of February 29, 1996
between Hexcel and Ciba-Geigy Limited ("Ciba")(the "Governance Agreement"),
Ciba, which currently holds 49.9% of the issued and outstanding Common Stock, is
subject to certain voting restrictions with respect to the shares of Common
Stock held by it. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS --
Relationships and Related Transactions with Ciba." In accordance with such
restrictions, Ciba has indicated that it will vote its shares of Common Stock in
favor of each of the nominees for election to the Board of Directors and for the
approval and adoption of the Charter Amendments and the Bylaw Amendments, as
recommended by the Board of Directors. See "-- Recommendations of the Board of
Directors."
4
<PAGE>
PROXIES
All shares of Common Stock which are entitled to vote and are represented at
the Annual Meeting by properly executed proxies received prior to or at the
Annual Meeting, and which have not been revoked, will be voted at such Annual
Meeting in accordance with the instructions indicated on such proxies. If no
instructions are indicated, such proxies will be voted as follows:
FOR the election of each of the nominees to Hexcel's Board of Directors,
FOR the approval and adoption of the Charter Amendments, and
FOR the approval and adoption of the Bylaw Amendments.
If any other matters are properly presented for consideration at the Annual
Meeting, the persons named in the enclosed form of proxy and acting thereunder,
or their duly constituted substitutes acting at the Annual Meeting, will have
the discretion to vote on such matters in accordance with their judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Hexcel, at or before the taking of the vote at the Annual
Meeting, a written notice of revocation bearing a later date than the proxy,
(ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary of Hexcel before the taking of the vote at the
Annual Meeting or (iii) attending the Annual Meeting and voting in person.
Notice of revocation or subsequent proxy should be sent so as to be delivered to
Hexcel Corporation, 5794 West Las Positas Boulevard, Pleasanton, California
94588. Attention: Secretary, or hand delivered to the Secretary of Hexcel, at or
before the taking of the vote at the Annual Meeting.
The cost of solicitation of proxies will be paid by Hexcel. Hexcel has
retained Chemical Mellon Shareholder Services LLC ("Chemical Mellon") to aid in
the solicitation of proxies at a fee of $4,500 plus expenses. In addition to
solicitation by use of the mails, proxies may be solicited by directors,
officers and employees of Hexcel and representatives of Chemical Mellon in
person or by telephone, telegram, facsimile or other means of communication.
Such directors, officers and employees of Hexcel will not be additionally
compensated, but may be reimbursed for reasonable out-of-pocket expenses
incurred in connection with such solicitation. Arrangements will also be made
with custodians, nominees and fiduciaries for the forwarding of proxy
solicitation materials to beneficial owners of shares held of record by such
custodians, nominees and fiduciaries, and Hexcel will reimburse such custodians,
nominees and fiduciaries for reasonable expenses incurred in connection
therewith.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR the election of
each of the nominees to the Board of Directors, a vote FOR the approval and
adoption of the Charter Amendments and a vote FOR the approval and adoption of
the Bylaw Amendments. See "ELECTION OF DIRECTORS," "THE CHARTER AMENDMENTS," and
"THE BYLAW AMENDMENTS."
ELECTION OF DIRECTORS
Prior to February 29, 1996, the Board of Directors consisted of nine
directors. Effective February 29, 1996, the Board of Directors was reconstituted
in accordance with the terms of a Strategic Alliance Agreement dated as of
September 29, 1995 among Hexcel, Ciba and Ciba-Geigy Corporation ("CGC"), as
amended (the "Strategic Alliance Agreement"), and the Governance Agreement to
consist of 10 directors, initially including four directors designated by Ciba
(the "Ciba Directors," currently John M.D. Cheesmond, Stanley Sherman, Joseph T.
Sullivan and Hermann Vodicka), the Chairman of the Board and Chief Executive
Officer of Hexcel (John J. Lee), the President and Chief Operating Officer of
Hexcel (Juergen Habermeier) and four additional directors who are independent of
Ciba (the "Independent Directors," currently Marshall S. Geller, Peter A.
Langerman, George S. Springer and Frederick W. Stanske).
5
<PAGE>
Pursuant to the Governance Agreement, the composition of any slate of
nominees to be presented to stockholders of Hexcel for election to the Board of
Directors is generally determined as follows: (i) if Ciba beneficially owns
voting securities representing 30% or more of the total voting power of Hexcel,
the slate of nominees will consist of four individuals designated by Ciba (the
"Ciba Nominees"), the Chairman of the Board and Chief Executive Officer of
Hexcel (the "Chairman"), the President and Chief Operating Officer of Hexcel
(the "President") and four additional individuals, each of whom (x) is not a
Ciba Director, (y) is not and has not been an officer, employee or director of
Ciba or any affiliate or associate of Ciba and (z) has no affiliation or
relationship with Ciba or its affiliates such that a reasonable person would
regard such person as likely to be influenced by Ciba or its affiliates (the
"Independent Nominees"); (ii) if Ciba beneficially owns voting securities
representing less than 30% but at least 20% of the total voting power of Hexcel,
the slate of nominees will consist of three Ciba Nominees, the Chairman, the
President and five additional Independent Nominees; (iii) if Ciba beneficially
owns voting securities representing less than 20% but at least 15% of the total
voting power of Hexcel, the slate of nominees will consist of two Ciba Nominees,
the Chairman, the President and six additional Independent Nominees; and (iv) if
Ciba beneficially owns voting securities representing less than 15% but at least
10% of the total voting power of Hexcel, the slate of nominees will consist of
one Ciba Nominee, the Chairman, the President and seven additional Independent
Nominees. In accordance with the Governance Agreement, Independent Nominees are
designated by the Independent Directors.
Ciba currently beneficially owns approximately 49.9% of the total voting
power of Hexcel. In accordance with the Governance Agreement, the following
individuals have been nominated for election to the Board of Directors: (i) John
J. Lee (the Chairman); (ii) Juergen Habermeier (the President); (iii) John M.D.
Cheesmond, Stanley Sherman, Joseph T. Sullivan and Hermann Vodicka (Ciba
Nominees); and (iv) Marshall S. Geller, Peter A. Langerman, George S. Springer
and Franklin S. Wimer (Independent Nominees). With the exception of Mr. Wimer,
who served as a director of Hexcel from February 1995 until his resignation on
February 29, 1996, all of the nominees for election to the Board of Directors
are currently serving as directors of Hexcel.
Unless otherwise directed on the enclosed form of proxy, the persons named
therein will vote such proxy (if properly executed and returned) for the
election of each of the director nominees. In case any nominee becomes
unavailable for election or declines to serve for any reason, an event Hexcel
does not anticipate, the shares of Common Stock represented by a properly
executed and returned proxy will be voted for an alternative or alternatives
designated in accordance with the Governance Agreement. No family relationship
exists between any director, director nominee or executive officer of Hexcel and
any other director, director nominee or executive officer of Hexcel.
INFORMATION REGARDING THE DIRECTORS AND DIRECTOR NOMINEES
Set forth below is certain information concerning the directors and director
nominees of Hexcel as of April 12, 1996. With the exception of Mr. Stanske, all
directors have been nominated for reelection to the Board of Directors. Mr.
Wimer, a former director of Hexcel, has also been nominated for election to the
Board of Directors.
6
<PAGE>
CURRENT DIRECTORS
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITION(S) WITH HEXCEL
- --------------------------- --- ----------- ---------------------------------------------------------
<S> <C> <C> <C>
John J. Lee 59 1993 Chairman of the Board; Chief Executive Officer; Director
Juergen Habermeier 54 1996 President; Chief Operating Officer; Director
John M.D. Cheesmond 46 1996 Director
Marshall S. Geller 57 1994 Director
Peter A. Langerman 40 1995 Director
Stanley Sherman 57 1996 Director
George S. Springer 62 1993 Director
Frederick W. Stanske 37 1995 Director
Joseph T. Sullivan 55 1996 Director
Hermann Vodicka 53 1996 Director
</TABLE>
JOHN J. LEE, age 59, has served as Chairman of the Board of Directors of
Hexcel since February 1996, Chief Executive Officer since January 1994, Chairman
and Chief Executive Officer from January 1994 to February 1995, Chairman and
Co-Chief Executive Officer of Hexcel from July 1993 to December 1993 and a
director of Hexcel since May 1993. Mr. Lee also serves as Chairman of the
Nominating Committee and a member of the Finance Committee of Hexcel. Mr. Lee
has served as a director of XTRA Corporation, a transportation equipment leasing
company, since 1990, and Chairman of the Board, President and Chief Executive
Officer of Lee Development Corporation, a merchant banking company, since 1987.
Mr. Lee has been a Trustee of Yale University and an advisor to The Clipper
Group, a private investment partnership since 1993. From July 1989 through April
1993, Mr. Lee served as Chairman of the Board and Chief Executive Officer of
Seminole Corporation, a manufacturer and distributor of fertilizer. From April
1988 through April 1993, Mr. Lee served as a director of Tosco Corporation, a
national refiner and marketer of petroleum products, and as President and Chief
Operating Officer of Tosco from 1990 through April 1993. Mr. Lee is also a
director of Aviva Petroleum Corporation and various privately held corporations.
DR. JUERGEN HABERMEIER, age 54, has served as President, Chief Operating
Officer and a director of Hexcel since February 1996. Dr. Habermeier also serves
as a member of the Technology Committee of Hexcel. Prior to joining Hexcel, Dr.
Habermeier served as the President of the worldwide Composites Division of Ciba
(the "Ciba Composites Business") and as a Vice President of CGC since 1989.
Since 1994, Dr. Habermeier has served on the Board of Directors of RHR
International. He is also a member of the Advisory Committee of the Polymer
Composites Laboratory of the University of Washington.
JOHN M.D. CHEESMOND, age 46, has been a director of Hexcel since February
1996. Mr. Cheesmond also serves as Chairman of the Executive Compensation
Committee and a member of the Finance Committee of Hexcel. Mr. Cheesmond has
served as Senior Vice President and Head of Regional Finance and Control of Ciba
since 1994. From 1991 through 1993, Mr. Cheesmond served as Vice President and
Head of Regional Finance and Control at Ciba Vision Corporation.
MARSHALL S. GELLER, age 57, served as Co-Chairman of the Board of Directors
of Hexcel from February 1995 to February 1996 and has been a director of Hexcel
since August 1994. Mr. Geller also serves as Chairman of the Audit Committee and
a member of the Executive Compensation Committee and the Nominating Committee of
Hexcel. Mr. Geller has served as Chairman of the Board, Chief Executive Officer
and founding partner at Geller & Friend Capital Partners, Inc., a merchant
banking firm, since November 1995. From 1990 to November 1995, Mr. Geller was
Senior Managing Partner of Golenberg & Geller, Inc., a merchant banking firm.
From 1988 to 1990, he was Vice Chairman of Gruntal & Company, an investment
banking firm. From 1967 until 1988, he was a Senior Managing
7
<PAGE>
Director of Bear, Stearns & Co. Inc., an investment banking firm. Mr. Geller is
currently a director of Ballantyne of Omaha, Inc., Dycam, Inc., Players
International, Value Vision International, Inc., Styles on Video, Inc. and
various privately-held corporations and charitable organizations.
PETER A. LANGERMAN, age 40, served as Co-Chairman of the Board of Directors
of Hexcel from February 1995 to February 1996 and has been a director of Hexcel
since February 1995. Mr. Langerman also serves as Chairman of the Finance
Committee and a member of the Audit Committee and the Executive Compensation
Committee of Hexcel. Mr. Langerman is a director and the Executive Vice
President of Mutual Series Fund, Inc., a diversified open-end management
investment company registered under the Investment Company Act of 1940 and a
research analyst with Heine Securities Corporation, an investment advisor. Mr.
Langerman has been the Executive Vice President of Mutual Series Fund, Inc.
since March 1988 and has been a research analyst at Heine Securities since 1986.
Mr. Langerman is currently a director of Sunbeam Company, Inc. and various
privately held corporations.
STANLEY SHERMAN, age 57, has been a director of Hexcel since February 1996.
Mr. Sherman also serves as a member of the Finance Committee and the Executive
Compensation Committee of Hexcel. Mr. Sherman has served as a director and Vice
President -- Finance and Information Services of CGC since 1991. From 1986
through 1991, Mr. Sherman served as Vice President -- Corporate Planning of CGC.
DR. GEORGE S. SPRINGER, age 62, has been a director of Hexcel since January
1993. Dr. Springer also serves as Chairman of the Technology Committee of
Hexcel. Dr. Springer is Professor and Chairman of the Department of Aeronautics
and Astronautics and Professor of Mechanical Engineering and Professor of Civil
Engineering, at Stanford University. Dr. Springer joined Stanford University's
faculty in 1983.
FREDERICK W. STANSKE, age 37, has been a director of Hexcel since April 1995
and also served as a director of Hexcel from August 1994 to February 1995. Mr.
Stanske serves as a member of the Audit Committee of Hexcel. He is also Vice
President of Fisher Investments, Inc., an investment advisory firm. Mr. Stanske
has requested that he not be nominated for reelection to the Board of Directors.
DR. JOSEPH T. SULLIVAN, age 55, has been a director of Hexcel since February
1996. Dr. Sullivan also serves as a member of the Nominating Committee of
Hexcel. Dr. Sullivan has served as a director and Senior Vice President of CGC
since 1986.
HERMANN VODICKA, age 53, has been a director of Hexcel since February 1996.
Mr. Vodicka also serves as a member of the Nominating Committee and the
Technology Committee of Hexcel. Mr. Vodicka has served as President of the
Polymers Division and a member of the Executive Committee of Ciba since 1993.
Effective April 25, 1996, Mr. Vodicka will become Chairman of the Executive
Committee of Ciba. Mr. Vodicka is currently the Chairman of the Board of
Mettler-Toledo, a leading worldwide manufacturer of scales and balances and a
wholly owned subsidiary of Ciba. From 1988 to 1993, Mr. Vodicka was President
and Chief Executive Officer of Mettler-Toledo.
NON-INCUMBENT DIRECTOR NOMINEE
FRANKLIN S. WIMER, age 59, was a director of Hexcel from February 1995
through February 1996. Mr. Wimer serves as the President and principal of
UniRock Management Corporation ("UniRock"), a private merchant banking firm. Mr.
Wimer has been with UniRock since January of 1987. UniRock has acted as Hexcel's
strategic consultant since December 1993. Mr. Wimer is currently Chairman of the
Board of Vista Restaurants, Inc., a 12-unit Perkins Family Restaurant
franchisee, and a director of RAMI, Inc., Denver Paralegal Institute, Stainless
Fabrication Company, Inc. and Western Filter Company.
MEETINGS AND STANDING COMMITTEES OF THE BOARD OF DIRECTORS
During 1995, there were 15 meetings of the Board of Directors and 14
meetings in the aggregate of the four standing and other special committees of
the Board of Directors. Overall attendance at the
8
<PAGE>
Board of Directors and committee meetings was approximately 98% in 1995. Each of
the incumbent directors attended or participated in at least 75% of the
aggregate number of Board of Directors meetings and applicable committee
meetings held during 1995.
The Board of Directors has established the following standing committees:
Executive Compensation Committee; Audit Committee; Finance Committee; Nominating
Committee; and Technology Committee. The Board of Directors may establish other
special or standing committees from time to time. Members of committees serve at
the discretion of the Board of Directors. In accordance with the Governance
Agreement and subject to applicable law, rules and regulations (including those
of applicable self-regulatory organizations), for so long as Ciba beneficially
owns at least 40% of the total voting power of Hexcel, each committee of the
Board of Directors will consist of an equal number of Ciba Directors and
Independent Directors. At all other times, each committee will be comprised such
that Ciba's representation on each committee is at least proportionate to its
representation on the Board of Directors unless the committee is comprised of
three members or less, in which case at least one Ciba Director will serve on
such committee.
On behalf of the Board of Directors, the Audit Committee reviews, with the
independent auditors and with management as deemed necessary, the financial
statements, the results of the annual audit and internal accounting control
matters. It also recommends to the Board of Directors the selection of auditors.
While the Audit Committee is concerned with the accuracy and completeness of
Hexcel's financial statements and matters relating thereto, it is not in a
position to, nor does it in any sense professionally evaluate the quality of the
independent audit. It is believed that the Audit Committee's activities serve a
useful function in providing ongoing review on behalf of the Board of Directors
but they in no way alter the traditional roles and responsibilities of Hexcel's
management and independent auditors with respect to the accounting and control
functions and financial statements. The current members of the Audit Committee
are Messrs. Geller (Chairman), Langerman and Stanske. During 1995, the Audit
Committee held two meetings.
The Executive Compensation Committee makes recommendations to the Board of
Directors pertaining to the compensation of, and certain related matters
affecting, Hexcel's executive officers. The Executive Compensation Committee
also administers Hexcel's long-term incentive plans and makes grants of stock
options and/or awards of restricted stock or other equity-based compensation to
executive officers and certain non-officer key employees of Hexcel. The current
members of the Executive Compensation Committee are Messrs. Cheesmond
(Chairman), Geller, Langerman and Sherman. During 1995, the Executive
Compensation Committee held five meetings.
The Finance Committee oversees certain financial affairs of Hexcel and makes
recommendations to the Board of Directors with respect thereto. The Finance
Committee was established on February 29, 1996, and as a result, held no
meetings in 1995. The current members of the Finance Committee are Messrs.
Langerman (Chairman), Cheesmond, Lee and Sherman.
The Nominating Committee recommends nominees for election to the Board of
Directors. The Nominating Committee does not solicit stockholder recommendations
for nomination. Under the Governance Agreement, the Nominating Committee is
required to nominate the Chairman, the President, the Ciba Nominees and the
Independent Nominees. See "ELECTION OF DIRECTORS." The current members of the
Nominating Committee are Messrs. Lee (Chairman), Geller and Sullivan. During
1995, the Nominating Committee held one meeting.
The Technology Committee oversees Hexcel's technological processes and
research and development activities and makes recommendations to the Board of
Directors with respect thereto. The current members of the Technology Committee
are Messrs. Springer (Chairman), Habermeier and Sullivan. During 1995, the
Technology Committee held one meeting.
9
<PAGE>
EXECUTIVE OFFICERS
Set forth below is certain information concerning the executive officers of
Hexcel and all persons chosen to become executive officers of Hexcel as of April
12, 1996. For additional information concerning Messrs. Lee and Habermeier, see
"ELECTION OF DIRECTORS -- Information Regarding the Directors and Director
Nominees."
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME AGE SINCE POSITION(S) WITH HEXCEL
- ------------------------ --- ----------- ---------------------------------------------------------
<S> <C> <C> <C>
John J. Lee 59 1993 Chairman of the Board; Chief Executive Officer; Director
Juergen Habermeier 54 1996 President; Chief Operating Officer; Director
Stephen C. Forsyth 40 1994 Senior Vice President of Finance and Administration
Rodney P. Jenks, Jr. 45 1994 Vice President; General Counsel of Americas and
Asia-Pacific Operations
David M. Wong 51 1996 Vice President of Corporate Affairs
William P. Meehan 60 1993 Vice President of Finance; Chief Financial Officer
Wayne C. Pensky 40 1993 Corporate Controller; Chief Accounting Officer
Bruce D. Herman 40 1996 Treasurer
Joseph H. Shaulson 30 1996 Vice President of Corporate Development; Acting General
Counsel; Acting Secretary
Michael Carpenter 39 1996 Vice President of the Structures and Interiors Business
Unit
William Hunt 53 1996 President of the European Operations of the Composite
Materials Business Unit
Claude Genin 60 1996 President of the Fabrics Business Unit
James A. Koshak 52 1996 President of the U.S. Operations of the Composite
Materials Business Unit
Thomas J. Lahey 55 1991 President of the Pacific Rim Business Unit
Robert A. Petrisko 41 1993 Vice President of Research and Technology
Gary L. Sandercock 54 1989 President of the Special Process Business Unit
David Tanonis 39 1996 Vice President of the Structures and Interiors Business
Unit
Justin Taylor 42 1996 President of Structures and Interiors Business Unit
</TABLE>
STEPHEN C. FORSYTH, age 40, has served as Senior Vice President of Finance
and Administration of Hexcel since February 1996. Mr. Forsyth served as Vice
President of International Operations of Hexcel from October 1994 to February
1996 and General Manager of Hexcel's Resins Business and Export Marketing from
1989 to 1994 and held other general management positions with Hexcel from 1980
to 1989. Mr. Forsyth joined Hexcel in 1980.
