EXHIBIT 99.2
Exhibit A to
the Strategic Alliance Agreement
GOVERNANCE AGREEMENT dated as of [ ],
1995, between CIBA-GEIGY LIMITED, a Swiss
corporation ("Ciba"), and HEXCEL CORPORATION,
a Delaware corporation ("Hexcel").
WHEREAS Hexcel, Ciba and Ciba-Geigy Corporation, a New
York corporation ("CGC"), are parties to a Strategic Alliance
Agreement dated as of September 29, 1995 (the "Strategic Alliance
Agreement") and upon consummation of the transactions
contemplated therein (the "Transactions"), Ciba will Beneficially
Own approximately 49.9% of the Total Voting Power of Hexcel (as
such terms are defined below); and
WHEREAS the parties hereto wish to further establish
the nature of their strategic alliance and set forth their
agreement concerning the governance of Hexcel following
consummation of the Transactions as well as certain matters
relating to Ciba's ownership of Voting Securities (as such term
is defined below).
NOW, THEREFORE, in consideration of the mutual
covenants and undertakings contained herein and for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. As used in this Agreement,
the following terms shall have the following meanings:
An "affiliate" of any Person means any other Person
that directly or indirectly, through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such
first Person. "Control" has the meaning specified in Rule 12b-2
under the Exchange Act as in effect on the date of this
Agreement.
"associate" has the meaning set forth in Rule 12b-2
under the Exchange Act as in effect on the date of this
Agreement.
Any Person shall be deemed to "Beneficially Own", to
have "Beneficial Ownership" of, or to be "Beneficially Owning"
any securities (which securities shall also be deemed
"Beneficially Owned" by such Person) that such Person is deemed
to
"beneficially own" within the meaning of Rule 13d-3
under the Exchange Act as in effect on the date of this
Agreement.
"Board" means the board of directors of Hexcel.
"Broad Distribution" means a distribution of Voting
Securities that, to the knowledge, after due inquiry, of the
Person on whose behalf such distribution is being made, will not
result in the acquisition by any other Person of any such Voting
Securities to the extent that, after giving effect to such
acquisition, such acquiring Person would hold in excess of the
greater of (x) 5% of the Total Voting Power of Hexcel or (y) if
such acquiring Person is an institutional investor eligible to
file a Statement on Schedule 13G (or any successor form) with
respect to its investment in Hexcel, 7% of the Total Voting Power
of Hexcel.
"Buyout Transaction" means a tender offer, merger, sale
of all or substantially all Hexcel's assets or any similar
transaction that offers each holder of Voting Securities (other
than, if applicable, the Person proposing such transaction) the
opportunity to dispose of all Voting Securities Beneficially
Owned by each such holder or otherwise contemplates the
acquisition of all (but not less than all) Voting Securities
Beneficially Owned by each such holder.
"CGC" has the meaning set forth in the recitals to this
Agreement.
"Chairman" means the Chairman of the Board and Chief
Executive Officer of Hexcel.
"Ciba" has the meaning set forth in the recitals to
this Agreement.
"Ciba Directors" means Ciba Nominees who are elected or
appointed to serve as members of the Board in accordance with
this Agreement.
"Ciba Entity" means any Subsidiary of Ciba that holds
Voting Securities.
"Ciba Nominees" means such Persons as are so designated
by Ciba, as such designations may change from time to time in
accordance with this Agreement, to serve as members of the Board
pursuant to Section 2.02 hereof.
"Closing Date" means the date of the closing of the
Transactions.
"Customary Acquisition/Control Premium" means the
aggregate realizable value for all Voting Securities (including
Voting Securities owned by Ciba or any Ciba Entity), assuming a
sale of Hexcel in its entirety in a transaction or series
of related transactions to a third party or parties on an arm's
length basis in a
controlled auction process designed to maximize shareholder
value by attracting all possible bidders, including
Ciba and its affiliates.
"Election Date" means the tenth anniversary of the
Closing Date and, if Ciba exercises its right to extend this
Agreement for one or more successive two year periods thereafter
pursuant to Section 5.01(a)(i), the date on which each such
extension period expires.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder.
"Governmental Entity" means any court, administrative
agency, regulatory body, commission or other governmental
authority, board, bureau or instrumentality, domestic or foreign
and any subdivision thereof.
"group" has the meaning set forth in Section 13(d) of
the Exchange Act as in effect on the date of this Agreement.
"Hexcel" has the meaning set forth in the recitals to
this Agreement.
"Hexcel Common" means the common stock of Hexcel, par
value $0.01 per share.
"Independent Director" means a director of Hexcel who
is not a Ciba Director and who (i) is not and has never been an
officer, employee or director of Ciba or any affiliate (other
than Hexcel) or associate of Ciba and (ii) has no affiliation or
compensation, consulting or contractual relationship with Ciba or
any of its affiliates (other than Hexcel) such that a reasonable
person would regard such director as likely to be unduly
influenced by Ciba or any of its affiliates (other than Hexcel).
"Other Holders" means the holders of the Other Shares.
"Other Shares means Voting Securities not Beneficially
Owned by Ciba or any Ciba Entity.
