Exhibit 10.37
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 30th day of July, 2001, between
Hexcel Corporation, a Delaware corporation (the "COMPANY"), and Xxxxx X. Xxxxxx
(the "EXECUTIVE").
WHEREAS, the parties desire to enter into this agreement,
together with the Exhibits attached hereto, setting forth the terms and
conditions of the employment relationship of the Executive with the Company
(this "Agreement");
NOW, THEREFORE, in consideration of the premises and the
respective covenants and agreements of the parties herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve the Company, on the terms
and conditions set forth herein.
2. TERM. The period during which the Executive is employed by
the Company hereunder (the "EMPLOYMENT PERIOD") shall commence on July 30, 2001
(the "EFFECTIVE DATE") and shall end on the fourth anniversary thereof;
PROVIDED, HOWEVER, that commencing on the fourth anniversary of the Effective
Date and on each subsequent anniversary of the Effective Date (each such
anniversary, a "RE NEWAL DATE"), the Employment Period shall automatically be
extended for one additional year unless, not later than the date which is one
year prior to such Renewal Date, the Company or the Executive shall have given
notice not to extend the Employment Period for such one additional year.
3. POSITION AND DUTIES. The Executive shall serve as Chairman
of the Board of Directors of the Company (the "BOARD") and Chief Executive
Officer of the Company and shall have such responsibilities, duties and
authorities consistent with such position and as may from time to time be
assigned to the Executive by the Board. The Executive shall devote substantially
all of his working time and efforts to the business and affairs of the Company;
PROVIDED, HOWEVER, that the Executive will be permitted to serve as a director
to other for-profit and not-for-profit organiza tions and corporations so long
as (a) such service does not materially interfere with the performance of his
obligations hereunder and (b) such organizations and corpora tions are not
competitive in any business
area in which the Company is engaged during the Employment Period. The Executive
shall furnish to the Company a list of each such entity on the Effective Date
and shall update such list as appropriate.
4. PLACE OF PERFORMANCE. In connection with the Executive's
employment by the Company, the Executive shall perform his duties and conduct
his business, and his principal place of employment shall be, at the principal
executive offices of the Company, except for required travel on the Company's
business.
5. COMPENSATION AND RELATED MATTERS.
(a) SALARY. During the period of the Executive's employment
hereunder, the Company shall pay to the Executive an annual base salary at a
rate of $550,000, which salary shall be reviewed annually by the Board for
possible increase; PROVIDED, HOWEVER, that once the Executive's annual base
salary is in creased, it may not thereafter be decreased during the term of this
Agreement (such salary, as it may be increased, the "BASE SALARY"). The Base
Salary shall be paid in substantially equal installments, no less frequently
than monthly, in accordance with the Company's standard payroll practices.
(b) ANNUAL BONUSES; SIGN-ON AWARD.
(i) During the term of the Executive's employment
hereunder, the Executive shall participate in the Company's Management
Incentive Compensation Plan (or in such alternative or successor annual
cash incentive compensation plans as the Company shall make available
to its other officers) (such plan or alternative or successor plan, the
"MICP") and shall have (A) a target bonus opportunity thereunder of not
less than 100% of his rate of Base Salary and (B) a maximum bonus
opportunity thereunder of not less than 200% of his rate of Base
Salary. With respect to fiscal 2001, the Company shall pay to the
Executive a bonus pursuant to the terms of the MICP which is no less
than $229,167.
(ii) Immediately following the Effective Date, the
Company shall pay to the Executive a lump sum cash payment of $200,000
as a Sign-on Award.
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(c) EQUITY COMPENSATION.
(i) STOCK OPTION. Effective as of the Effective Date,
the Company shall grant to the Executive options to purchase 550,000
and 275,000 shares of common stock of the Company, par value $.01 per
share ( the "COMMON STOCK") pursuant to option agreements that are
attached hereto as Exhibits A and B, respectively.
(ii) RESTRICTED STOCK. Effective as of the Effective
Date, the Company shall grant to the Executive 90,000 shares of
restricted Common Stock pursuant to a restricted stock agreement that
is attached hereto as Exhibit C.