RODNEY P. JENKS, JR., age 45, has served as Vice President and General
Counsel of Americas and Asia-Pacific Operations of Hexcel since April 1996. From
March 1994 through April 1996, Mr. Jenks served as Vice President, General
Counsel and Secretary of Hexcel. Prior to joining Hexcel in 1994, Mr. Jenks was
a partner in the law firm of Wendel, Rosen, Black & Dean, where he continues to
serve as counsel.
DAVID M. WONG, age 51, has served as Vice President of Corporate Affairs of
Hexcel since February 1996. Mr. Wong served as Hexcel's Director of Special
Projects from July 1993 to February 1996, Corporate Controller and Chief
Accounting Officer of Hexcel from 1983 to 1993 and held other general management
positions from 1979 to 1993. Mr. Wong joined Hexcel in 1979.
WILLIAM P. MEEHAN, age 60, has served as Vice President of Finance and Chief
Financial Officer of Hexcel since September 1993 and Treasurer of Hexcel since
April 1994. Prior to joining Hexcel in
10
<PAGE>
1993, Mr. Meehan served as President and Chief Executive Officer of Thousand
Trails and NACO, a membership campground and resort business, from 1990 through
1992. From 1986 through 1989, Mr. Meehan served as Vice President of Finance and
Chief Financial Officer of Hadco Corporation.
WAYNE C. PENSKY, age 40, has served as Corporate Controller and Chief
Accounting Officer of Hexcel since July 1993. Prior to joining Hexcel in 1993,
Mr. Pensky was a partner at Arthur Andersen & Co., an accounting firm, where he
was employed from 1979.
BRUCE D. HERMAN, age 40, will serve as Treasurer of Hexcel commencing in
April 1996. Mr. Herman served as Vice President of Finance in the Transportation
and Industrial Financing Division of USL Capital Corp. (formerly U.S. Leasing,
Inc.) ("USL") from 1993 to 1996, Vice President of Finance in the Equipment
Financing Group of USL from 1991 to 1993 and as Vice President of Corporate
Analysis of USL from 1988 to 1991.
JOSEPH H. SHAULSON, age 30, will serve as Vice President of Corporate
Development, Acting General Counsel and Acting Secretary of Hexcel commencing in
April 1996. Mr. Shaulson was an associate in the law firm of Skadden, Arps,
Slate, Meagher & Flom, where he was employed from 1991 to 1996.
MICHAEL CARPENTER, age 39, has served as Vice President of Hexcel's
Structures and Interiors business unit, responsible for the structures business,
since February 1996. Mr. Carpenter served as the Vice President of Structures in
the Heath Tecna Division of CGC prior to February 1996. He has held various
technical and managerial positions with Heath Tecna since 1983.
WILLIAM HUNT, age 53, has served as the President of the European operations
of Hexcel's Composite Materials business unit since February 1996. Mr. Hunt
served as the President of the EuroMaterials unit of the Ciba Composites
Business from 1991 to February 1996 and as the Managing Director of Ciba-Geigy
Plastics from 1990 to 1991. Prior to joining Ciba in 1990, Mr. Hunt held various
other technical and managerial positions, including the position of Managing
Director of Illford Limited (Photographic) Co.
CLAUDE GENIN, age 60, has served as President of Hexcel's Fabrics business
unit since February 1996. Mr. Genin served as a managing director of Hexcel S.A.
(Lyon) from 1977 to 1996. Hexcel S.A. (Lyon) was acquired by Hexcel in 1985.
JAMES A. KOSHAK, age 52, has served as President of the U.S. operations of
Hexcel's Composite Materials business unit since February 1996. Mr. Koshak
served as Vice President of the Ciba Composites Business and General Manager of
the U.S. Materials unit of the Ciba Composites Business from 1993 to February
1996 and as Vice President of Ciba's Polymers Division and General Manager of
Ciba's Formulated Systems unit from 1988 to 1993. Mr. Koshak held various other
technical and managerial positions with Ciba from 1974 to 1988.
THOMAS J. LAHEY, age 55, has served as President of Hexcel's Pacific Rim
business unit since February 1996. Mr. Lahey served as Vice President of
Worldwide Sales of Hexcel from April 1993 to February 1996, Vice President of
Advanced Composites of Hexcel from 1992 to 1993, General Manager of Advanced
Composites of Hexcel from 1991 to 1992 and General Manager of Advanced Products
of Hexcel from 1989 to 1991. Prior to joining Hexcel in 1989, Mr. Lahey held the
position of Executive Assistant to the President of Kaman Aerospace Corporation
from 1987 to 1988 and was a Vice President of Grumman Corporation from 1985 to
1987.
ROBERT A. PETRISKO, Ph.D., age 41, has served as Vice President of Research
and Technology of Hexcel since September 1993. Dr. Petrisko served as Manager of
the Signature Technology Group at Hexcel's Chandler facility and Director of
Aerospace Technology from 1989 to 1993. Dr. Petrisko joined Hexcel in 1989,
after serving as a Research Specialist with Dow Corning Corporation from 1985 to
1989.
GARY L. SANDERCOCK, age 54, has served as President of Hexcel's Special
Process business unit since February 1996. Mr. Sandercock served as Vice
President of Manufacturing of Hexcel from April 1993 to February 1996, Vice
President of Reinforcement Fabrics of Hexcel from 1989 to 1993, General Manager
of the Trevarno Division of Hexcel from 1985 to 1989 and other manufacturing and
general management positions from 1967 to 1985. Mr. Sandercock joined Hexcel in
1967.
DAVID TANONIS, age 39, has served as Vice President of Hexcel's Structures
and Interiors business unit, responsible for the interiors business, since
February 1996. Mr. Tanonis served as the Vice President of Interiors in the
Heath Tecna Division of CGC prior to February 1996. Mr. Tanonis has held various
technical and managerial positions with Heath Tecna since he joined the division
in 1987. Mr. Tanonis held various management positions with Polymer Engineering,
Inc. from 1978 to 1987.
JUSTIN TAYLOR, age 42, will serve as President of Hexcel's Structures and
Interiors business unit commencing in April 1996. From July 1995 to April 1996,
Mr. Taylor served as a member of Ciba's strategic planning unit. Prior to July
1995, Mr. Taylor held various management positions in the Heath Tecna Division
of CGC.
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
STOCK BENEFICIALLY OWNED BY PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of April 12, 1996 with
respect to the beneficial ownership of Common Stock by any person (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) who is known to the Company to be the
beneficial owner of more than five percent of the issued and outstanding shares
of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF PERCENT OF
NAME AND ADDRESS COMMON STOCK CLASS
- ---------------------------------- -------------- -------------
<S> <C> <C>
Ciba-Geigy Limited (1) 18,021,748 49.9%
Ciba-Geigy Corporation
CH 4002
Basle, Switzerland
Mutual Series Fund, Inc. (2) 3,576,273 9.9%
Heine Securities Corporation
Michael Price
51 John F. Kennedy Parkway
Short Hills, NJ 07078
</TABLE>
- ------------------------
(1) Based on information contained in Amendment No. 1 to a Statement on Schedule
13D filed with the Commission on March 8, 1996 on behalf of Ciba and CGC.
According to such Schedule 13D, Ciba has sole voting and investment power
with respect to 9,204,503 shares of Common stock and CGC has sole voting and
investment power with respect to 8,817,245 shares of Common Stock. The
shares of Common Stock beneficially owned by Ciba and CGC are subject to the
terms of the Governance Agreement. See "ELECTION OF DIRECTORS" and "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
(2) Based on information provided in Amendment No. 3 to a Statement on Schedule
13D filed with the Commission on April 7, 1995 on behalf of Mutual Series
Fund, Inc. ("Mutual Series Fund"), Heine Securities Corporation and Michael
Price. Includes 40,667 shares of Common Stock issuable upon the exercise of
options granted to Peter A. Langerman. See "-- Stock Beneficially Owned by
Directors, Director Nominees and Officers -- Note 2." Such shares are
treated as outstanding for purposes of calculating the percentage of
outstanding shares owned. According to such Schedule 13D, Mutual Series Fund
has sole voting and investment power with respect to all the shares of
Common Stock held by it (excluding the shares of Common Stock issuable upon
the exercise of Mr. Langerman's options).
12
<PAGE>
STOCK BENEFICIALLY OWNED BY DIRECTORS, DIRECTOR NOMINEES AND OFFICERS
The following table sets forth certain information as of April 12, 1996 with
respect to the beneficial ownership of Common Stock by each of Hexcel's
directors and director nominees, certain of its executive officers and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHARES OF OUTSTANDING
COMMON SHARES OF COMMON
NAME STOCK (4) STOCK
- ------------------------------------------- -------------- -----------------
<S> <C> <C>
John M.D. Cheesmond (1) 14,000 *
Marshall S. Geller 109,667 *
Juergen Habermeier 20,000 *
Peter A. Langerman (2) 40,667 *
John J. Lee 382,160 1.1%
Stanley Sherman (1) 14,000 *
George S. Springer 41,167 *
Frederick W. Stanske (3) 40,667 *
Joseph T. Sullivan (1) 14,000 *
Hermann Vodicka (1) 14,000 *
Franklin S. Wimer 50,000 *
William P. Meehan 26,000 *
Rodney P. Jenks, Jr. 33,500 *
Stephen C. Forsyth 43,169 *
Gary L. Sandercock 90,361 *
All Executive Officers and Directors as a
group (23 persons) 1,089,367 3.0%
</TABLE>
- ------------------------
* Less than 1%.
(1) Messrs. Cheesmond, Sherman, Sullivan and Vodicka serve on the Board of
Directors at the request of Ciba and/or CGC pursuant to the Governance
Agreement. Based on information provided in Amendment No. 1 to Schedule 13D
filed with the Commission on March 8, 1996 on behalf of Ciba and CGC, Ciba
and CGC beneficially own an aggregate of 18,021,748 shares of Common Stock
(see "- Stock Beneficially Owned by Principal Stock Holders.")
(2) Mr. Langerman is an Executive Vice President of Mutual Series Fund and
serves on the Board of Directors of Hexcel at the request of Mutual Series
Fund. Based on information contained in Amendment No. 3 to a Statement on
Schedule 13D filed with the Commission on April 7, 1995, Mutual Series Fund,
Heine Securities Corporation and Michael Price beneficially own 3,535,606
shares of Common Stock (see "- Stock Beneficially Owned by Principal Stock
Holders.") In accordance with the internal policies of Mutual Series Fund,
Mr. Langerman has agreed to provide Mutual Series Fund with the net
after-tax economic benefit to him of his directors' stock options for the
benefit of its fund investors. Mr. Langerman disclaims beneficial ownership
of the shares of Common Stock issuable upon exercise of his directors' stock
options.
(3) Mr. Stanske is a Vice President of Fisher Investments, Inc. ("Fisher
Investments"). Based on information contained in a Form 13F filed with the
Commission on February 12, 1996, Fisher Investments beneficially owns
274,800 shares of Common Stock. Mr. Stanske is not standing for reelection
to the Board of Directors.
(4) Includes shares issuable upon the exercise of options that are currently
exercisable or that will become exercisable within 60 days. Such shares are
held as follows: Mr. Cheesmond (14,000); Mr. Geller (40,667); Mr. Langerman
(40,667); Mr. Lee (94,172); Mr. Sherman (14,000); Dr. Springer (40,667); Mr.
Stanske (40,667); Dr. Sullivan (14,000); Mr. Vodicka (14,000); Mr. Wimer
(40,000); Mr. Meehan (26,000); Mr. Jenks (32,700); Mr. Forsyth (38,925); Mr.
Sandercock (79,375); and all other executive officers (174,025). Shares
issuable upon the exercise of options that are currently exercisable or that
will become exercisable within 60 days are treated as outstanding for
purposes of computing the percentage of outstanding shares. Other than Mr.
Langerman, all directors and executive officers of Hexcel have sole voting
and investment power with respect to the shares of Common Stock held by
them. See "-- Note 2."
13
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid or accrued by
Hexcel to or for the account of each of the Chief Executive Officer and the four
other most highly compensated executive officers of Hexcel for the fiscal year
ended December 31, 1995.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------
AWARDS
ANNUAL --------------------------
COMPENSATION (1)(2) RESTRICTED SECURITIES
-------------------- STOCK UNDERLYING ALL OTHER
SALARY BONUS AWARDS OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(6) ($)(7) (#) ($)(8)
- ---------------------------------------- --------- --------- --------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John J. Lee (3) ........................ 1995 400,000 500,000 -- 40,000 384,187
Chairman and Chief 1994 453,333 350,000 -- -- 6,448
Executive Officer 1993 160,005 -- 51,675
William P. Meehan (4) .................. 1995 200,000 70,000 -- 39,000 9,000
Vice President of Finance, Chief 1994 240,000 125,000 -- -- 6,517
Financial Officer 1993 86,461 -- -- -- --
Rodney P. Jenks, Jr. (5) ............... 1995 180,000 60,000 -- 39,000 4,500
Vice President and General Counsel of 1994 159,252 41,440 -- -- 3,877
Americas and Asia-Pacific Operations 1993 -- -- -- -- --
Stephen C. Forsyth ..................... 1995 149,375 100,000 -- 33,000 12,500
Senior Vice President of Finance and 1994 115,804 51,040 -- -- 4,404
Administration 1993 108,936 -- -- 1,500 3,268
Gary L. Sandercock ..................... 1995 145,386 50,000 -- 33,000 8,833
President of Special Process Business 1994 140,004 50,000 -- -- 6,488
Unit 1993 140,004 -- 35,706 15,000 6,236
</TABLE>
- ------------------------
(1) Annual compensation includes amounts earned in the fiscal year, whether or
not deferred.
(2) Aggregate perquisite values do not exceed the lesser of $50,000 or 10% of
reported salary and bonuses for each year.
(3) Mr. Lee served as a consultant in July and August 1993 and as an employee
commencing September 1, 1993.
(4) Mr. Meehan's employment with Hexcel commenced on August 23, 1993.
(5) Mr. Jenks' employment with Hexcel commenced on February 2, 1994. From March
1994 until April 1, 1996, Mr. Jenks served as Vice President, General
Counsel and Secretary of Hexcel.
(6) Bonuses were earned in fiscal year 1995 and paid in 1996. Bonuses for 1994
include consummation and employee retention bonuses earned during Hexcel's
Chapter 11 bankruptcy case and approved by the Bankruptcy Court, which were
paid in 1995.
(7) Restricted stock was granted under Hexcel's 1988 Management Stock Plan from
1988 through 1993 and is subject to certain restrictions requiring that the
executive remain in Hexcel's employ for a period of five years before being
entitled to receive all of the shares issued. The executive does not pay
cash for the shares issued. The shares are non-transferable while
restricted; however, the holder is entitled to vote the shares and receive,
without restrictions, all dividends and distributions, except dividends or
distributions in stock or other shares which then become similarly
restricted. The restrictions all terminate upon the executive's retirement,
death or disability. If employment otherwise terminates during the
restricted period, the unvested shares are forfeited to Hexcel without
payment of any consideration. The restrictions on the restricted
14
<PAGE>
stock will lapse in varying percentages between three and five years
following issuance. In the above table, the restricted stock is valued as of
the date of grant. At December 31, 1995, Messrs. Lee, Meehan, Jenks and
Forsyth held no restricted shares; and Mr. Sandercock held 5,924 restricted
shares valued at $66,645, based on the closing price of $11.25 per share of
the Common Stock on the New York Stock Exchange Composite Tape on December
29, 1995.
(8) All Other Compensation for fiscal year 1995 consists of (i) estimated
contributions by Hexcel to Hexcel's 401(k) Retirement Savings Plan (Mr. Lee
-- $4,500; Mr. Meehan -- $4,500; Mr. Jenks -- $4,500; Mr. Forsyth -- $3,740;
and Mr. Sandercock -- $4,500) and (ii) accruals under Hexcel's Executive
Deferred Compensation Plan (Mr. Lee -- $13,500; Mr. Meehan -- $4,500; Mr.
Forsyth -- $3,600; and Mr. Sandercock -- $2,931). For Mr. Sandercock, the
amount also includes a $1,402 reimbursement for income taxes attributable to
the personal use of an automobile leased by Hexcel. For Mr. Lee, the amount
also includes deferred compensation in an amount equal to $366,147 in
accordance with the terms of Mr. Lee's employment agreement with Hexcel. See
"-- Employment and Other Agreements -- Employment and Consulting Agreements
with Mr. Lee -- New Employment Agreement with Mr. Lee." Additional
disclosure regarding benefits under the Executive Deferred Compensation Plan
is provided below under "-- Deferred Compensation."
OPTIONS
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (2)
OPTIONS/SARS EMPLOYEES IN OR BASE EXPIRATION --------------------
NAME GRANTED (#) (1) FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
- --------------------------------- ------------------- ------------- ------------- ---------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John J. Lee...................... 40,000 5.08 4.75 April 5, 2005 119,490 302,811
William P. Meehan................ 39,000 4.95 6.38 June 7, 2000 68,744 151,907
Rodney P. Jenks, Jr.............. 39,000 4.95 6.38 June 7, 2000 68,744 151,907
Stephen C. Forsyth............... 33,000 4.19 6.38 June 7, 2000 58,168 128,537
Gary L. Sandercock............... 33,000 4.19 6.38 June 7, 2000 58,168 128,537
</TABLE>
- ------------------------
(1) All options were granted during fiscal year 1995 subject to stockholder
approval of Hexcel's Incentive Stock Plan, which approval was received on
February 21, 1996. Mr. Lee's options were granted to him in his capacity as
a director of Hexcel.
(2) The amounts shown in these columns are the potential realizable value of
options granted at assumed rates of stock price appreciation (5% and 10%)
set by the executive compensation disclosure provisions of the proxy rules
and have not been discounted to reflect the present values of such amounts.
The assumed rates of stock price appreciation are not intended to forecast
the future stock price appreciation of the Common Stock.
15
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN
OPTIONS/SARS AT FISCAL THE MONEY OPTIONS/SARS AT
YEAR END (#) (1) FISCAL YEAR END ($)(2)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
----------------------- --------------------------
<S> <C> <C>
John J. Lee................................................. 26,667/13,333 173,336/86,665
William P. Meehan........................................... 26,000/13,000 126,750/63,375
Rodney P. Jenks, Jr......................................... 26,000/13,000 126,750/63,375
Stephen C. Forsyth.......................................... 31,425/11,000 109,911/53,625
Gary L. Sandercock.......................................... 71,875/11,000 120,981/53,625
</TABLE>
- ------------------------
(1) Includes (i) options granted pursuant to Hexcel's Incentive Stock Plan as
follows: Mr. Lee (40,000); Mr. Meehan (39,000); Mr. Jenks (39,000); Mr.
Forsyth (33,000); and Mr. Sandercock (33,000); and (ii) options granted
pursuant to Hexcel's 1988 Management Stock Plan as follows: Mr. Forsyth
(10,425); and Mr. Sandercock (38,875).
(2) Based on the closing price of $11.25 per share of Common Stock as reported
on the New York Stock Exchange Composite Tape on December 29, 1995.
