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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HEXCEL CORPORATION
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
ABCDEFG
HEXCEL CORPORATION
TWO STAMFORD PLAZA
281 TRESSER BOULEVARD
STAMFORD, CONNECTICUT 06901-3238
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 1997
---------------------
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, Two Stamford Forum, Stamford, Connecticut, on May 22,
1997, at 10:30 a.m., local time, for the following purposes:
1. To elect 10 individuals (John M.D. Cheesmond, Marshall S. Geller,
Juergen Habermeier, John J. Lee, Stanley Sherman, Martin L. Solomon, 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 Incentive Stock Plan as amended and
restated as of January 30, 1997;
3. To approve and adopt Hexcel's Management Stock Purchase Plan; and
4. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
Hexcel's Board of Directors (the "Board of Directors") has fixed the close
of business on March 24, 1997 as the record date (the "Record Date") for the
determination of the 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 by proxy or in person. A list of such stockholders will be
available for inspection at the offices of Hexcel at least 10 days prior to the
Annual Meeting and will also be available for inspection at the Annual Meeting.
Each share of Hexcel common stock is entitled to one vote on each matter to be
acted upon or which may properly come before the Annual Meeting.
The enclosed proxy is solicited by the 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 your
proxy card. Your prompt attention is appreciated.
By order of the Board of Directors
Ira J. Krakower
Secretary
Dated: April 21, 1997
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
TWO STAMFORD PLAZA
281 TRESSER BOULEVARD
STAMFORD, CONNECTICUT 06901-3238
---------------------
PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 1997
---------------------
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 the Annual Meeting of Stockholders of Hexcel to be held
at the Marriott Hotel, Two Stamford Forum, Stamford, Connecticut, on May 22,
1997, at 10:30 a.m., local time, and at any adjournment or postponement thereof
(the "Annual Meeting"). At the Annual Meeting, stockholders will be asked to
consider and vote on (i) the election of 10 individuals (John M.D. Cheesmond,
Marshall S. Geller, Juergen Habermeier, John J. Lee, Stanley Sherman, Martin L.
Solomon, George S. Springer, Joseph T. Sullivan, Hermann Vodicka and Franklin S.
Wimer) to the Board of Directors; (ii) the approval and adoption of Hexcel's
Incentive Stock Plan as amended and restated as of January 30, 1997 (as so
amended, the "Incentive Stock Plan"); (iii) the approval and adoption of
Hexcel's Management Stock Purchase Plan (the "Management Stock Purchase Plan");
and (iv) such other matters as may properly come before the Annual Meeting.
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. The persons named in the enclosed proxy card, 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 proxy card are first being mailed
to stockholders of Hexcel on or about April 21, 1997. The date of this Proxy
Statement is April 21, 1997.
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
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<S> <C>
THE MEETING................................................................................................ 3
General.................................................................................................. 3
Matters to be Considered at the Meeting.................................................................. 3
Record Date; Voting Rights............................................................................... 3
Proxies.................................................................................................. 4
Recommendations of the Board of Directors................................................................ 4
ELECTION OF DIRECTORS...................................................................................... 4
Information Regarding the Directors and Director Nominees................................................ 6
Meetings and Standing Committees of the Board of Directors............................................... 8
EXECUTIVE OFFICERS......................................................................................... 9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 12
Stock Beneficially Owned by Principal Stockholders....................................................... 12
Stock Beneficially Owned by Directors and Officers....................................................... 13
EXECUTIVE COMPENSATION..................................................................................... 14
Summary Compensation Table............................................................................... 14
Options and Restricted Stock............................................................................. 15
Deferred Compensation.................................................................................... 17
Employment and Other Agreements.......................................................................... 18
Compensation Committee Report on Executive Compensation.................................................. 19
Compensation Committee Interlocks and Insider Participation.............................................. 22
Compensation of Directors................................................................................ 22
PERFORMANCE GRAPH.......................................................................................... 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................................. 23
Certain Relationships and Related Transactions with Ciba................................................. 23
Other Relationships and Related Transactions............................................................. 29
THE INCENTIVE STOCK PLAN................................................................................... 29
General.................................................................................................. 29
Description of the Principal Features of the Plan........................................................ 29
Certain Federal Income Tax Consequences.................................................................. 31
Plan Benefits............................................................................................ 32
THE MANAGEMENT STOCK PURCHASE PLAN......................................................................... 32
General.................................................................................................. 32
Description of the Principal Features of the Plan........................................................ 32
Certain Federal Income Tax Consequences.................................................................. 33
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.................................................... 34
OTHER MATTERS.............................................................................................. 34
STOCKHOLDER PROPOSALS...................................................................................... 34
INDEPENDENT AUDITORS....................................................................................... 34
ANNUAL REPORT.............................................................................................. 35
ANNEX A -- FORM OF INCENTIVE STOCK PLAN OF HEXCEL (TO TAKE EFFECT RETROACTIVELY ON
JANUARY 30, 1997 IF THE AMENDED AND RESTATED INCENTIVE STOCK PLAN IS APPROVED AND ADOPTED BY HEXCEL'S
STOCKHOLDERS)............................................................................................ A-1
ANNEX B -- FORM OF MANAGEMENT STOCK PURCHASE PLAN OF HEXCEL (TO TAKE EFFECT RETROACTIVELY ON JANUARY 1,
1997 IF THE MANAGEMENT STOCK PURCHASE PLAN IS APPROVED AND ADOPTED BY HEXCEL'S STOCKHOLDERS)............. B-1
</TABLE>
2
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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 of Hexcel
for use at the Annual Meeting to be held at the Marriott Hotel, Two Stamford
Forum, Stamford, Connecticut, on May 22, 1997, at 10:30 a.m., local time, and at
any adjournment or postponement thereof. Each copy of this Proxy Statement is
accompanied by a proxy card 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 ("Hexcel Common") will vote upon (i) the election of 10 individuals to the
Board of Directors; (ii) the approval and adoption of the Incentive Stock Plan;
(iii) the approval and adoption of the Management Stock Purchase Plan; and (iv)
such other matters as may properly be brought before the Annual Meeting and any
adjournment or postponement thereof.
RECORD DATE; VOTING RIGHTS
The Board of Directors of Hexcel has fixed the close of business on March
24, 1997 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 21,
1997 to holders of record of Hexcel Common on the Record Date. On the Record
Date, there were 36,615,959 shares of Hexcel Common outstanding held by 2,414
stockholders of record.
The presence, either in person or by proxy, of the holders of a majority of
the outstanding shares of the Hexcel Common entitled to vote at the Annual
Meeting is necessary to constitute a quorum at the Annual Meeting.
Approval and adoption of the Incentive Stock Plan and the Management Stock
Purchase Plan requires the affirmative vote of a majority of the votes present
in person or represented by proxy and entitled to vote at the Annual Meeting.
The election of directors requires a plurality of the votes cast in person or by
proxy at the Annual Meeting.
Under the rules of the New York Stock Exchange ("NYSE") 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 Incentive Stock Plan and the
Management Stock Purchase Plan, brokers may not vote shares held for customers
without specific instructions from such customers. In determining whether the
proposals to approve and adopt the Incentive Stock Plan and the Management Stock
Purchase Plan have received the requisite number of affirmative votes,
abstentions will be counted and will have the same effect as a vote against the
proposals; broker non-votes will be disregarded and will have no effect on the
outcome of the votes.
Under the terms of a Governance Agreement dated as of February 29, 1996,
between Hexcel and Ciba-Geigy Limited ("CGL"), as amended in accordance with the
Hexcel Consent Letter (as defined below) (the "Governance Agreement"), Ciba
Specialty Chemicals Holding Inc. ("Ciba"), which currently beneficially holds
49.2% of the issued and outstanding Hexcel Common, is subject to certain voting
restrictions with respect to the shares of Hexcel Common held by it. See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Certain Relationships and
Related Transactions with Ciba." In accordance with the terms of the Governance
Agreement, Ciba has indicated that it will vote its shares of Hexcel Common in
favor of each of the nominees for election to the Board of Directors and for the
approval and adoption of the Incentive Stock Plan and the Management Stock
Purchase Plan.
3
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PROXIES
All shares of Hexcel Common 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 not 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 Incentive Stock Plan; and
FOR the approval and adoption of the Management Stock Purchase Plan.
If any other matters are properly presented for consideration at the Annual
Meeting, the persons named in the enclosed proxy card and acting thereunder, or
their duly constituted substitutes acting at the Annual Meeting, will have
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,
Two Stamford Plaza, 281 Tresser Boulevard, Stamford, Connecticut 06901-3238,
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 Georgeson & Company Inc. to aid in the solicitation of proxies at a fee
of $3,000 plus expenses. In addition to solicitation by use of the mails,
proxies may be solicited by directors, officers and employees of Hexcel in
person or by telephone, telegram or other means of communication. Such
directors, officers and employees will not be additionally compensated, but may
be reimbursed for reasonable out-of-pocket expenses 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 Incentive Stock Plan and a vote FOR the approval and adoption of
the Management Stock Purchase Plan. See "ELECTION OF DIRECTORS," "THE INCENTIVE
STOCK PLAN" and "THE MANAGEMENT STOCK PURCHASE PLAN".
ELECTION OF DIRECTORS
On February 29, 1996, the Board of Directors was reconstituted in accordance
with the terms of the Governance Agreement and a Strategic Alliance Agreement,
dated as of September 29, 1995 (the "Strategic Alliance Agreement") among
Hexcel, CGL and Ciba-Geigy Corporation ("CGC" and together with CGL,
"Ciba-Geigy"). In accordance with a consent letter dated February 21, 1997 (the
"Hexcel Consent Letter"), Hexcel consented to the assignment by Ciba-Geigy of
all of their respective rights under such agreements to Ciba and to the
assumption by Ciba of all obligations thereunder. As amended in accordance with
the Hexcel Consent Letter, the Governance Agreement provides that the Board of
Directors shall consist of 10 directors, 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
4
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Ciba (the "Independent Directors,") (currently Marshall S. Geller, Martin L.
Solomon, George S. Springer and Franklin S. Wimer).
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 49.2% 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 (the Ciba
Nominees); and (iv) Marshall S. Geller, Martin L. Solomon, George S. Springer
and Franklin S. Wimer (the Independent Nominees). All of the nominees for
election to the Board of Directors are currently serving as directors of Hexcel.
Unless otherwise instructed on the enclosed proxy card, 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 Hexcel Common 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.
5
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INFORMATION REGARDING THE DIRECTORS AND DIRECTOR NOMINEES
Set forth below is certain information concerning the current directors of
Hexcel as of April 10, 1997. All current directors have been nominated for
reelection to the Board of Directors. There are no family relationships among
any of Hexcel's executive officers or directors.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITION(S) WITH HEXCEL
- -------------------------------------- --- ----------- ---------------------------------------------------------
<S> <C> <C> <C>
John J. Lee........................... 60 1993 Chairman of the Board; Chief Executive Officer; Director
Juergen Habermeier.................... 56 1996 President; Chief Operating Officer; Director
John M.D. Cheesmond................... 47 1996 Director
Marshall S. Geller.................... 58 1994 Director
Stanley Sherman....................... 58 1996 Director
Martin L. Solomon..................... 60 1996 Director
George S. Springer.................... 63 1993 Director
Joseph T. Sullivan.................... 57 1996 Director
Hermann Vodicka....................... 54 1996 Director
Franklin S. Wimer..................... 61 1996 Director
</TABLE>
JOHN J. LEE, age 60, 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 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 is also a
director of Aviva Petroleum Corporation, an oil and gas exploration company. Mr.
Lee is also a director of Hvide Marine Incorporated, a marine support and
transportation services company and has served as Chairman of the Board,
President and Chief Executive Officer of Lee Development Corporation, a merchant
banking company, since 1987. Mr. Lee is a Trustee of Yale University and has
been an adviser to the Clipper Group, a private investment partnership since
1993. Mr. Lee served as a director of XTRA Corporation, a transportation
equipment leasing company, from 1990 to January 1996. 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 Corporation from 1990 through
1993. Mr. Lee is also a director of various privately-held corporations.
JUERGEN HABERMEIER, age 56, has served as President, Chief Operating Officer
and a director of Hexcel since February 1996. Mr. Habermeier also serves as a
member of the Technology Committee of Hexcel. Prior to joining Hexcel, Mr.
Habermeier served as the President of the worldwide Composites Division of CGL
(the "Ciba Composites Business") and as a Vice President of CGC from 1989 to
1996. Since 1994, Mr. 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 47, 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 is
Executive Vice President of Ciba Specialty Chemicals Inc. (Switzerland). Mr.
Cheesmond served as Senior Vice President and Head of Regional Finance and
Control of CGL from 1994 to 1996. From 1991 to 1993, Mr. Cheesmond served as
Group Vice President, Planning, Information and Control at Ciba Vision
Corporation.
MARSHALL S. GELLER, age 58, 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 and Nominating Committees of Hexcel. Mr.
Geller has served as Chairman of the Board, Chief Executive Officer and
6
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founding partner at Geller & Friend Capital Partners, Inc., a merchant banking
firm, since November 1995. From 1991 to 1995, Mr. Geller was Senior Managing
Director 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 to 1988, he was a Senior Managing 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.
STANLEY SHERMAN, age 58, has been a director of Hexcel since February 1996.
Mr. Sherman also serves as a member of the Executive Compensation and Finance
Committees of Hexcel. Mr. Sherman is President and Chief Executive Officer of
Ciba Specialty Chemicals Corporation (North America) and Chairman of the Board
of Ciba Specialty Chemicals (Canada). Mr. Sherman served as a director and Vice
President and Chief Financial Officer of CGC from 1991 to 1996, serving on the
Finance Committee and the Corporate Management Committee of CGC's Board of
Directors. From 1986 to 1991, Mr. Sherman served as Vice President--Corporate
Planning of CGC. Mr. Sherman also serves on the Board of the Westchester
Educational Coalition.
MARTIN L. SOLOMON, age 60, has been a director of Hexcel since May 1996. Mr.
Solomon serves as Chairman of the Finance Committee and as a member of the Audit
and Executive Compensation Committees of Hexcel. Mr. Solomon has been a
self-employed investor since 1990. From 1988 to 1990, Mr. Solomon served as
Managing Partner of Value Equity Associates I, L.P., an investment partnership.
From 1985 to 1987, Mr. Solomon was an investment analyst and portfolio manager
of Steinhardt Partners, an investment partnership. Mr. Solomon served as a
director and Vice Chairman of the Board of Directors of Great Dane Holdings,
Inc., which is engaged in the manufacture of transportation equipment,
automobile stamping, the leasing of taxis and insurance from 1985 until December
1996. Mr. Solomon has also served as a director of XTRA Corporation since 1990
and a director of DLB Oil & Gas, Inc., a company engaged in oil exploration and
production, since 1995. Mr. Solomon is also a director of various privately-held
corporations and civic organizations.