(iii) ANNUAL GRANTS. The Executive shall not be
entitled to participate in the Company's long-term annual equity award
grant programs available to other senior level executives until the
fourth anniver sary of the Effective Date; PROVIDED, HOWEVER, that the
Board or the Compen sation Committee of the Board may grant equity
awards to the Executive in its sole discretion.
(d) OTHER BENEFITS. As of the Effective Date, the Com
pany and the Executive shall enter into a Supplemental Executive Retirement
Agreement in the form annexed hereto as Exhibit D. Pursuant to the terms of the
Company's executive perquisite plan, the Company shall pay the Executive $1,000
per month as an automobile allowance. In addition, the Executive shall be
entitled to elect benefits with a value up to $23,000 for benefits offered
pursuant to such plan, which perquisites currently include dues for one country
club, dues for one luncheon club, financial planning and tax preparation
assistance, supplemental health insur ance and supplemental life insurance. The
Executive shall also be entitled to participate in all other employee benefit
plans and arrangements of the Company applicable to, and on a basis no less
favorable than, senior level executives (includ ing, without limitation,
medical, dental, vision, hospitalization, life insurance, short- term
disability, long-term disability, accidental death and dismemberment protection
and travel accident insurance plans).
(e) VACATIONS. The Executive shall be entitled to six weeks
of vacation in each calendar year.
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(f) EXPENSES. During the term of the Executive's employ
ment hereunder, the Executive shall be entitled to receive prompt reimbursement
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, including but not limited to (i) legal fees and
expenses incurred by the Executive in connection with the Executive undertaking
employment with the Company in an amount up to the sum of (A) $50,000 and (B)
the lesser of (1) $25,000 and (2) one-half (1/2) of the excess, if any, of the
Executive's actual legal fees and expenses over $50,000, (ii) all reasonable and
customary expenses of travel and living expenses while away from home on
business or at the request of and in the service of the Company, in each case
provided that such expenses are incurred and accounted for in accordance with
the policies and procedures established by the Company and (iii) relocation, at
his election, from his current residence to the Stamford, Ct. area, in
accordance with the Company's relocation policy for new employees (without
regard to the 50-mile limitation therein).
6. DIRECTORSHIPS/OTHER OFFICES. The Executive agrees to serve
without additional compensation, if elected or appointed thereto, as a director
of any of the Company's subsidiaries and in one or more executive offices of any
of the Company's subsidiaries, provided that the Executive is indemnified for
serving in any and all such capacities on a basis no less favorable than is from
time to time provided by the Company or any of its subsidiaries to its other
directors and senior executive officers.
7. TERMINATION. The Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following circum
stances:
(a) DEATH. The Executive's employment hereunder shall
terminate upon his death.
(b) DISABILITY. If, the Executive is unable, due to
physical or mental incapacity, to substantially perform his full time duties and
responsibilities under this Agreement for a period of six consecutive months (as
determined by a medical doctor selected by Company and Executive) the Company
may terminate the Executive's employment hereunder for "DISABILITY". If the
parties cannot agree on a medical doctor for purposes of such determination of
Disability, each party shall select a medical doctor and the two doctors shall
select a third who shall be the approved medical doctor for this purpose.
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(c) CAUSE. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement, "CAUSE" shall
mean (i) the willful and continued failure by the Executive to substantially
perform his duties with the Company (other than any such failure resulting from
the Execu tive's incapability due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice of Termination by
the Executive for Good Reason), after demand for substantial performance is
delivered by the Company that specifically identifies the manner in which the
Company believes that the Executive has not substantially performed his duties,
or (ii) the willful engaging by the Execu tive in misconduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise
(including, but not limited to, conduct that constitutes a violation of Section
11 hereof). No act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause without (1) reasonable notice from
the Board to Executive setting forth the reasons for Company's intention to
terminate for Cause, (2) delivery to the Executive of a resolution duly adopted
by the affirmative vote of two-thirds or more of the Board then in office
(excluding the Executive) at a meeting of the Board called and held for such
purpose, finding that in the good faith opinion of the Board, the Executive was
guilty of the conduct set forth in this section and specifying the particulars
thereof in detail, (3) an opportunity for the Executive, together with his
counsel, to be heard before the Board and (4) delivery to the Executive of a
Notice of Termination from the Board specifying the particulars thereof in
detail.