DEFERRED COMPENSATION
EXECUTIVE DEFERRED COMPENSATION PLAN (1)(2)
ANNUAL RETIREMENT INCOME
<TABLE>
<CAPTION>
YEARS OF SERVICE (2)
----------------------------------------------------------------------------
REMUNERATION 10 15 20 25 30 35
- ----------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 125,000.......................... $ 18,750 $ 28,125 $ 37,500 $ 46,875 $ 56,250 $ 65,625
150,000.......................... 22,500 33,750 45,000 56,250 67,500 78,750
175,000.......................... 26,250 39,375 52,500 65,625 78,750 91,875
200,000.......................... 30,000 45,000 60,000 75,000 90,000 105,000
250,000.......................... 37,500 56,250 75,000 93,750 112,500 131,250
300,000.......................... 45,000 67,500 90,000 112,500 135,000 157,500
350,000.......................... 52,500 78,750 105,000 131,250 157,500 183,750
400,000.......................... 60,000 90,000 120,000 150,000 180,000 210,000
450,000.......................... 67,500 101,250 135,000 168,750 202,500 236,250
500,000.......................... 75,000 112,500 150,000 187,500 225,000 262,500
550,000.......................... 82,500 123,750 165,000 206,205 247,500 288,750
600,000.......................... 90,000 135,000 180,000 225,000 270,000 315,000
650,000.......................... 97,500 146,250 195,000 243,750 292,500 341,250
700,000.......................... 105,000 157,500 210,000 262,500 315,000 367,500
750,000.......................... 112,500 168,750 225,000 281,250 337,500 393,750
800,000.......................... 120,000 180,000 240,000 300,000 360,000 420,000
850,000.......................... 127,500 191,250 255,000 318,750 382,500 446,250
900,000.......................... 135,000 202,500 270,000 337,500 405,000 472,500
950,000.......................... 142,500 213,750 285,000 356,250 427,500 498,750
1,000,000......................... 150,000 225,000 300,000 375,000 450,000 525,000
</TABLE>
- ------------------------
(1) Executive Deferred Compensation Plan: This retirement plan consists of
individual agreements between Hexcel and certain key executive employees
designated by the Board of Directors. The agreements provide an annual
retirement income to these key employees of 1.5% of their cash compensation,
including salary and bonuses, for each year they are covered under the plan.
Each agreement also requires Hexcel to continue to cover the key executive
under Hexcel's group
16
<PAGE>
medical and dental insurance plans and to provide life insurance for so long
as the executive continues to receive monthly payments under the agreement
and has not attained the age of 75. See "-- Note 2."
(2) Benefits are payable monthly, as a life annuity (with a minimum of 120
monthly payments), commencing upon the later of the executive's attainment
of age 65 or retirement. However, Hexcel has the right to consent to the
executive's request for a different form of benefit payment, including a
lump sum payment. The benefits provided under the Executive Deferred
Compensation Plan are not offset by Social Security or any other amounts.
(3) As of the end of the 1995 fiscal year, estimated credited years of service
were as follows: Mr. Lee -- 1-1/3 years; Mr. Meehan -- 2 years; Mr. Forsyth
-- 1-1/3 years; Mr. Sandercock -- 6 years. Mr. Jenks did not participate in
the plan in 1995, but has participated in the plan in the current fiscal
year, commencing April 1, 1996.
EMPLOYMENT AND OTHER AGREEMENTS
EMPLOYMENT AND CONSULTING AGREEMENTS WITH MR. LEE
INTERIM EMPLOYMENT AGREEMENT AND CONSULTING AGREEMENT WITH MR. LEE
By authorization of the Bankruptcy Court dated as of September 21, 1994,
Hexcel was authorized to enter into an employment agreement (the "Interim
Employment Agreement") with Mr. Lee dated as of September 1, 1994 providing for
his continued employment as Chairman and Chief Executive Officer of Hexcel at an
annual salary of $400,000. Mr. Lee also participated in certain specified
benefit programs and was entitled to expense reimbursement. During the term of
the Interim Employment Agreement, Mr. Lee was not entitled to receive any Board
of Directors fees, but remained eligible to participate in, and have his service
during the term credited towards, Hexcel's Directors' Retirement Plan.
The Interim Employment Agreement contemplated that Mr. Lee would resign as
an officer of Hexcel and be retained as a consultant to Hexcel for strategic
planning pursuant to certain pre-negotiated terms for a period of two years. The
consulting agreement would be subject to termination at the end of the first
year by resolution of the Board of Directors delivered to Mr. Lee not earlier
than 60 days and not later than 30 days prior to the end of the first year. The
compensation provided to Mr. Lee as a consultant would have been as follows:
base compensation (salary and fees) of $180,000 per year during the first year,
and $230,000 during the second year, plus the benefits provided to him in the
Interim Employment Agreement. In addition, there would have been a bonus
opportunity, as determined by the Board of Directors. Pursuant to the terms of
the consulting agreement, Mr. Lee would have also received stock options for
113,379 shares of Common Stock. Such options would have had an exercise price of
$5.05 per underlying share of Common Stock and would have vested in equal
monthly installments over the two-year term of the consulting agreement, subject
to being fully vested upon an early termination thereof (other than for cause or
voluntary resignation) and would have been exercisable until the later of three
years following the date of grant or one year after expiration of the consulting
agreement.
As a result of the consummation of Hexcel's acquisition of the Ciba
Composites Business on February 29, 1996 (the "Acquisition"), Mr. Lee did not
resign as an officer of Hexcel and has not been retained as a consultant
pursuant to the consulting agreement contemplated by the Interim Employment
Agreement and the Plan of Reorganization. Rather, Mr. Lee is continuing to serve
as Chief Executive Officer and Chairman of the Board pursuant to the new
employment agreement described below.
NEW EMPLOYMENT AGREEMENT WITH MR. LEE
Hexcel has entered into a new five-year employment agreement with Mr. Lee
(the "New Lee Agreement") effective February 29, 1996. The New Lee Agreement
provides for (i) an annual base salary of $400,000, subject to annual review by
the Compensation Committee, and a bonus of $500,000 in respect of services
rendered in 1995, (ii) a deferred compensation arrangement intended to provide
17
<PAGE>
Mr. Lee an annual retirement benefit, which when added to his other Hexcel
retirement benefits, will be equal to approximately 50% of the average annual
cash compensation paid to him during the term of his employment with Hexcel and
(iii) Mr. Lee's participation, where appropriate, in all other components of
senior executive compensation, including a grant of 100,000 short-term options
under Hexcel's short-term option program (and, upon exercise of such short-term
options, grants of automatic reload options) and 200,000 performance accelerated
restricted stock units ("PARS") under Hexcel's PARS program. See "-- Short-Term
Option Program" and "-- Performance Accelerated Restricted Stock Units."
The New Lee Agreement also provided for the grant to Mr. Lee on February 29,
1996 of options to purchase 200,000 shares of Common Stock under the Incentive
Stock Plan, which options (i) have an exercise price per share equal to the fair
market value of the Common Stock on February 29, 1996 ($12.50 per share), (ii)
have a term of 10 years and (iii) become exercisable with respect to one-third
of the shares of Common Stock covered thereby on each of the first, second and
third anniversaries of the date of the grant, subject to earlier vesting upon
the attainment of certain performance goals. In subsequent fiscal years, Mr. Lee
will be entitled to participate in Hexcel's incentive plans at a level
appropriate in comparison to other senior executive officers of Hexcel.
The options and PARS granted to Mr. Lee provide for immediate acceleration
of vesting upon the occurrence of a change in control of Hexcel and in certain
other circumstances.
Finally, the New Lee Agreement preserves the economic benefits to Mr. Lee of
certain compensatory arrangements provided for in the First Amended Plan of
Reorganization of Reorganization which was confirmed by the Bankruptcy Court in
connection with Hexcel's bankruptcy reorganization (the "Plan of
Reorganization") and in the Interim Employment Agreement. In this regard, the
New Lee Agreement provided Mr. Lee with certain benefits that would have been
granted to him under the Plan of Reorganization and the Interim Employment
Agreement, including (i) the grant to Mr. Lee of an option to purchase 113,379
shares of Common Stock with an exercise price of $5.05 per share and vesting in
equal installments over a two-year period from the date of grant and (ii) a
$500,000 bonus relating to Mr. Lee's fiscal 1995 performance as Chief Executive
Officer. In exchange for the options and bonus provided to Mr. Lee under the New
Lee Agreement, Mr. Lee has foregone the two-year consulting agreement provided
for in the Plan of Reorganization and the Interim Employment Agreement. See "--
Interim Employment Agreement and Consulting Agreement with Mr. Lee."
INTERIM EMPLOYMENT AGREEMENT WITH MR. MEEHAN
Hexcel entered into an interim employment agreement with Mr. Meehan for the
term commencing on February 9, 1995 and ended June 30, 1995. Mr. Meehan received
compensation during the term based on an annual salary of $200,000, along with a
consummation bonus of $125,000 which was paid shortly after the effective date
of the Plan of Reorganization. Mr. Meehan also participated in the benefit plans
available to other employees of Hexcel. In December 1995, Hexcel agreed to
continue to employ Mr. Meehan until June 30, 1996. The new agreement with Mr.
Meehan provides for (i) an annual salary of $200,000 and a bonus of $100,000
payable within five business days after June 30, 1996, in respect of services
rendered in 1995 and the first half of 1996 and (ii) the vesting of the second
third of his 1995 option grant. See "-- Options."
TRANSITIONAL EMPLOYMENT AGREEMENT WITH MR. JENKS
In November 1995, Hexcel entered into a transitional employment agreement
with Mr. Jenks, pursuant to which Mr. Jenks continued to serve as Vice
President, General Counsel and Secretary of Hexcel until March 31, 1996. The
transitional employment agreement with Mr. Jenks provided for (i) an annual
salary of $180,000 and a bonus of $100,000 payable no later than five business
days after March 31, 1996 in respect of Mr. Jenks' service to Hexcel prior to
and during the term of such agreement and (ii) the vesting of the second third
of his 1995 option grant. See "-- Options." In April 1996, Hexcel entered into a
severance agreement with Mr. Jenks. See "-- Severance Agreements with Messrs.
Jenks, Forsyth and Sandercock."
18
<PAGE>
SEVERANCE AGREEMENTS WITH MESSRS. JENKS, FORSYTH AND SANDERCOCK
In April 1996, October 1994 and January 1995, Hexcel entered into severance
agreements with Messrs. Jenks, Forsyth and Sandercock, respectively, providing
each of them with severance benefits upon certain terminations of their
employment with Hexcel. Such agreements provide for a severance payment equal to
one year of annual base salary (as in effect on the date of termination). The
agreement with Mr. Sandercock also provides for an additional payment in an
amount equal to any bonus paid within the 12 month period immediately prior to
the date of termination upon a termination of employment by Hexcel (other than
for "cause", as defined in the severance agreement) or upon a termination of
employment by Mr. Sandercock for "good reason" (as defined in the severance
agreement). The severance agreements do not affect the employees' rights to
continue to receive benefits under Hexcel's benefit plans.
EXECUTIVE DEFERRED COMPENSATION AGREEMENTS
This program consists of individual agreements between Hexcel and certain
key executives designated by the Board of Directors. Messrs. Lee, Meehan, Jenks,
Forsyth and Sandercock participate in this program. The agreements provide an
annual retirement income to these key executives of 1.5% of their salary and
bonuses for each year they are covered under the program. The retirement
benefits are payable monthly, as a life annuity (with a minimum of 120 monthly
payments); however, Hexcel has the right to consent to the executive's request
for a different form of benefit payment, including a lump sum payment. Each
agreement also requires Hexcel to continue to cover the key executive under
Hexcel's group medical and dental insurance plans and to provide life insurance
for so long as the executive continues to receive monthly payments under the
agreement (i.e., the executive has not received a lump sum benefit under the
agreement) and has not attained the age of 75. The retirement benefits commence
upon the later of the executive's attainment of age 65 or retirement. Additional
information about these agreements is contained in the Executive Deferred
Compensation Plan table above.
SHORT-TERM OPTION PROGRAM
On February 29, 1996, Hexcel established a short-term option program (the
"Short-Term Option Program") under its Incentive Stock Plan. Participants in the
Short-Term Option Program have been granted options (the "Short-Term Options")
to purchase shares of Common Stock, which (i) have an exercise price per share
equal to the fair market value of the Common Stock on the date of exercise, (ii)
have a term of 90 days, (iii) are immediately exercisable and (iv) provide for
additional grants to the participant, on each date that the participant
exercises Short-Term Options, of options (the "Reload Options") to purchase two
shares of Common Stock for each Short-Term Option so exercised. The Reload
Options (i) have an exercise price per share equal to the fair market value of
Common Stock on the date of grant of the Reload Option, (ii) have a term of 10
years and (iii) become exercisable with respect to one-third of the shares of
Common Stock covered thereby on each of the first, second and third
anniversaries of the date of grant, subject to earlier vesting upon the
attainment of certain performance goals and subject to certain holding period
requirements with respect to the shares of Common Stock acquired upon exercise
of the Short-Term Options.
PERFORMANCE ACCELERATED RESTRICTED STOCK UNITS
On February 29, 1996, Hexcel established a performance accelerated
restricted stock units program (the "PARS Program") under the Incentive Stock
Plan. The PARS to be issued under the PARS Program vest, convert into Common
Stock and are distributed to participants on a date to be determined at the time
of grant, subject to accelerated vesting at a rate determined by the achievement
of certain performance goals.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee of the Board of Directors of Hexcel
(the "Committee") reviews and authorizes the salaries and bonuses of the
executive officers of Hexcel, administers Hexcel's incentive stock plans and
reviews and authorizes grants of stock options, restricted stock and
19
<PAGE>
other incentive compensation awards. During the fiscal year ended December 31,
1995, the Committee performed a review of compensation levels and arrangements
for all of the executive officers of Hexcel in order to develop overall
compensation objectives and design a compensation program that would assist
Hexcel in meeting such objectives.
OBJECTIVES
The Committee's primary objective is to retain the most qualified employees
and to insure that they are provided proper incentives to have Hexcel prosper
over the long term. In establishing the components and levels of compensation
for its executive officers, the Committee seeks (i) to maintain compensation at
levels that are competitive with the other companies in a comparator group
composed of companies in the aerospace and manufacturing industries (the
"Comparator Group") so that Hexcel can attract and retain highly qualified
executives and (ii) to provide financial incentives in order to align the
interests of executive officers more closely with those of the stockholders of
Hexcel and to motivate such executives to increase stockholder value by
improving corporate performance and profitability.
COMPONENTS OF EXECUTIVE COMPENSATION
CASH COMPENSATION
Cash compensation is generally comprised of base salary and bonus. Base
salaries are generally competitive with other companies in the Comparator Group.
In determining the appropriate base salaries of its executive officers, the
Committee considers those factors that it deems most relevant at the time,
including the levels of base salary provided to executive officers in the
Comparator Group as well as each executive officer's individual performance,
subjectively determined, in respect of the preceding fiscal year. In respect of
the past fiscal year, Hexcel's emergence from bankruptcy reorganization and
improving financial condition were significant factors affecting cash
compensation. In this regard, certain executive officers were awarded modest
increases in base salary during 1995. The Committee granted such increases in
recognition of the fact that base salaries had been frozen for two years and
that certain executive officers had been assigned additional responsibilities
without commensurate increases in salary.
Hexcel has historically provided performance-based bonus opportunities to
executive officers contingent on the success of Hexcel. However, in light of
Hexcel's bankruptcy reorganization, no such bonuses were granted in 1994. In
lieu of such bonuses, the Committee authorized cash "stay-on" bonuses in 1994
for executive officers and key employees of Hexcel. For fiscal 1995, the
Committee granted discretionary cash bonuses to certain executive officers and
other key employees, which were paid in 1996. In determining the appropriate
amount of the 1995 cash bonuses, the Committee considered (i) Hexcel's financial
performance in fiscal 1995 and (ii) each executive officer's and other key
employee's individual performance, including efforts made in connection with the
Acquisition, subjectively determined, in fiscal 1995.
EQUITY COMPENSATION
Equity compensation is comprised of stock options and other stock-based
awards; however, grants of such awards have been limited in the past fiscal year
by virtue of the bankruptcy reorganization. No stock options or stock awards
were granted in 1994. Stock options were granted to certain executive officers
and other key employees of Hexcel under the Incentive Stock Plan in 1995. Such
options were granted subject to stockholder approval of the Incentive Stock
Plan, which approval was subsequently obtained. Stock option grants reflect the
Committee's desire to provide a meaningful equity incentive for the executive to
have Hexcel prosper over the long term. Stock option grants are also determined
in consideration of individual performance as well as each executive officer's
personal contribution to the success of Hexcel.
CHIEF EXECUTIVE OFFICER COMPENSATION
Effective as of September 1, 1994, Hexcel and Mr. Lee entered into the
Interim Employment Agreement, which was agreed to by the Official Committee of
Equity Security Holders (the "Equity
20
<PAGE>
Committee") and the Board of Directors of Hexcel and authorized by the
Bankruptcy Court in accordance with Hexcel's bankruptcy reorganization. The
Interim Employment Agreement, which was in effect for all of 1995, provided for
Mr. Lee's continued employment as Chief Executive Officer at an annual salary of
$400,000, a reduction from his prior year's salary. The Interim Employment
Agreement also provided Mr. Lee (i) certain employment benefits (E.G., medical
coverage) and (ii) a monthly stipend of $5,000 for office space for Mr. Lee in
the New York metropolitan area.
In addition, in November 1994, the Committee approved a consulting agreement
with Mr. Lee that would be effective upon the selection of his successor and a
stock option to purchase approximately 0.625% of the reorganized Hexcel's fully
diluted Common Stock. As part of the confirmation of the Plan of Reorganization
in February 1995, the Bankruptcy Court, the Equity Committee and the Board of
Directors approved the consulting agreement and the option.
Mr. Lee received no other compensation during 1994. Mr. Lee was paid a
Reorganization Bonus of $350,000 upon the confirmation of the Plan of
Reorganization in 1995 as compensation for the services rendered by him to
Hexcel during the bankruptcy period. This bonus, along with bonuses to a number
of other key employees, was approved by Hexcel's Board of Directors and by the
Equity Committee in November 1994 and by the Equity Committee in November 1994
and by the Equity Committee and the Bankruptcy Court in February 1995. On
February 29, 1996, Hexcel entered into the New Lee Agreement with Mr. Lee,
which, among other things, provided for a $500,000 bonus payment in respect of
his performance in 1995. See "-- Employment and Other Agreements -- Employment
and Consulting Agreements with Mr. Lee -- New Employment Agreement with Mr.
Lee."
COMPENSATION OF EXECUTIVE OFFICERS GENERALLY
The procedure for determining executive officer compensation is as follows.
The Chief Executive Officer of Hexcel (the "CEO") recommends the level of
compensation of each executive officer to the Committee based on such criteria
as the compensation of executives at corporations of similar size and
operations, years of service to Hexcel, the amount of time and travel the
position requires, the effort put forth during the past year, the results of
Hexcel and the function for which the individual was responsible and the desire
to encourage the long-term commitment of the executive. The Committee considers
each of these factors in determining whether to approve or modify the CEO's
recommendation. With respect to new executives, the CEO and the Committee also
take into consideration the results of any arm's length negotiations between
Hexcel and such executive. In addition, as part of the compensation package of
each executive, the CEO recommends, and the Committee considers, the grant of
stock options and other incentive compensation to each executive based on the
above factors.
DEDUCTIBILITY OF COMPENSATION
Due to recent changes in tax law, the deductibility of compensation for
corporate tax purposes of certain compensation paid to individual executive
officers of Hexcel in excess of $1 million in any year may be restricted. The
Committee will, in general, seek to qualify compensation paid to its executive
officers for deductibility although the Committee believes it is appropriate to
retain flexibility to authorize payments of compensation that may not qualify
for deductibility if, in the Committee's judgment, it is in Hexcel's best
interest to do so.
The Compensation Committee
John M.D. Cheesmond (Chairman)
Marshall S. Geller
Peter A. Langerman
Stanley Sherman
21
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following current or former directors were members of the Executive
Compensation Committee of the Board of Directors during 1995: Gary Depolo, Cyrus
Holley, Marshall S. Geller, Joseph L. Harrosh, Peter A. Langerman, John J. Lee
and Robert L. Witt.