GEORGE S. SPRINGER, age 63, has been a director of Hexcel since January
1993. Mr. Springer also serves as Chairman of the Technology Committee of
Hexcel. Mr. Springer is the Paul Pigott Professor and Chairman of the Department
of Aeronautics and Astronautics, and by courtesy, Professor of Mechanical
Engineering and Professor of Civil Engineering at Stanford University. Mr.
Springer joined Stanford University's faculty in 1983.
JOSEPH T. SULLIVAN, age 57, has been a director of Hexcel since February
1996. Mr. Sullivan also serves as a member of the Nominating and Technology
Committees of Hexcel. Mr. Sullivan is a consultant. Mr. Sullivan served as a
director and Senior Vice President of CGC from 1986 to 1996.
HERMANN VODICKA, age 54, has been a director of Hexcel since February 1996.
Mr. Vodicka also serves as a member of the Nominating and Technology Committees
of Hexcel. Mr. Vodicka is Chief Executive Officer and a director of Ciba. Mr.
Vodicka served as President of the Polymers Division and a member of the
Executive Committee of CGL from 1993 to 1996. Mr. Vodicka was the Chairman of
the Board of Mettler-Toledo, a leading worldwide manufacturer of scales and
balances and a wholly owned subsidiary of CGL, until its sale in 1996. From 1988
to 1993, Mr. Vodicka was President and Chief Executive Officer of
Mettler-Toledo.
FRANKLIN S. WIMER, age 61, was a director of Hexcel from February 1995 to
February 1996 and was reelected in May 1996. Mr. Wimer also serves on the Audit
and Technology Committees of Hexcel. Mr. Wimer is President and Principal of
UniRock Management Corporation ("UniRock"), a private merchant banking firm
based in Denver, Colorado. Mr. Wimer has been with UniRock since 1987. UniRock
acted as strategic planning consultant to Hexcel from December 1993 through
April 1996. Mr. Wimer is currently Chairman of the Board of Vista Restaurants,
Inc., Chairman of the Board of Colorado Gaming & Entertainment Co. and is a
director of the Denver Paralegal Institute, Foresight Products, Inc., Metalwest,
Inc. and Metal Packaging International, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE NOMINEES FOR
DIRECTOR
7
<PAGE>
MEETINGS AND STANDING COMMITTEES OF THE BOARD OF DIRECTORS
During 1996, there were 11 meetings of the Board of Directors and 16
meetings in the aggregate of the five standing and other special committees of
the Board. Overall attendance at the Board and committee meetings was
approximately 94% in 1996. Each of the incumbent directors, except Mr. Vodicka,
attended or participated in at least 75% of the aggregate number of Board of
Directors meetings and applicable committee meetings held during 1996.
The Board of Directors has established the following standing committees:
Audit Committee; Executive Compensation 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 voting securities representing 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
management and the independent auditors as deemed necessary, the financial
statements, the results of the annual audit and internal accounting and 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), Solomon and Wimer. During 1996, the Audit
Committee held four meetings.
The Executive Compensation Committee makes recommendations to the Board of
Directors on matters pertaining to the compensation of, and certain related
matters affecting, Hexcel's executive officers. The Executive Compensation
Committee also administers Hexcel's incentive plans and makes grants of stock
options and/or awards of restricted stock units 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, Sherman and Solomon. During 1996, 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 held four meetings in 1996.
The current members of the Finance Committee are Messrs. Solomon (Chairman),
Cheesmond, Lee and Sherman.
The Nominating Committee recommends nominees for 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 "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Certain
Relationships and Related Transactions with Ciba--The Governance Agreement." The
current members of the Nominating Committee are Messrs. Lee (Chairman), Geller,
Sullivan and Vodicka. During 1996, 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, Sullivan, Vodicka and Wimer. During
1996, the Technology Committee held two meetings.
8
<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
10, 1997. 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......................... 60 1993 Chairman of the Board; Chief Executive Officer; Director
Juergen Habermeier.................. 55 1996 President; Chief Operating Officer; Director
Stephen C. Forsyth.................. 41 1994 Senior Vice President of Finance and Administration; Chief
Financial Officer
Ira J. Krakower..................... 56 1996 Senior Vice President; General Counsel; Secretary
Bruce D. Herman..................... 41 1996 Treasurer
Wayne C. Pensky..................... 41 1993 Corporate Controller; Chief Accounting Officer
Joseph H. Shaulson.................. 31 1996 Vice President of Corporate Development
David M. Wong....................... 52 1996 Vice President of Corporate Affairs
James N. Burns...................... 57 1996 President of the Fibers Business Unit
Michael J. Carpenter................ 40 1996 Vice President of the Structures and Interiors Business
Unit
Claude Genin........................ 61 1996 President of the Fabrics Business Unit
William Hunt........................ 54 1996 President of the EuroMaterials Business Unit
Rodney P. Jenks, Jr................. 46 1994 Vice President and General Counsel of Americas and
Asia-Pacific Operations
James A. Koshak..................... 53 1996 President of the U.S. Materials Business Unit
Thomas J. Lahey..................... 56 1991 President of the Pacific Rim Business Unit
William P. Meehan................... 61 1993 Vice President; Deputy Director of Operations
Robert A. Petrisko.................. 42 1993 Vice President of Research and Technology
Gary L. Sandercock.................. 56 1989 Vice President of Manufacturing
David R. Tanonis.................... 40 1996 Vice President of the Structures and Interiors Business
Unit
Justin Taylor....................... 43 1996 President of the Structures and Interiors Business Unit
</TABLE>
STEPHEN C. FORSYTH, age 41, has served as Chief Financial Officer of Hexcel
since November 1996 and 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.
IRA J. KRAKOWER, age 56, has served as Senior Vice President, General
Counsel and Secretary since September 1996. Prior to joining Hexcel, Mr.
Krakower served as Vice President and General Counsel to Uniroyal Chemical
Corporation from 1986 to August 1996 and served on the Board of Directors of and
as Secretary to Uniroyal Chemical Company, Inc. from 1989 to 1996.
BRUCE D. HERMAN, age 41, has served as Treasurer of Hexcel since April 1996.
Prior to joining Hexcel, 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.
9
<PAGE>
WAYNE C. PENSKY, age 41, 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 to 1993.
JOSEPH H. SHAULSON, age 31, has served as Vice President of Corporate
Development of Hexcel since April 1996. In addition, Mr. Shaulson served as
Acting General Counsel and Acting Secretary of Hexcel from April 1996 to
September 1996. Prior to joining Hexcel, Mr. Shaulson was an associate in the
law firm of Skadden, Arps, Slate, Meagher & Flom, where he was employed from
1991 to 1996.
DAVID M. WONG, age 52, 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 and Corporate Controller and Chief
Accounting Officer of Hexcel from 1983 to 1993 and held other general management
positions from 1979 to 1983. Mr. Wong joined Hexcel in 1979.
JAMES N. BURNS, age 57, has served as President of Hexcel's Fibers business
unit since July 1996. Prior to his employment with Hexcel, Mr. Burns served in a
number of management positions with the Composite Products Division of Hercules
Incorporated, including Business Director from March 1995 through June 1996,
Business Unit Director of Advanced Composite Materials from June 1992 through
March 1995 and Vice President of Marketing from June 1986 through June 1992.
MICHAEL J. CARPENTER, age 40, 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 held various
technical and managerial positions with Heath Tecna from 1983.
CLAUDE GENIN, age 61, 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.
WILLIAM HUNT, age 54, has served as the President of Hexcel's EuroMaterials
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 ("CGP") from 1990 to 1991.
Prior to joining CGP in 1990, Mr. Hunt held various other technical and
managerial positions, including the position of Managing Director of Illford
Limited (Photographic) Co.
RODNEY P. JENKS, JR., age 46, has served as Vice President and General
Counsel of Americas and Asia-Pacific Operations of Hexcel since April 1996. From
March 1994 to March 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 continued to
serve as counsel until March 1996.
JAMES A. KOSHAK, age 53, has served as President of Hexcel's U.S. 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
CGL's Polymers Division and General Manager of CGL's Formulated Systems unit
from 1988 to 1993. Mr. Koshak held various other technical and managerial
positions with CGL from 1974 to 1988.
THOMAS J. LAHEY, age 56, 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.
WILLIAM P. MEEHAN, age 61, has served as Vice President and Deputy Director
of Operations of Hexcel since November 1996. He also served as Vice President of
Finance and Chief Financial Officer
10
<PAGE>
from September 1993 to November 1996 and as Treasurer of Hexcel from April 1994
to April 1996. Prior to joining Hexcel in 1993, Mr. Meehan served as President
and Chief Executive Officer of Thousand Trails and NACO, a membership campground
and resort business from 1990 to 1992. From 1986 to 1989, Mr. Meehan served as
Vice President of Finance and Chief Financial Officer of Hadco Corporation.
ROBERT A. PETRISKO, age 42, has served as Vice President of Research and
Technology of Hexcel since September 1993. Mr. Petrisko served at Hexcel's
Chandler facility as Manager of the Signature Technology Group from 1989 to
April 1993 and as Director of Aerospace Technology from April 1993 to September
1993. Mr. Petrisko joined Hexcel in 1989 after serving as a Research Specialist
with Dow Corning Corporation from 1985 to 1989.
GARY L. SANDERCOCK, age 56, has served as Vice President of Manufacturing of
Hexcel since October 1996. From February 1996 through October 1996, he served as
President of Hexcel's Special Process business unit. 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 and General
Manager of the Trevarno Division of Hexcel from 1985 to 1989 and held other
manufacturing and general management positions from 1967 to 1985. Mr. Sandercock
joined Hexcel in 1967.
DAVID R. TANONIS, age 40, 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 1987. Mr.
Tanonis held various management positions with Polymer Engineering, Inc. from
1978 to 1987.
JUSTIN TAYLOR, age 43, has served as President of Hexcel's Structures and
Interiors business unit since April 1996. From July 1995 to April 1996, Mr.
Taylor served as a member of CGL'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 March 24, 1997 with
respect to the beneficial ownership of Hexcel Common 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 Hexcel to be the
beneficial owner of more than five percent of the issued and outstanding shares
of Hexcel Common.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF PERCENT
NAME AND ADDRESS HEXCEL COMMON OF CLASS
- ---------------------------------------------------------------------------------------- --------------- -----------
<S> <C> <C>
Ciba Specialty Chemicals Holding Inc.(1)................................................ 18,021,748 49.2%
Klybeckstrasse 141
CH 4002
Basle, Switzerland
Franklin Resources, Inc.(2)............................................................. 3,633,645 9.9%
Franklin Mutual Advisors, Inc.
51 John F. Kennedy Parkway
Short Hills, NJ 07078
FMR Corporation(3)...................................................................... 2,463,709 6.7%
Fidelity Management & Research Company
82 Devonshire Street
Boston, Ma. 02109
</TABLE>
- ------------------------
(1) Based on information contained in a Statement on Schedule 13D filed with the
Securities and Exchange Commission (the "Commission") on March 18, 1997 on
behalf of Ciba and its wholly owned affiliates, Ciba Specialty Chemicals
Corporation ("SCC") and Ciba Specialty Chemicals Inc. ("SCI"), SCI has sole
voting and investment power with respect to 9,204,503 shares of Hexcel
Common and SCC has sole voting and investment power with respect to
8,817,245 shares of Hexcel Common. The shares of Hexcel Common beneficially
owned by Ciba are subject to the terms of the Governance Agreement. See
"ELECTION OF DIRECTORS" and "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
(2) Based on information contained in a Statement on Schedule 13G filed with the
Commission on February 12, 1997 on behalf of Franklin Resources, Inc.,
Franklin Mutual Advisors, Inc., Rupert H. Johnson, Jr. and Charles B.
Johnson, such parties have sole voting and investment power with respect to
all the shares of Hexcel Common held by it.
(3) Based on information contained in a Statement on Schedule 13G filed with the
Commission on February 11, 1997 on behalf of FMR Corporation ("FMR"),
Fidelity Management & Research Company ("Fidelity"), Edward C. Johnson 3d.
and Fidelity Management Trust Company ("FMTC"). FMR, through its control of
Fidelity, and Fidelity each has sole power to dispose of 2,058,015 shares of
Hexcel Common beneficially owned by Fidelity. Sole power to vote such shares
resides with the Fidelity Funds' Board of Trustees. Edward C. Johnson 3d.
and FMR through its control of FMTC, each has sole voting and investment
power over 405,694 shares beneficially owned by FMTC.
12
<PAGE>
STOCK BENEFICIALLY OWNED BY DIRECTORS AND OFFICERS
Based on information supplied by those persons, beneficial ownership of
shares of Hexcel Common by the individually named directors and executive
officers, and by all directors and executive officers as a group, as of March
24, 1997, is as follows:
<TABLE>
<CAPTION>
SHARES OF HEXCEL PERCENT OF
NAME COMMON OWNED (3) CLASS
- -------------------------------------------------------------- ------------------ -------------
<S> <C> <C>
John J. Lee................................................... 701,483 1.9%
Juergen Habermeier............................................ 39,383 (1)
John M. D. Cheesmond(2)....................................... 28,666 (1)
Marshall S. Geller............................................ 82,000 (1)
Stanley Sherman(2)............................................ 28,666 (1)
Martin L. Solomon............................................. 45,333 (1)
George S. Springer............................................ 42,000 (1)
Joseph T. Sullivan(2)......................................... 28,666 (1)
Hermann Vodicka(2)............................................ 28,666 (1)
Franklin S. Wimer............................................. 42,000 (1)
Stephen C. Forsyth............................................ 46,869 (1)
William P. Meehan............................................. 15,100 (1)
Gary L. Sandercock............................................ 38,556 (1)
All Executive Officers and Directors as a group (28
persons).................................................... 1,424,231 3.9%
</TABLE>
- ------------------------
(1) Less than 1%.
(2) Messrs. Cheesmond, Sherman, Sullivan and Vodicka serve on the Board of
Directors at the request of Ciba pursuant to the Governance Agreement. Based
on information provided in a Statement on Schedule 13D filed with the
Commission on March 18, 1997 on behalf of Ciba and its wholly owned
affiliates SCC and SCI, Ciba beneficially owns an aggregate of 18,021,748
shares of Hexcel Common. See "--Stock Beneficially Owned by Principal
Stockholders."
(3) 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.
