EXHIBIT 10.4
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT made this 11day of October, 2000, between Hexcel
Corporation, a Delaware corporation (the "Company"), and Xxxx X. Xxx (the
"Executive").
The Executive is presently employed by the Company as its
Chairman and Chief Executive Officer pursuant to an Employment Agreement entered
into as of February 29, 1996, as amended (the "Prior Agreement").
The Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution to the growth and success of the Company has
been substantial. In connection with the transactions (the "Transactions")
contemplated by the Stock Purchase Agreement (the "Stock Purchase Agreement")
dated as of October 11, 2000 by and among Ciba Specialty Chemicals Holding, Inc.
("Ciba SCH"), Ciba Specialty Chemicals Inc. ("Ciba SCI"), Ciba Specialty
Chemicals Corporation ("Ciba SCC" and together with Ciba SCH and Ciba SCI,
"Ciba"), LXH, L.L.C. ("LXH") and LXH II, L.L.C. ("LXH II" and together with LXH,
"the Purchasers"), pursuant to which, among other things, the Purchasers will
purchase from Ciba shares of common stock of the Company, the Board desires to
provide for the continued employment of the Executive and to make certain
changes in the Executive's employment arrangements with the Company which the
Board has determined will reinforce and encourage the continued attention and
dedication to the Company of the Executive as a member of the Company's
management, in the best interest of the Company and its stockholders. The
Executive is willing to commit himself to continue to serve the Company, on the
terms and conditions herein provided.
In order to effect the foregoing, the Company and the
Executive wish to enter into this Amended and Restated Employment Agreement on
the terms and conditions set forth below. Accordingly, 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 continue to
employ the Executive, and the Executive hereby agrees to continue to serve the
Company, on the terms and conditions set forth herein.
2. Term. The employment of the Executive by the Company as
provided in Section 1 shall commence on the Closing Date (as such term is
defined in the Stock Purchase Agreement) (the "Commencement Date") and end on
the third anniversary of the Commencement Date, unless further extended or
sooner terminated as hereinafter provided; provided, however, that on such
third anniversary the term of this Agreement shall be automatically extended for
one additional year unless either the Company or the Executive shall have given
notice to the other at least 90 days prior to such third anniversary that this
Agreement shall not be so renewed.
3. Position and Duties. The Executive shall serve as Chairman
of the Board and Chief Executive Officer of the Company and shall have such
responsibilities, duties and authority 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
(i) to serve as a director or advisor to other for-profit and not-for-profit
organizations and corporations and (ii) to serve as an active partner of
investment partnerships, in each case so long as (x) such service does not
materially interfere with the performance of his obligations hereunder and (y)
such organizations, corporations and partnerships are not competitive in any
business area in which the Company is engaged during the term of this Agreement.
The Executive shall furnish to the Company a list of each such entity on the
Commencement 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 at the principal executive offices of the Company, which shall at
all times be located in the New York City/Connecticut metropolitan area, except
for required travel on the Company's business to an extent substantially
consistent with present business travel obligations.
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 no less than the rate of base salary in effect on the date
hereof or at such in creased rate as may from time to time be determined
by the Board, provided, however, that once the Executive's annual base salary is
increased, it may not thereafter be decreased during the term of this
Agreement. The Executive's annual base salary shall be paid in substantially
equal installments, no less frequently than monthly, in accordance with the
Company's standard payroll practices. Compensation of the Executive by salary
payments shall not be deemed exclusive and shall not prevent the Executive from
participating in any other compensation or benefit plan of the Company. The
salary payments (including any increased salary payments) hereunder shall not
in any way limit or reduce any other obligation of the Company hereunder, and no
other compensation, benefit or payment hereunder shall in any way limit or
reduce the obligation of the Company to pay the Executive's salary hereunder.
(b) Annual Bonuses. 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 annual incentive
compensation plans as the Company shall make available to its other officers)
(the "MICP") on terms no less favorable than those applicable to other
senior officers of the Company and shall have a target bonus thereunder of
not less than 80% of his rate of base salary.
(c) Equity Compensation.