During his service on the Executive Compensation Committee of Hexcel (from
February 28, 1995 through August 1, 1995), Mr. Lee also served as the Chief
Executive Officer of Hexcel. In addition, during 1995, Mr. Lee also served as a
member of the compensation committee of XTRA Corporation. Mr. Lewis Rubin, a
director of Hexcel until February 9, 1995, also served as President and Chief
Executive Officer of XTRA Corporation. Mr. Rubin did not serve on the Executive
Compensation Committee of Hexcel.
Mr. Witt, a member of the Executive Compensation Committee during 1995 (from
February 28, 1995 through February 29, 1996), had served as Chief Executive
Officer of Hexcel from 1986 to 1993 and held other positions with Hexcel dating
back to 1969. Mr. Witt was not an officer of Hexcel during his service on the
Executive Compensation Committee of Hexcel.
COMPENSATION OF DIRECTORS
Directors are compensated for their service as directors in the amount of
$10,000 per year payable quarterly. The Chairman of the Board of Directors does
not receive additional compensation by reason of such position. Directors are
also paid $1,000 for each in-person board meeting ($500 for each telephonic
meeting) and $750 for each in-person committee meeting ($375 for each telephonic
committee meeting) they attend. Committee chairmen are paid $1,000 for each
in-person committee meeting ($500 for each telephonic committee meeting) they
attend.
In addition, certain former directors of Hexcel currently receive benefits
under Hexcel's Directors' Retirement Plan. Under the Directors' Retirement Plan,
a director who had served as a director for at least five years, and during such
period did not accrue other Hexcel retirement benefits, was entitled, on
retirement, to a total retirement benefit equal to 50% of his or her annual
compensation as a director, averaged for the three years prior to retirement,
multiplied by the number of years he or she served on the Board of Directors
while not accruing other Hexcel retirement benefits, payable over a period not
to exceed 10 years. The amount and term of payment is subject to adjustment in
certain events. None of the current directors is entitled to receive benefits
under the Directors' Retirement Plan.
Pursuant to Hexcel's Incentive Stock Plan, each director of Hexcel on April
4, 1995 was granted an option to purchase 40,000 shares of Common Stock with an
exercise price equal to the fair market value of the Common Stock on the date of
grant ($4.75 per share). Each person who becomes a director after April 4, 1995
and who is not also a full-time employee of Hexcel and has not previously
received an option to purchase 40,000 shares of Common Stock under Hexcel's
Incentive Stock Plan will be granted, upon his election or appointment as a
director, an option to purchase 40,000 shares of Common Stock with an exercise
price equal to the fair market value of the Common Stock on the date of grant.
The Incentive Stock Plan further provides that on April 4, 1996 and on each
anniversary thereof through and including April 4, 2000, each director who is
not also a full-time employee of Hexcel on such date will be granted an option
to purchase an additional 2,000 shares of Common Stock with an exercise price
equal to the fair market value of the Common Stock on the date of grant.
In accordance with the internal policies of his employer, Mutual Series
Fund, Mr. Langerman has agreed to provide the net economic benefit to him of
such directors' compensation to Mutual Series for the benefit of its fund
investors. See "Stock Beneficially Owned by Directors, Director Nominees and
Officers -- Note 2."
22
<PAGE>
PERFORMANCE GRAPH
The following graph indicates Hexcel's total return to its stockholders
during the past five years, as compared to the total returns of the Standard &
Poor's 500 Composite Stock Price Index and Media General Financial Services'
("Media General") Aerospace Components Stock Price Index.
HEXCEL CORPORATION
TOTAL STOCKHOLDER RETURN ANALYSIS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HEXCEL S&P 500 MEDIA GEN. AEROSPACE
<S> <C> <C> <C>
12/90 $100.00 $100.00 $100.00
12/91 114.28 130.34 123.17
12/92 92.62 140.25 135.27
12/93 40.05 154.32 169.09
12/94 45.06 156.42 166.64
12/95 132.29 214.99 231.39
</TABLE>
<TABLE>
<CAPTION>
MEDIA GENERAL
AEROSPACE
DATE HEXCEL S&P 500 COMPONENTS**
- --------------------------------------------------------------------------- --------- --------- --------------
<S> <C> <C> <C>
December 1990.............................................................. $ 100.00 $ 100.00 $ 100.00
December 1991.............................................................. 114.28 130.34 123.17
December 1992.............................................................. 92.62 140.25 135.27
December 1993.............................................................. 40.05 154.32 169.09
December 1994.............................................................. 45.06 156.42 166.64
December 1995.............................................................. 132.29 214.99 231.39
</TABLE>
- ------------------------
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in the Common Stock, the
Standard & Poor's 500 Composite Stock Price Index and Media General's Aerospace
Components Stock Price Index, with quarterly reinvestment of dividends.
**Data provided by Media General
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIPS AND RELATED TRANSACTIONS WITH CIBA
The following summary of the relationships and related transactions with
Ciba arising in connection with the Acquisition is qualified in its entirety by
reference to the agreements discussed below, copies of which were filed as
exhibits to Hexcel's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
THE STRATEGIC ALLIANCE AGREEMENT
On February 29, 1996, Hexcel consummated the Acquisition pursuant to the
terms and conditions of the Strategic Alliance Agreement. Under the Strategic
Alliance Agreement, Hexcel acquired the assets (including the capital stock of
certain of Ciba's non-U.S. subsidiaries) and liabilities of the Ciba Composites
Business, other than certain excluded assets and liabilities, in exchange for
(i) 18,021,748 newly issued shares of Common Stock (representing 49.9% of the
outstanding Common
23
<PAGE>
Stock on the date of the Acquisition), (ii) $25 million in cash and (iii)
undertakings by Hexcel to deliver to Ciba and/or one or more of its
subsidiaries, following completion of certain post-closing adjustment procedures
contemplated by the Strategic Alliance Agreement, (x) senior subordinated notes
due 2003 (the "Senior Subordinated Notes") to be issued pursuant to an Indenture
dated as of February 29, 1996 between Hexcel and First Trust of California,
National Association, as trustee, in an aggregate principal amount of
approximately $43 million, subject to certain adjustments contemplated by the
Strategic Alliance Agreement, and (y) senior demand notes in a principal amount
equal to the cash on hand at certain of Ciba's former non-U.S. subsidiaries.
Pursuant to the Strategic Alliance Agreement, certain assets of the Ciba
Composites Business, including the capital stock of Ciba's Austrian subsidiary,
Danutec Werkstoff G.m.b.H. (or its successor), and certain assets of Ciba
affiliates that will continue to act as distributors following the closing of
the Acquisition (the "Closing") will be acquired from time to time prior to the
first anniversary of the Closing, pursuant to a Distribution Agreement among
Hexcel, Brochier S.A., Composite Materials Limited, Salver S.r.l. and Ciba (the
"Distribution Agreement"). See "-- The Distribution Agreement."
THE GOVERNANCE AGREEMENT
In connection with the Acquisition, Hexcel and Ciba entered into the
Governance Agreement at the Closing. Pursuant to the Governance Agreement,
Hexcel's Board of Directors was reconstituted as described under "ELECTION OF
DIRECTORS." In addition, certain key employees of the Ciba Composites Business,
including Juergen Habermeier, Michael Carpenter, William Hunt, James Koshak and
David Tanonis became executive officers of Hexcel effective as of the Closing.
CORPORATE GOVERNANCE
Pursuant to the Governance Agreement, Hexcel has agreed to exercise all
authority under applicable law to cause any slate of directors presented to
stockholders for election to the Board of Directors to consist of certain
specified numbers of Ciba Directors and Independent Directors, in addition to
the Chairman and the President. The precise number of Ciba Directors and
Independent Directors to be included in any slate of directors varies based on
Ciba's percentage ownership of the total voting power of Hexcel. See "ELECTION
OF DIRECTORS." The Governance Agreement further provides that (i) for so long as
Ciba beneficially owns at least 40% of the total voting power of Hexcel, each
committee of the Board of Directors shall consist of an equal number of Ciba
Directors and Independent Directors and (ii) at all other times, each committee
shall be comprised such that Ciba's representation is at least proportionate to
its representation on the Board of Directors, unless the committee is comprised
of three members or less, in which case at least one Ciba Director shall serve.
See "ELECTION OF DIRECTORS -- Meetings and Standing Committees."
Pursuant to the Governance Agreement, new directors chosen to fill vacancies
on the Board of Directors shall be selected as follows: (i) if the new director
is to be a Ciba Director, then Ciba shall designate the new director; (ii) if
the former director was the Chairman or President, the replacement Chairman or
President, respectively, shall be the replacement director; and (iii) if the new
director is to be an Independent Director (other than the Chairman or the
President), the remaining Independent Directors (including the Chairman and the
President if he or she is an Independent Director) shall designate the new
director.
If at any time the percentage of the total voting power of Hexcel
beneficially owned by Ciba decreases to a point at which the number of Ciba
Directors would decrease, the Governance Agreement generally requires Ciba to
cause a sufficient number of Ciba Directors to resign from the Board of
Directors so that the number of Ciba Directors on the Board of Directors after
such resignation(s) equals the number of Ciba Nominees that Ciba would have been
entitled to designate had an election of directors taken place at such time. Any
vacancies created by such resignations would be filled by Independent Directors.
CERTAIN APPROVALS
Under the Governance Agreement, so long as Ciba beneficially owns 40% or
more of the total voting power of Hexcel, neither the Board of Directors nor any
committee thereof shall take any
24
<PAGE>
action, including the approval, authorization or ratification of any action or
inaction by officers, agents or employees of Hexcel, without the affirmative
vote of at least one Ciba Director and one Independent Director. In addition,
the Governance Agreement generally provides that for so long as Ciba
beneficially owns at least 33% of the total voting power of Hexcel, the Board of
Directors shall not authorize, approve or ratify any of the following actions
without the approval of a majority of the Ciba Directors: (i) any merger,
consolidation, acquisition or other business combination involving Hexcel or any
subsidiary of Hexcel if the value of the consideration paid or received by
Hexcel in such individual transaction or the aggregate consideration paid or
received by Hexcel in all such transactions approved by the Board of Directors
during the prior 12 months exceeds the greater of $75 million or 11% of Hexcel's
total consolidated assets; (ii) any sale, transfer, conveyance, lease or other
disposition or series of related dispositions of assets, business or operations
of Hexcel or any of its subsidiaries, if the value of the assets, business or
operations so disposed exceeds the greater of $75 million or 11% of Hexcel's
total consolidated assets; (iii) any issuance by Hexcel or any significant
subsidiary of Hexcel of equity securities (other than pursuant to customary
employee or director stock option or incentive compensation or similar plans and
other than transactions solely among Hexcel and its subsidiaries) or any other
bonds, debentures, notes or securities convertible into, exchangeable for or
exercisable for equity securities if the aggregate net proceeds to Hexcel of
such issuance or of such issuance when added to the aggregate net proceeds to
Hexcel of all such issuances approved by the Board of Directors during the prior
12 months exceeds the greater of $75 million or 11% of Hexcel's total
consolidated assets; and (iv) any new capital expenditure program or any capital
expenditure that is not part of a capital expenditure program previously
approved by the Board of Directors, if the amount or anticipated amount of such
program or expenditure or of such program or expenditure when added to the
aggregate amount of capital expenditures not so approved by the Board of
Directors during the prior 12 months exceeds the greater of $50 million or 7% of
Hexcel's consolidated assets.
Under the terms of the Governance Agreement, Ciba has agreed that, until the
percentage of the total voting power of Hexcel beneficially owned by Ciba falls
below either (i) 15% if and so long as there is on file with the Commission any
statement showing beneficial ownership by any person other than Ciba of 10% or
more of the total voting power of Hexcel or (ii) 10% in all other cases, in any
election of directors or any meeting of stockholders of Hexcel called expressly
for the removal of directors, so long as the Board of Directors includes (and
will include after any such removal) the requisite number of Ciba Directors,
each of Ciba and any subsidiary of Ciba that holds voting securities of Hexcel
(each, a "Ciba Entity") will be present for purposes of establishing a quorum
and will vote all of its voting securities of Hexcel (x) in favor of any nominee
or director selected in accordance with the terms of the Governance Agreement
and (y) otherwise against the removal of any director designated in accordance
with the terms of the Governance Agreement. In any other matter submitted to a
vote of the stockholders of Hexcel, Ciba and each Ciba Entity will be present
for purposes of establishing a quorum and will vote all of its voting securities
of Hexcel either, at the discretion of Ciba, (i) as recommended by the Board of
Directors or (ii) in proportion to the votes cast with respect to the voting
securities of Hexcel not beneficially owned by Ciba or the Ciba Entities, except
that Ciba and each Ciba Entity will be free to vote all of its voting securities
entitled to vote in its sole discretion on the following matters submitted to
stockholders so long as such matters were not submitted to stockholders at the
request of Ciba or any of its affiliates (other than Hexcel): (A) any amendment
to the Certificate of Incorporation of Hexcel; (B) any merger, consolidation,
acquisition or other business combination involving Hexcel or any of its
subsidiaries; (C) any sale, lease, transfer or other disposition of the business
operations or assets of Hexcel; (D) any recapitalization, restructuring or
similar transaction or series of transactions involving Hexcel or any
significant subsidiary of Hexcel; (E) any dissolution or complete or partial
liquidation or similar arrangement of Hexcel or any significant subsidiary of
Hexcel, subject to certain exceptions; (F) certain issuances of equity
securities or securities convertible into or exchangeable or exercisable for
equity securities; and (G) entering into any material joint venture,
collaboration or partnership by Hexcel or any of its subsidiaries.
25
<PAGE>
STANDSTILL
Under the terms of the Governance Agreement, Ciba has agreed, subject to
certain specified exceptions, that it will not, directly or indirectly, (i)
purchase or otherwise acquire any beneficial ownership of voting securities of
Hexcel; (ii) enter into, propose to enter into, solicit or support any merger or
business combination or similar transaction involving Hexcel or any of its
subsidiaries or purchase, acquire, propose to purchase or acquire or solicit or
support the purchase or acquisition of any portion of the business or assets of
Hexcel or any significant subsidiary of Hexcel (except in the ordinary course of
business or in nonmaterial amounts); (iii) initiate or propose any security
holder proposal without the approval of the Board of Directors or make, or in
any way participate in, any "solicitation" of "proxies" (as such terms are used
in the proxy rules of the Commission) to vote or seek to advise or influence any
person or entity with respect to the voting of any voting securities of Hexcel
or request or take any action to obtain any list of security holders for such
purposes with respect to any matter other than those with respect to which Ciba
or the Ciba Entities may vote in their sole discretion under the Governance
Agreement (or, as to such matters, solicit any person in a manner that would
require the filing of a proxy statement under Regulation 14A of the Exchange
Act); (iv) form, join or otherwise participate in a group formed for the purpose
of acquiring, holding, voting, disposing of or taking any action with respect to
Hexcel's voting securities that would be required under Section 13(d) of the
Exchange Act to file a statement on Schedule 13D with the Commission; (v)
deposit any voting securities of Hexcel in a voting trust or enter into any
voting agreement with respect thereto (other than the Governance Agreement);
(vi) seek representation on the Board of Directors, remove a director or seek a
change in the size or composition of the Board of Directors; (vii) make any
request to amend or waive the provisions of the Governance Agreement referred to
in this paragraph that would require public disclosure; (viii) disclose any
intent, purpose, plan, arrangement or proposal inconsistent with the foregoing
(including any such intent, purpose, plan, arrangement or proposal that is
conditioned on or would require the waiver, amendment, nullification or
invalidation of any of the foregoing) or take any action that would require
public disclosure of any such intent, purpose, plan, arrangement or proposal;
(ix) take any action challenging the validity or enforceability of the
foregoing; or (x) assist, advise, encourage or negotiate with respect to or seek
to do any of the foregoing.
The Governance Agreement permits Ciba to purchase or otherwise acquire
beneficial ownership of Hexcel's voting securities in open market purchases so
long as after giving effect to such purchases or acquisitions the percentage of
the total voting power of Hexcel beneficially owned by Ciba does not exceed the
greater of (i) 49.9% until the third anniversary of the Closing or 57.5%
thereafter and (ii) the highest percentage of the total voting power of Hexcel
beneficially owned by Ciba immediately following any action by Hexcel that
increases the percentage of the total voting power of Hexcel beneficially owned
by Ciba due to a reduction in the amount of voting securities of Hexcel
outstanding as a result of such action.
BUYOUT TRANSACTIONS
The Governance Agreement provides that, notwithstanding the standstill
provisions described above, at any time after the fifth anniversary of the
Closing, Ciba may propose, participate in, support or cause the consummation of
a tender offer, merger, sale of substantially all of Hexcel's assets or similar
transaction (a "Buyout Transaction"), including a Buyout Transaction with Ciba
or any of its affiliates, if each stockholder other than Ciba and the Ciba
Entities (the "Other Holders") is entitled to received upon consummation of such
Buyout Transaction consideration that is (i) approved by (x) a majority of the
Independent Directors acting solely in the interests of the Other Holders after
the receipt of an opinion of an independent nationally recognized investment
banking firm retained by them or (y) a majority in interest of the Other Holders
by means of a stockholder vote solicited pursuant to a proxy statement
containing the information required by Schedule 14A under the Exchange Act (it
being understood that the Independent Directors will, consistent with their
fiduciary duties, be free to include in such proxy statement, if applicable, the
reasons underlying any failure by them to approve a Buyout Transaction by the
requisite vote, including whether a fairness opinion was
26
<PAGE>
sought by the Independent Directors and any opinions or recommendations
expressed in connection therewith) and (ii) is fair from a financial point of
view to the Other Holders in the opinion of an independent nationally recognized
investment banking firm (including such a firm retained by Ciba).
ISSUANCE OF ADDITIONAL SECURITIES
If, at any time after the Closing for so long as Ciba is entitled to
designate one or more nominees for election to the Board of Directors, Hexcel
issues any additional voting securities for cash (other than issuances of voting
securities in connection with employee or director stock option or incentive
compensation or similar plans), Ciba will, pursuant to the Governance Agreement,
have the option to purchase, for the same consideration and otherwise on the
same terms as are applicable to such issuance by Hexcel, an amount of such
voting securities that would allow Ciba to beneficially own the same percentage
of the total voting power of Hexcel after such issuance as Ciba beneficially
owned immediately prior to such issuance.
THIRD PARTY OFFERS
In the event that Hexcel becomes the subject of a bona fide offer to enter
into a Buyout Transaction by a person other than Ciba or any of its affiliates
or any other person acting on behalf of Ciba or any of its affiliates (a "Third
Party Offer") that is made after the third anniversary of the Closing and that
is approved by two-thirds of the Independent Directors, Ciba will, within ten
days after receipt of notice of such event, either (i) offer to acquire the
voting securities of Hexcel held by the Other Holders (the "Other Shares") on
terms at least as favorable to the Other Holders as those contemplated by such
Third Party Offer or (ii) support such Third Party Offer (or an alternative
Third Party Offer providing greater value to the Other Holders) by voting and
causing each Ciba Entity to vote all its voting securities of Hexcel eligible to
vote thereon in favor of such Third Party Offer or, if applicable, tendering or
selling and causing each Ciba Entity to tender or sell all its voting securities
of Hexcel to the person making such Third Party Offer. In the event that Hexcel
becomes the subject of a Third Party Offer, neither Ciba nor any of the Ciba
Entities may support or vote in favor of such Third Party Offer or tender or
sell its voting securities of Hexcel to the person making such Third Party Offer
unless such Third Party Offer is approved by (i) a majority of the Independent
Directors acting solely in the interests of the Other Holders or (ii) a majority
in interest of the Other Holders in a stockholder vote solicited pursuant to a
proxy statement containing the information required by Schedule 14A under the
Exchange Act (it being understood that the Independent Directors will,
consistent with their fiduciary duties, be free to include in such proxy
statement, if applicable, the reasons underlying any failure by them to approve
a Buyout Transaction by the requisite vote, including whether a fairness opinion
was sought by the Independent Directors and any opinions or recommendations
expressed in connection therewith).