Lee--333,195; Mr. Habermeier--10,233; Mr. Cheesmond--28,666; Mr.
Geller--42,000; Mr. Sherman--28,666; Mr. Solomon--27,333; Mr.
Springer--42,000; Mr. Sullivan--28,666; Mr. Vodicka--28,666; Mr.
Wimer--42,000; Mr. Meehan--15,100; Mr. Forsyth--38,625; Mr.
Sandercock--10,574 and all other executive officers as a group--167,187.
Some of such options were granted pursuant to Hexcel's Short-Term Option
Program, are exercisable at the fair market value of Hexcel Common on the
date of exercise, and, to the extent not exercised, expire on April 29,
1997. Such options are held as follows: Mr. Forsyth--1,200; Mr.
Meehan--2,100; Mr. Sandercock--2,500; and all other executive officers as a
group--18,440. 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. All directors and executive officers of Hexcel have sole
voting and investment power with respect to the shares of Hexcel Common held
by them.
13
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total annual compensation paid or accrued
by Hexcel to or for the account of each of the Chief Executive Officer and the
four most highly compensated executive officers of Hexcel (the "Named Executive
Officers") whose total cash compensation for the fiscal year ended December 31,
1996 exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
AWARDS
ANNUAL COMPENSATION(1) -------------
----------------------------------- SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS/ ALL OTHER
SALARY BONUSES COMPENSATION SARS COMPENSATION
NAME & PRINCIPAL POSITION YEAR ($) ($)(3) ($)(4) (#)(5) ($)(6)(7)(8)
- ----------------------------------------------- --------- --------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John J. Lee.................................... 1996 400,000 450,000 -- 580,379 467,359
Chairman and Chief Executive 1995 400,000 500,000 -- 40,000 419,187
Officer 1994 453,333 350,000 -- -- 6,448
Juergen Habermeier(2).......................... 1996 229,167 240,900 47,534 70,700 24,932
President and Chief Operating 1995 -- -- -- -- --
Officer 1994 -- -- -- -- --
Stephen C. Forsyth............................. 1996 191,667 150,000 88,284 25,000 18,202
Senior Vice President of 1995 149,375 100,000 -- 33,000 19,500
Finance and Administration and 1994 115,804 51,040 -- -- 4,404
Chief Financial Officer
William P. Meehan.............................. 1996 200,000 97,500 -- 2,000 19,058
Vice President and Deputy 1995 200,000 70,000 -- 39,000 13,900
Director of Operations 1994 240,000 125,000 -- -- 6,517
Gary L. Sandercock............................. 1996 150,000 88,800 -- 10,000 14,060
Vice President of Manufacturing 1995 145,386 50,000 -- 33,000 12,333
1994 140,004 50,000 -- -- 6,488
</TABLE>
- ------------------------
(1) Annual Compensation includes amounts earned in the fiscal year, whether or
not deferred.
(2) Mr. Habermeier's employment with Hexcel commenced on February 29, 1996.
(3) Bonuses shown for fiscal year 1996 were earned in fiscal year 1996 and paid
in 1997.
(4) Other Annual Compensation for fiscal year 1996 consists of allowances for
relocation costs and automobile expenses. Relocation allowances were $37,534
and $76,284 for Messrs. Habermeier and Forsyth, respectively, in fiscal year
1996. Automobile allowances were $10,000 and $12,000 for Messrs. Habermeier
and Forsyth, respectively, in fiscal year 1996. No other Named Executive
Officer received any perquisites or other personal benefits from Hexcel with
an aggregate value exceeding the disclosure threshold established by the
Commission of the lesser of $50,000 or 10% of cash compensation.
(5) This column includes Reload Options which were granted in 1996 as a result
of exercises of certain Short-Term Options ("STOPs") which were also granted
in 1996 and either expired or were exercised in 1996. The STOPs were
exercisable at the fair market value of Hexcel Common on the date of
exercise and are not included in this column. Each Named Executive Officer
was granted the following number of STOPs in 1996: Mr. Lee--100,000; Mr.
Habermeier--20,000; Mr. Forsyth-- 10,000; and Mr. Sandercock--7,500. See
"Compensation Committee Report on Executive Compensation--Equity-based
Incentives."
(6) All Other Compensation for fiscal year 1996 consists of contributions by
Hexcel to Hexcel's 401(k) Retirement Savings Plan as follows: Mr.
Lee--$10,500; Mr. Habermeier--$10,500; Mr. Forsyth-- $10,500; Mr.
Meehan--$10,500; and Mr. Sandercock--$10,500; (ii) contributions by Hexcel
to Hexcel's 401(k) Restoration Plan as follows: Mr. Lee--$31,000; Mr.
Habermeier--$12,769; Mr. Forsyth--$7,417; Mr. Meehan--$6,425; and Mr.
Sandercock--$2,664; and (iv) premiums for life insurance (exceeding $50,000
per Named Executive Officer) as follows: Mr. Lee--$4,790; Mr.
Habermeier--$1,663; Mr. Forsyth--$285; Mr. Meehan--$2,133; and Mr.
Sandercock--$896. For
14
<PAGE>
Mr. Lee, the amount also includes deferred compensation in an amount equal
to $421,069 in accordance with the terms of Mr. Lee's employment agreement
with Hexcel. See "Employment and Other Agreements--Employment Agreement with
Mr. Lee."
(7) Certain contributions by Hexcel to Hexcel's 401(k) Restoration Plan with
regard to the bonuses paid in 1997 cannot be estimated at this time. These
contributions will be determined at the end of 1997 and will be included as
adjustments in Hexcel's next annual Proxy Statement.
(8) 1995 amounts were increased to reflect contributions by Hexcel to Hexcel's
401(k) Restoration Plan with regard to the bonuses paid in 1996 for 1995.
These contributions are as follows: Mr. Lee-- $35,000; Mr. Forsyth--$7,000;
Mr. Meehan--$4,900; and Mr. Sandercock--$3,500.
OPTIONS AND RESTRICTED STOCK
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS/SARS OF STOCK PRICE APPRECIA-
UNDERLYING GRANTED TO EXERCISE OR TION FOR OPTION TERM (2)
OPTIONS/SARS EMPLOYEES IN BASE PRICE --------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) EXPIRATION DATE 5% ($) 10% ($)
- ------------------------------ ------------- --------------- ----------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John J. Lee................... 67,000 4.52 12.50 3/1/06 526,699 1,334,759
113,379 7.64 5.05 2/29/02 194,727 441,768
200,000 13.48 12.50 2/29/06 1,572,237 3,984,356
40,000(1) 2.70 12.25 3/5/06 308,158 780,934
40,000(1) 2.70 11.63 3/11/06 292,436 741,090
40,000(1) 2.70 12.50 4/15/06 314,447 796,871
80,000(1) 5.39 11.88 3/20/06 597,450 1,514,055
Juergen Habermeier............ 30,700 2.07 12.50 3/1/06 241,338 611,599
30,000(1) 2.02 11.63 3/19/06 219,327 555,818
10,000(1) 0.67 11.50 4/8/06 72,323 183,280
Stephen C. Forsyth ........... 18,000 1.21 12.50 3/1/06 141,501 358,592
5,000(1) 0.34 11.63 3/12/06 36,555 92,636
2,000(1) 0.13 14.50 5/24/06 18,238 46,219
William P. Meehan............. 2,000 0.13 17.88 11/1/06 22,483 56,976
Gary L. Sandercock............ 10,000 0.67 12.50 3/1/06 78,612 199,218
</TABLE>
- ------------------------
(1) The amounts shown in these rows reflect Reload Options granted as a result
of exercises of STOPs (which were exercisable at the fair market value of
Hexcel Common on the date of exercise). See "Compensation Committee Report
on Executive Compensation--Equity-based Incentives."
(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
of the Commission 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 Hexcel
Common.
15
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN THE MONEY
NUMBER OF SECURITIES OPTIONS/SARS AT
SHARES UNDERLYING UNEXERCISED FISCAL YEAR END
ACQUIRED VALUE OPTIONS/SARS AT FISCAL ($)(3)
ON REALIZED YEAR END (#)(2) EXERCISABLE/
NAME EXERCISE (#) ($)(1) EXERCISABLE/UNEXERCISABLE UNEXERCISABLE
- ---------------------------------------------- ------------ ---------- ----------------------- --------------------
<S> <C> <C> <C> <C>
John J. Lee................................... 100,000 -- 87,241/533,138 989,102/2,586,993
Juergen Habermeier............................ 20,000 -- --/70,700 --/301,375
Stephen C. Forsyth............................ 3,500 -- 31,425/36,000 245,973/202,063
William P. Meehan............................. -- -- 26,000/15,000 255,125/127,563
Gary L. Sandercock............................ 22,000 232,481 17,283/21,000 28,755/145,438
</TABLE>
- ------------------------
(1) No value was realized upon the exercise of certain options because they were
STOPs exercisable at the fair market value of Hexcel Common on the date of
exercise. See "--Summary Compensation Table-- Note 5" and "--OPTION/SAR
GRANTS IN LAST FISCAL YEAR--Note 1."
(2) Includes (i) options granted pursuant to Hexcel's Incentive Stock Plan as
follows: Mr. Lee--620,379; Mr. Habermeier--70,700; Mr. Forsyth--58,000; Mr.
Meehan--41,000; and Mr. Sandercock--21,000; and (ii) options granted
pursuant to Hexcel's 1988 Management Stock Plan as follows: Mr. Forsyth--
9,425; and Mr. Sandercock--17,283.
(3) Based on the closing price of $16.25 per share of Hexcel Common as reported
on the New York Stock Exchange Composite Tape on December 31, 1996.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
NUMBER OF OR OTHER
SHARES, PERIOD UNTIL
UNITS OR OTHER MATURATION OR
NAME RIGHTS (#) PAYOUT
- ---------------------------------------------------------------------------- -------------- --------------------
<S> <C> <C>
John J. Lee................................................................. 200,000(1) February 28, 2001
20,600(2) February 28, 2003
Juergen Habermeier.......................................................... 9,500(2) February 28, 2003
Stephen C. Forsyth.......................................................... 5,500(2) February 28, 2003
William P. Meehan........................................................... 1,000(2) October 31, 2003
Gary L. Sandercock.......................................................... 3,000(2) February 28, 2003
</TABLE>
- ------------------------
(1) The indicated restricted stock units (Performance Accelerated Restricted
Stock Units or "PARS"), subject to certain employment conditions, will vest
and be converted into an equivalent number of shares of Hexcel Common on the
earlier of (i) February 28, 2001, or (ii) the date on which Hexcel's
earnings before interest and taxes ("EBIT") equal or exceed certain target
levels for any fiscal year.
(2) The indicated PARS will vest on the dates indicated above, subject to
certain employment conditions. However, if Hexcel's EBIT for any fiscal year
equal or exceed certain target levels and if the grantee is an employee of
Hexcel or a subsidiary thereof on December 31, 1998, part or all of the PARS
will vest and be converted into an equivalent number of shares of Hexcel
Common at the later of (i) the date such performance targets are met or (ii)
March 1, 2003.
16
<PAGE>
DEFERRED COMPENSATION
PENSION PLAN TABLE(1)
<TABLE>
<CAPTION>
YEARS OF PARTICIPATION
------------------------------------------------------------------------
REMUNERATION 10 15 20 25 30 35
- --------------------------------------------------- ------------ ---------- ---------- ---------- ---------- ----------
<C> <S> <C> <C> <C> <C> <C> <C>
$125,000 ..................................... $ 31,250 $ 46,875 $ 62,500 $ 78,125 $ 93,750 $ 109,375
150,000 ..................................... 37,500 56,250 75,000 93,750 112,500 131,250
175,000 ..................................... 41,250 61,875 82,500 103,125 123,750 144,375
200,000 ..................................... 45,000 67,500 90,000 112,500 135,000 157,500
225,000 ..................................... 48,750 73,125 97,500 121,875 146,250 170,625
250,000 ..................................... 52,500 78,750 105,000 131,250 157,500 183,750
300,000 ..................................... 60,000 90,000 120,000 150,000 180,000 210,000
350,000 ..................................... 67,500 101,250 135,000 168,750 202,500 236,250
400,000 ..................................... 75,000 112,500 150,000 187,500 225,000 262,500
450,000 ..................................... 82,500 123,750 165,000 206,250 247,500 288,750
500,000 ..................................... 90,000 135,000 180,000 225,000 270,000 315,000
550,000 ..................................... 97,500 146,250 195,000 243,750 292,500 341,250
600,000 ..................................... 105,000 157,500 210,000 262,500 315,000 367,500
650,000 ..................................... 112,500 168,750 225,000 281,250 337,500 393,750
700,000 ..................................... 120,000 180,000 240,000 300,000 360,000 420,000
750,000 ..................................... 127,500 191,250 255,000 318,750 382,500 446,250
800,000 ..................................... 135,000 202,500 270,000 337,500 405,000 472,500
850,000 ..................................... 142,500 213,750 285,000 356,250 427,500 498,750
900,000 ..................................... 150,000 225,000 300,000 375,000 450,000 525,000
950,000 ..................................... 157,500 236,250 315,000 393,750 472,500 551,250
1,000,000 ..................................... 165,000 247,500 330,000 412,500 495,000 577,500
</TABLE>
- ------------------------
(1) The Pension Plan Table shows the combined estimated annual benefits payable
upon retirement under the Hexcel Corporation Pension Plan (the "Pension
Plan") and under each Named Executive Officer's Executive Deferred
Compensation and Consulting Agreement (the "Retirement Agreement").
PENSION PLAN. The Named Executive Officers began to participate in the
Pension Plan in 1996. Subject to tax-qualification limitations, the covered
compensation under the Pension Plan generally includes all cash and property
received for services (except for certain stock-related awards) and either
included in gross income or deferred under a tax-qualified plan, but the
covered compensation for 1996 is limited by tax-qualification requirements
to $150,000 for each Named Executive Officer. The annual benefit is
calculated as 1% of the executive's covered compensation for each year of
participation in the Pension Plan. As of the end of the 1996 fiscal year,
each Named Executive Officer had one credited year of service for accrued
benefits. Benefits are normally payable monthly, as a life annuity,
commencing upon the later of the executive's attainment of age 65 or
retirement. The benefits are not offset by Social Security or any other
amounts.