"Person" means any individual, group, corporation,
firm, partnership, joint venture, trust, business association,
organization, Governmental Entity or other entity.
"President" means the President and Chief Operating
Officer of Hexcel.
"Registration Rights Agreement" means the Registration
Rights Agreement dated as of the date hereof between Ciba and
Hexcel.
"Requisite Consideration" means 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 shall, 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) in the opinion of an
independent nationally recognized investment banking firm
(including such a firm retained by Ciba), fair to the Other
Holders from a financial point of view. In connection with the
retention of any investment banking firm referred to herein, the
Independent Directors shall instruct such investment banking
firm, unless the Independent Directors conclude, after
consultation with their outside legal and financial advisors,
that such instructions are not appropriate, to (a) value Hexcel's
businesses taking into account a premium for control and (b)
assume for purposes of such opinion that the Other Holders are
entitled to their proportionate part of a Customary
Acquisition/Control Premium.
"Requisite Distribution" means a public offering
registered under the Securities Act or a non-registered
distribution conducted pursuant to an applicable exemption from
registration under the Securities Act, in each case that is
conducted in a manner calculated to achieve a Broad Distribution.
"SEC" means the Securities and Exchange Commission or
any successor Governmental Entity.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Significant Subsidiary" has the meaning set forth in
Rule 1-02 of Regulation S-X under the Securities Act as in effect
on the date of this Agreement.
"Standstill Period" means the five-year period
commencing on the Closing Date.
"Stockholder Vote" means as to any matter to be
presented to holders of Voting Securities, a vote at a duly
called and held annual or special meeting of the holders of
Voting Securities entitled to vote on such matter.
"Strategic Alliance Agreement" has the meaning set
forth in the recitals to this Agreement.
"Subsidiary" means, with respect to any Person, as of
any date of determination, any other Person as to which such
Person owns, directly or indirectly, or otherwise controls, more
than 50% of the voting shares or other similar interests.
"Third Party Offer" means 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 that does not treat Ciba or any Ciba Entity
differently than the Other Holders.
"Total Voting Power of Hexcel" means the total number
of votes that may be cast in the election of directors of Hexcel
if all Voting Securities outstanding or treated as outstanding
pursuant to the final sentence of this definition were present
and voted at a meeting held for such purpose. The percentage of
the Total Voting Power of Hexcel Beneficially Owned by any Person
is the percentage of the Total Voting Power of Hexcel that is
represented by the total number of votes that may be cast in the
election of directors of Hexcel by Voting Securities Beneficially
Owned by such Person. In calculating such percentage, the Voting
Securities Beneficially Owned by any Person that are not
outstanding but are subject to issuance upon exercise or exchange
of rights of conversion or any options, warrants or other rights
Beneficially Owned by such Person shall be deemed to be
outstanding for the purpose of computing the percentage of the
Total Voting Power represented by Voting Securities Beneficially
Owned by such Person, but shall not be deemed to be outstanding
for the purpose of computing the percentage of the Total Voting
Power represented by Voting Securities Beneficially Owned by any
other Person.
"Transactions" has the meaning set forth in the
recitals to this Agreement.
"Voting Securities" means Hexcel Common and any other
securities of Hexcel or any Subsidiary of Hexcel entitled to vote
generally in the election of directors of Hexcel or such
Subsidiary of Hexcel.
ARTICLE II
Corporate Governance
SECTION 2.01. Board of Directors. The Board shall
consist of ten members, two of whom shall be the Chairman and the
President.
SECTION 2.02. Ciba Board Representation. (a) If Ciba
Beneficially Owns 30% or more of the Total Voting Power of Hexcel
determined in accordance with Section 2.02(e), the parties hereto
shall exercise all authority under applicable law to cause any
slate of directors presented to stockholders for election to the
Board
to consist of such nominees that, if elected, would result
in the Board consisting of four Ciba Directors, the Chairman, the
President and four additional Independent Directors.
(b) If Ciba Beneficially Owns less than 30% but at
least 20% of the Total Voting Power of Hexcel determined in
accordance with Section 2.02(e), the parties hereto shall
exercise all authority under applicable law to cause any slate of
directors presented to stockholders for election to the Board to
consist of such nominees that, if elected, would result in the
Board consisting of three Ciba Directors, the Chairman, the
President and five additional Independent Directors.
(c) If Ciba Beneficially Owns less than 20% but at
least 15% of the Total Voting Power of Hexcel determined in
accordance with Section 2.02(e), the parties hereto shall
exercise all authority under applicable law to cause any slate of
directors presented to stockholders for election to the Board to
consist of such nominees that, if elected, would result in the
Board consisting of two Ciba Directors, the Chairman, the
President and six additional Independent Directors.
(d) If Ciba Beneficially Owns less than 15% but at
least 10% of the Total Voting Power of Hexcel determined in
accordance with Section 2.02(e), the parties hereto shall
exercise all authority under applicable law to cause any slate of
directors presented to stockholders for election to the Board to
consist of such nominees that, if elected, would result in the
Board consisting of one Ciba Director, the Chairman, the
President and seven additional Independent Directors.