TRANSFER RESTRICTIONS
Except in connection with a Third Party Offer that has been approved by the
Independent Directors or the Other Holders in accordance with the Governance
Agreement, Ciba and the Ciba Entities are not permitted to sell, transfer to
otherwise dispose of any voting securities of Hexcel except (i) transfers solely
among Ciba and its wholly owned subsidiaries, (ii) in accordance with the volume
and manner-of-sale limitations of Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"), and otherwise subject to compliance with the
Securities Act or (iii) in a registered public offering or a non-registered
offering subject to an applicable exemption from the registration requirements
of the Securities Act, and in the case of clauses (ii) and (iii), in a manner
calculated to achieve a Broad Distribution (as defined in the Governance
Agreement).
In addition, the Governance Agreement provides that Ciba will not (i) permit
any subsidiary of Ciba that is not wholly owned to become a Ciba Entity or (ii)
dispose of any of the capital stock of any Ciba Entity except to another direct
or indirect wholly owned subsidiary of Ciba. This provision does not, however,
prohibit Ciba from effecting (i) a pro rata distribution to Ciba's stockholders
or (ii) a sale in a manner calculated to achieve a Broad Distribution of up to
20%, in each case, of the equity securities of a Ciba Entity if (x) such
distribution or sale has a bona fide business purpose (other than
27
<PAGE>
the sale or distribution of such voting securities), (y) the voting securities
of Hexcel beneficially owned by such Ciba Entity do not constitute a material
portion of the total assets of such Ciba Entity and (z) in the case of a pro
rata distribution to Ciba's stockholders, such Ciba Entity agrees in writing to
be bound by the terms and provisions of the Governance Agreement to the same
extent that Ciba would be if it beneficially owned the voting securities of
Hexcel beneficially owned by such Ciba Entity.
TERMINATION; EXTENSION
On the tenth anniversary of the Closing, or at the end of any subsequent
renewal period, if the percentage of the total voting power of Hexcel
beneficially owned by Ciba is greater than 10% but less than 100%, Ciba will
have the option to (i) extend the Governance Agreement for an additional two-
year period, in which case so long as Ciba beneficially owns voting securities
of Hexcel representing 25% or more of the total voting power of Hexcel, on one
occasion during such two-year period Ciba may require Hexcel to solicit in good
faith a Buyout Transaction in which Ciba, the Ciba Entities and the Other
Holders receive the same consideration per voting security of Hexcel (in which
event the provisions of the Governance Agreement will continue in full force and
effect until the consummation of such Buyout Transaction) or (ii) undertake to
sell a sufficient number of voting securities of Hexcel so that the percentage
of total voting power of Hexcel beneficially owned by Ciba falls below 10%
during the subsequent 18 months pursuant to one or more registered or
non-registered offerings calculated to achieve a Broad Distribution (in which
event the provisions of the Governance Agreement will continue in full force and
effect until Ciba's percentage ownership of the total voting power of Hexcel
falls below 10%). If Ciba exercises its option to require Hexcel to solicit a
Buyout Transaction as described above, Ciba and the Ciba Entities may vote in
favor of or tender or sell their voting securities pursuant to any Third Party
Offer made as a result of or during such solicitation so long as the Third Party
Offer offers the same consideration to the Other Holders. Unless Hexcel has
accepted another Third Party Offer providing at least equivalent value to all
Hexcel stockholders, Hexcel will not take any action to interfere with Ciba's
right to vote in favor of or tender into such a Third Party Offer, provided,
however, that Hexcel will remain free to pursue alternative Third Party Offers
that provide for at least equivalent currently realizable value to all Hexcel
stockholders (including Ciba and the Ciba Entities) as such previously proposed
Third Party Offer.
The Governance Agreement will automatically terminate at any time that Ciba
beneficially owns voting securities of Hexcel representing either 100% or less
than 10% of the total voting power of Hexcel.
THE DISTRIBUTION AGREEMENT
In accordance with the terms of the Strategic Alliance Agreement, Hexcel and
Ciba entered into the Distribution Agreement at the Closing. Pursuant to the
Distribution Agreement, certain assets of Ciba that relate to the Ciba
Composites Business, but which are located in certain Excluded Jurisdictions (as
defined in the Strategic Alliance Agreement)(the "Deferred Assets") were not
acquired by Hexcel at the Closing, but will be acquired by Hexcel at various
times subsequent to the Closing. The Deferred Assets primarily consist of
inventory and certain fixed assets, which are not in the aggregate expected to
be material to the financial position of Hexcel. The initial principal amount of
the Senior Subordinated Notes will be reduced by the net book value of the
Deferred Assets that are current assets and by an additional $457,500 related to
a facility in South Africa. Upon the earlier of (i) the first anniversary of the
Closing or (ii) the date of the final sale and transfer of the Deferred Assets
to Hexcel under the Distribution Agreement, Hexcel will pay to Ciba an
additional principal amount of Senior Subordinated Notes equal to the aggregate
value of the Deferred Assets sold to Hexcel pursuant to the Distribution
Agreement after the Closing (which are currently expected to be approximately $7
million to $10 million, based on currently available information and in
accordance with the terms of the Distribution Agreement).
In addition, the Distribution Agreement provides that certain affiliates of
Ciba (the "Distributors") will continue to provide certain distribution services
for the non-U.S. subsidiaries of Ciba acquired as part of the Ciba Composites
Business under the same terms and conditions as such
28
<PAGE>
services were provided by the Distributors to the Ciba Composites Business prior
to the Closing. The Distributors have agreed to use their reasonable efforts to
solicit and serve customers of the Ciba Composites Business, and the non-U.S.
subsidiaries acquired by Hexcel as part of the Ciba Composites Business have
agreed to continue to supply the Distributors with composite materials on the
same terms and conditions as provided prior to the Acquisition. The Distributors
provided approximately $5 million in distribution services to the Ciba
Composites Business during 1995.
The Distributors have agreed not to, without the prior consent of Hexcel
(which shall not be unreasonably withheld), transfer key employees providing
services to the Ciba Composites Business to any other businesses of Ciba or its
subsidiaries. The Distribution Agreement terminates on December 31, 1996, but
may be terminated earlier for one or more specified Distributors by Hexcel upon
two months' written notice. Upon termination, Hexcel and the non-U.S.
subsidiaries of Ciba acquired as part of the Ciba Composites Business will be
required either to employ the employees working for the Distributors in
connection with the Ciba Composites Business or to be responsible for finding
alternative employment for them. If Hexcel fails to offer employment to one or
more of such employees within three months of termination of the Distribution
Agreement, Hexcel will contribute to the severance costs associated with such
employees, an amount up to the amount specified by law, or if no such law
exists, an amount to be agreed to by the parties, which will not exceed one
year's total compensation for each such employee.
REGISTRATION RIGHTS AGREEMENT
In connection with the Acquisition, Hexcel and Ciba entered into a
registration rights agreement at the Closing (the "Registration Rights
Agreement") which provides that Hexcel shall prepare and, not later than 60 days
prior to March 1, 1998, file with the Commission a "shelf" registration
statement covering the shares of Common Stock beneficially owned by Ciba and the
Ciba Entities. If Hexcel is not eligible to use a short form registration
statement, Ciba will have the right to demand, commencing March 1, 1998, that
Hexel effect the registration under the Securities Act of the shares of Common
Stock that are then eligible for sale under the Registration Rights Agreement.
Ciba's shares of Common Stock will generally become eligible for sale under the
Registration Rights Agreement in four equal annual installments commencing on
March 1, 1998. The shares eligible for sale under the Registration Rights
Agreement in any year that are not sold in such year will continue to be
eligible for sale under the Registration Rights Agreement in subsequent years.
Under the Registration Rights Agreement, Ciba also has the right, subject to
certain restrictions, to include its shares of Common Stock eligible for sale
under the Registration Rights Agreement in certain equity offerings of Hexcel.
The Registration Rights Agreement also contains certain provisions relating to
blackout periods (during which Ciba would not be permitted to sell shares of
Common Stock otherwise eligible for sale under the Registration Rights
Agreement), payment of expenses, selection of underwriters and indemnification.
SUPPLY AND MANUFACTURING AGREEMENTS
Hexcel and Ciba have entered into various agreements and purchase orders,
some of which were entered into in connection with the Acquisition, pursuant to
which Hexcel and Ciba purchase certain products from each other. Sales to Ciba
under such agreements are expected to be $[ ] on a worldwide basis during 1996.
Sales to Hexcel under such agreements are expected to be approximately $20
million on a worldwide basis during 1996.
29
<PAGE>
OTHER RELATIONSHIPS AND RELATED TRANSACTIONS
On February 2, 1994, Rodney P. Jenks, Jr. became an employee of Hexcel, and
on March 11, 1994, he became Vice President, General Counsel and Secretary of
Hexcel. Prior to becoming an employee of Hexcel, Mr. Jenks was a partner in the
law firm of Wendel, Rosen, Black & Dean ("Wendel, Rosen") which, during 1995,
provided legal services to Hexcel for which Hexcel was paid $293,002 (some of
which was paid in respect of services rendered in 1994). Upon becoming an
employee of Hexcel, Mr. Jenks resigned as a partner and served as counsel to the
law firm until March 31, 1996. Wendel, Rosen currently provides limited legal
services to Hexcel and is expected to continue to provide such services to
Hexcel.
UniRock Management Corporation ("UniRock") is a strategic planning
consultant to Hexcel. Franklin S. Wimer, a former director of Hexcel and a
nominee for election to the Board of Directors, is a principal of UniRock.
Hexcel paid $458,954 to UniRock in 1995 for consulting services rendered during
1994 and 1995, which amount includes a success fee of $291,721 which was earned
by UniRock during Hexcel's bankruptcy reorganization.
Marcus Montgomery Wolfson P.C. ("MMW") was counsel to the Equity Committee.
From 1993 until October 1995, Peter D. Wolfson, a former director of Hexcel, was
a member of MMW. Pursuant to the federal bankruptcy laws and by order of the
Bankruptcy Court, MMW was paid $603,675 in 1995 for services rendered during
1994 and 1995.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires Hexcel's directors and executive
officers, and persons who own more than ten percent of a registered class of
Hexcel's equity securities, to file with the Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of Hexcel. Executive officers, directors and greater than ten percent
shareholders are required by Commission regulation to furnish Hexcel with copies
of all Section 16(a) forms they file. To Hexcel's knowledge, based solely on
review of the copies of such reports furnished to Hexcel and written
representations that no other reports were required, for the fiscal year ended
December 31, 1995, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than ten percent shareholders were
complied with (other than an Initial Statement of Beneficial Ownership on Form 3
relating to the shares of Common Stock owned by Ciba and CGC that was
inadvertently filed late by Ciba and CGC on October 23, 1995).
THE CHARTER AMENDMENTS
The Board of Directors has approved and unanimously recommends that
stockholders approve and adopt the Charter Amendments. The Charter Amendments,
if adopted, would (i) increase the number of authorized shares of preferred
stock, no par value (the "Preferred Stock"), from 1,500,000 to 20,000,000, (ii)
eliminate the Certificate of Incorporation's current restriction on the issuance
of non-voting equity securities, (iii) revise certain provisions of the
Certificate of Incorporation relating to the calling of special meetings of
stockholders, (iv) expand the range within which the exact number of directors
constituting the Board of Directors could be fixed from time to time, (v) modify
certain provisions of the Certificate of Incorporation relating to amendments to
the Bylaws, (vi) incorporate certain provisions of the General Corporation Law
of the State of Delaware (the "GCL") relating to compromises or arrangements
between Hexcel and its creditors or stockholders, (vii) eliminate certain
provisions that are no longer relevant to Hexcel and (viii) make certain
modifications and simplifications to certain provisions of the Certificate of
Incorporation that are primarily editorial in nature and do not affect the
substantive rights of stockholders, directors or officers. A copy of the
Restated Certificate of Incorporation of Hexcel that would become effective in
the event stockholders
30
<PAGE>
approve and adopt the Charter Amendments is included as Annex A to this Proxy
Statement. The following discussion of the Charter Amendments does not purport
to be complete and is qualified in its entirety by reference to the Restated
Certificate of Incorporation included in Annex A.
INCREASE IN AUTHORIZED SHARES OF PREFERRED STOCK
Section 1 of the Certificate of Incorporation currently authorizes Hexcel to
issue 100,000,000 shares of Common Stock and 1,500,000 shares of Preferred
Stock. If the Charter Amendments are approved, the Board of Directors would be
authorized to issue up to 20,000,000 shares of Preferred Stock, to be issued, as
is the case with the shares of Preferred Stock currently authorized in the
Certificate of Incorporation, in one or more classes or series with such
designations, rights, preferences, limitations, qualifications, privileges and
restrictions (if any) as the Board may determine in its discretion, including,
without limitation, distribution rights, dividend rights (whether cumulative or
otherwise), dividend rate, conversion or exchange rights, subscription rights,
voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices and the liquidating preference of
such shares.
The primary purpose of the increase in the number of authorized shares of
Preferred Stock is to ensure that there will be a sufficient number of
authorized but unissued shares of Preferred Stock available for general
corporate purposes and opportunities that may arise from time to time (such as
financings and possible acquisitions), without the necessity of further
stockholder action at a special or annual meeting. Hexcel does not have any
current plans to issue any shares of Preferred Stock. From time to time,
however, Hexcel reviews potential financing and acquisition opportunities that
could involve the issuance of Preferred Stock.
An issuance of Preferred Stock could also be used as an anti-takeover device
by making it more difficult for a person to acquire control of Hexcel. The
increase in available unissued shares of Preferred Stock would enable Hexcel to
take certain actions, if Hexcel so determined, to dilute the stock ownership of
a person seeking to obtain control of Hexcel and the voting power of all
stockholders generally. Such an issuance may discourage or render more difficult
a takeover or other transaction which the holders of some or a majority of the
Common Stock might believe to be in their best interest or in connection with
which such holders might receive a premium for their shares of Common Stock over
the then market price of such shares.
Under the provisions of the GCL, a board of directors generally may issue
authorized but unissued shares of preferred stock without stockholder approval.
A substantial number of authorized shares of Preferred Stock would allow Hexcel
to take prompt action with respect to corporate opportunities that may develop
from time to time, without the delay and expense of convening a meeting of
stockholders. The issuance of shares of Preferred Stock may, depending on the
circumstances under which they are issued, cause a dilution of voting rights,
net income and net book value per share of Common Stock. In the event that the
Charter Amendments are adopted, it is the present intention of the Board of
Directors not to seek stockholder approval prior to any issuance of Preferred
Stock unless otherwise required by law or the rules of any securities exchange
or inter-dealer quotation system on which Hexcel's securities may be listed at
the time.
RESTRICTION ON NON-VOTING EQUITY SECURITIES
The Certificate of Incorporation currently provides that Hexcel generally
shall not issue non-voting equity securities. The GCL provides that a
corporation may issue one or more classes or series of stock with or without par
value which may have such voting rights (if any) and such designations,
preferences and relative participating, optional or other special rights, and
qualifications or restrictions thereof, as shall be stated in the Certificate of
Incorporation or in the resolution providing for the issuance of such stock
adopted by the Board of Directors. Hexcel does not believe that a restriction on
its ability to determine the voting rights of its equity securities is desirable
or in the best interests of Hexcel or its stockholders. Accordingly, if the
Charter Amendments are approved and adopted, the limitation on the issuance of
non-voting securities would be deleted from the Certificate of Incorporation.
31
<PAGE>
NUMBER OF DIRECTORS
Section 6.1 of the Certificate of Incorporation currently provides that the
authorized number of directors serving on Hexcel's Board of Directors generally
shall be not less than eight nor more than fifteen, with the exact number of
directors within such range to be determined by an amendment to the Bylaws duly
adopted by the Board of Directors or by the holders of a majority of the
outstanding shares authorized to vote. The Certificate of Incorporation further
provides that the actual number of directors is initially fixed at nine, subject
to change following Hexcel's first annual meeting of stockholders held after
adoption of the Certificate of Incorporation (which meeting occurred on February
21, 1996). If the Charter Amendments are approved, the range of directors in the
Certificate of Incorporation would be expanded so that the authorized number of
directors will be not less than three nor more than fifteen, with the exact
number of directors within such range to be determined in the manner provided in
the Bylaws, or if the Bylaws do not so provide, by a resolution passed by the
Board of Directors. The expansion in the range of permitted numbers of directors
is desirable in order to enable the Board of Directors, if it so determines, to
consist of fewer than eight directors. The Board of Directors has no current
plans to change the number of directors presently serving on the Board of
Directors.
The Charter Amendments would also delete references in the Certificate of
Incorporation to the initial number of directors on the Board of Directors and
the restriction on changing such number until after the first annual meeting
held after the adoption of the Certificate of Incorporation. Such provisions in
the Certificate of Incorporation relate to Hexcel's former bankruptcy
reorganization proceedings and are no longer applicable.
CALLING OF SPECIAL MEETINGS
Section 7 of the Certificate of Incorporation currently provides that
special meetings of stockholders of Hexcel may be called at any time and for any
purpose or purposes by the Board of Directors, the Chairman of the Board, the
Chief Executive Officer, the President or by certain committees of the Board of
Directors whose power and authority includes 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. As currently in effect, Section 7 of the
Certificate of Incorporation further provides that no such meeting may be held
for the purpose of election or removal of directors without cause and, except as
provided in the Bylaws, no amendment to the Certificate of Incorporation or
Bylaws which would have the effect of modifying or permitting the circumvention
of such section may be adopted prior to November 9, 1996. The GCL provides that
special meetings of the stockholders of a corporation may be called by a
corporation's board of directors or by such person or persons as may be
authorized by the Certificate of Incorporation or by the Bylaws. If the Charter
Amendments are approved and adopted, only the Board of Directors, the Chairman
of the Board, the Chief Executive Officer and certain committees of the Board of
Directors whose power and authority includes the power to call such meetings
would be authorized to call special meetings of stockholders. The Charter
Amendments would therefore eliminate the power of stockholders to call special
meetings. The purpose of these Charter Amendments is primarily to prevent
stockholders who seek to acquire control of Hexcel from using their ability to
call a special meeting to undercut the authority of the Board of Directors to
negotiate on behalf of Hexcel and its stockholders. Moreover, where the Board of
Directors has determined that an acquisition offer is unfair or inadequate to
Hexcel's stockholders, the Charter Amendments would prevent a potential acquiror
from using the power to call special meetings to remove directors and replace
them with the acquiror's nominees, or to reverse prior actions of the Board of
Directors that had been taken to protect Hexcel and its stockholders.
Eliminating the power of stockholders to call special meetings is desirable
because it would strengthen the position of the Board of Directors and eliminate
much of the time and expense involved in dealing with such potential acquirors.
The Charter Amendments relating to the calling of special meetings may, however,
have the effect of discouraging certain potential acquirors from making
unsolicited offers to acquire control of
32
<PAGE>
Hexcel, which the holders of some of the Common Stock might believe to be in
their best interest or in connection with which such holders might receive a
premium for their shares of Common Stock over the then market price of such
shares.