RETIREMENT AGREEMENTS. The Named Executive Officer's current covered
compensation under his Retirement Agreement is the sum of the respective
officer's salary and incentive cash bonuses set forth in the Summary
Compensation Table. The annual benefit is calculated as 1.5% of the
executive's covered compensation for each year of employment following the
effective date of the executive's Retirement Agreement. As of the end of the
1996 fiscal year, estimated credited years of service under the Retirement
Agreements were as follows: Mr. Lee--2 1/3 years; Mr. Habermeier-- 5/6 year;
Mr. Forsyth--2 1/6 years; Mr. Meehan--3 years; and Mr. Sandercock--7 1/6
years. Benefits are normally 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. The benefits are not offset
by Social Security or any other amounts. Each Retirement Agreement also
requires Hexcel to continue to cover the 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 Retirement
Agreement and has not attained the age of 75.
17
<PAGE>
EMPLOYMENT AND OTHER AGREEMENTS
EMPLOYMENT AGREEMENT WITH MR. LEE
Hexcel entered into a five-year employment agreement with Mr. Lee (the "Lee
Agreement") effective February 29, 1996. The Lee Agreement provides for (i) an
annual base salary of $400,000, subject to annual review by the Executive
Compensation Committee, and a bonus of $500,000 in respect of services rendered
in 1995, (ii) a deferred compensation arrangement intended to provide 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 STOPs under Hexcel's
Short-Term Option Program (and, upon exercise of such STOPs, grants of Reload
Options) and 200,000 performance accelerated restricted stock units ("PARS")
under Hexcel's PARS program. See "Compensation Committee Report on Executive
Compensation--Equity-based Incentives."
The Lee Agreement also provides for the grant to Mr. Lee on February 29,
1996 of options to purchase 200,000 shares of Hexcel Common under the Incentive
Stock Plan, which options (i) have an exercise price per share equal to the fair
market value of the Hexcel Common 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 Hexcel Common 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 Lee Agreement preserves the economic benefits to Mr. Lee of
certain compensatory arrangements provided for in the First Amended Plan of
Reorganization which was confirmed by the Bankruptcy Court in connection with
Hexcel's bankruptcy reorganization (the "Plan of Reorganization"). In this
regard, the Lee Agreement provides Mr. Lee with certain benefits that would have
been granted to him under the Plan of Reorganization, including the grant to Mr.
Lee of an option to purchase 113,379 shares of Hexcel Common with an exercise
price of $5.05 per share and vesting in equal monthly installments over a
two-year period from the date of grant.
SEVERANCE AGREEMENTS WITH MESSRS. FORSYTH, SANDERCOCK AND MEEHAN
In October 1994, January 1995 and November 1996, Hexcel entered into
severance agreements with Messrs. Forsyth, Sandercock and Meehan, 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.
18
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Hexcel's Executive Compensation Committee of the Board of Directors (the
"Committee") in Fiscal Year 1996 ("FY96") consisted of Messrs. Cheesmond
(Chairman), Geller, Sherman and Solomon, each of whom is a non-employee member
of the Hexcel's Board of Directors.
The Committee is accountable to the Board of Directors for developing,
monitoring and managing the executive compensation programs at Hexcel.
Specifically, the Committee reviews and authorizes the salaries, cash incentives
and equity incentives for the executive officers of Hexcel, including all of the
Named Executive Officers. The Committee administers the Incentive Stock Plan,
which provides for grants of stock options, restricted stock units and other
forms of equity and equity-based compensation.
Hexcel's compensation programs have been aligned with the Committee's
beliefs that:
1. Base salaries should be at or below median practices for similar
positions in the aerospace and manufacturing industries;
2. Annual cash incentive opportunities at target performance goals
should represent a significant portion of total cash compensation for
executives, and provide meaningful downside risk and upside opportunity for
variations in performance from targets;
3. The present value of long term incentives, when granted, can be
above average relative to a comparator group of companies ("Comparator
Group") in order to focus executive attention on creation of long term
stockholder value; and
4. Stock incentives should encourage executive ownership of Hexcel
equity as well as grants of stock options in order to link executives'
rewards directly with stockholders' risks and opportunities.
It is the Committee's belief that establishing a compensation program that
reflects these principles will result in the alignment of executive and
stockholder interests and enhance the financial returns to Hexcel's stockholders
relative to the Comparator Group. During FY96, the Committee, with the
assistance of executive compensation consultants Watson Wyatt & Co., reviewed
the total compensation provided to executives to ensure that it is consistent
with Hexcel's performance-based principles and the practices among the
Comparator Group. Each component of executive compensation is described more
fully below.
BASE SALARY
Base salaries for executives are determined by the Committee based on
Comparator Group salary practices for positions of similar responsibilities, and
on individual and business unit performance as presented by the Chairman and
Chief Executive Officer ("CEO"). While there are no preset weights on
performance criteria, the Committee assesses executives' contributions to
Hexcel's overall and divisional financial objectives such as: return to
stockholders, return on net assets, implementation of capital investments, cost
effectiveness, margin improvements, quality, labor relations, execution of
acquisitions and divestitures and revenue growth.
It is the Committee's objective and practice to set base salaries at levels
equivalent to the median (50th percentile) of comparable positions in the
Comparator Group. At the beginning of FY96, salaries for the Named Executive
Officers, including the CEO, were set forth below median to demonstrate a
conservative, controlled cost environment upon emergence from bankruptcy
reorganization. Effective January 1997, the Committee approved salary increases
for the Named Executive Officers, other than the CEO, that ranged from 0% to
16.7% and on average equaled 9.7%, to reflect a successful 1996 and make
progress toward an aggregate median competitive posture. Survey analysis
provided by Watson Wyatt & Co. indicates that Named Executive Officers' salaries
in the aggregate remain at the Comparator Group median after the 1997 salary
increases.
19
<PAGE>
ANNUAL INCENTIVES
In 1996, the Management Incentive Compensation Plan provided median cash
incentive compensation opportunities, compared to the Comparator Group, for
achievement of Hexcel's performance target with respect to earnings before
interest, taxes, depreciation and amortization ("EBITDA") and for achievement of
personal objectives. Incentive targets ranged from 25% to 60% of base salary,
depending on the nature of the position and Comparator Group practices. Actual
annual bonuses can range between 0% and 150% of the incentive target based on
actual EBITDA and personal results. Beginning in 1997, bonus awards will be
based on multiple performance measures for both Hexcel overall and its business
units. These measures are selected for their importance during any particular
year and include: revenue targets, revenue growth, gross margin improvement,
earnings before interest and taxes ("EBIT"), earnings before taxes ("EBT"), net
income and return on net assets.
In order to promote ownership of Hexcel's stock by key executives, the
Committee and Board approved, effective for bonuses earned with respect to FY97,
a Management Stock Purchase Plan (the "Management Stock Purchase Plan"). Under
this program, an executive may elect to purchase restricted stock units,
("Restricted Stock Units") with up to 50% of his/her pre-tax bonus award. A
Restricted Stock Unit becomes an unrestricted share of Hexcel Common upon the
expiration of the applicable Restricted Period (as such term is defined in the
Management Stock Purchase Plan). The purchase price of a Restricted Stock Unit
is 80% of the FMV of a share of Hexcel Common on the purchase date. One-third of
the Restricted Stock Units purchased will vest on each of the first three
anniversaries of the date of purchase.
EQUITY-BASED INCENTIVES
On February 29, 1996, Hexcel established two equity-based, longer-term
incentive programs: stock options and performance accelerated restricted stock
units ("PARS"). It is anticipated that grants of stock options and PARS will be
made annually to key executives. During FY96, an aggregate of 145,200 stock
options and 19,000 PARS were granted to the Named Executives Officers, not
including the CEO.
Non Qualified Stock Options ("NQSOs") are granted at 100% of fair market
value ("FMV") on the date of grant, vest at the rate of one-third of the initial
grant on each of the first three anniversaries from grant and expire ten years
after grant. Short-Term Options ("STOPs") are granted periodically, vest
immediately for an exercise period of 90 days and are exercisable at a price per
share equal to the FMV of a share of Hexcel Common on the date of exercise.
Reload options ("Reload Options") are granted upon the exercise of STOPs in the
ratio of two Reload Options for each STOP exercised. Reload Options vest (but
are not exercisable) one-third on each of the first three anniversaries of the
grant of the Reload Option, and become exercisable on the fourth anniversary of
the grant date. The sale of any shares acquired through the exercise of a STOP
prior to the fourth anniversary results in forfeiture of the associated Reload
Options. This arrangement represents an additional means of promoting ownership
of Hexcel Common by executives.
PARS are restricted stock units which vest seven years from the date of
grant unless accelerated upon Hexcel reaching certain targeted goals.
The Incentive Stock Plan permits the Committee to design awards with
features which it believes will provide great incentive for Hexcel's employees
to maximize stockholder value. As part of this goal, and subject to stockholder
approval of the requested additional shares for the Incentive Stock Plan, on
January 30, 1997, the Executive Compensation Committee authorized up to
2,600,000 Performance Accelerated Stock Options ("PASOs"). 2,474,000 PASOs were
granted on February 3, 1997 with an exercise price of $18.50 to 36 employees and
directors. Absent a significant increase in share value, the PASOs will vest
over nine years. If the closing price of Hexcel Common equals or exceeds $35 per
share for ten or more consecutive trading days within the first three years of
the date of grant, the options will become completely vested and exercisable at
that time. The PASOs are not reflected in the "OPTIONS/ SAR GRANTS IN LAST
FISCAL YEAR" table because they were not granted in fiscal 1996.
20
<PAGE>
Grants of stock options and PARS to the Named Executive Officers, except to
the CEO, are based on the Committee's assessment of competitive practices,
recommendations from the CEO based on individual performance and executives'
past awards.
CEO COMPENSATION
In determining Mr. Lee's compensation the Committee considers Hexcel's
financial and non-financial performance, as well as an analysis of Mr. Lee's
total compensation in relation to CEOs in the Comparator Group. The Committee
notes that in FY96 Hexcel generated a return to stockholders in excess of 40%.
Hexcel's strategic activities resulted in a company that is a global leader in
the Advanced Structural Materials business by successfully consummating the
acquisitions of the Ciba Composites and Hercules Composites businesses. During
this year of rapid revenue and net income growth (before consolidation
expenses), Hexcel maintained its gross margin performance and implemented an
aggressive operational restructuring to drive future cost savings and
efficiencies.
Mr. Lee's base salary for FY96 was $400,000, which was voluntarily unchanged
from the prior year and was significantly below the median salary level for CEOs
in the Comparator Group based on publicly available data. In light of this
salary relationship, Hexcel's strategic, operational and financial results for
FY96 and Mr. Lee's leadership in positioning Hexcel for growth and profitability
in 1997 and beyond, the Committee granted him a salary increase of 25% effective
January 1997, raising his annual salary to $500,000. Compensation data provided
to the Committee shows this salary remains below the industry median pay
practice.
Mr. Lee's target under the Management Incentive Compensation Plan is 75% of
base salary and his bonus can range, based on actual performance against goals,
between 0% and 112.5% of base salary. Based upon Hexcel's achievement of EBITDA
targets before consolidation expenses, Mr. Lee's actual FY96 bonus under the
terms of the Management Incentive Compensation Plan was $450,000, which is 150%
of target and equal to his maximum bonus. In 1996, Mr. Lee's bonus was based
solely on Hexcel's financial performance, with no component for personal
objectives.
In FY96, Mr. Lee received grants of stock options for 67,000 NQSOs, and
200,000 Reload Options upon exercise of STOPs. In addition, 20,600 PARS were
granted to Mr. Lee during FY96.
Under the terms of his employment agreement (see "Employment and Other
Agreements--Employment Agreement with Mr. Lee"), Mr. Lee also received in 1996,
100,000 STOPs, 200,000 PARS and 313,379 NQSOs.
TAX DEDUCTIBILITY OF COMPENSATION
It is the Committee's general policy to consider whether particular payments
and awards are deductible to Hexcel for federal income tax purposes, along with
other factors which may be relevant in setting executive compensation practices.
Consistent with this policy and in response to the final Treasury regulations
regarding the deductibility of executive compensation under Section 162(m) of
the Internal Revenue Code, the Committee takes appropriate steps to optimize
deductibility except where the best interests of Hexcel call for a different
compensation design.
John M.D. Cheesmond
Marshall S. Geller
Stanley Sherman
Martin L. Solomon
The Members of the Committee
21
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following current directors were members of the Committee during 1996:
John M.D. Cheesmond (Chairman), Marshall S. Geller, Stanley Sherman and Martin
L. Solomon. The following former directors were members of the Committee during
1996: Joseph L. Harrosh, Robert L. Witt and Peter Langerman.
Mr. Cheesmond and Mr. Sherman, members of the Committee from February 29,
1996 to December 31, 1996, each served as an executive officer of CGL or CGC
during 1996. During the period that Messrs. Cheesmond and Sherman served on the
Committee, pursuant to certain manufacturing and supply agreements between
Hexcel and Ciba-Geigy, sales to Ciba-Geigy were approximately $32.4 million and
sales to Hexcel were approximately 15.1 million. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS--Certain Relationships and Related Transactions with Ciba."
Any direct or indirect interest of Mr. Cheesmond or Mr. Sherman in these
transactions cannot be determined.
COMPENSATION OF DIRECTORS
Non-employee directors are compensated for services as directors in the
amount of $20,000 per year payable quarterly. Non-employee directors are also
paid $1,000 for each in-person Board of Directors' 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. By reason of their management positions, Messrs. Lee and
Habermeier do not receive any compensation as members of the Board of Directors.
Pursuant to Hexcel's Incentive Stock Plan, each person who becomes a
director after January 1, 1997 and who is not also a full-time employee of
Hexcel and has not previously received an option to purchase 40,000 shares of
Hexcel Common under Hexcel's Incentive Stock Plan will be granted, upon his
election or appointment as a director, an option to purchase 20,000 shares of
Hexcel Common with an exercise price equal to the fair market value of Hexcel
Common on the date of grant. The Incentive Stock Plan further provides that
immediately after each annual meeting of stockholders held after January 1, 1997
and prior to February 7, 2005, 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 Hexcel Common with an exercise price equal to the
fair market value of Hexcel Common on the date of grant.
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 GENERAL AEROSPACE
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 80.71 107.56 109.82
1993 34.90 118.38 137.28
1994 39.27 119.93 135.29
1995 98.16 164.94 187.86
1996 141.79 202.83 211.75
</TABLE>
<TABLE>
<CAPTION>
12/91 12/92 12/93 12/94 12/95 12/96
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Hexcel............................................... $ 100.00 $ 80.71 $ 34.90 $ 39.27 $ 98.16 $ 141.79
S&P.................................................. 100.00 107.56 118.38 119.93 164.94 202.83
Media General Aerospace*............................. 100.00 109.82 137.28 135.29 187.86 211.75
</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 Hexcel Common,
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
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH CIBA
On February 29, 1996, Hexcel consummated certain transactions with
Ciba-Geigy whereby Hexcel acquired the Ciba Composites Business (the
"Acquisition") pursuant to the terms and conditions of the Strategic Alliance
Agreement, the Governance Agreement, a Registration Rights Agreement, a
Distribution Agreement and other agreements (collectively, the "Agreements").