(i) Incentive Stock Plan. (A) Effective as
of the Commencement Date, the Executive shall be granted non-qualified
options (the "Option") to purchase 400,000 shares of common stock of
the Company, par value $.01 per share ("Common Stock"), under the
Company's Incentive Stock Plan (the "Incentive Stock Plan"), at a per
share exercise price equal to the greater of (1) the closing price per
share (the "Price Per Share") of Common Stock on the New York Stock
Exchange (or if not then listed on such ex change, such other national
securities exchange or quotation system as then listed upon) on the
Commencement Date or (2) $11. Such options will become vested and
exercisable at the rate of (x) 33-1/3% of such options on each of the
first three anniversaries of the Commencement Date and shall expire on
the earlier of the third anniversary of the termination of the
Executive's employment (90 days following termination of employment if
his employment is terminated for Cause (as defined below)) or the tenth
anniversary of the Commencement Date. The Company agrees that such
grant shall not be in lieu of, or otherwise be taken into account in
determining the size or terms of, the annual long term incentive grant
to the Executive for the 2001 or other fiscal year.
(ii) Forfeiture. If the Executive's employment
with the Company is involuntarily terminated for Cause or the
Executive voluntarily terminates his employment with the Company other
than for Good Reason (as defined below), the Executive shall forfeit
the portion of the Option which has not yet become vested and/or
exercisable as of the Date of Termination (as defined below).
Notwithstanding any other provision contained herein, if the
Executive's employment with the Company is involuntarily terminated
other than for Cause, the Executive terminates employment for Good
Reason, or the Executive dies or terminates employment due to
disability, the Option shall become immediately vested and exercisable.
(iii) Plan Terms Govern. Subject to the
foregoing, the Option shall contain such terms and conditions as shall
be set forth in the Incentive Stock Plan.
(iv) Annual Grants. During the term of the
Executive's employment hereunder, the Executive shall participate in
such long-term incentive and equity compensation plans as the Company
shall make available to its other officers on terms no less favor able
than those applicable to such other officers.
(d) Deferred Compensation Account. (i) Following the
Commencement Date, the Company shall continue to maintain the nonqualified
deferred compensation arrangement and the related Account established for the
benefit of the Executive pursuant to the Section 5(d) of the Prior Agreement.
The Company shall credit to the Account an amount equal to $489,987 on December
31, 2000, an additional $519,387 on December 31, 2001, an additional $550,550 on
December 31, 2002 and an additional $583,583 on December 31, 2003. The Account
shall continue to be credited with interest at the end of each fiscal year at a
rate of 9%. No later than January 31 of each year during the term of this
Agreement beginning with January 31, 2001, the Company shall deliver to the
Executive a statement showing the balance of the Account as of December 31 of
the prior year and all amounts credited to the Account during such year.
(ii) At any time following the later of (x)
the Executive's attainment of age 65 or (y) the last required crediting
to the Account pursuant to the second sentence of Section 5(d)(i) above
(including any early crediting as described in (iv) below) (but in no
event earlier than the Executive's termination of employment with the
Company), the Executive shall receive, or commence to receive, the
amount credited to the Account. The Executive may elect to receive the
value of the Account (l) in a lump sum, (2) in the form of a single
life annuity with a ten-year certain payment, or (3) by causing the
Company to purchase a single premium annuity contract from an insurance
company of the Executive's choice, provided that any such election is
made no later than the time determined by the Company's counsel to
avoid the application of the doctrine of constructive receipt. If the
Executive fails to make a timely election, payment will be in the form
of a lump sum. Annuity payments (if applicable) shall be the actuarial
equivalent of the lump sum amount, using the mortality table for males
provided in Revenue Ruling 95-28 and assuming an interest rate equal to
the product of (x) the prime rate in effect at Credit Suisse as of the
first day of the month immediately preceding the first month for which
an annuity payment is to be made to the Executive hereunder and (y) 1
minus the highest rate of individual federal, state and local income
tax in effect for the year in which the annuity payments commence and
in the jurisdiction of the Executive's residence for such year (giving
effect to any available deduction for state and local income taxes in
calculating federal income tax).
(iii) If the Executive's employment with the
Company is involuntarily terminated other than for Cause or he
terminates employment for Good Reason, (A) all remaining contribution
installments referred to in clause (i) above that have not been made to
the Account will be credited to the Account as of the Date of
Termination, and (B) the Company shall commence distribution of the
Account as soon as practicable following the Date of Termination in
accordance with the election made by the Executive under clause (ii)
above.
If the Executive's employment with the Company is
involuntarily terminated for Cause or if he terminates employment
voluntarily other than for Good Reason, in either case during the term
of this Agreement, no further contributions shall be made to the
Account and the Company shall commence distribution of the Account
as soon as practicable following the Date of Termination in accordance
with the election made by the Executive under clause (ii) above. If the
Executive's employment with the Company is involuntarily terminated
for Cause, or if the Executive terminates employment with the Company
voluntarily other than for Good Reason, in either case following the
expiration of the term of this Agreement, the Company shall continue
to credit to the Account all amounts as they become due in accordance
with clause (i) above and the Company shall commence distribution of
the Account as soon as practicable following the last date on which
amounts are so credited in accordance with the election made by the
Executive under clause (ii) above.