AMENDMENTS TO BYLAWS
Section 8 of the Certificate of Incorporation currently provides that the
Bylaws may be amended or repealed by a vote of either a majority of the
directors or stockholders holding a majority of the outstanding shares
authorized to vote; PROVIDED, HOWEVER, that any Bylaws concerning the election
or removal of directors, the range of the number of directors and the method of
fixing the number of directors within such range, the filling of vacancies on
the Board of Directors, the calling of special meetings of stockholders and the
method of adopting, amending or repealing Bylaws may not be amended, adopted or
repealed, nor shall any other Bylaw be amended, adopted or repealed which would
have the effect of modifying or permitting the circumvention of such Bylaws,
unless such adoption, amendment or repeal is approved by stockholders of Hexcel
holding a majority of the outstanding shares authorized to vote. The GCL
provides that the stockholders of a corporation have the power to amend the
Bylaws of such corporation, and any corporation may, in its Certificate of
Incorporation, confer without limitation the power to adopt, amend or repeal
bylaws upon the directors. The GCL further provides that the fact that such
power has been so conferred upon the directors shall neither divest the
stockholders of the power nor limit their power to adopt, amend or repeal
Bylaws. The Charter Amendments, if adopted, would grant the Board of Directors
greater flexibility in amending the Bylaws by eliminating the restrictions
contained in the current Certificate of Incorporation and authorizing the Board
of Directors to make, alter, amend or repeal the Bylaws, except as such power
may be expressly restricted or limited by the GCL, the Certificate of
Incorporation or the Bylaws. For a description of the restrictions that are
included in the Bylaw Amendments with respect to the ability of the Board of
Directors to amend the Bylaws, see "THE BYLAW AMENDMENTS -- Amendments to
Bylaws." The Charter Amendments would not have any effect on the ability of
stockholders to adopt, amend or repeal the Bylaws.
CERTAIN COMPROMISES OR ARRANGEMENTS
The GCL permits a corporation to provide in its certificate of incorporation
that (i) when a compromise or arrangement is proposed between the corporation
and its creditors and/or between the corporation and its stockholders, a
Delaware court of equitable jurisdiction may, on the application of a receiver
appointed for the corporation or its trustees in dissolution, order a meeting of
creditors and/ or stockholders of the corporation, as the case may be, in such
manner as the court directs, and (ii) if a three-fourths majority in value of
the creditors and/or stockholders of the corporation agree to any compromise or
arrangement and to any reorganization as a result of such compromise or
arrangement, such compromise or arrangement and reorganization shall, if
sanctioned by the court, be binding on all the creditors and/or stockholders of
the corporation and on the corporation. The GCL further provides that such
provisions of the certificate of incorporation, if included therein by
amendment, shall include and be binding upon all persons who become creditors or
stockholders of the corporation after such amendment. If the Charter Amendments
are approved and adopted, the provisions described above would be included in
the Restated Certificate of Incorporation.
ELIMINATION OF DIRECTORS' LIABILITY; INDEMNIFICATION
The Certificate of Incorporation currently provides for the elimination, to
the fullest extent authorized by the GCL, of any personal liability of Hexcel's
directors to Hexcel or its stockholders for breach of fiduciary duty as a
director; PROVIDED, HOWEVER, that a director's liability is not eliminated with
respect to the following actions unless permitted by an amendment to the GCL or
such provision of the Certificate of Incorporation: (i) breach of fiduciary duty
of loyalty to Hexcel or its stockholders; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) actions under Section 174 of the GCL (regarding unlawful dividends or
redemptions); or (iv) transactions from which the director derived an improper
personal benefit. The GCL provides that a corporation may eliminate or limit the
liability of a director for breach of fiduciary duty except for those actions
listed in clauses (i)-(iv) above. The Charter Amendments, if approved and
adopted,
33
<PAGE>
would modify the provisions of the Certificate of Incorporation regarding the
elimination of liability of directors by providing that the personal liability
of directors is eliminated to the fullest extent permitted by the GCL, as the
same exists or may hereafter be amended. The Charter Amendments relating to the
elimination of directors' liability, therefore, would not have any effect on the
substantive rights of stockholders, directors, officers or Hexcel and are
designed solely to simplify the existing provisions of the Certificate of
Incorporation.
The Certificate of Incorporation currently provides that Hexcel shall
indemnify any director or officer of Hexcel 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, in his or her capacity as a director, officer, employee or agent
of Hexcel or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, serving at the request
of Hexcel, 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 by such person in connection therewith. The
Certificate of Incorporation further provides that Hexcel will indemnify any
other person who is not a director or officer of Hexcel who is sued or
threatened to be sued in his or her capacity as an employee or agent of Hexcel
or as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, serving at the request of
Hexcel, provided that the Board of Directors has made a determination (in
accordance with the GCL) that the employee or agent has met the standard of
conduct which makes such indemnification permissible under the GCL. In addition,
the Certificate of Incorporation currently provides that the right to
indemnification includes the right to have Hexcel advance the expenses incurred
in defending any such proceeding, provided that any such advancement of expenses
shall be made only upon delivery to Hexcel of an undertaking to repay all
amounts so advanced if such person is not entitled to indemnification. As with
the current Certificate of Incorporation, the Charter Amendments, if approved
and adopted, would require that Hexcel indemnify (and advance expenses to) its
directors and officers, to the fullest extent permitted by the GCL, from and
against any and all expenses (including attorneys' fees) incurred by any such
director or officer in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative. The Charter Amendments, however, would not require Hexcel to
indemnify employees and agents of Hexcel who are not directors and officers of
Hexcel. Instead, under the Restated Certificate of Incorporation, such
indemnification would be permitted if and to the extent authorized by the Board
of Directors. Hexcel believes that such provisions are desirable because they
would give Hexcel greater discretion in determining who is entitled to be
indemnified and would allow the Board of Directors, in making such
determination, to consider all the facts and circumstances giving rise to any
such claim for indemnification and would not limit the Board of Directors'
considerations to a determination of whether such indemnification is permissible
under the GCL.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL AND ADOPTION OF THE CHARTER AMENDMENTS.
THE BYLAW AMENDMENTS
The Board of Directors has approved and unanimously recommends that
stockholders approve and adopt the Bylaw Amendments. The Bylaw Amendments, if
approved and adopted, would (i) incorporate in the Bylaws certain provisions of
the Governance Agreement relating to the composition of the Board of Directors
and its committees, (ii) modify certain provisions of the Bylaws with respect to
the calling of special meetings of stockholders, (iii) delete certain provisions
of the Bylaws relating to the ability of stockholders of Hexcel to act by
written consent in lieu of holding a meeting that are inconsistent with the
Certificate of Incorporation, (iv) expand the range within which the exact
number of directors constituting the Board of Directors could be fixed from time
to time, (v) make other conforming changes to reflect the changes in the
Certificate of Incorporation to take effect if the Charter Amendments are
approved and adopted, (vi) modify certain other provisions of
34
<PAGE>
the Bylaws which do not require prior stockholder approval, and (vii) make
certain modifications and simplifications to certain provisions of the Bylaws
which are primarily editorial in nature and do not affect the substantive rights
of stockholders, directors, officers or Hexcel. A copy of the revised Bylaws of
Hexcel that would become effective in the event that stockholders approve and
adopt the Bylaw Amendments (the "Restated Bylaws") is included as Annex B to
this Proxy Statement. The following discussion of the Bylaw Amendments does not
purport to be complete and is qualified in its entirety by reference to the
Restated Bylaws included in Annex B.
GOVERNANCE AGREEMENT AMENDMENTS
Pursuant to the Governance Agreement, Hexcel has agreed to present to its
stockholders for approval at its first meeting of stockholders following
February 29, 1996 amendments to the Bylaws to reflect certain provisions of the
Governance Agreement relating to the composition of the Board of Directors and
its committees. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS --
Relationships and Related Transactions with Ciba -- The Governance Agreement."
In the event that the Bylaw Amendments are approved and adopted, the Bylaws
would be revised to reflect such provisions.
CALLING OF SPECIAL MEETINGS
Consistent with the Charter Amendments, the Bylaw Amendments, if approved
and adopted, would provide that only the Board of Directors, the Chairman of the
Board, the Chief Executive Officer and certain committees of the Board of
Directors whose power and authority include the power and authority to call
special meetings of stockholders would be authorized to call such meetings. See
"THE CHARTER AMENDMENTS -- Calling of Special Meetings."
ACTION BY WRITTEN CONSENT
The Bylaws currently contain provisions which purport to allow stockholders
to take any action required or permitted to be taken at any meeting of
stockholders without a meeting, without prior notice and without a vote, if a
written consent is signed by the holders of the outstanding shares of Hexcel
having not less than the minimum number of votes that would be necessary to take
such action at a meeting at which all holders of shares authorized to vote
thereon were present and voting. Such provisions, however, are inconsistent with
the provisions of the current Certificate of Incorporation and the Restated
Certificate of Incorporation, each of which prohibits stockholders from taking
action by written consent in lieu of a meeting. Hexcel believes that the
prohibition on taking action by written consent contained in the Certificate of
Incorporation is desirable in order to prevent one or more stockholders from
taking actions that require stockholder approval without giving all of Hexcel's
stockholders adequate notice and an adequate opportunity to participate at a
meeting to consider such actions. Accordingly, the Bylaw Amendments would delete
the provisions in the Bylaws relating to the taking of action by written
consent.
NUMBER OF DIRECTORS
Consistent with the Charter Amendments, the Bylaw Amendments, if approved
and adopted, would provide that the authorized number of directors serving on
the Board of Directors will be not less than three nor more than fifteen. See
"THE CHARTER AMENDMENTS -- Number of Directors."
The Bylaws currently provide that the number of directors is fixed at 10.
The Restated Bylaws would continue to provide for a 10 member Board of Directors
and would also provide that such number of directors include the Chairman and
the President.
AMENDMENTS TO BYLAWS
The Bylaws currently provide that new Bylaws may be adopted or the Bylaws
may be amended by a vote of either a majority of the directors or the holders of
a majority of the outstanding shares of Hexcel authorized to vote; PROVIDED,
HOWEVER, that stockholder approval is required for Hexcel to adopt, amend or
repeal Bylaw provisions with respect to (i) special meetings, (ii) the number of
directors, (iii) the election, term of office and vacancies on the Board of
Directors, (iv) the removal of
35
<PAGE>
directors and (v) amendments of the Bylaws. In the event that the Bylaw
Amendments are approved and adopted, the Board of Directors would be authorized
to make, alter, amend or repeal the Bylaws, except as limited by the GCL, and
PROVIDED, that Ciba's prior written consent would be required for Hexcel to
amend or repeal the Bylaw provisions required by the Governance Agreement. See
"-- Governance Agreement Amendments." However, such provisions would
automatically be repealed and cease to have any force or effect on the date upon
which Ciba ceases to have the rights provided in such provisions under the
Governance Agreement.
OTHER BYLAW AMENDMENTS
Certain other amendments to the Bylaws are included in the Restated Bylaws,
but do not require stockholder approval. Such amendments are summarized below.
OFFICES
The Bylaws currently provide that the principal office of Hexcel is located
in Pleasanton, California. The Restated Bylaws would provide that Hexcel's
principal executive office be located at 2 Stamford Plaza, Stamford,
Connecticut. The Restated Bylaws would also expand the ability of Hexcel to have
other offices in such other places in the United States or elsewhere as the
Board of Directors may designate or as Hexcel's business may from time to time
require. The Bylaws currently provide that other offices of Hexcel may be
established only in places where Hexcel is qualified to conduct business.
ANNUAL MEETINGS
The Bylaw Amendments would delete the provisions of the Bylaws that require
that the first annual meeting following adoption of the Bylaws be held not
earlier than nine months after the effective date of Hexcel's Plan of
Reorganization. Such provisions relate to Hexcel's former bankruptcy
reorganization proceedings and are no longer applicable.
The Bylaws currently provide that for a stockholder to properly bring
business before an annual meeting of stockholders, the stockholder must have
given timely notice to Hexcel of such business. Under the current Bylaws, a
notice will be considered timely if it is delivered to or mailed and received at
the principal executive office of Hexcel by such date as is required by Delaware
law and Rule 14a-8(a)(3)(i) under the Exchange Act which generally requires that
a stockholder proposal be received at the registrant's principal executive
offices not less than 120 calendar days in advance of the date of the previous
year's annual meeting proxy statement. The Restated Bylaws would provide that
business may properly be brought before the annual meeting by a stockholder of
record if such stockholder's notice is delivered to or mailed and received at
the principal executive offices of Hexcel not less than 60 nor more than 90 days
prior to the anniversary date of the immediately preceding annual meeting;
PROVIDED, HOWEVER, that in the event that the annual meeting is called for a
date that is not within 30 days before or after the anniversary date of the
previous year's annual meeting, the notice will be considered timely only if it
is received not later than the close of business on the 10th day following the
date on which notice of the date of the annual meeting was mailed or otherwise
made public.
The Bylaws currently require that a stockholder's notice of business to be
transacted at an annual meeting set forth (i) the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(ii) the name and record address of the stockholder proposing the business,
(iii) the class and number of shares of capital stock of Hexcel that are
beneficially owned by the stockholder and (iv) any material interest of the
stockholder in the business being proposed. The Restated Bylaws would require
that a stockholder's notice of business include (i) 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, (ii) the name and record address
of the stockholder proposing such business, (iii) the class or series and number
of shares of the capital stock of Hexcel that are owned beneficially or of
record by the stockholder, (iv) as to each person, if any, whom the stockholder
proposes to nominate for election to the Board of Directors, (a) the name, age,
business address and residence address of the person, (b) the principal
occupation or employment of the person
36
<PAGE>
and (c) the class or series and number of shares of capital stock of Hexcel that
are owned beneficially or of record by the person, (v) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their name(s)) in connection with the proposal of such
business (or the nomination of any person or persons for election to the Board
of Directors) by any stockholder and any material interest of such stockholder
in such business (or nomination), (vi) any other information that would be
required to be disclosed in a proxy statement or other filing required to be
made in connection with the solicitation of proxies for the proposal (or the
election of a person or persons to the Board of Directors) pursuant to the
Exchange Act if such stockholder were engaged in such a solicitation and (vii) a
representation that such stockholder or a representative thereof intends to
appear in person at the annual meeting to bring such business before the meeting
(or nominate a person or persons for election to the Board of Directors). Under
the Restated Bylaws, any such notice relating to the nomination of a person or
persons for election to the Board of Directors must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve as a
director if elected.
ADJOURNED MEETINGS
The Bylaws currently permit the vote of the majority of the shares present
in person or represented by proxy at a stockholders' meeting to adjourn such
meeting. The Restated Bylaws would also permit the chairman of the meeting to
adjourn the meeting.
CHAIRMAN AND SECRETARY AT MEETINGS
The Restated Bylaws would provide that, at any meeting of stockholders, the
Chairman of the Board of Directors, or in his absence, a person designated by
the Board of Directors, shall preside at and act as chairman of the meeting. The
Secretary of Hexcel, or in his absence, a person designated by the chairman of
the meeting, shall act as secretary of the meeting. The current Bylaws do not
designate who shall serve as the chairman and secretary of stockholders'
meetings.
INSPECTORS
The Restated Bylaws would provide that the Board of Directors may, in
advance of any meeting of stockholders, appoint one or more inspectors to
execute the duties of inspector at such meeting. Under the Restated Bylaws,
before entering upon the discharge of their duties, the inspector or inspectors
shall take and sign an oath to faithfully execute the duties of inspector. The
Restated Bylaws would also provide that no director or candidate for the office
of director shall act as an inspector of an election of directors. The current
Bylaws do not contain any provisions with respect to inspectors for
stockholders' meetings.
COMMITTEES
The Bylaws currently provide that in the event that a new Chief Executive
Officer has not succeeded John J. Lee before the effective date of the Plan of
Reorganization, a special committee would be authorized to appoint a new Chief
Executive Officer. In light of the consummation of the Acquisition and Mr. Lee's
appointment as Chief Executive Officer of Hexcel, this provision would be
eliminated in the Restated Bylaws.
In addition, the Restated Bylaws, if approved and adopted, would provide
that all directors of Hexcel (including those directors who are not members of a
particular committee) are entitled to receive notice of, and to attend, all
meetings of any committee of the Board of Directors. Under the Restated Bylaws,
however, only those directors who are members of a particular committee would be
entitled to vote at the meetings thereof.
INTERESTED DIRECTORS
The Bylaws contain certain provisions with respect to "interested director"
transactions which essentially mirror the provisions of the GCL. The Restated
Bylaws would eliminate such provisions because they are unnecessary in light of
the GCL's provisions.
37
<PAGE>
EMPLOYEE COMPENSATION MEASURES
The current Bylaws provide that no director shall vote upon any "employee
compensation measures" (as defined therein) in which he has a direct personal
interest, and any vote cast on such measures by the director shall be nullified
and deemed void. The Restated Bylaws would eliminate any such provision because
such provisions fall within the scope of the interested director provisions of
the GCL.
OFFICERS
The Bylaws currently provide that the officers of Hexcel include a Chief
Executive Officer, a President, a Secretary and a Treasurer. The Bylaws also
provide that the Board of Directors may choose a Chairman of the Board, one or
more Vice Chairmen, a Chief Financial Officer, a General Counsel and one or more
Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers.
The Restated Bylaws would include these provisions and add that the Board of
Directors may also choose a Chief Operating Officer and would clarify that the
Board of Directors may designate Vice Presidents as Executive or Senior Vice
Presidents. The Restated Bylaws would also provide that the officers shall
perform their duties and exercise their powers subject to the direction of the
Chief Executive Officer and the overriding direction of the Board of Directors.
The provision in the Bylaws that currently restricts any Vice President,
Assistant Secretary and Assistant Treasurer from being appointed for a term
exceeding the term of office of the President, Secretary or Treasurer,
respectively, would be eliminated in the Restated Bylaws.
AUTHORITY TO SIGN CONTRACTS
The Bylaws currently provide that the Board of Directors generally may
authorize any officer or officers or agent or agents to enter into any contract
in the name of and on behalf of Hexcel and that unless so authorized, no
officer, agent or employee shall have any power or authority to bind Hexcel by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or amount. The Restated Bylaws would revise such provisions so that
the Chairman of the Board, the President, any Vice President or Treasurer or
such other officer or officers as may be so authorized by the Board of Directors
would be authorized to sign in the name and on behalf of Hexcel deeds,
conveyances and contracts and any other documents requiring execution by Hexcel.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL AND ADOPTION OF THE BYLAW AMENDMENTS.
INDEPENDENT AUDITORS
A representative of Deloitte & Touche LLP, Hexcel's independent auditors, is
expected to be present at the Annual Meeting. The representative will have an
opportunity to make a statement if he desires to do so and will be available to
answer appropriate questions from stockholders.
OTHER MATTERS
As of the date of this Proxy Statement, Hexcel does not know of any other
matters to be presented for action by the stockholders at the Annual Meeting.
However, if any other matters are properly brought before the Annual Meeting,
the persons named in the enclosed form of proxy and acting thereunder, will have
the discretion to vote in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS
Hexcel expects to hold its 1997 Annual Meeting of Stockholders in May 1997.
Any proposal that a Hexcel stockholder intends to include in the proxy statement
relating to Hexcel's 1997 Annual Meeting of Stockholders must be submitted to
the Secretary of Hexcel at its offices located at 2 Stamford Plaza, 281 Tresser
Boulevard, Stamford, Connecticut 06901 no later than December [ ], 1996 in
order to be considered for inclusion in such proxy statement.
38
<PAGE>
ANNEX A
FORM OF RESTATED
CERTIFICATE OF INCORPORATION
OF
HEXCEL CORPORATION
1. NAME. The name of this Corporation is HEXCEL CORPORATION.
2. REGISTERED AGENT. The address in the State of Delaware of the
registered office of the Corporation is Corporation Trust Center, 1209 Orange
Street, in the City of Wilmington, County of New Castle, and the name of its
registered agent at that address is The Corporation Trust Company.
3. PURPOSE. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "GCL").
4. CAPITALIZATION. The total number of shares which the Corporation is
authorized to issue is 120,000,000, consisting of 20,000,000 shares of Preferred
Stock without par value (hereinafter in this Certificate of Incorporation called
the "Preferred Stock"), and 100,000,000 shares of Common Stock with a par value
of $.01 per share (hereinafter in this Certificate called the "Common Stock").