On December 20, 1996, CGL and Sandoz Limited effected a business
combination, forming Novartis Inc., a Swiss corporation. Prior to the business
combination, CGL formed a new subsidiary, Ciba Specialty Chemical Holdings Inc.
("Ciba"). On March 13, 1997, all direct and indirect interests in Hexcel
previously held by CGL were transferred to Ciba, including without limitation,
all of its direct or indirect interest in Hexcel Common, the Senior Subordinated
Debt (as defined below) and all of its rights and obligations under the
Agreements. In the Hexcel Consent Letter, Hexcel acknowledged Ciba as the
successor to the rights and obligations of CGL and CGC under the Agreements.
23
<PAGE>
THE STRATEGIC ALLIANCE AGREEMENT
Under the Strategic Alliance Agreement, Hexcel acquired the assets
(including the capital stock of certain non-U.S. subsidiaries) and assumed the
liabilities of the Ciba Composites Business, other than certain excluded assets
and liabilities, in exchange for (i) 18.0 million newly issued shares of Hexcel
Common, (ii) $25.0 million in cash, (iii) senior subordinated notes in an
aggregate principal amount of approximately $34.9 million, subject to certain
adjustments (the "Senior Subordinated Debt"); and (iv) senior demand notes in an
aggregate principal amount of $5.3 million. The aggregate purchase price for the
net assets acquired in 1996 was $206.4 million. Furthermore, in exchange for
various remaining assets of Ciba-Geigy's worldwide composites division acquired
between January 1, 1997 and February 28, 1997, Hexcel has subsequently
undertaken to deliver additional senior subordinated notes in an aggregate
principal amount of approximately $2.7 million.
THE GOVERNANCE AGREEMENT
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 of the Acquisition (the
"Closing").
CORPORATE GOVERNANCE
Pursuant to the Governance Agreement, Hexcel has agreed to exercise all
authority under applicable law to cause any slate of nominees presented to
stockholders for election to the Board of Directors to consist of certain
specified numbers of Ciba Nominees and Independent Nominees, in addition to the
Chairman and the President. The precise number of Ciba Nominees and Independent
Nominees to be included in any slate of nominees varies based on Ciba's
percentage ownership of the voting securities of Hexcel. See "ELECTION OF
DIRECTORS." The Governance Agreement further provides that (i) for so long as
Ciba beneficially owns voting securities representing 40% or more 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 of the Board of Directors."
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 voting
securities representing 40% or more of the total voting power of Hexcel, neither
the Board of Directors nor any committee thereof shall take any 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
24
<PAGE>
one Independent Director. In addition, the Governance Agreement generally
provides that for so long as Ciba beneficially owns voting securities
representing 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 total 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.
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
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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 or 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
sought by the Independent Directors and any opinions or recommendations
expressed in connection therewith) and (ii) 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).
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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 or
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 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
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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
CGL entered into the Distribution Agreement, which was assigned to Ciba in
accordance with the Hexcel Consent Letter (as so assigned, the "Distribution
Agreement"). Pursuant to the Strategic Alliance Agreement and the Distribution
Agreement, certain subsidiaries of CGL continued to act as distributors for
Hexcel for one year following the Closing through February 28, 1997. In
accordance with these agreements, Hexcel acquired certain assets (primarily
inventory and certain fixed assets) of these distributors from time to time
during the year following the Closing for an aggregate purchase price of
approximately $2.7 million, to be paid in senior subordinated notes. Pursuant to
the Distribution Agreement, sales to CGL subsidiaries were approximately $32.4
million from March 1, 1996 to December 31, 1996.
THE REGISTRATION RIGHTS AGREEMENT
In connection with the Acquisition, Hexcel and CGL entered into a
registration rights agreement, which was assigned to Ciba in accordance with the
Hexcel Consent Letter (as so assigned, the "Registration Rights Agreement"). The
Registration Rights Agreement provides that Hexcel will prepare and, not later
than 60 days prior to March 1, 1998, file with the Commission a "shelf"
registration statement covering the shares of Hexcel Common 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 Hexcel effect the registration under the Securities Act of the shares
of Hexcel Common that are then eligible for sale under the Registration Rights
Agreement. Ciba's shares of Hexcel Common 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
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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 Hexcel Common 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
Hexcel Common otherwise eligible for sale under the Registration Rights
Agreement), payment of expenses, selection of underwriters and indemnification.
THE SUPPLY AND MANUFACTURING AGREEMENTS
Hexcel and CGL have entered into various agreements and purchase orders,
some of which were entered into in connection with the Acquisition, pursuant to
which Hexcel and CGL have purchased certain products from each other. Sales to
CGL under such agreements were approximately $32.4 million on a worldwide basis
from March 1, 1996 to December 31, 1996. Sales to Hexcel under such agreements
were approximately $15.1 million on a worldwide basis from March 1, 1996 to
December 31, 1996.
OTHER RELATIONSHIPS AND RELATED TRANSACTIONS
UniRock Management Corporation ("UniRock") has served as a strategic
planning consultant to Hexcel during 1996, and Franklin S. Wimer, a director of
Hexcel and member of the Audit Committee, is a principal of UniRock. Hexcel had
an agreement with UniRock for consulting services, which terminated in April,
1996. Pursuant to such agreement, UniRock was paid $125,356 for services
rendered during 1996.
THE INCENTIVE STOCK PLAN
GENERAL
On February 21, 1996 the stockholders of Hexcel approved the Incentive Stock
Plan (the "Unamended Plan"). On January 30, 1997, the Board of Directors
approved certain amendments thereto (the "Incentive Stock Plan Amendments"),
subject to stockholder approval, and upon such stockholder approval the
Incentive Stock Plan, as amended and restated January 30, 1997 (as so amended
and restated, the "Incentive Stock Plan") will replace the Unamended Plan. Any
awards previously granted under the Unamended Plan will remain outstanding
pursuant to its terms.
The Incentive Stock Plan is being submitted to stockholders in view of,
among other things, the proposed increase in the number of shares of Hexcel
Common subject to the provisions of the Incentive Stock Plan.
The following description of the Incentive Stock Plan is not intended to be
complete and is qualified in its entirety by the complete text of the Incentive
Stock Plan, a copy of which is included as Annex A to this Proxy Statement.
DESCRIPTION OF THE PRINCIPAL FEATURES OF THE PLAN
AUTHORIZED SHARES
The Incentive Stock Plan authorizes an aggregate of 4,012,533 shares of
Hexcel Common that may be subject to awards, subject to adjustment as provided
in the Incentive Stock Plan. This aggregate number of authorized shares is
comprised of the 162,533 shares remaining available under the Unamended Plan
immediately prior to January 30, 1997 plus an additional 3,850,000 shares.
PURPOSE
The purpose of the Incentive Stock Plan is to benefit the stockholders of
Hexcel by enabling Hexcel and its subsidiaries to attract, retain and provide
incentives to the most highly qualified employees, officers, directors and
consultants.
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ADMINISTRATION
The Plan will be administered by the Executive Compensation Committee of the
Board of Directors (the "Committee"). The Committee has the authority to make
determinations with respect to the participation of employees, officers and
consultants in the Incentive Stock Plan and the grant terms of all awards (other
than awards granted to directors, as described below). The Committee has the
authority to establish, among other things, vesting schedules, performance
criteria, post-termination exercise provisions and all other material terms and
conditions of awards and has the authority to accelerate the time at which any
award becomes exercisable. The Committee has the authority to interpret and
construe the provisions of the Incentive Stock Plan.
ELIGIBILITY
Any employee, officer, director or consultant of Hexcel or its subsidiaries
selected by the Committee is eligible to receive discretionary awards under the
Incentive Stock Plan. Additionally, directors are eligible to receive formula
awards under the Incentive Stock Plan. It is currently estimated that up to
approximately 400 employees will be eligible to participate in the Incentive
Stock Plan.
DISCRETIONARY AWARDS
The Incentive Stock Plan provides for grants of a variety of awards,
including stock options, stock options in lieu of compensation elections, stock
appreciation rights, restricted shares, and other stock-based awards. Stock
options may be either "incentive stock options" which qualify under Section 422
of the Code ("ISOs") or "nonqualified stock options" which do not qualify under
Section 422 of the Code ("NQSOs"). To the extent that the aggregate fair market
value of Hexcel Common underlying options intended to be ISOs are exercisable
for the first time by any individual during any calendar year exceeds $100,000,
such options will be treated as NQSOs.
FORMULA AWARDS
Each eligible director appointed or elected between April 4, 1995 and
December 31, 1996, was automatically issued a nonqualified stock option to
purchase 40,000 shares of Hexcel Common. Any person who becomes a director for
the first time on or after January 1, 1997 who is not also a full-time employee
of Hexcel or any subsidiary is automatically granted (as of the date of his or
her election or appointment as a director) a nonqualified stock option to
acquire 20,000 shares of Hexcel Common. In addition, immediately after each
annual meeting of stockholders held after January 1, 1997 and before February 7,
2005, each director who is not a full-time employee of Hexcel or any subsidiary
and who is re-elected at such meeting will be granted a nonqualified stock
option to acquire 2,000 shares of Hexcel Common. All options described in this
paragraph will be granted automatically with an exercise price equal to the fair
market value of a share of Hexcel Common on the date of grant and with a term of
ten years. Such options will be exercisable as to one-third of the shares
subject thereto upon grant and as to an additional one-third of the shares on
the first and second anniversaries of the date of grant. Upon the occurrence of
a "change in control" of Hexcel (as defined in the Incentive Stock Plan), each
option described in this paragraph will become fully exercisable.
AMENDMENT AND TERMINATION
The Committee has the authority to terminate the Incentive Stock Plan or
make such modifications or amendments to the Incentive Stock Plan as it may deem
advisable. No amendment to the Incentive Stock Plan which requires stockholder
approval under applicable law, rule or regulation shall become effective without
the approval of Hexcel's stockholders. In addition, no termination or amendment
of the Incentive Stock Plan may adversely affect the rights of a participant
without the consent of such participant.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of certain United States federal
income tax consequences under current federal income tax laws relating to awards
under the Incentive Stock Plan. This summary is not intended to be exhaustive
and, among other things, does not describe state, local or foreign income and
other tax consequences. ACCORDINGLY, PARTICIPANTS IN THE INCENTIVE STOCK PLAN
SHOULD CONSULT THEIR RESPECTIVE TAX ADVISORS IN DETERMINING THE TAX CONSEQUENCES
OF SUCH PARTICIPATION.
NONQUALIFIED STOCK OPTIONS
An optionee will not recognize any taxable income upon the grant of an NQSO
and Hexcel will not be entitled to tax deduction with respect to such grant.
Upon exercise of an NQSO, the excess of the fair market value of the Hexcel
Common on the exercise date over the exercise price will be taxable as
compensation income to the optionee and will be subject to applicable
withholding taxes. Hexcel will generally be entitled to a tax deduction at that
time in the amount of such compensation income. The optionee's tax basis for the
Hexcel Common received pursuant to the exercise of an NQSO will equal the sum of
the compensation income recognized and the exercise price.
In the event of a sale or other disposition of Hexcel Common received upon
the exercise of an NQSO, any appreciation or depreciation after the exercise
date generally will be taxed as capital gain or loss and will be long-term
capital gain or loss if the holding period for such Hexcel Common (which begins
upon such exercise) is more than one year.
INCENTIVE STOCK OPTIONS
An optionee will not recognize any taxable income at the time of grant or
timely exercise of an ISO and Hexcel will not be entitled to a tax deduction
with respect to such grant or exercise. Exercise of an ISO may, however, give
rise to taxable compensation income subject to applicable withholding taxes, and
a corresponding tax deduction to Hexcel, if the ISO is not exercised on a timely
basis (generally, while the optionee is employed by Hexcel or one of its
subsidiaries or within 90 days after termination of employment) or if the
optionee engages in a "disqualifying disposition" as described below. The excess
of the fair market value, on the date of the exercise of an ISO, of the Hexcel
Common acquired pursuant to and over the exercise price constitutes an item of
tax preference for purposes of the federal alternative minimum tax.
A sale or exchange by an optionee of Hexcel Common acquired upon the
exercise of an ISO more than one year after the transfer of such Hexcel Common
to such optionee and more than two years after the date of grant of the ISO
generally will result in any difference between the net sale proceeds and the
exercise price being treated as long-term capital gain or loss to the optionee.
If such sale or exchange takes place within two years after the date of grant of
the ISO or within one year from the date of transfer of Hexcel Common to the
optionee, such sale or exchange will generally constitute a "disqualifying
disposition" of such Hexcel Common that will have the following results: any
excess of (i) the lesser of (a) the fair market value of the Hexcel Common at
the time of exercise of the ISO and (b) the amount realized on such
disqualifying disposition of the Hexcel Common over (ii) the exercise price of
such ISO will be taxable as compensation income to the optionee, subject to
applicable withholding taxes, and Hexcel will be entitled to a tax deduction in
the amount of such compensation income. Any further gain or loss after the date
of exercise generally will qualify as capital gain or loss and will not result
in any deduction by Hexcel.
STOCK APPRECIATION RIGHTS
The amount of any cash received upon the exercise of a stock appreciation
right ("SAR") will be includible in the grantee's ordinary income and Hexcel
generally will be entitled to a deduction for such amount. Upon disposition of
any stock received upon exercise of an SAR, the grantee will recognize
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capital gain or loss, which will be long or short-term depending on the period
elapsed since the date of such exercise equal to the difference between the
amount realized on such disposition and the fair market value of the Hexcel
Common on the date the SAR was exercised.
RESTRICTED SHARES
If restricted shares are awarded to a participant in accordance with the
terms of the Incentive Stock Plan, generally no income will be recognized by
such participant at the time the award is made. Generally, such participant will
be required to include in his or her ordinary income, as compensation, the fair
market value of such restricted shares upon the lapse of the forfeiture
provisions applicable thereto, less any amount paid therefor. The participant
may, however, elect within 30 days after acquiring the shares, to be taxed
immediately upon receipt of such shares rather than when the forfeiture
provisions lapse. If such election is made, the participant will recognize
ordinary income in the taxable year of his or her award in an amount equal to
the fair market value of such restricted shares (determined without regard to
the restrictions which by their terms will lapse) at the time of receipt, less
any amount paid therefor. Absent the making of the election referred to in the
preceding sentences, any cash dividends or other distributions paid with respect
to restricted shares prior to lapse of the applicable restrictions will be
includible in the participant's ordinary income as compensation at the time of
receipt. In each case, Hexcel will be entitled to a deduction in the same amount
as the participant realizes compensation income.