(d) TERMINATION BY THE EXECUTIVE.
(i) The Executive may terminate his employment
hereunder for (A) Good Reason or (B) upon no less than 30 days notice,
without Good Reason. A termination by the Executive pursuant to clause
(B) above is not a breach of this Agreement.
(ii) For purposes of this Agreement, "GOOD REASON"
shall mean termination by the Executive of his employment after the
occurrence of any of the following events without his consent:
(A) a diminution in the Executive's position,
duties, responsibilities or authority (except during periods
when the Execu-
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tive is unable to perform all or substantially all of his
duties on account of illness (either physical or mental) or
other incapacity);
(B) a reduction in the Executive's annual rate of
Base Salary as in effect on the date hereof or as the same may
be increased from time to time;
(C) a failure to elect or reelect the Executive
to the positions of Chairman and Chief Executive Officer or
removal of him from either of such positions;
(D) a change in the reporting structure so that
the Executive reports to someone other than the Board of
Directors;
(E) failure by the Company to continue in
effect any compensation plan in which the Executive
participates which is material to the Executive's total
compensation, unless an equitable arrangement (embodied in an
ongoing substitute plan) has been made with respect to such
plan, or failure by the Company to continue the Executive's
participation therein (or in such substitute plan) on a basis
not materially less favorable to the Executive includ ing,
without limitation, his target and maximum annual bonus oppor
tunities provided in Section 5(b)(i);
(F) failure by the Company to continue to provide
the Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company's pension,
savings, life insurance, medical, health and accident, or
disability plans in which the Executive was participating
(except for across-the-board changes similarly affecting all
senior executives of Company and all senior executives of any
Person in control of Company), or failure by the Company to
continue to provide the Executive with the number of paid
vacation days per year equal to the greater of (1) six weeks
and (2) the number to which Executive is entitled in
accordance with Company's vacation policy;
(G) failure to provide facilities or services
which are suitable to the Executive's position;
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(H) failure of any successor (whether direct
or indirect, by purchase of stock or assets, merger,
consolidation or otherwise) to the Company to assume the
Company's obligations hereunder or failure by the Company to
remain liable to the Executive hereunder after such
assumption;
(I) any termination by the Company of Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of a Notice of
Termination contained in this Agreement; or
(J) the relocation of the Executive's principal
place of employment to a location more than fifty (50)
miles from the Executive's principal place of employment as of
the date hereof.
There shall be no termination for Good Reason without written notice
from the Executive within 30 days following his knowledge of the
circumstances giving use to Good Reason describing the basis for the
termination and the Company's having 30 days in which to cure.
(e) NOTICE OF TERMINATION. Any termination of the
Executive's employment by the Company or by the Executive (other than a
termination by reason of death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 13 hereof. For
purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated.
(f) DATE OF TERMINATION. "DATE OF TERMINATION" shall
mean (i) if the Executive's employment is terminated by his death, the date of
his death, (ii) if the Executive's employment is terminated pursuant to
subsection (b) above, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the performance of his
duties on a full-time basis during such thirty (30)-day period), (iii) if the
Executive's employment is terminated pursuant to subsection (c) above, the date
specified in the Notice of Termination, (iv) if the Executive's employment is
terminated pursuant to subsection (d)(i)(B) above, the date specified in the
Notice of Termination, but
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in no event less than thirty (30) days after Notice of Termination is given) and
(v) if the Executive's employment is terminated for any other reason, the date
on which a Notice of Termination is given.
(g) INDEMNIFICATION. Notwithstanding any other provision
of this Agreement to the contrary, during the Employment Period and upon the
Executive's termination of employment hereunder for any reason, the Company
shall take such action necessary and appropriate to provide that the Executive's
rights to indemnification from the Company as provided by applicable law, by the
Company's charter and by-laws and by any agreement between the Company and the
Executive shall not be affected in any manner adverse to the Executive and shall
be continued in full force and effect for a period of at least six years
following such termination of employment.