If the Executive dies or terminates employment due to
disability, all remaining contribution installments referred to in
clause (i) above that have not been made to the Account will be
credited to the Account as of the Date of Termination and the Company
shall commence distribution of the Account as soon as practicable
following the Date of Termination as a lump-sum distribution.
(iv) In no event shall payment of the Account be
paid, or commence to be paid, until the first business day
following the Executive's termination of employment.
(e) Other Benefits. The Company shall maintain in full
force and effect, and the Executive shall be entitled to continue to participate
in with a level of benefits no less favorable than any other senior executive
officer of the Company, all of the employee benefit plans and arrangements in
effect on the date hereof in which the Executive participates or plans or
arrangements providing the Executive with at least equivalent benefits
thereunder (including, without limitation, each retirement plan, supplemental
and excess retirement plans, annual and long- term incentive compensation plans,
stock option and purchase plans, group life insurance and accident plan, medical
and dental insurance plans, and disability plan). The Executive shall be
entitled to participate in or receive benefits under any employee benefit plan
or arrangement made available by the Company in the future to its executives and
key management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements.
(f) Vacations. The Executive shall be entitled to a number
of vacation days in each calendar year, and to compensation in respect of earned
but unused vacation days, equal to the maximum number of vacation days for which
any executive officer of the Company may become eligible determined under the
Company's vacation policy as in effect from time to time, but in no event less
than six (6) weeks per year. The Executive shall also be entitled to all paid
holidays and personal days given by the Company to its senior executive
officers.
(g) Services Furnished. The Company shall furnish the
Executive with office space, stenographic assistance and such other facilities
and services as shall be suitable to the Executive's position and adequate for
the performance of his duties as set forth in Section 3 hereof and no less
favorable to the Executive than those provided to the Executive immediately
prior to the Commencement Date.
(h) Expenses. During the term of the Executive's
employment 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 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, provided that
such expenses are incurred and accounted for in accordance with the policies and
procedures established by the Company.
6. Directorships/Other Offices. Subject to Sections 3 and 4,
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
circumstances:
(a) Death. The Executive's employment hereunder shall
terminate upon his death.
(b) Disability. If, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties hereunder on a full-time basis for the entire period of
six consecutive months, and within thirty (30) days after written notice of
termination is given (which may occur before or after the end of such six month
period) shall not have returned to the performance of his duties hereunder on a
full-time basis, the Company may terminate the Executive's employment hereunder.
(c) Cause. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment hereunder upon (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
Executive's incapability due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination, as defined in
Section 7(e), by the Executive for Good Reason, as defined in Section 7 (d)
(ii)), after demand for substantial performance is delivered by the Company that
specifically identifies the manner in which the Company believes the Executive
has not substantially per formed his duties, or (ii) the willful engaging by the
Executive in misconduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise including, but not limited to, conduct that
constitutes Competitive Activity, as defined in Section 11). For purposes of
this Section 7(c), 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 the Executive setting forth the reasons for the 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 7(c) 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, as defined in subsection (e) hereof, from
the Board specifying the particulars thereof in detail.
(d) Termination by the Executive. (i) The Executive may
terminate his employment hereunder (A) for Good Reason or (B) upon 60 days
written notice to the Company.