PLAN BENEFITS
Awards under the Incentive Stock Plan will be granted at the sole discretion
of the Committee and performance criteria may vary from year to year and from
participant to participant. Therefore, benefits under the Incentive Stock Plan
are not determinable. Compensation paid and other benefits granted to certain
executive officers of Hexcel for the 1996 fiscal year are set forth above in the
section entitled "EXECUTIVE COMPENSATION."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND
ADOPTION OF THE INCENTIVE STOCK PLAN
THE MANAGEMENT STOCK PURCHASE PLAN
GENERAL
The Board of Directors unanimously recommends that stockholders approve and
adopt the Management Stock Purchase Plan (the "Management Stock Purchase Plan").
On December 5, 1996, the Board of Directors adopted the Management Stock
Purchase Plan, subject to stockholder approval, and, upon such stockholder
approval, the Management Stock Purchase Plan will become effective as of January
1, 1997.
A copy of the Management Stock Purchase Plan is included as Annex B to this
Proxy Statement. The following discussion of the Management Stock Purchase Plan
does not purport to be complete and is qualified in its entirety by reference to
the Management Stock Purchase Plan included as Annex B hereto.
DESCRIPTION OF THE PRINCIPAL FEATURES OF THE PLAN
AUTHORIZED SHARES
The Management Stock Purchase Plan authorizes an aggregate of 150,000 shares
of Hexcel Common that may be subject to awards, subject to adjustment as
provided in the Management Stock Purchase Plan.
PURPOSES
The purposes of the Management Stock Purchase Plan are (i) to attract and
retain highly qualified executives, (ii) to align executive and stockholder
long-term interests, and (iii) to enable executives to purchase stock by using a
portion of their annual incentive compensation so that they can develop and
maintain a substantial stock ownership position in Hexcel.
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ADMINISTRATION
The Plan will be administered by the Executive Compensation Committee of the
Board of Directors (the "Committee"). The Committee has the authority to grant
Restricted Stock Units (as such term is defined in Section 5 of the Management
Stock Purchase Plan). The Committee has the authority to interpret and construe
the provisions of the Management Stock Purchase Plan and may establish, among
other things, the time at which Restricted Stock Units shall be granted and the
number of Restricted Stock Units to be covered by each grant.
ELIGIBILITY
Any officer or key management employee of Hexcel or its subsidiaries
selected by the Committee to participate in Hexcel's Management Incentive
Compensation Plan can participate in the Management Stock Purchase Plan
("Eligible Employees"). It is currently estimated that up to approximately 20
employees will be eligible to participate in the Management Stock Purchase Plan.
GRANT OF RESTRICTED STOCK UNITS
Eligible Employees can elect to receive up to fifty (50%) percent of their
annual bonus in Restricted Stock Units. This is called a "purchase" of the
Restricted Stock Units. The price of each Restricted Stock Unit will be eighty
(80%) percent of its fair market value on the date of purchase.
Restricted Stock Units generally cannot be sold or transferred for a
three-year period commencing on the date of purchase (the "Restricted Period"),
but the Restricted Period ends immediately in the event of a "Change in Control"
of Hexcel or certain employment termination events (as such terms are defined
and discussed in the Management Stock Purchase Plan).
VESTING
One-third (1/3) of the Restricted Stock Units purchased on a given date will
generally vest on each of the first three anniversaries of the date of purchase;
however, all Restricted Stock Units will immediately become completely vested
upon the occurrence of a "Change in Control" or certain employment termination
events (as such terms are defined and discussed in the Management Stock Purchase
Plan).
AMENDMENT AND TERMINATION
The Board has the authority to terminate the Management Stock Purchase Plan
or make such modifications or amendments to the Management Stock Purchase Plan
as it may deem advisable. If the Board determines that stockholder approval of
an amendment is necessary or appropriate, that amendment may be made subject to
such approval. In addition, no termination or amendment of the Management Stock
Purchase Plan may adversely affect any grant previously made to a participant
without the consent of such participant.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Generally, no income will be recognized at the time Restricted Stock Units
are granted to a participant in accordance with the terms of the Management
Stock Purchase Plan. Such participant will generally be required to include in
ordinary income, as compensation, the fair market value of such Restricted Stock
Units upon the lapse of the forfeiture provisions applicable thereto (less any
amounts paid for such Restricted Stock Units, except pre-tax amounts).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND
ADOPTION OF THE MANAGEMENT STOCK PURCHASE PLAN
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SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
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 Hexcel Common and other equity
securities of Hexcel. Executive officers, directors, and greater than ten
percent stockholders are required by Commission regulations to furnish Hexcel
with copies of all Section 16(a) forms they file. To Hexcel's knowledge, based
solely on a 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, 1996, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than ten percent stockholders were
complied with, except for one inadvertent late filing of a Form 3 by each of
Franklin Wimer and Robert Witt and one inadvertent late filing of a Form 5 by
William Meehan.
OTHER MATTERS
As of the date of this Proxy Statement, the management of 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 not known are brought before the
Annual Meeting, proxies will be voted at the discretion of the proxy holders
according to their discretion and best judgment.
STOCKHOLDER PROPOSALS
Any proposal that a Hexcel stockholder intends to present at the 1998 Annual
Meeting of Stockholders of Hexcel must be submitted to the Secretary of Hexcel
at its offices, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, Connecticut
06901-3238, no later than December 22, 1997 in order to be considered for
inclusion in the Proxy Statement relating to that meeting.
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.
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ANNUAL REPORT
Hexcel's Annual Report to Stockholders containing audited financial
statements for the year ended December 31, 1996, is being mailed herewith to all
stockholders of record. Additional copies are available without charge on
request. Requests should be addressed to the Secretary, Hexcel Corporation, Two
Stamford Plaza, 281 Tresser Boulevard, Stamford Connecticut, 06901-3238.
HEXCEL CORPORATION
Stamford, Connecticut
April 21, 1997
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ANNEX A
HEXCEL CORPORATION
INCENTIVE STOCK PLAN,
AS AMENDED AND RESTATED JANUARY 30, 1997
I. PURPOSE
This Incentive Stock Plan, as approved by the stockholders of the Company on
February 21, 1996, combined the Hexcel Corporation Long-Term Incentive Plan and
the Hexcel Corporation 1995 Directors' Stock Option Plan and, subject to
approval by the stockholders of the Company, is now amended and restated herein
(as so amended and restated, the "Plan"). The Plan is intended to attract,
retain and provide incentives to Employees, officers, Directors and consultants
of the Company, and to thereby increase overall stockholders' value. The Plan
generally provides for the granting of stock, stock options, stock appreciation
rights, restricted shares, other stock-based awards or any combination of the
foregoing to the eligible participants.
II. DEFINITIONS
(a) "Award" includes, without limitation, stock options (including Director
Options and incentive stock options within the meaning of Section 422(b) of the
Code) with or without stock appreciation rights, dividend equivalent rights,
stock awards, restricted share awards, or other awards that are valued in whole
or in part by reference to, or are otherwise based on, the Common Stock ("other
Common Stock-based Awards"), all on a stand-alone, combination or tandem basis,
as described in or granted under this Plan.
(b) "Award Agreement" means a written agreement setting forth the terms and
conditions of each Award made under this Plan.
(c) "Beneficial Owner" (and variants thereof) shall have the meaning given
in Rule 13d-3 promulgated under the Exchange Act.
(d) "Board" means the Board of Directors of the Company.
(e) "Ciba" shall mean Ciba-Geigy Limited, a Swiss corporation, or such
corporation or corporations as are substituted for Ciba-Geigy Limited, together
with their respective affiliates and any former affiliates holding Corporation
voting securities pursuant to Section 4.01(b) of the Governance Agreement.
(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(g) "Committee" means the Executive Compensation Committee of the Board or
such other committee of the Board as may be designated by the Board from time to
time to administer this Plan.
(h) "Common Stock" means the $.01 par value common stock of the Company.
(i) "Company" means Hexcel Corporation, a Delaware corporation.
(j) "Director" means a member of the Board.
(k) "Director Option" means a stock option granted pursuant to Section VII
hereof to a Director.
(l) "Director Optionee" means a recipient of an Award of a Director Option.
(m) "Employee" means an employee of the Company or a Subsidiary.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(o) "Fair Market Value" means the closing price for the Common Stock as
reported in publications of general circulation from the New York Stock Exchange
Consolidated Transactions Tape on such date, or, if there were no sales on the
valuation date, on the next preceding date on which such closing price was
recorded; provided, however, that the Committee may specify some other
definition of Fair Market Value in good faith with respect to any particular
Award.
(p) "Governance Agreement" shall have the meaning given in the Strategic
Alliance Agreement.
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(q) "Participant" means an Employee, officer, Director or consultant who has
been granted an Award under the Plan.
(r) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) of the Exchange Act, but
excluding Ciba for so long as Ciba is subject to the restrictions imposed by the
Governance Agreement.
(s) "Plan Year" means a calendar year.
(t) "Strategic Alliance Agreement" shall mean the Strategic Alliance
Agreement among the Company, Ciba-Geigy Limited and Ciba-Geigy Corporation,
dated as of September 29, 1995, as amended.
(u) "Subsidiary" means any corporation or other entity, whether domestic or
foreign, in which the Company has or obtains, directly or indirectly, a
proprietary interest of more than 50% by reason of stock ownership or otherwise.
III. ELIGIBILITY
Any Employee, officer, Director or consultant of the Company or Subsidiary
selected by the Committee is eligible to receive an Award pursuant to Section VI
hereof. Additionally, Directors described in Section VII(a) hereof are eligible
to receive Awards of Director Options pursuant to Section VII.
IV. PLAN ADMINISTRATION
(a) Except as otherwise determined by the Board, the Plan shall be
administered by the Committee. The Board, or the Committee to the extent
determined by the Board, shall periodically make determinations with respect to
the participation of Employees, officers, Directors and consultants in the Plan
and, except as otherwise required by law or this Plan, the grant terms of
Awards, including vesting schedules, price, restriction or option period,
dividend rights, post-retirement and termination rights, payment alternatives
such as cash, stock, contingent awards or other means of payment consistent with
the purposes of this Plan, and such other terms and conditions as the Board or
the Committee deems appropriate which shall be contained in an Award Agreement
with respect to a Participant.
(b) The Committee shall have authority to interpret and construe the
provisions of the Plan and any Award Agreement and make determinations pursuant
to any Plan provision or Award Agreement which shall be final and binding on all
persons. No member of the Committee shall be liable for any action or
determination made in good faith, and the members shall be entitled to
indemnification and reimbursement in the manner provided in the Company's
Certificate of Incorporation, as it may be amended from time to time.
(c) The Committee shall have the authority at the time of the grant of any
Award to provide for the conditions and circumstances under which such Award
shall be forfeited. The Committee shall have the authority to accelerate the
vesting of any Award and the time at which any Award becomes exercisable.
V. CAPITAL STOCK SUBJECT TO THE PROVISIONS OF THIS PLAN
(a) The capital stock subject to the provisions of this Plan shall be shares
of authorized but unissued Common Stock and shares of Common Stock held as
treasury stock. Subject to adjustment in accordance with the provisions of
Section XI, and subject to Section V(c) below, the maximum number of shares of
Common Stock that shall be available for grants of Awards under this Plan shall
be 4,012,533 (the number of shares remaining available under the Incentive Stock
Plan immediately prior to its amendment and restatement on January 30, 1997)
plus 3,850,000 additional shares.
(b) The grant of a restricted share Award shall be deemed to be equal to the
maximum number of shares which may be issued under the Award. Awards payable
only in cash will not reduce the number of shares available for Awards granted
under the Plan.
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(c) There shall be carried forward and be available for Awards under the
Plan, in addition to shares available for grant under paragraph (a) of this
Section V, all of the following: (i) shares represented by Awards which are
cancelled, forfeited, surrendered, terminated, paid in cash or expire
unexercised; and (ii) the excess amount of variable Awards which become fixed at
less than their maximum limitations.
VI. DISCRETIONARY AWARDS UNDER THIS PLAN
As the Board or Committee may determine, the following types of Awards and
other Common Stock-based Awards may be granted under this Plan on a stand-alone,
combination or tandem basis:
(a) STOCK OPTION. A right to buy a specified number of shares of Common
Stock at a fixed exercise price during a specified time, all as the Committee
may determine.
(b) INCENTIVE STOCK OPTION. An Award which may be granted only to Employees
in the form of a stock option which shall comply with the requirements of Code
Section 422 or any successor section as it may be amended from time to time. The
exercise price of any incentive stock option shall not be less than 100% of the
Fair Market Value of the Common Stock on the date of grant of the incentive
stock option Award. Subject to adjustment in accordance with the provisions of
Section XI, the aggregate number of shares which may be subject to incentive
stock option Awards under this Plan shall not exceed the maximum number of
shares provided in paragraph (a) of Section V above. To the extent that the
aggregate Fair Market Value of Common Stock with respect to which options
intended to be incentive stock options are exercisable for the first time by any
individual during any calendar year exceeds $100,000, such options shall be
treated as options which are not incentive stock options.
(c) STOCK OPTION IN LIEU OF COMPENSATION ELECTION. A right given with
respect to a year to a Director, officer or key Employee to elect to exchange
annual retainers, fees or compensation for stock options.
(d) STOCK APPRECIATION RIGHT. A right which may or may not be contained in
the grant of a stock option or incentive stock option to receive the excess of
the Fair Market Value of a share of Common Stock on the date the option is
surrendered over the option exercise price or other specified amount contained
in the Award Agreement.
(e) RESTRICTED SHARES. A transfer of Common Stock to a Participant subject
to forfeiture until such restrictions, terms and conditions as the Committee may
determine are fulfilled.
(f) DIVIDEND OR EQUIVALENT. A right to receive dividends or their equivalent
in value in Common Stock, cash or in a combination of both with respect to any
new or previously existing Award.
(g) STOCK AWARD. An unrestricted transfer of ownership of Common Stock.
(h) OTHER STOCK-BASED AWARDS. Other Common Stock-based Awards which are
related to or serve a similar function to those Awards set forth in this Section
VI.
VII. FORMULA AWARDS UNDER THIS PLAN
In addition to discretionary Awards (including, without limitation, options)
that may be granted to Directors pursuant to Section VI hereof, Director Options
shall be granted as provided below:
(a) GRANTS OF DIRECTOR OPTIONS.