8. COMPENSATION UPON CERTAIN EVENTS.
(a) ANY TERMINATION OF EMPLOYMENT. If the Executive's
employment with the Company is terminated for any reason, in addition to the
amounts and benefits provided pursuant to the remainder of this Section 8, the
Company shall pay or provide to the Executive (i) any fully earned but unpaid
performance bonus for completed performance periods, subject to any deferral
election that the Executive has made with respect to such amounts, (ii) any
expense reimbursements owed to the Executive by the Company and (iii) all
compensation and benefits that are due to the Executive under the terms of the
Company's compensation and benefit plans, programs and arrangements in
accordance with the terms of such plans, programs and arrangements.
(b) DISABILITY. If the Executive's employment with the
Company is terminated by reason of the Executive's Disability, then (i) the
Executive shall receive disability benefits in accordance with the terms of the
long-term disability program then in effect for senior executives of the
Company, (ii) the Company shall pay to the Executive his Base Salary through the
end of the month immediately preceding the month in which such disability
benefits commence and (iii) the Company shall pay to the Executive at the time
bonuses are customarily paid to senior level executives a bonus for the year in
which such termination of employ ment occurs equal to the Executive's bonus as
determined under the MICP for such year multiplied by a fraction, the numerator
of which is the number of days during such year that the Executive was employed
by the Company and the denominator of which is 365 (the "PRO RATA BONUS").
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(c) DEATH. If the Executive's employment is terminated by
reason of the Executive's death, then (i) the Company shall pay to his legal
represen tative the Executive's Base Salary through the Date of Termination (the
"EARNED SALARY") and (ii) the Company shall pay to the Executive's legal
representative the Pro Rata Bonus.
(d) BY THE COMPANY FOR CAUSE. If the Executive's
employment with the Company shall be terminated by the Company for Cause, then
the Company shall pay the Executive the Earned Salary.
(e) BY THE COMPANY OTHER THAN FOR DISABILITY OR CAUSE; BY
THE EXECUTIVE FOR GOOD REASON. If the Company shall terminate the Executive's
employment other than for Disability or Cause or the Executive shall terminate
his employment for Good Reason, then:
(i) the Company shall pay to the Executive the Earned
Salary;
(ii) notwithstanding any provision of the MICP to the
contrary, the Company shall pay to the Executive the Pro Rata Bonus;
(iii) the Company shall pay to the Executive, promptly
following the Date of Termination, a cash lump sum equal to the product
of (A) two and (B) the sum of (1) the annual Base Salary rate in effect
for the Executive immediately preceding the Date of Termination,
disregarding any reduction in annual Base Salary which constitutes Good
Reason hereunder and (2) the average of the last three annual bonus
amounts awarded to the Executive under the MICP (or, if the Executive
has not participated in the MICP for three completed annual award
periods, the average of the annual bonus amounts awarded), provided
that any award made in respect of an annual award period in which the
Executive did not participate for the full period shall be annualized
for purposes of this calcula tion; and
(iv) for the twenty-four (24) month period immedi ately
following the Date of Termination, the Executive shall continue to
participate in all medical, dental, hospitalization, life insurance and
other welfare and perquisite plans and programs, in each case in which
he was participating on the Date of Termination (or, if any such plan
or program does not permit his participation, the
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Company shall provide the Executive with the economic equivalent on an
after-tax basis). Benefits or payments other wise receivable by the
Executive pursuant to this Section 8(e)(iv) shall be re duced to the
extent benefits of the same type are received by or made avail able to
the Executive by a subsequent employer during the twenty-four (24)
month period following the Date of Termination (and any such benefits
re ceived by or made available to the Executive shall be reported to
the Compa ny by the Executive).
(f) UPON TERMINATION OF EMPLOYMENT BY THE EXECUTIVE
OTHER THAN FOR GOOD REASON OR OTHER THAN BY REASON OF DEATH. If the Executive
terminates his employment with the Company other than for Good Reason or other
than by reason of his death, then the Company shall pay to the Executive the
Earned Salary. If such termination is prior to the six-month anniversary of the
Effective Date, the Executive shall pay to the Company an amount equal to the
Sign on Award.
(g) CHANGE IN CONTROL.