(e) In order to determine (x) the number of Ciba
Nominees to be included in any slate of directors to be presented
to stockholders for election to the Board and (y) the percentage
of the Total Voting Power of Hexcel Beneficially Owned by Ciba
for purposes of Sections 2.04 and 2.06, Ciba shall be deemed to
Beneficially Own a percentage of the Total Voting Power of Hexcel
that is no more than (1) 49.9% of the Total Voting Power of
Hexcel (or such greater percentage as Ciba in fact hereafter
Beneficially Owns in accordance with the terms of this Agreement)
less (2) the percentage of the Total Voting Power of Hexcel
represented by any Voting Securities disposed of by Ciba or any
Ciba Entity since the Closing.
SECTION 2.03. Designation of Slate. Any Ciba Nominees
that are included in a slate of directors pursuant to Section
2.02 shall be designated by Ciba, and any Independent Director
nominees who are to be included in any slate of directors
pursuant to Section 2.02 shall be designated by majority vote by
the then incumbent Independent Directors (including the Chairman
and the President if he or she is an Independent Director).
Hexcel's nominating committee shall nominate each person so
designated. The initial Ciba Nominees shall be Xxxx M. D.
Xxxxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxx X. Xxxxxxxx and Xxxxxxx
Xxxxxxx. The initial Chairman shall be Xxxx X. Xxx. The initial
President shall be Xxxxxxx Xxxxxxxxxx. Upon
consummation of the Transactions, the number of
directors constituting the entire Board will be fixed at ten and
a sufficient number of the then serving members of the Board will
resign in order to permit the appointment of the initial Ciba
Nominees and the initial President to fill the vacancies thereby
created. The remaining members of the Board shall be Xxxxxxxx X.
Xxxxxx, Xxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxxxx and Xxxxxxxxx X.
Xxxxxxx.
SECTION 2.04. Committee Membership. Ciba Directors
shall serve on each committee of the Board, including the
finance, audit, nominating, and compensation committees of the
Board. So long as Ciba Beneficially Owns 40% or more of the Total
Voting Power of Hexcel determined in accordance with Section
2.02(e), each committee of the Board shall consist of the same
number of Ciba Directors as Independent Directors. At all other
times, each such committee shall be comprised such that Ciba's
representation on such committee is at least proportionate to its
representation on the Board unless the committee is comprised of
three members or less, in which case at least one Ciba Director
shall serve.
SECTION 2.05. Resignations and Replacements. (a) If at
any time a member of the Board resigns (pursuant to this Section
2.05 or otherwise) or is removed, a new member shall be
designated to replace such member until the next election of
directors. If consistent with Section 2.02 the replacement
director is to be a Ciba Director, Ciba shall designate the
replacement Ciba Director. If the former member was the Chairman
or President, the replacement Chairman or President,
respectively, shall be the replacement. Except as set forth in
paragraph (c) below, if consistent with Section 2.02, the
replacement director is to be an Independent Director (other than
the Chairman or President), the remaining Independent Directors
(including the Chairman and the President if he or she is an
Independent Director) shall designate the replacement Independent
Director.
(b) Subject to paragraph (c) below, 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 Nominees
entitled to be nominated to the Board in accordance with this
Agreement in an election of directors presented to stockholders
would decrease, within 10 days thereafter Ciba shall cause a
sufficient number of Ciba Directors to resign from the Board so
that the number of Ciba Directors on the Board after such
resignation(s) equals the number of Ciba Nominees that Ciba would
have been entitled to designate had an election of directors
taken place at such time. Ciba shall also cause a sufficient
number of Ciba Directors to resign from any relevant committees
of the Board so that such committees are comprised in the manner
contemplated by Section 2.04 after giving effect to such
resignations. Any vacancies created by the resignations required
by this Section 2.05(b) shall be filled by Independent Directors.
(c) If at any time the percentage of the Total Voting
Power of Hexcel Beneficially Owned by Ciba decreases as a result
of an issuance of Voting Securities by Hexcel, Ciba may notify
Hexcel that Ciba intends to acquire a sufficient amount of
additional Voting Securities in accordance with this Agreement
necessary to maintain its then current level of Board
representation within 90 days, provided, however, that if during
such period (or any extension under this proviso), Ciba is
prohibited from purchasing Voting Securities in order to comply
with applicable law or refrains from such purchases at Hexcel's
request, such period shall be extended by the number of days
during which Ciba is so prohibited or so refrains. In such event,
until the end of such period (and thereafter if Ciba in fact
restores its percentage of the Total Voting Power of Hexcel
during such period and provided that Ciba continues to maintain
the requisite level of Beneficial Ownership of Voting Securities
in accordance with Section 2.02) the Board shall continue to have
the number of Ciba Directors that corresponds to the percentage
of the Total Voting Power of Hexcel Beneficially Owned by Ciba
prior to such issuance of Voting Securities by Hexcel.
SECTION 2.06. Approvals. (a) So long as Ciba
Beneficially Owns 40% or more of the Total Voting Power of Hexcel
determined in accordance with Section 2.02(e), neither the Board
nor any committee of the Board shall take any action, including
approval, authorization or ratification of any action or inaction
by officers, agents or employees of Hexcel, without the
affirmative vote of at least one Ciba Director and one
Independent Director.