(ii) For purposes of this Agreement, "Good
Reason" shall mean (A) a failure by the Company to comply with any
material provision of this Agreement which failure has not been cured
within thirty (30) days after written notice of such noncompliance has
been given by the Executive to the Company, (B) any purported
termination of the Executive's employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of
paragraph (e) hereof (and for purposes of this Agreement no such
purported termination shall be effective) or (C) a "Change in Control"
shall have occurred. For purposes of this Agreement, Change in Control
means:
(A) (i) any Person is or becomes the Beneficial Owner,
directly or indirectly, of 40% or more of either (x) the then
outstanding common stock of the Company (the "Outstanding Common
Stock") or (y) the combined voting power of the then outstanding
securities entitled to vote generally in the election of directors of
the Company (the "Total Voting Power"), excluding, however, the
following (1) any acquisition by the Company or any of its Controlled
Affiliates, (2) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the 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 "Incumbent
Directors") cease for any reason to constitute at least a majority
of the Board; provided, however, for purposes of this definition that
any individual who becomes a director subsequent to such date whose
election, or nomination for election by the Company's stockholders, was
made or approved pursuant to the Governance Agreement or by a vote of
at least a majority of the Incumbent Directors (or directors whose
election or nomination for election was previously so approved) shall
be considered a member of the Incumbent Board; but, provided, further,
that any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a person or legal entity
other than the Board shall not be considered a member of the Incumbent
Board; or
(C) there is consummated a merger or consolidation of
the Company or any direct or indirect subsidiary of the Company or a
sale or other disposition of all or substantially all of the assets
of the 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
Beneficially 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 the company resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership immediately
prior to such Corporate Transaction of the Outstanding Common Stock
and Total Voting Power, as the case may be, and (y) immediately
following which the individuals who comprise the Board immediately
prior thereto constitute at least a majority of the board of directors
of the company resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries); or
(D) the approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
(e) Notice of Termination. Any termination of the
Executive's employment by the Company or by the Executive (other than
termination pursuant to subsection (a) hereof) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section
13. 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 clause (B) of subsection (d)(i) above, the date specified
in the Notice of Termination, but in no event earlier than 60 days following the
date the Notice of Termination is delivered and (v) if the Executive's
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided, however, that, if within thirty (30) days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
(g) Indemnification After Termination. Notwithstanding
any other provision of this Agreement to the contrary, 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.
(h) Definitions. For purposes of Section 7(d) hereof,
the following terms shall have the following meanings:
(i) Affiliate of any Person shall mean 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.
(ii) Beneficial Owner shall have the meaning used
in Rule 13d-3 promulgated under the Exchange Act.
(iii) 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.
(iv) Exchange Act shall mean the Securities
Exchange Act of 1934, as amended.
(v) Governance Agreement shall mean the
Governance Agreement, dated [ ], 2000, among LXH, L.L.C., LXH II, L.L.C.,
Hexcel Corporation and the other parties listed on the signature pages thereto.
(vi) Person shall have the meaning set forth in
Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and
14(d) of the Exchange Act.
8. Compensation Upon Termination or During Disability.
(a) During any period that the Executive fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness ("disability period"), the Executive shall continue to receive his full
salary at the rate then in effect for such period until his employment is
terminated for disability pursuant to Section 7(b) hereof, provided that
payments so made to the Executive shall be reduced by the sum of the amounts,
if any, payable to the Executive at or prior to the time of any such payment
under disability benefit plans of the Company or under the Social Security
disability insurance program, and which amounts were not previously applied
to reduce any such payment.
(b) If the Executive's employment is terminated by his
death, the Company shall pay any amounts due to the Executive under Section 5
through the date of his death in accordance with Section 12(b).
(c) If the Executive's employment shall be terminated
by the Company for Cause or voluntarily by the Executive other than for Good
Reason, the Company shall pay the Executive his full salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given and
the Company shall have no further obligations to the Executive relating to the
provision of salary under this Agreement.
(d) If (A) in breach of this Agreement, the Company
shall terminate the Executive's employment other than for disability pursuant to
Section 7(b) or other than for Cause or (B) the Executive shall terminate his
employment for Good Reason (but for the purpose of this Section 8(d), the term
Good Reason shall not include any reference to change in control as set forth in
Section 7(d)(ii)(C) hereof), then
(i) the Company shall pay the Executive
(A) his full salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, (B) a pro rata
portion of any incentive bonus for the year in which the Date of
Termination occurs, such amount determined based on the target bonus
amount that the Executive would have received if all performance goals
(if any) had been attained in full and had his employment continued
until the end of such year, and on the number of full and partial
months worked during such year, and (C) all other unpaid amounts, if
any, with respect to which the Executive has a vested interest as of
the Date of Termination under any compensation plan or program of the
Company, at the time such payments are due;
(ii) in lieu of any further salary payments
to the Executive for periods subsequent to the Date of Termination, the
Company shall pay as liquidated damages, in full settlement of the
Company's obligations to the Executive relating to the provision of
salary and bonus under this Agreement, to the Executive an amount equal
to the product of (A) the sum of (1) the highest annual salary rate in
effect for the Executive in the 90 days immediately preceding the Date
of Termination and (2) the highest annual amount payable to the
Executive under the Company's annual bonus plans in respect of the
three calendar years preceding the calendar year in which such Date of
Termination occurs, and (B) the greater of the number of years
(including partial years) remaining in the term of employment hereunder
or the number two (2); such payment to be made in substantially
equal monthly installments.
(e) If the Executive shall terminate his employment
under clause (B) of subsection 7(d) (i) hereof, the Company shall pay the
Executive his full salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given.