(i) IN GENERAL. If the Executive's employment is
terminated by the Company other than for Cause or Disability or if the
Executive terminates his employment for Good Reason, in either case
within two years following a Change in Control, then the Executive
shall receive the payments and benefits set forth in Section 8(e)
above, except that the two times multiplier set forth in Section
8(e)(iii) shall be increased to three and the 24-month benefit
continuation period set forth in Section 8(e)(iv) above shall be
extended to 36 months.
(ii) POTENTIAL CHANGE IN CONTROL. If the Company shall
terminate the Executive's employment other than for Cause, or the
Executive shall terminate his employment for Good Reason, in either
case, during the period of a Potential Change in Control or at the
request of a Person who, directly or indirectly, takes any action
designed to cause a Change in Control, then the Company shall make
payments and provide benefits to the Executive under this Agreement as
though a Change in Control had occurred immediately prior to such
termination. A "Potential Change in Control" shall exist during the
period commencing at the time the Company enters into any agreement or
arrangement which, if consummated, would result in a Change in Control
and ending at the time such
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agreement or arrangement either (i) results in a Change in Control or
(ii) terminates, expires or otherwise becomes of no further force or
effect.
(h) DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "CHANGE IN CONTROL" shall mean the occurrence of
any one of the following events:
(A) any Person is or becomes the Beneficial
Owner, directly or indirectly, of 40% or more of either (x)
the then outstanding common stock of 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 Company (the "TOTAL VOTING POWER"),
excluding, however, the fol lowing: (1) any acquisition by
Company or any of its Controlled Affiliates, (2) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Company or any of its Controlled
Affiliates and (3) any Person who becomes such a Beneficial
Owner in connection with a transaction described in the
exception within paragraph (C) below; or
(B) a change in the composition of the Board such
that the individuals who, on the date hereof, constitute the
Board (such individuals shall be hereinafter referred to as
the "INCUM BENT 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 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
11
entity other than the Board shall not be considered a member
of the Incumbent Board; or
(C) there is consummated a merger or consolidation
of Company or any direct or indirect subsidiary of Company or
a sale or other disposition of all or substantially all of the
assets of Company ("CORPORATE TRANSACTION"); excluding,
however, such a Corporate Transaction pursuant to which (x)
all or substantially all of the individuals and entities who
are the Beneficial Owners, respectively, of the Outstanding
Common Stock and the Total Voting Power immediately prior to
such Corporate Transaction will Benefi cially Own, directly or
indirectly, more than 50%, respectively, of the outstanding
common stock and the combined voting power 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 Company resulting from such Corporate
Transaction (including, without limitation, a corporation
which as a result of such transaction owns Company or all or
substantially all of Company's assets either directly or
through one or more subsidiaries) in substan tially 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, and (y) immediately
follow ing which the individuals who comprise the Board
immediately prior thereto constitute at least a majority of
the board of directors of Company resulting from such
Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns Company
or all or substantially all of Company's assets either
directly or through one or more subsidiaries); or
(D) the approval by the stockholders of Company
of a complete liquidation or dissolution of Company.
(ii) "AFFILIATE" of any Person shall mean any other
Person that directly or indirectly, through one or more intermediaries,
Con trols, is Controlled by, or is under common Control with, such
first Person.
(iii) "BENEFICIAL OWNER" shall have the meaning used in
Rule 13d-3 promulgated under the Exchange Act.
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(iv) "CONTROL" shall have the meaning specified in Rule
12b-2 under the Securities Exchange Act of 1934 as in effect on the
date of this Agreement.
(v) "EXCHANGE ACT" shall mean the Securities Exchange
Act of 1934, as amended.
(vi) "GOVERNANCE AGREEMENT" shall mean the Governance
Agreement, dated December 19, 2000, among LXH, L.L.C., LXH II, L.L.C.,
Hexcel Corporation and the other parties listed on the signature pages
thereto.
(vii) "PERSON" shall have the meaning set forth in
Section 3(a)(9) of the Exchange Act, as modified and used in Section
13(d) and 14(d) of the Exchange Act.
9. EXCISE TAX.
(a) GROSS-UP. The following provision shall apply if the
Date of Termination occurs on or prior to December 19, 2002.