(b) The Board shall not authorize, approve or ratify
any of the following actions without the approval of a majority
of the Ciba Directors (x) so long as Ciba Beneficially Owns 33%
or more of the Total Voting Power of Hexcel determined in
accordance with Section 2.02(e) and, if Ciba's percentage
ownership of the Total Voting Power of Hexcel is reduced below
33% as so determined by an issuance of Voting Securities by
Hexcel, until 10 business days after Hexcel notifies Ciba in
writing of such issuance, and (y) during the 90-day period
following an issuance of Voting Securities by Hexcel that causes
Ciba to Beneficially Own less than 33% of the Total Voting Power
of Hexcel as so determined if Ciba shall have notified Hexcel
within 10 business days after Ciba's receipt of a written
notification of such issuance that Ciba intends to acquire a
sufficient amount of Voting Securities within such 90-day period
so that it will Beneficially Own at least 33% of the Total Voting
Power of Hexcel determined in accordance with Section 2.02(e) by
the end of such 90-day period:
(i) any merger, consolidation, acquisition or
other business combination involving Hexcel or any
Subsidiary of Hexcel if the value of the consideration to be
paid or received by Hexcel in any such individual
transaction or in such transaction when added to the
aggregate value of the consideration paid or received by
Hexcel in all other such transactions approved by the Board
during
the prior 12 months exceeds the greater of (x) $75
million or (y) 11% of Hexcel's total consolidated assets;
(ii) any sale, transfer, assignment, conveyance,
lease or other disposition or any series of related
dispositions of any assets, business or operations of Hexcel
or any of its Subsidiaries if the value of the assets,
business or operations so disposed exceeds the greater of
(x) $75 million or (y) 11% of 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 of
any bonds, debentures, notes or other 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 of
all such issuances approved by the Board during the prior 12
months exceeds the greater of (x) $75 million or (y) 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, 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 during the prior 12 months exceeds the greater of
(x) $50 million or (y) 7% of Hexcel's total consolidated
assets.
SECTION 2.07. Solicitation and Voting of Shares. (a)
Hexcel shall use reasonable efforts to solicit from the
stockholders of Hexcel eligible to vote for the election of
directors proxies in favor of the Board nominees selected in
accordance with Section 2.02.
(b) Except as provided in Section 3.03, until the
percentage of the Total Voting Power of Hexcel Beneficially Owned
by Ciba falls below either (x) 15% if and so long as there is on
file with the SEC any Statement on Schedule 13D or 13G (or any
comparable successor form) showing Beneficial Ownership by any
Person (other than Ciba or the Ciba Entities) of 10% or more of
the Total Voting Power of Hexcel or (y) 10% in all other cases,
(A) in any election of directors or at any meeting of the
stockholders of Hexcel called expressly for the removal of
directors, so long as the Board includes (and will include after
any such removal) the Ciba Directors contemplated by Section
2.02, Ciba shall and shall cause any Ciba Entity to be present
for purposes of establishing a quorum and shall vote and shall
cause any Ciba Entity to vote all its Voting Securities entitled
to vote (1) in favor of any nominee or director selected in
accordance with Section 2.02 and (2) otherwise against the
removal of any director designated in accordance with Section
2.02 and
(B) in any other matter submitted to stockholders, Ciba
shall and shall cause any Ciba Entity to be present for purposes
of establishing a quorum and shall vote and shall cause any Ciba
Entity to vote all its Voting Securities entitled to vote either,
at the discretion of Ciba, (1) as recommended by the Board or (2)
in proportion to the votes cast with respect to the Other Shares;
provided, however, that, except as provided in Section 3.03, Ciba
and any Ciba Entity shall be free to vote all 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, without the
concurrence of the Board (or if with such concurrence so long as
such concurrence is not obtained by Ciba in violation of this
Agreement), at the request of Ciba or any of its affiliates
(other than Hexcel) or at the request of any Person acting on
behalf of Ciba or any of its affiliates (other than Hexcel):
(i) any amendment to Hexcel's certificate of
incorporation (provided, however, that Ciba and any Ciba
Entity shall vote against any such amendment that is
inconsistent with Section 4.14 of the Strategic Alliance
Agreement);
(ii) any merger, consolidation, acquisition or
other business combination involving Hexcel or any
Subsidiary of Hexcel;
(iii) any sale, lease, transfer or other
disposition of the business operations or assets of Hexcel;
(iv) any recapitalization, restructuring or
similar transaction or series of transactions involving
Hexcel or any Significant Subsidiary of Hexcel;
(v) any dissolution or complete or partial
liquidation or similar arrangement of Hexcel or any
Significant Subsidiary of Hexcel;
(vi) any issuance 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
approved by the Board in accordance with this Agreement) or
of any bonds, debentures, notes or other securities
convertible into, exchangeable for or exercisable for equity
securities; and
(vii) entering into any material joint venture,
collaboration or partnership by Hexcel or any Subsidiary of
Hexcel.