9. Additional Payments.
(a) In the event that the Executive becomes entitled
to the payments under Section 8 hereof or Section 4 of the Executive Severance
Agreement entered into between the Company and the Executive as of February 3,
1999 (the "Executive Severance Agreement"), if any of the payments or benefits
received or to be received by the Executive in connection with the transactions
contemplated by the Stock Purchase Agreement (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 affiliated 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.
(b) 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) 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 opinion
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 payments, 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.
(c) 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
employment 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 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.
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.
11. Noncompetition/Confidential Information. The Executive
agrees that, in order to protect the Company's trade secrets in the field of
engineered materials (e.g., high technology, lightweight structural materials
and specialty chemicals and resins) and other products being manufactured or
marketed by the Company or developed for manufacture or marketing at the time of
the Executive's retirement or termination of employment, or the trade secrets of
any business acquired by the Company within six months after retirement or
termination of such employment if said acquisition was in the process of
negotiation at the time of such retirement or termination (hereinafter
collectively designated the "Company's Business"), at all times prior to his
retirement or termination of employment and during so much of the two-year
period following such retirement or termination that the Company, or any of its
successors, assigns or affiliated companies carries on any portion of the
Company's Business, the Executive shall not directly or indirectly, as a
partner, substantial owner, employee, associate, consultant, agent or otherwise,
engage in any activity related to or competitive with the Company's Business in
any county in the State of California, or in any other state, territory or
foreign country within which the Company carries on the Company's Business or in
which any of its products are sold either prior or subsequent to the date
hereof. The invalidity or unenforceability of any provision of this Section 11
shall not affect the validity or enforceability of any other provision of this
Section 11, which shall remain in full force and effect.
12. Successors; Binding Agreement.
(a) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, 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.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same
amount and on the same terms as he would be entitled to hereunder if he
terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. 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 Agreement 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 requested, postage prepaid, addressed as follows:
If to the Executive:
Xxxx X. Xxx
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
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 New York 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. Survivorship. Any rights and obligations of the parties
set forth in Sections 5, 8 and 11 of this Agreement shall survive any
termination of this Agreement.
18. Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators, at a location mutually agreed
upon by the Company and the Executive which is situated within 50 miles of the
Company's headquarters, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that the Company shall be
entitled to seek a restraining order or injunction in any court of competent
jurisdiction to prevent any continuation of any violation of the provisions of
Section 11 of the Employment Agreement and the Executive hereby consents that
such restraining order or injunction may be granted without the necessity of
the Company's posting any bond, and provided further that the Executive shall
be entitled to seek specific performance of his right to be paid until the Date
of Termination during the pendency of any dispute or controversy arising under
or in connection with this Agreement. The Company shall pay to the Executive
all legal fees and expenses incurred by the Executive in disputing in good faith
any issue relating to the termination of the Executive's employment or in
seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement, provided, that either (i) the Executive eventually prevails
on at least one material issue which is a subject of such arbitration or (ii)
the Executive and the Company enter into a written settlement agreement relating
to one or more of such material issues prior to the conclusion of any such
arbitration. Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
19. Entire Agreement; Other Agreements.
(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, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto (including the Prior Agreement and the employment
agreement dated as of September 1, 1994 between the Executive and the
Company) in respect of the subject matter contained herein is hereby terminated
and cancelled).
(b) The Executive and the Company hereby agree that
the consummation of the transactions contemplated by the Stock Purchase
Agreement shall not be deemed to constitute a Change in Control for purposes of
any plan, award or agreement between the Company and the Executive, including
without limitation, the Incentive Stock Plan, the MICP, any agreements
entered into thereunder between the Executive and the Company and the Executive
Severance Agreement. Commencing on January 2, 2001, the Company shall deliver
to the Executive as soon as practicable following the election by the Executive
therefor, the number of shares of Common Stock allocable to vested restricted
stock units credited to the Executive under the Incentive Stock Plan and the
Company's Management Stock Purchase Plan (the Plans"); provided, however, that
the number of shares of Common Stock the Executive may elect to receive from the
Plans by reason of such election in any calendar year may not exceed the lesser
of (1) 100,000 shares or (2) the number of shares allocable to vested restricted
stock units credited to the Executive under the Plans.
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/ Xxx X. Xxxxxxxx /s/ Xxxx X. Xxx
Xxxx X. Xxx
Xxxx X. Xxx: Interests in Other Corporations, Organizations and Partnerships.
1. Chairman, President & CEO of Xxx Development Corporation.
2. Advisor to The Clipper Group.
3. Director of the Crane Company.