(i) As of April 4, 1995, each Director shall be granted an Option to
acquire 40,000 shares of Common Stock upon the terms and subject to the
conditions set forth in the Plan and this Section VII. With respect to any
individual who becomes a Director and who is not also a full-time employee
of the Company or any Subsidiary (provided such individual has not
previously received a grant pursuant to this Section VII(a)(i)), such
individual shall be granted as of the date of his election or appointment as
a Director a Director Option to acquire (x) 40,000 shares of Common Stock if
elected or appointed between April 4, 1995 and December 31, 1995 inclusive
or, (y) 20,000 shares of Common Stock if elected or appointed on or after
January 1, 1997, upon the terms and subject to the conditions set forth in
the Plan and this Section VII.
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(ii) On April 4, 1996 and immediately after each annual meeting of
stockholders of the Corporation held after January 1, 1997 and before
February 7, 2005, each person who is not on such date also a full-time
employee of the Company or any Subsidiary and who (x) is a Director on April
4, 1996 or (y) has been re-elected at such meeting shall be granted a
Director Option to acquire 2,000 shares of Common Stock upon the terms and
subject to the conditions set forth in the Plan and this Section VII.
(iii) If on any date when Options are to be granted pursuant to Section
VII(a)(i) or (ii) the total number of shares of Common Stock as to which
Director Options are to be granted exceeds the number of shares of Common
Stock remaining available under the Plan, there shall be a pro rata
reduction in the number of shares of Common Stock as to which each Director
Option is granted on such day.
(b) TERMS OF DIRECTOR OPTIONS.
The terms of each Director Option granted under this Section VII shall be
determined by the Board consistent with the provisions of the Plan, including
the following:
(i) The purchase price of the shares of Common Stock subject to each
Director Option shall be equal to the Fair Market Value of such shares on
the date such option is granted.
(ii) Each Director Option shall be exercisable as to one-third of the
shares subject thereto immediately upon the grant of the option and as to an
additional one-third of such shares on the first and second anniversaries of
the date of such grant.
(iii) Shares of Common Stock obtained upon exercise of a Director Option
may not be sold until six months after the date such option was granted.
(iv) Each Director Option shall expire ten years after the granting
thereof. Each Director Option shall be subject to earlier expiration as
expressly provided in Section VII(c) hereof.
(c) DISABILITY, DEATH OR TERMINATION OF DIRECTOR STATUS; CHANGE IN CONTROL.
(i) If a Director Optionee ceases to be a Director for any reason other
than his disability or death, each Director Option held by him to the extent
exercisable on the effective date of his ceasing to be a Director shall
remain exercisable until the earlier to occur of (i) the first anniversary
of such effective date and (ii) the expiration of the stated term of the
Director Option; PROVIDED, HOWEVER, that if the Director Optionee is
removed, withdraws or otherwise ceases to be a Director due to his fraud,
dishonesty or intentional misrepresentation in connection with his duties as
a Director or his embezzlement, misappropriation or conversion of assets or
opportunities of the Company or any Subsidiary, all unexercised Director
Options held by the Director Optionee shall expire forthwith. Each Director
Option held by the Director Optionee to the extent not exercisable on the
effective date of his ceasing to be a Director for any reason other than his
disability or death shall expire forthwith.
(ii) If a Director Optionee ceases to be a Director as a result of his
disability or death, each Director Option held by him to the extent that the
Director Option is exercisable on the effective date of his ceasing to be a
Director shall remain exercisable by the Director Optionee or the Director
Optionee's executor, administrator, legal representative or beneficiary, as
the case may be, until the earlier to occur of (x) the third anniversary of
such effective date and (y) the expiration of the stated term of the
Director Option. Each Director Option held by the Director Optionee to the
extent not exercisable on the effective date of his ceasing to be a Director
as a result of his disability or death shall expire forthwith.
(iii) In the event of a Change in Control (as hereinafter defined) while
a Director Optionee is a Director, each Director Option held by the Director
Optionee to the extent not then exercisable shall thereupon become
exercisable. If a Change in Control occurs on or before the effective date
of a Director Optionee's ceasing to be a Director, the provisions of this
subsection (iii) shall govern with
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respect to the exercisability of the Director Options held by him as of the
date on which the Director Optionee ceases to be a Director and the
provisions of subsection (i) or (ii) of this Section VII(c) shall govern
with respect to the period of time during which such Director Options shall
remain exercisable. For purposes of this subsection (iii), "Change in
Control" shall mean any of the following events:
(1)(a) any Person is or becomes the Beneficial Owner of 20% or more of
either (i) the then outstanding Common Stock of the Company (the
"Outstanding Common Stock") or (ii) the combined voting power of the then
outstanding securities entitled to vote generally in the election of
directors of the Company (the "Total Voting Power"); excluding, however,
the following: (A) any acquisition by the Company or any of its
affiliates or (B) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its
affiliates and (b) Ciba beneficially owns, in the aggregate, a lesser
percentage of the Total Voting Power than such Person beneficially owns;
or
(2) a change in the composition of the Board such that the
individuals who, as of January 30, 1997, constitute the Board (such
individuals shall be hereinafter referred to as the "Incumbent
Directors") cease for any reason to constitute at least a majority of the
Board; provided, however, for purposes of this definition, that any
individual who becomes a director subsequent to such effective date,
whose election, or nomination for election by the Company's stockholders,
was made or approved pursuant to the Governance Agreement or by a vote of
at least a majority of the Incumbent Directors (or directors whose
election or nomination for election was previously so approved) shall be
considered a member of the Incumbent Board; but, provided, further, that
any such individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies or consents by or
on behalf of a person or legal entity other than the Board shall not be
considered a member of the Incumbent Board; or
(3) the approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company ("Corporate
Transaction"); excluding, however, such a Corporate Transaction (a)
pursuant to which all or substantially all of the individuals and
entities who are the beneficial owners, respectively, of the Outstanding
Common Stock and Total Voting Power immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 50%,
respectively, of the outstanding common stock and the combined voting
power of the then outstanding securities entitled to vote generally in
the election of directors of the company resulting from such Corporate
Transaction (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all
of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Corporate Transaction of the Outstanding Common
Stock and Total Voting Power, as the case may be, or (b) after which no
Person beneficially owns a greater percentage of the combined voting
power of the then outstanding securities entitled to vote generally in
the election of directors of such corporation than does Ciba; or
(4) Ciba shall become the Beneficial Owner of more than 57.5% of the
Total Voting Power; or
(5) the approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
VIII. AWARD AGREEMENTS
Each Award under the Plan shall be evidenced by an Award Agreement setting
forth the terms and conditions of the Award and executed by the Company and
Participant.
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IX. OTHER TERMS AND CONDITIONS
(a) ASSIGNABILITY. Unless provided to the contrary in any Award, no Award
shall be assignable or transferable except by will, by the laws of descent and
distribution and during the lifetime of a Participant, the Award shall be
exercisable only by such Participant. No Award granted under the Plan shall be
subject to execution, attachment or process.
(b) TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP. Except as provided in
Section VII(c) with respect to Director Options, the Committee shall determine
the disposition of the grant of each Award in the event of the retirement,
disability, death or other termination of a Participant's employment or other
relationship with the Company or a Subsidiary.
(c) RIGHTS AS A STOCKHOLDER. A Participant shall have no rights as a
stockholder with respect to shares covered by an Award until the date the
Participant is the holder of record. No adjustment will be made for dividends or
other rights for which the record date is prior to such date.
(d) NO OBLIGATION TO EXERCISE. The grant of an Award shall impose no
obligation upon the Participant to exercise the Award.
(e) PAYMENTS BY PARTICIPANTS. The Committee may determine that Awards for
which a payment is due from a Participant may be payable: (i) in U.S. dollars by
personal check, bank draft or money order payable to the order of the Company,
by money transfers or direct account debits; (ii) through the delivery or deemed
delivery based on attestation to the ownership of shares of Common Stock with a
Fair Market Value equal to the total payment due from the Participant; (iii)
pursuant to a "cashless exercise" program if established by the Company; (iv) by
a combination of the methods described in (i) through (iii) above; or (v) by
such other methods as the Committee may deem appropriate.
(f) WITHHOLDING. Except as otherwise provided by the Committee, (i) the
deduction of withholding and any other taxes required by law will be made from
all amounts paid in cash and (ii) in the case of payments of Awards in shares of
(g) COMMON STOCK. The Participant shall be required to pay the amount of any
taxes required to be withheld prior to receipt of such stock, or alternatively,
a number of shares the Fair Market Value of which equals the amount required to
be withheld may be deducted from the payment.
(h) MAXIMUM AWARDS. The maximum number of shares of Common Stock that may be
issued to any single Participant pursuant to options under this Plan is equal to
the maximum number of shares provided for in paragraph (a) of Section V.
X. TERMINATION, MODIFICATION AND AMENDMENTS
(a) The Executive Compensation Committee may at any time terminate the Plan
or from time to time make such modifications or amendments of the Plan as it may
deem advisable; provided, however, that no amendments to the Plan which require
stockholder approval under applicable law, rule or regulation shall become
effective unless the same shall be approved by the requisite vote of the
Company's stockholders.
(b) No termination, modification or amendment of the Plan may adversely
affect the rights conferred by an Award without the consent of the recipient
thereof.
(c) Notwithstanding anything herein to the contrary, the provisions of
Section VII shall not be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
or the rules thereunder.
XI. RECAPITALIZATION
The aggregate number of shares of Common Stock as to which Awards may be
granted to Participants, the number of shares thereof covered by each
outstanding Award, and the price per share thereof in each such Award, shall all
be proportionately adjusted for any increase or decrease in the number of issued
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shares of Common Stock resulting from a subdivision or consolidation of shares
or other capital adjustment, or the payment of a stock dividend or other
increase or decrease in such shares, effected without receipt of consideration
by the Company, or other change in corporate or capital structure; provided,
however, that any fractional shares resulting from any such adjustment shall be
eliminated. The Committee shall also make the foregoing changes and any other
changes, including changes in the classes of securities available, to the extent
it is deemed necessary or desirable to preserve the intended benefits of the
Plan for the Company and the Participants in the event of any other
reorganization, recapitalization, merger, consolidation, spin-off, extraordinary
dividend or other distribution or similar transaction.
XII. NO RIGHT TO EMPLOYMENT
Except as provided in Section VII with respect to Director Options, no
person shall have any claim or right to be granted an Award, and the grant of an
Award shall not be construed as giving a Participant the right to be retained in
the employ of, or in any other relationship with, the Company or a Subsidiary.
Further, the Company and each Subsidiary expressly reserve the right at any time
to dismiss a Participant free from any liability, or any claim under the Plan,
except as provided herein or in any Award Agreement issued hereunder.
XIII. GOVERNING LAW
To the extent that federal laws do not otherwise control, the Plan shall be
construed in accordance with and governed by the laws of the State of Delaware.
XIV. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable laws and
regulations. In case any one or more of the provisions of this Plan shall be
held invalid, illegal or unenforceable in any respect under applicable law and
regulation, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and the invalid,
illegal or unenforceable provision shall be deemed null and void; however, to
the extent permissible by law, any provision which could be deemed null and void
shall first be construed, interpreted or revised retroactively to permit this
Plan to be construed in compliance with all applicable laws so as to foster the
intent of this Plan.
XV. EFFECTIVE DATE AND TERM
The Hexcel Corporation Incentive Stock Plan is amended and restated herein
on January 30, 1997. The effectiveness of such amendment and restatement is
subject to approval by stockholders of the Company.
AWARDS GRANTED UNDER THE AMENDED AND RESTATED PLAN PRIOR TO SUCH APPROVAL BY
THE STOCKHOLDERS SHALL BE SUBJECT TO SUCH APPROVAL. THE PLAN SHALL TERMINATE ON
FEBRUARY 8, 2005. NO AWARDS SHALL BE GRANTED AFTER THE TERMINATION OF THE PLAN.
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ANNEX B
HEXCEL CORPORATION
MANAGEMENT STOCK PURCHASE PLAN
1. PURPOSES; TYPES OF GRANTS; CONSTRUCTION.
The purposes of the Hexcel Corporation Management Stock Purchase Plan (the
"Plan") are to attract and retain highly-qualified executives, to align
executive and stockholder long-term interests by creating a direct link between
annual incentive executive compensation and stockholder return and to enable
executives to purchase stock by using a portion of their annual incentive
compensation so that they can develop and maintain a substantial stock ownership
position in Hexcel Corporation (the "Company").
2. DEFINITIONS.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Agreement" shall mean an agreement entered into between the Company
and a Participant in connection with a grant under the Plan.
(b) "Annual Bonus" shall mean the bonus earned by a Participant for any
Company fiscal year under the Annual Plan.
(c) "Annual Plan" shall mean the Hexcel Corporation Management Incentive
Compensation Plan, as amended from time to time.
(d) "Beneficial Owner" (and variants thereof) shall have the meaning
given in Rule 13d-3 promulgated under the Exchange Act.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Cause" shall mean (i) the willful and continued failure by the
Participant to substantially perform the Participant's duties with the
Company (other than any such failure resulting from the Participant's
incapacity due to physical or mental illness) after a written demand for
substantial performance is delivered to the Participant by the Company,
which demand specifically identifies the manner in which the Company
believes that the Participant has not substantially performed the
Participant's duties, or (ii) the willful engaging by the Participant in
conduct which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii)
of this definition, no act, or failure to act, on the Participant's part
shall be deemed "willful" unless done, or omitted to be done, by the
Participant not in good faith and without reasonable belief that the
Participant's act, or failure to act, was in the best interest of the
Company.
(g) "Change in Control" shall have the meaning given in Article 6
hereof.
(h) "Ciba" shall mean Ciba-Geigy Limited, a Swiss corporation, or such
corporation or corporations as are substituted for Ciba-Geigy Limited,
together with their respective affiliates and any former affiliates holding
Company voting securities pursuant to Section 4.01(b) of the Governance
Agreement.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(j) "Committee" shall mean the Executive Compensation Committee of the
Board or such other committee of the Board as may be designated by the
Board.
(k) "Company" shall mean Hexcel Corporation, a corporation organized
under the laws of the State of Delaware, or any successor corporation.
(l) "Disability" shall mean that, as a result of the Participant's
incapacity due to physical or mental illness or injury, the Participant
shall not have performed all or substantially all of the
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Participant's usual duties as an employee for a period of more than
one-hundred-fifty (150) days in any period of one-hundred-eighty (180)
consecutive days.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" per share of Stock shall be the average of the
closing prices on the NYSE Consolidated Transactions Tape for the five
trading days immediately preceding the relevant valuation date and "Fair
Market Value" of a Restricted Stock Unit on any valuation date shall be
deemed to be equal to the Fair Market Value of a share of Stock on such
valuation date.