(i) If any of the payments or benefits received or to
be received by the Executive in connection with a Change in Control or
the Executive's termination of employment, whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement
with the Company, any Person whose actions result in a Change in
Control or any Person affili ated with the Company or such Person (all
such payments and benefits, excluding the Gross-Up Payment, being
hereinafter referred to as the "TOTAL PAYMENTS") will be subject to the
excise tax (the "EXCISE TAX") imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "CODE"), the Company
shall pay to the Executive an additional amount (the "GROSS-UP
PAYMENT") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Total Payments and any federal,
state and local income and employment taxes and Excise Tax upon the
Gross- Up Payment, shall be equal to the Total Payments.
(ii) For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i)
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all of the Total Payments shall be treated as "parachute payments"
(within the meaning of Section 280G(b)(2) of the Code) unless, in the
opin ion of tax counsel ("TAX COUNSEL") reasonably acceptable to the
Executive and selected by the accounting firm which was, immediately
prior to the Change in Control, the Company's independent auditor (the
"AUDITOR"), such payments or benefits (in whole or in part) do not
constitute parachute pay ments, including by reason of Section
280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within
the meaning of Section 280G(b)(l) of the Code shall be treated as
subject to the Excise Tax unless, in the opinion of Tax Counsel, such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess of the base amount (within
the meaning of Section 280G(b)(3) of the Code) allocable to such
reasonable compensation, or are otherwise not subject to the Excise
Tax, and (iii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Auditor in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of the
Executive's residence on the Date of Termination (or if there is no
Date of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section), net of the maximum reduction
in federal income taxes which could be obtained from deduction of such
state and local taxes.
(iii) In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to the
Company, within five (5) business days following the time that the
amount of such reduction in the Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus
that portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income and employ ment taxes imposed on the
Gross-Up Payment being repaid by the Executive, to the extent that such
repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executive's taxable income and wages
for purposes of federal, state and local income and employment taxes,
plus interest on the amount of such repayment at 120% of the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise
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Tax is determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment
the existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such excess) within
five (5) business days following the time that the amount of such
excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of liability for Excise Tax with respect to the Total Payments.
(b) VALLEY. The following provision shall apply if the Date
of Termination occurs after December 19, 2002.
(i) Notwithstanding any other provisions of this
Agree ment, in the event that any payment, benefit, property or right
received or to be received by the Executive in connection with a Change
in Control or the Executive's termination of employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in a
Change in Control or any Person affili ated with the Company or such
Person) (all such payments, benefits, proper ties and rights being
hereinafter referred to as the "Total Payments") would be subject (in
whole or part) to the tax (the "Excise Tax") imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended, or any successor
provision (the "Code"), then the payments and benefits provided under
Section 4(d) or 4(e) hereof ("Severance Payments") which are cash shall
first be reduced, and the noncash Severance Payments shall thereafter
be reduced, to the extent necessary so that no portion of the Total
Payments is subject to the Excise tax, but only if (A) the net amount
of such Total Payments, as so reduced (and after subtracting the net
amount of federal, state and local income taxes on such reduced Total
Payments) is greater than or equal to (B) the net amount of such Total
Payment without such reduction (but after subtracting the net amount of
federal, state and local income taxes an such Total Payments and the
amount of Excise Tax to which the Executive would be subject in respect
of such unreduced Total Payments); provided, however, that the
Executive may elect (by waiving the receipt or enjoyment of all or any
portion of the noncash Severance Payments at such time and in such
manner that the Severance Payments so waived shall not constitute a
"pay ment" within the meaning of section 280G(b) of the Code) to have
15
the noncash Severance Payments reduced (or eliminated) prior to any
reduction of the cash Severance Payments.
(ii) For purposes of determining whether and the
extent to which the Total Payments will be subject to the Excise tax
(i) no portion of the Total Payments the receipt or enjoyment of which
the Executive shall have waived at such time and in such manner as not
to constitute a "payment" within the meaning of section 280G(b) of the
Code shall be taken into account, (ii) no portion of the Total Payments
shall be taken into account which, in the written opinion of tax
counsel ("Tax Counsel") reasonably acceptable to the Executive and
selected by the accounting firm (the "Audi tor") which was, immediately
prior to the Change in Control, the Company's Independent auditor, does
not constitute a "parachute payment" within the meaning of section
280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no
portion of such Total Payments shall be taken into account which, in
the written opinion of Tax Counsel, constitutes reasonable compensation
for services actually rendered within the meaning of section
280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to
such reasonable compensa tion, and (iii) the value of any noncash
benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Auditor in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
(iii) At the time that payments are made under this
Agree ment, the Company shall provide the Executive with a written
statement setting forth the manner in which such payments were
calculated and the basis for such calculations including, without
limitation, any opinions, or other advice the Company has received from
Tax Counsel, the Auditor or other advisors or consultants (and all such
opinions or advice shall be in writing, shall be attached to the
statement and shall expressly state that the Executive may rely
thereon). If the Executive objects to the Company's calculations, the
Company shall pay to the Executive such portion of the Severance
Payments (up to 100% thereof) as the Executive determines is necessary
to result in the proper application of the first sentence of Section
9(b)(i) above. The Executive and the Company shall each reasonably
xxxxxx ate with the other in connection with any administrative or
judicial proceed ing concerning the existence or amount of liability
for Excise Tax with respect to the Total Payments.
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10. NO MITIGATION. The Company agrees that, if the Executive's
employment with the Company terminates during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company hereunder. Further,
the amount of any payment or benefit provided for in this Agreement shall not be
reduced by any compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, or otherwise, except as
specifically provided in this Agreement.
11. NONCOMPETITION/CONFIDENTIAL INFORMATION/COMPANY MATERIALS.
(a) The Executive acknowledges that, as a senior management
employee, the Executive will be involved, on a high level, in the development,
implementation and management of the Company's global business plans, including
those which involve the Company's finances, research, marketing, planning, opera
tions, and acquisition strategies. By virtue of the Executive's position and
knowledge of the Company, the Executive acknowledges that his employment by a
competitor of the Company represents a serious competitive danger to the
Company, and that the use of the Executive's experience and knowledge about the
Company's business, strategies and plans by a competitor can and would
constitute a valuable competitive advantage over the Company. In view of the
foregoing, and in consideration of the payments made to the Executive under this
Agreement, the Executive covenants and agrees that, if the Executive's
employment is terminated and the Company has fulfilled its obligations under
this Agreement, for a period of two years (or three years if the Executive
receives payments under Section 8(g) above) after the Date of Termination the
Executive will not engage, in any capacity, directly or indirectly, including
but not limited as employee, agent, consultant, manager, executive, owner or
stockholder (except as a passive investor holding less than a 5% equity interest
in any enterprise) in any business entity engaged in competition with the
business conducted by the Company on the Date of Termination anywhere in the
world (the "Business"); provided, that these restrictions shall not apply so
long as the Execu tive's duties and responsibilities for any such business
entity do not relate directly or indirectly to the business segment of such
business entity which is actually or potentially competitive with the Business.
(b) The Executive agrees that all processes, technologies,
designs and inventions, including new contributions, improvements, ideas and
discoveries, whether patentable or not (collectively "Inventions"), conceived,
developed, invented or made by the Executive prior to the Date of Termination
shall belong to the Company, provided that
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such Inventions grew out of the Executive's work with the Company or any of its
subsidiaries or affiliates, are related in any manner to the business
(commercial or experimental) of the Company or any of its subsidiaries or
affiliates or are conceived or made on the Company's time or with the use of the
Company's facilities or materials. At the request of the Company, the Executive
shall (i) promptly disclose such inventions to the Company, (ii) assign to the
Com pany, without additional compensation, all patent and other rights to such
Inventions for the United States and foreign countries, (iii) sign all papers
necessary to carry out the foregoing, and (iv) give testimony or otherwise take
action in support of the Executive's status as the inventor of such Inventions,
in each case at the Company's expense.