SECTION 2.08. Certificate of Incorporation and By-Laws;
Anti-takeover Measures. (a) The by-laws of Hexcel shall be
amended as of the Closing Date to include each of the provisions
set forth in Annex A hereto and such provisions shall not
thereafter be amended during the term of this Agreement except
with Ciba's written consent. Hexcel and Ciba shall each take or
cause to be taken all
lawful action necessary to ensure at all times that
Hexcel's certificate of incorporation and by-laws are not at any
time inconsistent with the provisions of this Agreement.
(b) Hexcel shall not adopt or implement any takeover
defense measures applicable to Ciba or any of its affiliates,
including the institution or amendment by Hexcel or any of its
Subsidiaries of any stockholders rights plan or similar plan or
device, or any change of control matters (including provisions in
future agreements or collaborations (i) that contain any
restrictions on Ciba by virtue of its Beneficial Ownership of
Voting Securities or (ii) that would subject Ciba or Hexcel to
any adverse effect if Ciba increased the Total Voting Power of
Hexcel Beneficially Owned by it in accordance with this
Agreement).
(c) Except as required by applicable law, rule or
regulation, Hexcel shall not approve or recommend to its
stockholders any transaction or approve, recommend or take any
other action (other than those expressly contemplated by this
Agreement and other than those that affect Ciba and each Other
Holder or each director at the same time in the same manner) that
would (1) impose limitations on the legal rights of Ciba or its
affiliates or associates as a stockholder of Hexcel, including,
any action that would impose restrictions based upon the size of
security holding, nationality of a securityholder, the business
in which a securityholder is engaged or other considerations
applicable to Ciba or its affiliates or associates and not to
stockholders generally, (2) deny any benefit to Ciba or its
affiliates or associates, proportionately as a holder of any
class of Voting Securities, (3) otherwise materially adversely
discriminate against Ciba, its affiliates or associates as
stockholders of Hexcel or (4) restrict the right of any Ciba
Director to vote on any matter as such director believes
appropriate in light of his or her duties as a director or the
manner in which a Ciba Director may participate in his or her
capacity as a director in deliberations or discussions at
meetings of the Board or any committee thereof, except with
respect to (i) entering into contractual or other business
relationships with Ciba or any of its affiliates (other than in
their capacity as stockholders of Hexcel), (ii) disputes with
Ciba or any of its affiliates (including disputes under this
Agreement), (iii) interpretation or enforcement of this Agreement
or any other agreement with Ciba or any of its affiliates or (iv)
any other matter involving an actual or potential conflict of
interest due to such director's relationship with Ciba or any of
its affiliates.
ARTICLE III
Standstill
SECTION 3.01. Standstill. (a) Except as otherwise
expressly provided in this Agreement (including this Section
3.01, Section 2.02 or Section 3.03) or as specifically approved
by a majority of the Independent Directors (so long as such
approval was not obtained by Ciba in violation of this
Agreement), neither Ciba nor any of Ciba's controlled affiliates
shall, directly or indirectly, (i) by purchase or otherwise,
acquire, agree to acquire or offer to acquire Beneficial
Ownership of any Voting Securities or direct or indirect rights
or options to Beneficially Own Voting Securities (including any
voting trust certificates representing such securities), (ii)
enter, propose to enter into, solicit or support any merger or
business combination or similar transaction involving Hexcel or
any of its Subsidiaries, or purchase, acquire, propose to
purchase or acquire or solicit or support the purchase or
acquisition of any portion of the business or assets of Hexcel or
any of its Subsidiaries (except (x) for purchases or acquisitions
in the ordinary course of business and (y) for proposals to
purchase or acquire a nonmaterial portion of the assets of Hexcel
or any of its Subsidiaries that are not required to be publicly
disclosed), (iii) initiate or propose any securityholder proposal
without the approval of the Board granted in accordance with this
Agreement or make, or in any way participate in, any
"solicitation" of "proxies" (as such terms are used in the proxy
rules promulgated by the SEC under the Exchange Act) to vote, or
seek to advise or influence any Person with respect to the voting
of, any Voting Securities or request or take any action to obtain
any list of securityholders for such purposes with respect to any
matter other than those upon which Ciba and the Ciba Entities may
vote in their sole discretion under Section 2.07 (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 in any way participate in a group (other
than a group consisting solely of Ciba and its affiliates) formed
for the purpose of acquiring, holding, voting or disposing of or
taking any other action with respect to Voting Securities that
would be required under Section 13(d) of the Exchange Act to file
a Statement on Schedule 13D with respect to such Voting
Securities, (v) deposit any Voting Securities in a voting trust
or enter into any voting agreement or arrangement with respect
thereto (other than this Agreement), (vi) seek representation on
the Board, the removal of any directors from the Board or a
change in the size or composition of the Board, (vii) make any
request to amend or waive any provision of this Section 3.01,
which request would require public disclosure under applicable
law, rule or regulation, (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 any
Person with respect to, or seek to do, any of the foregoing.