5. PREFERRED STOCK. The Preferred Stock may be issued from time to time in
one or more classes or series. The Board of Directors is hereby authorized to
issue the Preferred Stock as Preferred Stock of any class or series and in
connection with any such class or series fix or alter the designations, rights,
preferences, limitations, qualifications, privileges and restrictions granted to
or imposed upon such class or series of Preferred Stock to the fullest extent
now or hereafter permitted by this Certificate of Incorporation and the laws of
the State of Delaware, including without limiting the generality of the
preceding clause, the authority to fix or alter distribution rights, dividend
rights (whether cumulative or otherwise) dividend rate, conversion or exchange
rights, subscription 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 class or series and the designation thereof, and to
increase or decrease the number of shares of any class or series subsequent to
the issue of shares of that class or series, but not below the number of shares
of such class or series then outstanding. In case the number of shares of any
class or 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 class or series. Shares of
Preferred Stock that have been issued and reacquired in any manner by the
Corporation (excluding, until the Corporation elects to retire them, shares
which are held as treasury shares, but including shares redeemed, shares
purchased and retired and shares which have been converted into shares of Common
Stock or exchanged into other securities) shall have the status of authorized
but unissued shares of Preferred Stock and may be reissued as a part of the
class or series of which they were originally a part or may be reissued as part
of another class or series of Preferred Stock, all subject to the conditions or
restrictions on issuance set forth in the resolution or resolutions adopted by
the Board of Directors providing for the issuance of any class or series of
Preferred Stock. The holders of Preferred Stock shall not have any preemptive
rights except to the extent such rights shall be specifically provided for in
the resolution or resolutions adopted by the Board of Directors providing for
the issuance thereof.
6. DIRECTORS.
6.1 NUMBER OF DIRECTORS. Except as provided in any certificate filed
pursuant to Section 151(g) of the GCL 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, the authorized number of directors of the Corporation shall be not less
than three
A-1
<PAGE>
(3) nor more than fifteen (15). The exact number of directors within such range
may be changed from time to time in the manner provided in the Bylaws of the
Corporation (the "Bylaws"), or if the Bylaws do not so provide, by a resolution
passed by the Corporation's Board of Directors. The election of directors need
not be by written ballot unless the Bylaws so provide.
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 applicable certificate
filed pursuant to Section 151(g) of the GCL 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.
6.3 REMOVAL OF DIRECTORS. Except as provided in Subsection 6.2 hereof or
in the Bylaws, a director may be removed from office at any time, with or
without cause, 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 or in the
Bylaws, any vacancies in the Board of Directors for any reason, and any newly
created directorships, may be filled by the Board of Directors, acting by a
majority of the directors then in office, even though 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 or until their earlier
death, resignation or removal.
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 expressly conferred upon
them by statute, this Certificate of Incorporation or the Bylaws, 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 GCL, this Certificate of
Incorporation and the Bylaws, PROVIDED, HOWEVER, that no bylaw or provision
of this Certificate of Incorporation hereafter adopted or amended shall
invalidate any prior act of the directors which would have been valid absent
such adoption or amendment.
7. ACTION BY STOCKHOLDERS; SPECIAL MEETINGS; VOTING. All actions 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 may be
called at any time and for any purpose or purposes by the Board of Directors,
the Chairman of the Board of Directors, the Chief Executive Officer 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 Bylaws, include the power to call such meetings.
If, and to the extent that, any special meeting of stockholders may be called by
any other person or persons specified in any provision of the Certificate of
Incorporation or any amendment thereto or in any certificate filed under Section
151(g) of the GCL, 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
Bylaws 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 stockholders
entitled to vote at a meeting or, if no such date
A-2
<PAGE>
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 OF INCORPORATION AND BYLAWS.
8.1 CERTIFICATE OF INCORPORATION. 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
consistent with the Bylaws, and all rights conferred to stockholders, directors
and officers herein are granted subject to this reservation.
8.2 BYLAWS. The Board of Directors is authorized and empowered from time
to time in its discretion to make, alter, amend or repeal the Bylaws, except as
such power may be expressly restricted or limited by the GCL, this Certificate
of Incorporation or the Bylaws.
9. CERTAIN COMPROMISES OR ARRANGEMENTS.
Whenever a compromise or arrangement is proposed between the Corporation and
its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under Section 291 of
Title 8 of the Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for the Corporation under Section 279 of
Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders of the Corporation, as the case
may be, and also on the Corporation.
10. ELIMINATION OF DIRECTORS' LIABILITY; INDEMNIFICATION.
10.1 ELIMINATION OF DIRECTORS' LIABILITY. The personal liability of the
directors of the Corporation is hereby eliminated to the fullest extent
authorized or permitted by the GCL, as the same exists or may hereafter be
amended. Any repeal or modification of this Section 10.1 shall be prospective
only, and shall not adversely affect the personal liability or alleged personal
liability of any director of the Corporation with respect to any act or
occurrence taking place prior to such repeal or modification.
10.2 INDEMNIFICATION AND INSURANCE.
(a) INDEMNIFICATION. The Corporation shall, to the fullest extent
authorized or permitted by the GCL, as the same exists or may hereafter be
amended, (i) indemnify its directors and officers from and against any and
all expenses (including attorneys' fees), liabilities or other matters and
(ii) advance expenses (including attorneys' fees) incurred by any and all of
its directors and officers in connection with any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative. Except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify any
director or officer in connection with a proceeding (or part thereof)
initiated by such person unless such proceeding (or part thereof) was
authorized by the Board of Directors. The Corporation may, to the extent
authorized from time to time by the Board of Directors, provide rights to
indemnification and to the advancement of expenses similar to those provided
in this Section 10.2(a) to the directors and officers of the Corporation to
employees and agents of the Corporation who are not directors or officers.
The rights to indemnification and advancement of expenses provided for in
this Section 10.2(a) (i) shall not be deemed exclusive of any other rights
to which those entitled to indemnification may be entitled under the Bylaws,
any agreement, any vote of stockholders or
A-3
<PAGE>
disinterested directors or otherwise, (ii) shall continue as to any person
who has ceased to be a director, officer, employee or agent and (iii) shall
inure to the benefit of the heirs, executors and administrators of any such
person. Any repeal or modification of this Section 10.2(a) shall be
prospective only, and shall not adversely affect any right to
indemnification or advancement of expenses existing under this Section
10.2(a) with respect to any act or occurrence taking place prior to such
repeal or modification.
(b) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of (i) the Corporation
(notwithstanding whether any such individual is also a director, officer,
employee or agent of another corporation) or (ii) another corporation,
partnership, joint venture, trust or other enterprise (if such director,
officer, employee or agent is or was serving as such at the request of the
Corporation) against any liability asserted against him and incurred by him
in any such capacity, whether or not the Corporation would have the power to
indemnify such person against such liability under the GCL.
11. SEVERABILITY. If any provision in this Certificate of Incorporation is
determined to be invalid, void, illegal or unenforceable, the remaining
provisions of this Certificate of Incorporation shall continue to be valid and
enforceable and shall in no way be affected, impaired or invalidated thereby.
A-4
<PAGE>
ANNEX B
FORM OF BYLAWS OF HEXCEL CORPORATION
A DELAWARE CORPORATION
AMENDED AND RESTATED AS OF MAY [ ], 1996
OFFICES
1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office of the
Corporation is hereby fixed and located at 2 Stamford Plaza, Stamford,
Connecticut. The Board of Directors is hereby granted full power and authority
to change the place of said principal executive office from time to time.
2. OTHER OFFICES. The registered office of the Corporation in the State of
Delaware is hereby fixed and located at 1209 Orange Street, Wilmington,
Delaware, c/o The Corporation Trust Company. The Board of Directors is hereby
granted full power and authority to change the place of said registered office
within the State of Delaware from time to time. The Corporation may also have
offices in such other places in the United States or elsewhere as the Board of
Directors may from time to time designate or as the business of the Corporation
may from time to time require.
STOCKHOLDERS
3. PLACE OF MEETINGS. Stockholders' meetings shall be held at such place,
whether within or without the State of Delaware, as the Board of Directors
shall, by resolution, designate.
4. ANNUAL MEETINGS. Annual meetings of stockholders shall be held on such
dates and at such times as shall be designated from time to time by the Board of
Directors and stated in the notice of such annual meeting. At such annual
meetings directors shall be elected and such other business as may be properly
brought before such meeting shall be conducted.
Written notice of each annual meeting shall be mailed to or delivered to
each stockholder of record entitled to vote thereat not less than ten (10) days
nor more than sixty (60) days before the date of such annual meeting. Such
notice shall specify the place, the day, and the hour of such meeting, and the
matters which the Board of Directors intends to present for action by the
stockholders.
Except to the extent, if any, specifically provided to the contrary in the
Certificate of Incorporation or these Bylaws, to be properly brought before an
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 of record who complies with the
notice procedures set forth below. In addition to any other applicable
requirements, for business (including the nomination of a person or persons for
election to the Board of Directors) to be properly brought before any annual
meeting by a stockholder, the stockholder must have given timely notice thereof,
in proper form, to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) nor more
than ninety (90) days prior to the anniversary date of the immediately preceding
annual meeting; PROVIDED, HOWEVER, that in the event the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the date on which notice of the date of the annual meeting was mailed or
otherwise made public. To be in proper form, a stockholder's notice to the
Secretary must be in writing and must set forth with respect to each matter the
stockholder proposes to bring before the annual meeting (a) 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, (b) the name
B-1
<PAGE>
and record address of the stockholder proposing such business, (c) the class or
series and number of shares of the capital stock of the Corporation that are
owned beneficially or of record by the stockholder, (d) as to each person whom
the stockholder proposes to nominate for election to the Board of Directors, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person and (iii) the class or series
and number of shares of capital stock of the Corporation that are owned
beneficially or of record by the person, (e) a description of all arrangements
or understandings between such stockholder and any other person or persons
(including their name(s)) in connection with the proposal of such business (or
the nomination of any person or persons for election to the Board of Directors)
by any stockholder and any material interest of such stockholder in such
business (or nomination), (f) any other information that would be required to be
disclosed in a proxy statement or other filing required to be made in connection
with the solicitation of proxies for the proposal (or the election of a person
or persons to the Board of Directors) pursuant to the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder if such
stockholder were engaged in such a solicitation and (g) a representation that
such stockholder or a representative thereof intends to appear in person at the
annual meeting to bring such business before the meeting (or nominate a person
or persons for election to the Board of Directors). Any such notice relating to
the nomination of a person or persons for election to the Board of Directors
must be accompanied by a written consent of each proposed nominee to being named
as a nominee and to serve as a director if elected.
The Chairman of the annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 4 and any such
business not properly brought before the meeting shall not be transacted at the
meeting.
5. SPECIAL MEETINGS. Special meetings of the stockholders may be called at
any time and for any purpose or purposes by the Board of Directors, the Chairman
of the Board, the Chief Executive Officer 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 Bylaws, include the power to call such meetings. If and to the extent
that any special meeting of stockholders may be called by any other person or
persons specified in any provision of the Certificate of Incorporation or any
amendment thereto, or any certificate filed under Section 151(g) of the General
Corporation Law of the State of Delaware (the "GCL") 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, 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 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. Such notice shall also specify the general nature of the business
to be transacted at the meeting, and no business shall be transacted at the
special meeting except as specified in such notice (or any supplement thereto).
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 chairman of such meeting or by the vote of a majority of the
shares present in person or represented by proxy at such meeting, 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 if the adjourned meeting were a new meeting.
7. VOTING. Except as otherwise provided by applicable law, the Certificate
of Incorporation or these Bylaws, 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 notice of and to vote at a meeting or, if no such
date is fixed, the date determined in accordance with applicable law. If any
share is entitled to
B-2
<PAGE>
more or less than one vote on any matter, all references herein to a majority or
other proportion of shares shall refer to a majority or other proportion of the
voting power of shares entitled to vote on such matter.
8. QUORUM. A majority of the outstanding shares entitled to vote,
represented in person or by proxy, shall 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 being present in person or by proxy at such meeting. If a quorum
is present at a meeting, the affirmative vote of a majority of the shares
present or represented by proxy 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 applicable law, the Certificate of Incorporation or these Bylaws.
If a quorum is present at the commencement of a meeting but the withdrawal of
stockholders results in less than a quorum being present in person or by proxy
at such meeting, the affirmative vote of a majority of the shares required to
constitute a quorum shall be the act of the stockholders unless the vote of a
larger number is required by applicable law, the Certificate of Incorporation or
these Bylaws.
9. 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.
10. CHAIRMAN AND SECRETARY AT MEETINGS. At any meeting of stockholders,
the Chairman of the Board of Directors, or in his absence, a person designated
by the Board of Directors, shall preside at and act as chairman of the meeting.
The Secretary, or in his absence a person designated by the chairman of the
meeting, shall act as secretary of the meeting.
11. INSPECTORS. The Board of Directors may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath to faithfully execute the duties of
inspector. The inspector(s) shall determine the number of shares of capital
stock of the Corporation outstanding and the voting power of each, the number of
shares present or represented by proxy at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, count and tabulate all votes, ballots or consents, determine the
results of any election or vote, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. At the request of the
chairman of the meeting, the inspectors shall make a written report of any
matters determined by them. No director or candidate for the office of director
shall act as an inspector of an election of directors.
12. 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.
B-3
<PAGE>
DIRECTORS
13. POWERS. Subject to any limitations contained in the Certificate of
Incorporation, these Bylaws or the GCL as to actions to be authorized or
approved by the stockholders, and subject to the duties of directors as
prescribed by these Bylaws, 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.
14. CERTAIN DEFINITIONS. For purposes of these Bylaws:
Any person shall be deemed to "BENEFICIALLY OWN", to have "BENEFICIAL
OWNERSHIP" of, or to be "BENEFICIALLY OWNING" any securities (which securities
shall also be deemed "BENEFICIALLY OWNED" by such person) that such person is
deemed to "beneficially own" within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, as in effect on February 29, 1996.
"CIBA" means Ciba-Geigy Limited, a Swiss corporation, or such corporation(s)
as may succeed to the rights of Ciba-Geigy Limited, pursuant to that certain
letter agreement dated as of April [ ], 1996 between the Corporation and
Ciba-Geigy Limited.
"CIBA DIRECTORS" means Ciba Nominees who are elected or appointed to serve
as members of the Board of Directors.
"CIBA ENTITY" means any Subsidiary of Ciba that holds Voting Securities.
"CIBA NOMINEES" means such persons as are so designated by Ciba, as such
designations may change from time to time, to serve as members of the Board of
Directors pursuant to Sections 17 and 18.
"INDEPENDENT DIRECTOR" means a director of the Corporation who is not a Ciba
Director and who (i) is not and has never been an officer, employee or director
of Ciba or any affiliate (other than the Corporation) or associate of Ciba and
(ii) has no affiliation or compensation, consulting or contractual relationship
with Ciba or any of its affiliates (other than the Corporation) such that a
reasonable person would regard such director as likely to be unduly influenced
by Ciba or any of its affiliates (other than the Corporation).
"PERSON" or "person" means any individual, group, corporation, partnership,
joint venture, trust, business association, organization, governmental entity or
other entity.
"SUBSIDIARY" means, with respect to any Person, as of any date of
determination, any other Person as to which such Person owns, directly or
indirectly, or otherwise controls, more than 50% of the voting shares or other
similar interests.
"SIGNIFICANT SUBSIDIARY" has the meaning set forth in Rule 1-02 of
Regulation S-X under the Securities Act of 1933, as amended, as in effect on
February 29, 1996.
"TOTAL VOTING POWER OF THE CORPORATION" means the total number of votes that
may be cast in the election of directors of the Corporation if all Voting
Securities outstanding or treated as outstanding pursuant to the final sentence
of this definition were present and voted at a meeting held for such purpose.
The percentage of the Total Voting Power of the Corporation Beneficially Owned
by any Person is the percentage of the Total Voting Power of the Corporation
that is represented by the total number of votes that may be cast in the
election of directors of the Corporation by Voting Securities Beneficially Owned
by such Person. In calculating such percentage, the Voting Securities
Beneficially Owned by any Person that are not outstanding but are subject to
issuance upon exercise or exchange of rights of conversion or any options,
warrants or other rights Beneficially Owned by such Person shall be deemed to be
outstanding for the purpose of computing the percentage of the Total Voting
Power represented by Voting Securities Beneficially Owned by such Person, but
shall not be deemed to be outstanding for the purpose of computing the
percentage of the Total Voting Power represented by Voting Securities
Beneficially Owned by any other Person.
B-4
<PAGE>
"VOTING SECURITIES" means the Common Stock of the Corporation and any other
securities of the Corporation or any subsidiary of the Corporation entitled to
vote generally in the election of directors of the Corporation or such
subsidiary of the Corporation.
15. NUMBER OF DIRECTORS.
(a) Except as provided in Section 6.1 of the Certificate of Incorporation,
the authorized number of directors of this Corporation shall be not less than
three (3) nor more than fifteen (15), with the exact number of directors within
such range specified in subsection (b) below, or, if not so specified, with the
exact number of directors within such range fixed from time to time by
resolution of the Board of Directors.
(b) It is hereby specified that this Corporation shall have ten (10)
directors, two of whom shall be the Chief Executive Officer (who shall also be
Chairman of Board) and the President of the Corporation.
16. ELECTION.
(a) Directors shall hold office until the annual meeting next following
their election and until their successors are nominated, elected and qualified
pursuant to these Bylaws; subject, however, to their prior resignation, death or
removal as provided by the Certificate of Incorporation, these Bylaws or
applicable law.
Subject to the Certificate of Incorporation and Subsections (b), (c), (d)
and (e) 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, even if 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 or until their earlier death, resignation or removal.
(b) If at any time a member of the Board dies, resigns or is removed, a new
member shall be designated to replace such member until the next election of
directors. If, consistent with Section 17, the replacement director is to be a
Ciba Director, Ciba shall designate the replacement Ciba Director. If the former
member was the Chief Executive Officer or President, the replacement Chief
Executive Officer or President, respectively, shall be the replacement. Except
as set forth in paragraph (d) below, if consistent with Section 17, the
replacement director is to be an Independent Director (other than the Chief
Executive Officer or President), the remaining Independent Directors (including
the Chief Executive Officer and the President, respectively, if he or she is an
Independent Director) shall designate the replacement Independent Director.
(c) Subject to paragraph (d) below, if at any time the percentage of the
Total Voting Power of the Corporation Beneficially Owned by Ciba decreases to a
point at which the number of Ciba Nominees entitled to be nominated to the Board
of Directors in accordance with these Bylaws in an election of directors
presented to stockholders would decrease, within 10 days thereafter Ciba shall
cause a sufficient number of Ciba Directors to resign from the Board of
Directors so that the number of Ciba Directors on the Board of Directors after
such resignation(s) equals the number of Ciba Nominees that Ciba would have been
entitled to designate had an election of directors taken place at such time.
Ciba shall also cause a sufficient number of Ciba Directors to resign from any
relevant committees of the Board of Directors so that such committees are
comprised in the manner contemplated by Section 19 after giving effect to such
resignations. Any vacancies created by the resignations required by this
subsection (c) shall be filled by Independent Directors.
(d) If at any time the percentage of the Total Voting Power of the
Corporation Beneficially Owned by Ciba decreases as a result of an issuance of
Voting Securities by the Corporation, Ciba may notify the Corporation that Ciba
intends to acquire a sufficient amount of additional Voting Securities necessary
to maintain its then current level of Board of Directors representation within
90days, PROVIDED, HOWEVER, that if during such period (or any extension under
this proviso), Ciba is prohibited from purchasing Voting Securities in order to
comply with applicable law or refrains from such
B-5
<PAGE>
purchases at the Corporation's request, such period shall be extended by the
number of days during which Ciba is so prohibited or so refrains. In such event,
until the end of such period (and thereafter if Ciba in fact restores its
percentage of the Total Voting Power of the Corporation during such period and
provided that Ciba continues to maintain the requisite level of Beneficial
Ownership of Voting Securities in accordance with Section 17) the Board of
Directors shall continue to have the number of Ciba Directors that corresponds
to the percentage of the Total Voting Power of the Corporation Beneficially
Owned by Ciba prior to such issuance of Voting Securities by the Corporation.