(o) "Governance Agreement" shall have the meaning given in the Strategic
Alliance Agreement.
(p) "Participant" shall mean a person who receives a grant of Restricted
Stock Units under the Plan; all such grants are sometimes referred to herein
as "purchases".
(q) "Person", as used in Article 6 hereof, shall have the meaning given
in Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) of the Exchange Act, but excluding Ciba for so long as Ciba
is subject to the restrictions imposed by the Governance Agreement.
(r) "Plan" means this Hexcel Corporation Management Stock Purchase Plan,
as amended from time to time.
(s) "Restricted Period" shall have the meaning given in Sections 5(c)
and 5(h) hereof.
(t) "Restricted Stock Unit" or "Restricted Stock Units" shall have the
meaning given in Section 5 hereof.
(u) "Retirement" shall mean the termination of a Participant's
employment (other than by reason of death or Cause) which occurs either (i)
at or after age 65 or (ii) at or after age 55 after five (5) years of
employment by the Company (or a Subsidiary thereof).
(v) "Stock" shall mean shares of the common stock of the Company, par
value $.01 per share.
(w) "Strategic Alliance Agreement" shall mean the Strategic Alliance
Agreement among Hexcel Corporation, Ciba-Geigy Limited and Ciba-Geigy
Corporation, dated as of September 29, 1995, as amended.
(x) "Subsidiary" shall mean any subsidiary of the Company (whether or
not a subsidiary at the date the Plan is adopted) which is designated by the
Committee to participate in the Plan.
(y) "Term" shall have the meaning given in Article 14 hereof.
3. STOCK.
The maximum number of shares of the Stock which shall be reserved for the
grant of Restricted Stock Units under the Plan shall be 150,000, which number
shall be subject to adjustment as provided in Article 7 hereof. Such shares may
be either authorized but unissued shares or shares that shall have been or may
be reacquired by the Company.
If any outstanding grant of Restricted Stock Units under the Plan should,
for any reason be cancelled or be forfeited before all its restrictions lapse,
the shares of Stock allocable to the cancelled or terminated portion of such
grant shall (unless the Plan shall have been terminated) become available for
subsequent grants under the Plan.
4. ELIGIBILITY.
During the Term of the Plan any Participant in the Annual Plan can elect to
receive up to fifty (50%) percent of the Participant's Annual Bonus in
Restricted Stock Units granted pursuant to, and subject to the terms and
conditions of, this Plan. Except as otherwise provided by the Committee in its
discretion with respect to the first fiscal year of the Company in which (i) the
Plan is in effect or (ii) a Participant participates in the Plan, any such
election by a Participant must be made at least six months prior to the
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<PAGE>
day the amount of the Participant's Annual Bonus is finally determined under the
Annual Plan. Since the Restricted Stock Units are "purchased" with part or all
of the Annual Bonus, all Restricted Stock Unit grants under this Plan are
sometimes referred to herein as "purchases." For purposes of the Plan, the date
of purchase of a Restricted Stock Unit shall be deemed to be the date the Annual
Bonus (from which the purchase funds are derived) is payable.
5. RESTRICTED STOCK UNITS.
Each grant of Restricted Stock Units under the Plan shall be evidenced by a
written Agreement between the Company and the Participant, in such form as the
Committee shall from time to time approve, and shall comply with the following
terms and conditions (and with such other terms and conditions not inconsistent
with the terms of this Plan as the Committee, in its discretion, shall
establish):
(a) NUMBER OF RESTRICTED STOCK UNITS. Each Agreement shall state the
number of Restricted Stock Units to be subject to a grant.
(b) PRICE. The price of each Restricted Stock Unit purchased under the
Plan shall be eighty (80%) percent of its Fair Market Value on the date of
purchase. Notwithstanding any other provision of the Plan, in no event shall
the price per Restricted Stock Unit be less than the par value per share of
Stock.
(c) NORMAL VESTING; NORMAL END OF RESTRICTED PERIOD. Subject to Section
5(d) hereof, one-third ( 1/3) of Restricted Stock Units purchased on a given
date shall vest on each of the first three anniversaries of the date of
purchase, but the Restricted Period of all Restricted Stock Units purchased
on that date shall end on the third anniversary thereof.
(d) ACCELERATION OF VESTING AND END OF RESTRICTED PERIOD.
Notwithstanding Section 5(c) hereof, a Participant's Restricted Stock Units
shall immediately become completely vested and their respective Restricted
Periods shall end upon the first to occur of (x) a Change in Control, (y)
the involuntary termination of the Participant's employment without Cause,
or (z) the termination of a Participant's employment by reason of Retirement
or the Participant's death or Disability. Additionally, the Committee shall
have the authority to vest any or all of a Participant's Restricted Stock
Units and to end their respective Restricted Periods at such earlier time or
times and on such terms and conditions as the Committee shall deem
appropriate.
(e) PAYMENT AT END OF RESTRICTED PERIOD. Upon the end of the Restricted
Period with respect to a Restricted Stock Unit, the Participant (or the
Participant's estate, in the event of the Participant's death) will receive
payment of all the Participant's Restricted Stock Units in the form of an
equal number of unrestricted shares of Stock.
(f) TERMINATION DURING THE RESTRICTED PERIOD AND VESTED RESTRICTED STOCK
UNITS; PAYMENT. If the termination of the employment of a Participant occurs
during the Restricted Period, the Participant (or the Participant's estate,
in the event of the Participant's death) will receive unrestricted shares of
Stock equal in number to the Participant's vested Restricted Stock Units.
(g) TERMINATION DURING RESTRICTED PERIOD AND UNVESTED RESTRICTED STOCK
UNITS; PAYMENT. If the termination of the employment of a Participant occurs
during the Restricted Period, the Participant will receive a cash payment
equal to eighty (80%) percent of the Fair Market Value of the Participant's
unvested Restricted Stock Units on the date of their purchase.
(h) RESTRICTIONS. Restricted Stock Units (whether or not vested) may not
be sold, assigned, transferred, pledged, hypothecated or otherwise disposed
of, except by will or the laws of descent and distribution, during the
Restricted Period. The Committee may also impose such other restrictions and
conditions on the shares as it deems appropriate.
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6. CHANGE IN CONTROL OF THE COMPANY.
For purposes of the Plan, the term "Change in Control" shall mean any of the
following events:
(a) (i) any Person is or becomes the Beneficial Owner of 20% or more of
either (x) the then outstanding common stock of the Company (the
"Outstanding Common Stock") or (y) the combined voting power of the then
outstanding securities entitled to vote generally in the election of
directors of the Company (the "Total Voting Power"), excluding, however, the
following: (1) any acquisition by the Company or any of its affiliates or
(2) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its affiliates; and (ii)
Ciba Beneficially Owns, in the aggregate, a lesser percentage of the Total
Voting Power than such Person Beneficially Owns; or
(b) a change in the composition of the Board such that the individuals
who, as of the date of the adoption of the Plan by the Board, constitute the
Board (such individuals shall be hereinafter referred to as the "Incumbent
Directors") cease for any reason to constitute at least a majority of the
Board; PROVIDED, HOWEVER, for purposes of this definition, that any
individual who becomes a director subsequent to such date, whose election,
or nomination for election by the Company's stockholders, was made or
approved pursuant to the Governance Agreement or by a vote of at least a
majority of the Incumbent Directors (or directors whose election or
nomination for election was previously so approved) shall be considered a
member of the Incumbent Board; but, PROVIDED, FURTHER, that any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of a
person or legal entity other than the Board shall not be considered a member
of the Incumbent Board; or
(c) the approval by the stockholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially
all of the assets of the Company ("Corporate Transaction"); excluding,
however, such a Corporate Transaction (i) pursuant to which all or
substantially all of the individuals and entities who are the Beneficial
Owners, respectively, of the Outstanding Common Stock and Total Voting Power
immediately prior to such Corporate Transaction will Beneficially Own,
directly or indirectly, more than 50%, respectively, of the outstanding
common stock and the combined voting power of the then outstanding
securities entitled to vote generally in the election of directors of the
company resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership immediately prior to such Corporate Transaction of the
Outstanding Common Stock and Total Voting Power, as the case may be, or (ii)
after which no Person Beneficially Owns a greater percentage of the combined
voting power of the then outstanding securities entitled to vote generally
in the election of directors of such corporation than does Ciba; or
(d) Ciba shall become the Beneficial Owner of more than 57.5% of the
Total Voting Power; or
(e) the approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
7. EFFECT OF CERTAIN CHANGES.
In the event of any extraordinary dividend, stock dividend,
recapitalization, merger, consolidation, stock split, warrant or rights
issuance, or combination or exchange of such shares, or other similar
transactions, the number of shares of Stock available for grants and the number
of such shares covered by outstanding grants shall be equitably adjusted by the
Committee to reflect such event and preserve the value of such grants; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated.
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<PAGE>
8. PAYMENT OF WITHHOLDING TAXES.
The Committee shall have discretion to permit or require a Participant, on
such terms and conditions as it determines, to pay all or a portion of any taxes
arising in connection with a purchase of Restricted Stock Units hereunder or the
vesting or lapse of restrictions with respect thereto by having the applicable
employer withhold shares of the Stock or by the Participant's delivering other
shares of Stock having a then-current Fair Market Value equal to the amount of
taxes to be withheld.
9. RIGHTS AS A STOCKHOLDER.
A Participant or a transferee of a grant shall have no rights as a
stockholder with respect to any shares of Stock which may become issuable
pursuant to the grant until the date of the issuance of a stock certificate to
him or her for such shares. No adjustment shall be made for dividends (whether
ordinary or extraordinary, and whether in cash, securities or other property) or
distribution of other rights for which the record date is prior to the date such
stock certificate is issued, except as provided in Article 7 hereof.
10. NO RIGHTS TO EMPLOYMENT.
Nothing in the Plan or in any grant made or Agreement entered into pursuant
hereto shall confer upon any Participant the right to continue in the employ of
the Company or any Subsidiary or to be entitled to any remuneration or benefits
not set forth in the Plan or such Agreement or to interfere with, or limit in
any way, the right of the Company or any such Subsidiary to terminate such
Participant's employment. Grants made under the Plan shall not be affected by
any change in duties or position of a Participant as long as such Participant
continues to be employed by the Company or any Subsidiary.
11. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall have
the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Restricted Stock Units; to determine the
persons to whom, and the time or times at which grants shall be granted; to
determine the number of Restricted Stock Units to be covered by each grant; to
interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Agreements
(which need not be identical) and to cancel or suspend grants, as necessary; and
to make all other determinations deemed necessary or advisable for the
administration of the Plan.
The Board shall fill all vacancies, however caused, in the Committee. The
Board may from time to time appoint additional members to the Committee, and may
at any time remove one or more Committee members and substitute others. The
Committee may appoint a chairperson and a secretary and make such rules and
regulations for the conduct of its business as it shall deem advisable, and
shall keep minutes of its meetings. The Committee shall hold its meetings at
such times and places (and its telephonic meetings at such times) as it shall
deem advisable. The Committee may delegate to one or more of its members or to
one or more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. All decisions, determinations
and interpretations of the Committee shall be final and binding on all persons,
including the Company, the Participant (or any person claiming any rights under
the Plan from or through any Participant) and any stockholder.
No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any grant
hereunder.
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12. AMENDMENT AND TERMINATION OF THE PLAN.
The Board at any time and from time to time may suspend, terminate, modify
or amend the Plan; provided, however, that an amendment for which the Board
determines stockholder approval is necessary or appropriate under the
circumstances then prevailing shall not be effective unless approved by the
requisite vote of stockholders. Except as provided in Article 7 hereof, no
suspension, termination, modification or amendment of the Plan may adversely
affect any grant previously made to a Participant, unless the written consent of
the Participant is obtained.
13. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant hereto shall
be governed by the laws of the State of Delaware.
14. EFFECTIVE DATE; APPROVAL OF STOCKHOLDERS; TERM.
The Plan shall become effective January 1, 1997, subject to the approval of
the shareholders of the Company. Unless the Plan is terminated earlier pursuant
to Article 12 hereof, the Term of the Plan shall end on March 31, 2007 (or such
earlier date as all Restricted Stock Units to be granted in connection with
elections made under the Annual Plan with respect to the Company's 2006 fiscal
year have been granted), and no grants shall be made thereafter. However,
holdings of Restricted Stock Units granted hereunder may extend beyond such
date, and the provisions of the Plan shall continue to apply to such Restricted
Stock Units.
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<PAGE>
HEXCEL CORPORATION
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901-3238
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 John J. Lee, John M.D. Cheesmond and Marshall S. Geller 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 March 24, 1997 at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Marriott Hotel, Two
Stamford Forum, Stamford, Connecticut, on May 22, 1997 at 10:30 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 Proxy Statement
dated April 21, 1997, receipt of which is hereby acknowledged.
(Continued and to be signed on the reverse side)
<PAGE>
PLEASE SIGN, DATE AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
HEXCEL CORPORATION
MAY 22, 1997
A /X/ Please mark your
votes as in this
example
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
FOR all WITHHOLD
nominees AUTHORITY
listed at to vote
right for all
(except as nominees
written to listed
the contrary at THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
below right NOMINEES FOR DIRECTOR AND FOR APPROVAL OF THE STATED PROPOSALS. FOR AGAINST ABSTAIN
1. Election of / / / / Nominees: John M.D. Cheesmond 2. Approval and Adoption of the Incentive / / / / / /
Directors (check Marshall S. Geller Stock Plan of Hexcel as Amended and
one box only): Juergen Habermeier Restated as of January 30, 1997.
John J. Lee
INSTRUCTION: To withhold authority to vote Stanley Sherman 3. Approval and Adoption of the / / / / / /
for any individual nominee(s), write the Martin L. Solomon Management Stock Purchase Plan of
name(s) of the nominee(s) below: George S. Springer Hexcel.
Joseph T. Sullivan
__________________________________________ Hermann Vodicka
Franklin S. Wimer 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 matters that may properly come before the Annual
Meeting. IN THE ABSENCE OF SPECIFIC INSTRUCITONS, 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 MATTERS THAT MAY PROPERLY COME BEFORE
THE ANNUAL MEETING.
</TABLE>
Signatures(s) ___________________ ____________________ DATED: _______, 1997
Note: Please sign exactly 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 an agent, attorney or fiduciary, please
indicate the capacity in which you are signing.