(b) Nothing in this Section 3.01 shall (i) prohibit or
restrict Ciba from responding to any inquiries from any
shareholders of Hexcel as to Ciba's intention with respect to the
voting of any Voting Securities Beneficially Owned by Ciba so
long as such response is consistent with the terms of this
Agreement; (ii) prohibit the purchase or other acquisition of
Beneficial Ownership of any Voting Securities, including pursuant
to Section 3.02 or in open market purchases, so long as after
giving effect to such purchase or other acquisition the
percentage of the Total Voting Power of Hexcel Beneficially Owned
by Ciba does not exceed the greater of (A) 49.9% until the third
anniversary of the Closing, or 57.5% thereafter, and (B) the
highest percentage of the Total Voting Power of Hexcel
Beneficially Owned by Ciba immediately following any action by
Hexcel (including a purchase by Hexcel of Voting Securities) 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 outstanding as a result of such action; (iii)
restrict the right of each Ciba Director on the Board or any
committee thereof to vote on any matter as such individual
believes appropriate in light of his or her duties as a director
or committee member or the manner in which a Ciba Nominee may
participate in his or her capacity as a director in deliberations
or discussions at meetings of the Board or as a member of any
committee thereof; (iv) prohibit Ciba from Beneficially Owning
Voting Securities issued as dividends or distributions in respect
of, or issued upon conversion, exchange or exercise of,
securities which Ciba is permitted to Beneficially Own under this
Agreement; (v) prohibit any officer, director, employee or agent
of Ciba and its Subsidiaries from purchasing or otherwise
acquiring Voting Securities so long as he or she is not a member
of a group that includes Ciba or any of its affiliates or is not
otherwise acting on behalf of Ciba or any of its affiliates; or
(vi) prohibit Ciba or any of its affiliates from disclosing in
accordance with its obligations (if any) under the federal
securities laws or other applicable law its desire (if any) that
Hexcel become the subject of a Buyout Transaction.
(c) After the Standstill Period, nothing in this
Section 3.01 shall prohibit or restrict Ciba or its affiliates
from proposing, participating in, supporting or causing the
consummation of a Buyout Transaction, including a transaction
with Ciba or any of its affiliates, if all Other Holders are
entitled to receive Requisite Consideration upon consummation of
such Buyout Transaction.
SECTION 3.02. Ciba Right to Maintain Position. Hexcel
hereby grants to Ciba the following irrevocable option:
If, at any time after the Closing for so long as Ciba
shall be entitled to designate one or more Ciba Nominees for
election to the Board, Hexcel shall issue for cash any additional
Voting Securities (except for any issuances described in the
following sentence), then Hexcel shall notify Ciba of such
issuance and the price and terms thereof, and Ciba shall have the
option, for a period of 45 days after receipt of such notice, to
purchase from Hexcel an Amount (as defined below) of such Voting
Securities for the same consideration per security and on the
same terms as were applicable to such issuance by Hexcel. The
foregoing option shall not apply to any issuance of Voting
Securities in connection with employee or director stock option
or incentive compensation or similar plans. An "Amount" shall
mean the smallest number of securities that would allow Ciba to
Beneficially Own the same percentage of the Total Voting Power of
Hexcel as Ciba Beneficially Owned immediately prior to such
issuance.
SECTION 3.03. Third Party Offers. (a) In the event that
Hexcel becomes the subject of 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, promptly after such
approval, Hexcel shall deliver a written notice to Ciba, briefly
describing the material terms of such Third Party Offer. Ciba
shall, within 10 business days after receipt of such notice,
either (i) offer to acquire the Other Shares on terms at least as
favorable to the Other Holders as those contemplated by such
Third Party Offer (in which event Hexcel shall endorse such offer
by Ciba rather than such Third Party Offer; provided, however,
that if Hexcel becomes the subject of another Third Party Offer
that provides for greater currently realizable value to Hexcel's
stockholders (including Ciba and the Ciba Entities) than such
previously proposed Third Party Offer, Hexcel shall be free to
pursue such newly proposed Third Party Offer; and provided,
further, that such newly proposed Third Party Offer shall be
subject to Ciba's rights pursuant to this Section 3.03(a)(i) and
obligations pursuant to Section 3.03(a)(ii)) or (ii) confirm in
writing that it will support, and at the appropriate time Ciba
shall actually support, such Third Party Offer (or an alternative
Third Party Offer providing greater currently realizable value to
all Other Holders) by voting and causing each Ciba Entity to vote
all its Voting Securities eligible to vote thereon in favor of
such Third Party Offer or, if applicable, tendering or selling
and causing each such Ciba Entity to tender or sell all its
Voting Securities to the Person making such Third Party Offer.
(b) In the event that Hexcel becomes the subject of a
Third Party Offer, neither Ciba nor any of the Ciba Entities may
support such Third Party Offer, vote in favor of such Third Party
Offer or tender or sell its Voting Securities to the Person
making such Third Party Offer unless such Third Party Offer is
approved by (x) a majority of the Independent Directors acting
solely in the interest of the Other Holders or (y) 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 shall, consistent with their fiduciary
duties, be free to include in such proxy statement, if
applicable, the reasons underlying any failure by them to approve
such
Third Party Offer by the requisite vote, including whether a
fairness opinion was sought and any opinions or recommendations
expressed in connection therewith).