(e) 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 GCL designating such class or series and the
rights, preferences, privileges and restrictions granted to and imposed on the
holders of such designated Preferred Stock.
17. CIBA BOARD REPRESENTATION. (a) If Ciba Beneficially Owns 30% or more
of the Total Voting Power of the Corporation determined in accordance with
paragraph (e) of this Section 17, the Corporation shall exercise all authority
under applicable law to cause any slate of directors presented to stockholders
for election to the Board of Directors to consist of such nominees that, if
elected, would result in the Board of Directors consisting of four Ciba
Directors, the Chief Executive Officer (who shall also be the Chairman of the
Board), the President and four additional Independent Directors.
(b) If Ciba Beneficially Owns less than 30% but at least 20% of the Total
Voting Power of the Corporation determined in accordance with paragraph (e) of
this Section 17, the Corporation shall exercise all authority under applicable
law to cause any slate of directors presented to stockholders for election to
the Board of Directors to consist of such nominees that, if elected, would
result in the Board of Directors consisting of three Ciba Directors, the Chief
Executive Officer (who shall also be the Chairman of the Board), the President
and five additional Independent Directors.
(c) If Ciba Beneficially Owns less than 20% but at least 15% of the Total
Voting Power of the Corporation determined in accordance with paragraph (e) of
this Section 17, the Corporation shall exercise all authority under applicable
law to cause any slate of directors presented to stockholders for election to
the Board of Directors to consist of such nominees that, if elected, would
result in the Board of Directors consisting of two Ciba Directors, the Chief
Executive Officer (who shall also be the Chairman of the Board), the President
and six additional Independent Directors.
(d) If Ciba Beneficially Owns less than 15% but at least 10% of the Total
Voting Power of the Corporation determined in accordance with paragraph (e) of
this Section 17, the Corporation shall exercise all authority under applicable
law to cause any slate of directors presented to stockholders for election to
the Board of Directors to consist of such nominees that, if elected, would
result in the Board of Directors consisting of one Ciba Director, the Chief
Executive Officer (who shall also be the Chairman of the Board), the President
and seven additional Independent Directors.
(e) In order to determine (x) the number of Ciba Nominees to be included in
any slate of directors to be presented to stockholders for election to the Board
of Directors and (y) the percentage of the Total Voting Power of the Corporation
Beneficially Owned by Ciba for purposes of Sections 19 and 20, Ciba shall be
deemed to Beneficially Own a percentage of the Total Voting Power of the
Corporation that is no more than (1) 49.9% of the Total Voting Power of the
Corporation (or such greater percentage as Ciba in fact Beneficially Owns after
February 29, 1996) less (2) the percentage of the Total Voting Power of the
Corporation represented by any Voting Securities disposed of by Ciba or any Ciba
Entity since February 29, 1996.
18. DESIGNATION OF SLATE. Any Ciba Nominees that are included in a slate
of directors pursuant to Section 17 shall be designated by Ciba, and any
Independent Director nominees who are
B-6
<PAGE>
to be included in any slate of directors pursuant to Section 17 shall be
designated by majority vote of the then incumbent Independent Directors
(including the Chief Executive Officer (who shall also be the Chairman of the
Board) and the President if he or she is an Independent Director). The
Corporation's nominating committee shall nominate each person so designated.
19. CIBA COMMITTEE MEMBERSHIP. Subject to applicable law, rules and
regulations (including those of applicable self-regulatory organizations), Ciba
Directors shall serve on each committee of the Board of Directors, including the
finance, audit, nominating, and compensation committees of the Board of
Directors, as follows: (i) so long as Ciba Beneficially Owns 40% or more of the
Total Voting Power of the Corporation determined in accordance with Section
17(e), each committee of the Board of Directors shall consist of the same number
of Ciba Directors as Independent Directors and (ii) at all other times, each
such committee shall be comprised such that Ciba's representation on such
committee is at least proportionate to its representation on the Board of
Directors unless the committee is comprised of three members or less, in which
case at least one Ciba Director shall serve.
20. APPROVALS. (a) So long as Ciba Beneficially Owns 40% or more of the
Total Voting Power of the Corporation determined in accordance with Section
17(e), neither the Board of Directors nor any committee of the Board of
Directors shall take any action, including approval, authorization or
ratification of any action or inaction by officers, agents or employees of the
Corporation, without the affirmative vote of at least one Ciba Director and one
Independent Director.
(b) The Board of Directors shall not authorize, approve or ratify any of the
following actions without the approval of a majority of the Ciba Directors (x)
so long as Ciba Beneficially Owns 33% or more of the Total Voting Power of the
Corporation determined in accordance with Section 17(e) and, if Ciba's
percentage ownership of the Total Voting Power of the Corporation is reduced
below 33% as so determined by an issuance of Voting Securities by the
Corporation, until 10 business days after the Corporation notifies Ciba in
writing of such issuance, and (y) during the 90-day period following an issuance
of Voting Securities by the Corporation that causes Ciba to Beneficially Own
less than 33% of the Total Voting Power of the Corporation as so determined if
Ciba shall have notified the Corporation within 10 business days after Ciba's
receipt of a written notification of such issuance that Ciba intends to acquire
a sufficient amount of Voting Securities within such 90-day period so that it
will Beneficially Own at least 33% of the Total Voting Power of the Corporation
determined in accordance with Section 17(e) by the end of such 90-day period:
(i) any merger, consolidation, acquisition or other business combination
involving the Corporation or any subsidiary of the Corporation if the value
of the consideration to be paid or received by the Corporation in any such
individual transaction or in such transaction when added to the aggregate
value of the consideration paid or received by the Corporation in all other
such transactions approved by the Board of Directors during the prior 12
months exceeds the greater of (x) $75 million or (y) 11% of the
Corporation's total consolidated assets;
(ii) any sale, transfer, assignment, conveyance, lease or other
disposition or any series of related dispositions of any assets, business or
operations of the Corporation or any of its subsidiaries if the value of the
assets, business or operations so disposed exceeds the greater of (x) $75
million or (y) 11% of the Corporation's total consolidated assets;
(iii) any issuance by the Corporation or any Significant Subsidiary of
equity securities (other than pursuant to customary employee or director
stock option or incentive compensation or similar plans and other than
transactions solely among the Corporation and its subsidiaries) or of any
bonds, debentures, notes or other securities convertible into, exchangeable
for or exercisable for equity securities if the aggregate net proceeds to
the Corporation of such issuance or of such issuance when added to the
aggregate net proceeds of all such issuances approved by the Board of
Directors during the prior 12 months exceeds the greater of (x) $75 million
or (y) 11% of the Corporation's total consolidated assets; and
B-7
<PAGE>
(iv) any new capital expenditure program or any capital expenditure that
is not part of a capital expenditure program previously approved by the
Board of Directors, if the amount or anticipated amount of such program or
expenditure or of such program or expenditure when added to the aggregate
amount of capital expenditures not so approved by the Board of Directors
during the prior 12 months exceeds the greater of (x) $50 million or (y) 7%
of the Corporation's total consolidated assets.
21. 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 Bylaws, 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 of Directors. 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.
22. REMOVAL. Except as provided in the Certificate of Incorporation and in
Section 16 hereof, a director may be removed from office at any time, with or
without cause, 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.
23. RESIGNATION. Any director may resign by giving written notice to the
Chairman of the Board, the Chief Executive Officer, 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.
24. COMPENSATION. If the Board of Directors so resolves, the directors,
including the Chairman of the Board, shall receive compensation and expenses of
attendance at meetings of the Board of Directors and committees of the Board of
Directors. Nothing herein shall preclude any director from serving the
Corporation in another capacity and receiving compensation for such service.
25. COMMITTEES. Subject to Section 19, 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 of Directors. In the absence or
disqualification of any member of a committee of the Board of Directors, the
other members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may, subject to Section 19,
unanimously appoint another member of the Board of Directors to act in the place
of such absent or disqualified member. The Board of Directors may, subject to
Section 19, 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 of Directors to the extent permitted by Section
141(c) of the General Corporation Law of Delaware.
26. TIME AND PLACE OF MEETINGS AND TELEPHONE MEETINGS. Immediately
following each annual meeting of stockholders (or at such other time and place
as may be determined by the Board of Directors), the Board of Directors shall
hold a regular meeting for purposes of organizing the Board of Directors,
electing officers, appointing committees and transacting other business. The
Board of Directors may establish by resolution the times, if any, that other
regular meetings of the Board of Directors shall be held. All meetings of
directors shall be held at the principal executive office of the Corporation or
at such other place, whether within or without the State of Delaware, as shall
be
B-8
<PAGE>
designated in the notice for the meeting or in a resolution of the Board of
Directors. 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.
27. 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
Secretary or any two directors.
28. NOTICE. Regular meetings of the Board of Directors may be held without
notice if the date and time of such meetings have been fixed by the Board of
Directors. Special meetings shall be held upon four days' notice by mail, 24
hours notice delivered personally or by telephone, telegraph or confirmed fax or
on such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate under the circumstances. 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, telegram or fax shall be addressed to a director
at his business or home address/fax number as shown upon the records of the
Corporation, or at such other address/fax number as the director specifies in
writing delivered to the Corporation, or if such an address/fax number is not so
shown on such records and no written instructions have been received from the
director, at the place at which meetings of directors are regularly held. Such
mailing, telegraphing, delivery or transmittal, as above provided, shall be due,
legal and personal notice to such director. If a meeting is adjourned for more
than 24 hours, notice of the adjourned meeting shall be given prior to the time
of such meeting to the directors who were not present at the time of the
adjournment.
29. MEETING WITHOUT REGULAR CALL AND NOTICE. The transaction of business
at any meeting of the Board of Directors, however called and noticed or wherever
held, is as valid as though transacted 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.
30. 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 of Directors individually or collectively consent in writing to
such action. In addition, all directors (including those who are not members of
a particular committee) shall receive notice of, and shall be entitled to
attend, all meetings of any committee of the Board of Directors. Only those
directors who are members of a particular committee shall be entitled to vote at
meetings thereof.
31. COMMITTEE MEETINGS. The principles set forth in Sections 26 through 30
of these Bylaws shall also apply to committees of the Board of Directors and to
actions taken by such committees.
32. 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 of Directors shall not be a director for any purpose or
with respect to any provision of the Certificate of Incorporation, these Bylaws
or of the GCL, and shall have no vote as a director. However, an Honorary
Advisor to the Board of Directors may receive such compensation and expense
reimbursement as the Board of Directors shall from time to time determine.
OFFICERS
33. 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
B-9
<PAGE>
Operating Officer, a Chief Financial Officer, a General Counsel, and one or more
Vice Presidents (who may be designated Executive or Senior 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 Chief Executive Officer and the overriding direction of the Board of
Directors. If there shall occur a vacancy in any office, in the absence of the
appointment of a replacement by the Board of Directors, the Chief Executive
Officer shall have the right and power to appoint a Secretary, a Treasurer, a
Chief Operating Officer, a Chief Financial Officer, a General Counsel, one or
more additional Vice Presidents (who may be designated Executive or Senior 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 and the overriding direction of the
Board of Directors. Any number of offices may be held simultaneously by the same
person.
34. ELECTION, TERM OF OFFICE AND VACANCIES. At its regular annual meeting,
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
Chief Executive Officer and the President. 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 33 of these Bylaws, if an office becomes
vacant for any reason, the vacancy shall be filled by the Board of Directors.
35. 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.
36. COMPENSATION. The Board of Directors shall fix the compensation of the
Chairman of the Board, any Vice Chairman, the Chief Executive Officer and the
President and may fix the salaries of other employees of the Corporation
including the other officers. If the Board of Directors does not fix the
salaries of the other officers, the Chief Executive Officer shall fix such
salaries.
37. 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 Bylaws.
38. CHIEF EXECUTIVE OFFICER. Unless otherwise determined by the Board of
Directors, the Chief Executive Officer shall be deemed general manager of the
Corporation. The Chief Executive Officer shall be the Chairman of the Board,
shall be entitled to attend all meetings of the Board of Directors and any
committees thereof and shall effectuate orders and resolutions of the Board of
Directors and exercise such other powers and perform such other duties as the
Board of Directors shall from time to time prescribe.
39. PRESIDENT AND VICE PRESIDENTS. In the absence or disability of the
Chief Executive Officer and 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 by the Board of Directors or these Bylaws.
40. SECRETARY. The Secretary (or in his absence an Assistant Secretary or,
if there be no Assistant Secretaries, another person designated by the Board of
Directors) 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
B-10
<PAGE>
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 Bylaws, as amended from time to time.
(b) RECORD OF SHARES. Unless a transfer agent is appointed by the Board
of Directors to keep a share register, the Secretary shall keep at the
principal executive office of the Corporation a share register showing the
names of the stockholders 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.
(c) NOTICES. The Secretary shall give such notices as may be required
by law or these Bylaws.
(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 from time to time prescribe.
41. 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 or by one or more persons authorized by the Board of
Directors, taking proper vouchers for such disbursements, and when requested
shall render to the Chief Executive Officer, the Board of Directors and, if
applicable, the Chief Financial Officer, 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, the Chief Executive Officer
or, if applicable, the Chief Financial Officer shall prescribe.
42. OTHER OFFICERS AND AGENTS. Such other officers and agents as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
SHARES
43. CERTIFICATES. Every stockholder shall be entitled to have a
certificate or certificates certifying the number and class of shares of the
capital stock of the Corporation owned by him. All such certificates shall be
signed in the manner prescribed in the GCL. Any signature on such certificates
may be a facsimile signature. The Board of Directors shall have the power to
appoint one or more transfer agents and/or registrars for the transfer or
registration of certificates of stock of any class, and may require stock
certificates to be countersigned or registered by one or more of such transfer
agents and/or registrars.
44. TRANSFERS OF SHARES OF CAPITAL STOCK. Transfers of shares shall be
made only upon the transfer books of the Corporation, kept at the office of the
Corporation or transfer agents and/or registrars designated by the Board of
Directors. Before any new certificate is issued, the old certificate shall be
surrendered for cancellation.
45. STOCKHOLDERS OF RECORD. Only stockholders of record 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 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 law.
46. LOST, STOLEN 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
B-11
<PAGE>
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.
47. STOCKHOLDERS RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of and to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date, which shall be not more than sixty (60) days nor less than ten (10)
days before the date of such meeting. A determination of stockholders of record
entitled to notice of and to vote at a meeting of stockholders shall apply to
any adjournment of the meeting, provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting, and shall fix a new record
date for such adjourned meeting if the adjourned meeting is to take place more
than thirty (30) days from the date set for the original meeting.
48. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation and the GCL, the Board of Directors may, out of funds legally
available therefor, declare dividends upon the stock of the Corporation. Before
the declaration of any dividend, the Board of Directors may set apart, out of
any funds of the Corporation available for dividends, such sum or sums as from
time to time in its discretion may be deemed proper for working capital or as a
reserve fund to meet contingencies or for such other purposes as shall be deemed
conducive to the interests of the Corporation.
AMENDMENTS
49. ADOPTION OF AMENDMENTS. The Board of Directors is authorized and
empowered from time to time in its discretion to make, alter, amend or repeal
these Bylaws, except as such power may be restricted or limited by the GCL;
PROVIDED, HOWEVER, that the provisions set forth in Sections 14, 16(a)-(d), 17,
18, 19, 20 or this Section 49 shall not be amended or repealed unless Ciba shall
have consented thereto in writing. Notwithstanding the foregoing, Sections 14,
16(b)-(d), 17, 18, 19, 20 and the proviso in the preceding sentence of this
Section 49 shall be automatically repealed and cease to have any force or effect
on the date upon which Ciba's rights under that certain Governance Agreement
dated as of February 29, 1996 between the Corporation and Ciba terminate
pursuant to the terms of such agreement.
50. RECORD OF AMENDMENTS. Whenever an amendment or new bylaw 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 bylaw is repealed, the fact of repeal with the
date of the meeting at which the repeal was enacted or written consent with
respect thereto was filed shall be stated in said book.
CORPORATE SEAL
51. 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
52. 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 by or to the Corporation, shall be signed or endorsed by the Chief
Executive Officer, the President, the Chief Financial Officer, the Treasurer or
such other person or persons as may from time to time be so authorized in
accordance with a resolution of the Board of Directors.
B-12
<PAGE>
53. CONTRACTS, ETC.; HOW EXECUTED. Except as otherwise provided in these
Bylaws, the Chairman of the Board (in his capacity as Chief Executive Officer),
the President, any Vice President or Treasurer, or such other officer or
officers as may from time to time be so authorized in accordance with a
resolution of the Board of Directors, shall have the power and authority to sign
and execute on behalf of the Corporation deeds, conveyances and contracts, and
any and all other documents requiring execution by the Corporation. The Board of
Directors may authorize any other 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.
54. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The Chief Executive
Officer, the President or any Vice President or the Secretary or Assistant
Secretary of the Corporation are authorized to vote, represent, and exercise on
behalf of the Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the Corporation. The
authority herein granted to said officers to vote or represent on behalf of the
Corporation any and all shares held by the 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.
55. INSPECTION OF BYLAWS. The Corporation shall keep in its principal
office for the transaction of business the original or a copy of these Bylaws 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.
56. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
57. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise requires,
the general provisions, rules and construction, and definitions contained in the
GCL shall govern the construction of these Bylaws. 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 or other entity or
organization as well as a natural person.
58. SEVERABILITY. If any provision of these Bylaws is determined to be
invalid, void, illegal or unenforceable, the remaining provisions of these
Bylaws shall continue to be valid and enforceable and shall in no way be
affected, impaired or invalidated thereby.
B-13
<PAGE>
- --------------------------------------------------------------------------------
HEXCEL CORPORATION
5794 WEST LAS POSITAS BOULEVARD
PLEASANTON, CALIFORNIA 94588
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF HEXCEL CORPORATION
The undersigned stockholder of Hexcel Corporation ("Hexcel") hereby
appoints Marshall S. Geller, Peter A. Langerman and John J. Lee and each of
them, the lawful attorneys and proxies of the undersigned, each with powers of
substitution, to vote all the shares of Common Stock of Hexcel held of record by
the undersigned on April 19, 1996 at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the Marriott Hotel, 2 Stamford Forum,
Stamford, Connecticut, on May 23, 1996 at 11:00 a.m., local time, and at any
and all adjournments or postponements thereof, with all the powers the
undersigned would possess if personally present, upon all matters set forth
in the Notice of Annual Meeting of Stockholders and the Proxy Statement dated
April [ ], 1996, receipt of which is hereby acknowledged.
Shares represented by all properly executed proxies will be voted in
accordance with the instructions appearing on the proxy and in the discretion of
the proxy holders as to any other matter that may properly come before the
Annual Meeting. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED
FOR EACH OF THE NOMINEES SET FORTH IN ITEM 1, FOR ITEM 2, FOR ITEM 3, AND IN THE
DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE ANNUAL MEETING OF STOCKHOLDERS.
- --------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS (check one box only):
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below). to vote for all
nominees listed
listed below.
John M.D. Cheesmond Stanley Sherman
Marshall S. Geller George S. Springer
Juergen Habermeier Joseph T. Sullivan
Peter A. Langerman Hermann Vodicka
John J. Lee Franklin S. Wimer
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
write the names of the nominee(s) below:
_________________________________________________________
2. Approval and adoption of Hexcel's Restated Certificate of
Incorporation, which incorporates certain amendments to Hexcel's
Certificate of Incorporation, as described in the Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
3. Approval and adoption of the amendments to Hexcel's Bylaws
described in the Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
DATED: __________________________________________ , 1996
__________________________________________________________
Signature(s)
__________________________________________________________
Please sign as name(s) appear on this proxy, and date this
proxy. If a joint account, each joint owner must sign. If
signing for a corporation or partnership or as agent,
attorney or fiduciary, please indicate the capacity in which
you are signing.
- --------------------------------------------------------------------------------