(c) In addition to any obligation regarding Inventions, the
Execu tive acknowledges that the trade secrets and confidential and proprietary
information of the Company, its subsidiaries and affiliates, including without
limitation:
(i) unpublished information concerning (A) research
activities and plans, (B) marketing or sales plans, (C) pricing or pricing
strategies, (D) operational techniques, and (E) strategic plans;
(ii) Unpublished financial information, including
information concerning revenues, profits and profit margins;
(iii) internal confidential manuals; and
(iv) any "material inside information" as such phrase
is used for purposes of the Exchange Act;
all constitute valuable, special and unique information of the Company, its
subsidiar ies and affiliates. In recognition of this fact, the Executive agrees
that he will not disclose any such trade secrets or confidential or proprietary
information (except (i) information which becomes publicly available without
violation of this Agreement, (ii) information of which the Executive, prior to
disclosure by the Executive, did not know and should not have known was
disclosed to the Executive by a third party in violation of any other person's
confidentiality or fiduciary obligation, (iii) disclosure required in connection
with any legal process (provided the Executive promptly gives the Company
written notice of any legal process seeking to compel such disclosure and
reasonably cooperates in the Company's attempt to eliminate or limit the scope
of such disclosure) and (iv) disclosure while employed by the
18
Company which the Executive reasonably and in good faith believes to be in or
not opposed to the interests of the Company) to any person, firm, corporation,
association or other entity, for any reason or purpose whatsoever, nor shall the
Executive make use of any such information for the benefit of any person, firm,
corporation or other entity except on behalf of the Company, its subsidiaries
and affiliates.
12. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substan tially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
12 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
(b) This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to him hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agree ment to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
13. NOTICE. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States certified or registered mail,
return receipt re quested, postage prepaid, addressed as follows:
If to the Executive:
Xxxxx X. Xxxxxx
c/o Hexcel Corporation
Two Stamford Plaza
19
000 Xxxxxxx Xxxx.
If to the Company:
Hexcel Corporation
Two Stamford Plaza
000 Xxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attn: Board of Directors
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
14. MISCELLANEOUS. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer of the Company as
may be specifically designated by the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Connecticut without
regard to its conflicts of law principles.
15. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
16. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
17. DISPUTE RESOLUTION. Any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration, conducted
20
before a panel of three arbitrators in Stamford, Connecticut, in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. Judgement may be entered on the arbitrator's award in any court having
jurisdiction; PROVIDED, HOWEVER, that the Company shall be entitled to seek a
restrain ing order or injunction in any court of competent jurisdiction to
prevent any continu ation of any violation of the provisions of Section 11
hereof. The Company shall advance to the Executive all legal fees and expenses
incurred by the Executive in seeking to obtain or enforce any right under this
Agreement as a result of his termina tion of employment, including all such fees
and expenses incurred in contesting, arbitrating or disputing any action or
failure to act by the Company, provided that the Executive shall be required to
repay all such amounts to the Company unless the Executive obtains a final
determination supporting at least part of his claim and there has been no
determination that the balance of his claim was made in bad faith.
18. ENTIRE AGREEMENT; REPRESENTATIONS.
(a) This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representa tions or warranties, whether oral or written, by any
officer, employee or representa tive of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled. In the event of any inconsistency
between any provision of this Agreement and any provision applicable to the
Executive in any plan, program, policy or other agreement of the Company, the
provisions of this Agreement shall control to the extent that such provisions of
this Agreement are more favorable to the Executive.
(b) The Company represents and warrants that (i) it is
fully authorized by its Board or the Committee (and by any person or body whose
action is required) to enter into this Agreement and to perform its obligations
under it, (ii) the execution, delivery and performance of this Agreement by the
Company does not violate any applicable law, regulation, order, judgment or
decree or any agreement, plan or corporate governance document of the Company or
any agreement among holders of its shares and (iii) upon execution and delivery
of this Agreement by the Company and the Executive, this Agreement shall be the
valid and binding obliga tion of the Company, enforceable in accordance with its
terms, except to the extent enforceability may be limited
21
by applicable bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally or by the inapplicability of equitable remedies
in certain circumstances.
(c) The Executive represents and warrants that he is
not a party to any agreement or instrument which would prevent him from entering
into or performing his duties in any way under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
HEXCEL CORPORATION
Attest:
By: /s/ Xxxxxx X. Xxxxx, Xx. By: /s/ Xxx X. Xxxxxxxx
----------------------------- ---------------------------
Name: Xxx X. Xxxxxxxx
Title: Senior Vice President
WITNESS EXECUTIVE
/s/ Xxxx X. Xxxxxx /s/ Xxxxx X. Xxxxxx
----------------------------- ---------------------------
Xxxxx X. Xxxxxx
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