(c) Notwithstanding Section 3.03(b), if Ciba has
exercised the right to require Hexcel to solicit a Buyout
Transaction pursuant to Section 5.01, 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 such Third Party Offer offers the
same consideration to all Hexcel stockholders. Unless Hexcel
shall have accepted another Third Party Offer providing at least
equivalent value to all Hexcel stockholders, Hexcel shall not
take any action to interfere with Ciba's right to vote in favor
of or tender into such a Third Party Offer (it being understood
that Hexcel shall remain free to pursue alternative Third Party
Offers that provide for at least equivalent currently realizable
value to Hexcel's stockholders (including Ciba and the Ciba
Entities) as such previously proposed Third Party Offer).
ARTICLE IV
Transfer Restrictions
SECTION 4.01. Restrictions. (a) Except in connection
with a Third Party Offer that has been approved by the
Independent Directors or the Other Holders in accordance with
Section 3.03 or as provided in Section 3.03(c), Ciba shall not,
and shall not permit any Ciba Entity, directly or indirectly, to
sell, transfer or otherwise dispose of any Voting Securities
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
(regardless of whether such limitations are applicable) 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, in the case of clauses (ii)
and (iii), in a manner calculated to achieve a Broad
Distribution.
(b) Ciba shall not sell, transfer or otherwise dispose
of any of the capital stock of any Ciba Entity, except to another
direct or indirect wholly owned Subsidiary of Ciba; provided,
however, that nothing in this Agreement shall prohibit Ciba from
effecting (x) a pro rata distribution to Ciba's stockholders or
(y) a sale in a manner calculated to achieve a Broad Distribution
of up to 20%, of the equity securites of a Ciba Entity if (1)
such distribution or sale has a bona fide business purpose (other
than the sale or distribution of Voting Securities), (2) the
Voting Securities Beneficially Owned by such Ciba Entity do not
constitute a material portion of the total assets of such Ciba
Entity and (3) in the case of clause (x), such Ciba Entity agrees
in writing to be bound by the terms and provisions of this
Agreement to the same extent that Ciba would be bound if it
Benefically Owned the Voting
Securities Beneficially Owned by such Ciba Entity. Ciba
shall not permit any Subsidiary of Ciba that is not a direct or
indirect wholly owned Subsidiary of Ciba to become a Ciba Entity.
SECTION 4.02. Legends. (a) Except as set forth in
paragraph (b) below, during the term of this Agreement all
certificates representing Voting Securities Beneficially Owned by
Ciba shall bear an appropriate restrictive legend indicating that
such Voting Securities are subject to restrictions pursuant to
this Agreement and that such Voting Securities were not issued
pursuant to a public offering registered pursuant to the
Securities Act.
(b) Upon any transfer or proposed transfer of
Beneficial Ownership by Ciba or any Ciba Entity of any Voting
Securities to any Person other than Ciba or a Ciba Entity that is
permitted pursuant to this Agreement, Hexcel shall, upon receipt
of timely notice and such certificates, opinions and other
documentation as shall be reasonably requested by Hexcel, cause
certificates representing such transferred Voting Securities to
be issued not later than the time needed to effect such transfer
(x) without any restrictive legend if upon consummation of such
transfer such Voting Securities are no longer "restricted
securities" as defined in Rule 144 under the Securities Act or
(y) without any reference to this Agreement if upon consummation
of such transfer such Voting Securities continue to be
"restricted securities".
SECTION 4.03. Effect. Any purported transfer of Voting
Securities that is inconsistent with the provisions of this
Article IV shall be null and void and of no force or effect.
ARTICLE V
Extension and Termination
SECTION 5.01. Ciba Election. (a) If the percentage of
the Total Voting Power of Hexcel Beneficially Owned by Ciba on
any Election Date is greater than 10% but less than 100%, Ciba
shall take either of the following actions on such Election Date:
(i) extend this Agreement for an additional two
year period, in which case so long as Ciba Beneficially Owns
25% or more of the Total Voting Power of Hexcel, on one
occasion during each 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 (in which event
the provisions of this Agreement shall continue in full
force and effect until the consummation of such a Buyout
Transaction); or
(ii) undertake to sell a sufficient number of
Voting Securities so that the percentage of the Total Voting
Power of Hexcel Beneficially Owned by Ciba falls below 10%
during the subsequent 18 months pursuant to one or more
Requisite Distributions (in which event the provisions of
this Agreement shall continue until the percentage of the
Total Voting Power of Hexcel Beneficially Owned by Ciba
falls below 10%).
(b) If at any time in accordance with this Agreement
the percentage of the Total Voting Power of Hexcel Beneficially
Owned by Ciba is either (x) 10% or less or (y) 100%, this
Agreement shall automatically terminate.
(c) If either party to this Agreement is in breach of
or violates any material obligation under this Agreement and
fails to cure such breach or violation within 60 days after
delivery of written notice from the other party specifying such
breach and requesting its cure, such other party may terminate
its obligations under this Agreement.
ARTICLE VI
Miscellaneous
SECTION 6.01. Notices. All notices, requests and other
communications hereunder shall be in writing (including fax) and
shall be sent, delivered or mailed, addressed, or faxed:
(a) if to Hexcel, to:
Hexcel Corporation
0000 Xxxx Xxx Xxxxxxx Xxxxxxxxx
Xxxxxxxxxx,XX 00000
(T) (000) 000-0000
(F) (000) 000-0000
Attention of Xxxxxx X. Xxxxx, Esq.
with a copy to:
Xxxx X. Xxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
(T) (000) 000-0000
(F) (000) 000-0000
(b) if to Ciba, to:
Ciba-Geigy Limited
XX 0000
Xxxxx, Xxxxxxxxxxx
(T) (00) 00 000-0000
(F) (00) 00 000-0000
Attention of Mr. John M.D. Xxxxxxxxx
with copies to:
Ciba-Geigy Corporation
000 Xxxxx Xxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000-0000
(T) (000) 000-0000
(F) (000) 000-0000
Attention of Xx. Xxxxxxx Xxxxxxx and
Attention of Xxxx X. XxXxxx, Esq.
and
Ciba-Geigy Limited
XX0000
Xxxxx, Xxxxxxxxxxx
(T) (00) 000-0000
(F) (00) 000-0000
Attention of Xx. Xxxxx Xxxxxx
and
Xxxxxx X. Xxxxxxx, Esq.
Cravath, Swaine & Xxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
(T) (000) 000-0000
(F) (000) 000-0000
Each such notice, request or other communication shall
be given (i) by hand delivery, (ii) by nationally recognized
courier service or (iii) by fax, receipt confirmed.
Each such notice, request or communication shall be
effective (A) if delivered by hand or by nationally recognized
courier service, when delivered at the address specified in this
Section 6.01 (or in accordance with the latest unrevoked written
direction from such party) and (B) if given by fax, when such fax
is transmitted to the fax number specified in this Section 6.01
(or in accordance with the latest unrevoked written direction
from such party), and the appropriate confirmation is received.
SECTION 6.02. Interpretation. The headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement. Whenever the words "included", "includes" or
"including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation".
SECTION 6.03. Severability. The provisions of this
Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity
or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any
person or entity or any circumstance, is found to be invalid or
unenforceable in any jurisdiction, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so
far as may be valid and enforceable, the intent and purpose of
such invalid or unenforceable provision and (b) the remainder of
this Agreement and the application of such provision to other
Persons or circumstances shall not be affected by such invalidity
or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
SECTION 6.04. Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original and all of which shall, taken together, be
considered one and the same agreement, it being understood that
both parties need not sign the same counterpart.
SECTION 6.05. Entire Agreement; No Third Party
Beneficiaries. This Agreement together with the Registration
Rights Agreement and the Strategic Alliance Agreement (a)
constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and (b) is not
intended to confer upon any Person, other than the parties hereto
and, solely with respect to the proviso in Section 2.07(b)(i),
the Indemnified Individuals (as defined in the Strategic Alliance
Agreement), any rights or remedies hereunder.
SECTION 6.06. Further Assurances. Each party shall
execute, deliver, acknowledge and file such other documents and
take such further actions as may be reasonably requested from
time to time by the other party hereto to give effect to and
carry out the transactions contemplated herein.
SECTION 6.07. Governing Law; Equitable Remedies. This
Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts
of law. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the
parties hereto shall be entitled to equitable relief, including
in the form of injunctions, in order to enforce specifically the
provisions of this Agreement, in addition to any other remedy to
which they are entitled at law or in equity.
SECTION 6.08. Consent to Jurisdiction. Each party
hereto irrevocably submits to the exclusive jurisdiction of the
United States District Court for the Southern District of New
York located in the borough of Manhattan in the City of New York,
or if such court does not have jurisdiction, the Supreme Court of
the State of New York, New York County, for the purposes of any
suit, action or other proceeding arising out of this Agreement or
any transaction contemplated hereby. Each party hereto further
agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set
forth in Section 6.01 shall be effective service of process for
any action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction as set forth
above in the immediately preceding sentence. Each party hereto
irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of
this Agreement or the transactions contemplated hereby in (a) the
United States District Court for the Southern District of New
York or (b) the Supreme Court of the State of New York, New York
County, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such
action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
SECTION 6.09. Amendments; Waivers. (a) No provision of
this Agreement may be amended or waived unless such amendment or
waiver is in writing and signed, in the case of an amendment, by
the parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective; provided that no such
amendment or waiver by Hexcel shall be effective without the
approval of a majority of the Independent Directors.
Notwithstanding any provision herein to the contrary, if a
majority of the Independent Directors determine in good faith to
do so, such Independent Directors may seek to enforce, in the
name and on behalf of Hexcel, the terms of this Agreement against
Ciba.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 6.10. Assignment. Neither this Agreement nor
any of the rights or obligations hereunder shall be assigned by
either of the parties hereto without the prior written consent of
the other party, except that either party may assign all its
rights and obligations to the assignee of all or substantially
all of the assets of such party, provided that such party shall
in no event be released from its obligations hereunder without
the prior written consent of the other party. Subject to the
preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered, all as of the date
first set forth above.
CIBA-GEIGY LIMITED,
by
-------------------------
Name:
Title:
HEXCEL CORPORATION,
by
-------------------------
Name:
Title:
