8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

January 12, 2005          (January 6, 2005)

Date of report     (Date of earliest event reported)

Hexcel Corporation

(Exact Name of Registrant as Specified in Charter)

Delaware	1-8472	94-1109521
(State of Incorporation)	(Commission File No.)	(IRS Employer Identification No.)

Two Stamford Plaza

281 Tresser Boulevard

Stamford, Connecticut  06901-3238

(Address of Principal Executive Offices and Zip Code)

(203) 969-0666

(Registrant’s telephone number, including area code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written Communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 1 – Registrant’s Business and Operations

Item 1.01 Entry into a Material Definitive Agreement

On January 6, 2005 Hexcel made its annual long term incentive equity grants, which include stock options and restricted stock units (RSUs), to all executives and a group of key employees.  Also on January 6, 2005 Hexcel granted RSUs to certain directors who elected to receive RSUs in lieu of their annual retainer fees for services as a director during 2005. In connection with such grants, Hexcel entered into employee option agreements and RSU agreements with each person who received such awards.

The employee option agreement provides for a grant of options at the closing price of a share of common stock on the date of grant, and for the options to vest one-third on each of the first, second and third anniversaries of the date of grant, subject to acceleration under certain circumstances.  The term of the option is ten years, subject to earlier termination under certain circumstances.

The RSU agreement for employees provides for a grant of RSUs which vest and convert into shares of common stock on a one-to-one basis at a rate of one-third of the RSUs on each of the first, second and third anniversaries of the date of grant, subject to acceleration under certain circumstances.  The employee may elect to defer conversion, but not vesting, of the RSUs until the end of the three-year vesting period or until termination of employment.  Generally, upon termination of employment, the RSUs that have vested convert into common stock, and the unvested RSUs are forfeited.

The RSU agreement for directors provides for a grant of RSUs that vest proportionately over the one year period following the grant date and convert into shares of common stock on a one-to-one basis on the first anniversary of the grant date, subject to acceleration under certain circumstances.  The director may elect to defer conversion, but not vesting, of the RSUs until such time as the director leaves the board.  Generally, upon leaving the board, the RSUs that have vested convert into common stock, and the unvested RSUs are forfeited.

A copy of the form of employee option agreement and form of RSU agreement for employees are filed as exhibits.  The form of RSU agreement used for directors was filed as exhibit 10.21 to Hexcel’s 2003 Annual Report on Form 10-K.  The summaries above are qualified in their entirety by such forms of agreement.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(c)  Exhibits

99.1Form of employee option agreement.

99.2Form of restricted stock unit agreement.

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	HEXCEL CORPORATION
January 12, 2005
	/s/ Ira J. Krakower
	Ira J. Krakower
	Senior Vice President

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Exhibit Index

Exhibit No.	Description
99.1	Form of employee option agreement.
99.2	Form of restricted stock unit agreement.

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EX-99.1

Exhibit 99.1

EMPLOYEE OPTION AGREEMENT

under the

Hexcel Corporation 2003 Incentive Stock Plan

EMPLOYEE OPTION AGREEMENT, dated as of the Grant Date, by and between the Optionee and Hexcel Corporation (the “Company”).

W I T N E S S E T H:

WHEREAS, the Company has adopted the Hexcel Corporation 2003 Incentive Stock Plan (the “Plan”); and

WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) has determined that it is desirable and in the best interest of the Company to grant to the Optionee a stock option as an incentive for the Optionee to advance the interests of the Company;

NOW, THEREFORE, the parties agree as follows:

1.Notice of Grant; Incorporation of Plan.  A Notice of Grant is attached hereto as Annex A and incorporated by reference herein.  Unless otherwise provided herein, capitalized terms used herein and set forth in such Notice of Grant shall have the meanings ascribed to them in the Notice of Grant and capitalized terms used herein and set forth in the Plan shall have the meanings ascribed to them in the Plan.  The Plan is incorporated by reference and made a part of this Employee Option Agreement, and this Employee Option Agreement shall be subject to the terms of the Plan, as the Plan may be amended from time to time, provided that any such amendment of the Plan must be made in accordance with Section IX of the Plan.  The Option granted herein constitutes an Award within the meaning of the Plan.

2.Grant of Option.  Pursuant to the Plan and subject to the terms and conditions set forth herein and therein, the Company hereby grants to the Optionee the right and option (the “Option”) to purchase all or any part of the Option Shares of the Company’s common stock, $.01 par value per share (the “Common Stock”), which Option is not intended to qualify as an incentive stock option, as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

3.Purchase Price.  The purchase price per share of the Option Shares shall be the Purchase Price.

4.Term of Option.

(a)  Expiration Date; Term.  Subject to Section 4(c) below, the Option shall expire on, and shall no longer be exercisable following, the tenth anniversary of the Grant Date. The ten-year period from the Grant Date to its tenth anniversary shall constitute the “Term” of the Option.

(b)  Vesting Period; Exercisability.  Subject to Section 4(c) below, the Option shall vest and become exercisable at the rate of 33-1/3% of the Option Shares on each of the first three anniversaries of the Grant Date.

(c)  Termination of Employment; Change in Control.

(i) For purposes of the grant hereunder, any transfer of employment by the Optionee among the Company and its Subsidiaries shall not be considered a termination of employment. If the Optionee’s employment with the Company is terminated for Cause (as defined in the last Section hereof), the Option, whether or not then vested, shall be automatically terminated as of the date of such termination of employment. If the Optionee’s employment with the Company shall terminate other than by reason of Retirement (as defined in the last Section hereof), Disability (as defined in the last Section hereof), death or Cause, the Option (to the extent then vested) may be exercised at any time within ninety (90) days after such termination (but not beyond the Term of the Option).  The Option, to the extent not then vested, shall immediately expire upon such termination.

If the Optionee dies or becomes Disabled (A) while employed by the Company or (B) within 90 days after the termination of his or her employment other than for Cause or Retirement, the Option shall (I) become fully and immediately vested and exercisable and (II) remain exercisable for one year from the date of death or Disability (but not beyond the Term of the Option).

If the Optionee’s employment terminates by reason of Retirement, (A) the Option shall, if not fully vested at the time of such termination, continue to vest in accordance with Section 4(b) above, and (B) the Option shall expire upon the earlier to occur of the three year anniversary date of such Retirement and the expiration of the Term. If the Optionee dies during the three year period immediately following the Retirement of the Optionee, the Options shall (I) become fully and immediately vested and exercisable and (II) remain exercisable for the remainder of the three-year period from the date of Retirement (but not beyond the Term of the Option).

(ii) In the event of a Change in Control (as defined in the last Section hereof), the Option shall immediately become fully vested and exercisable and the post-termination periods of exercisability set forth in Section 4(c)(i) hereof shall apply, except that the post-termination period of exercisability shall be extended and the Option shall remain exercisable for a period of two years from the date of such termination of employment, if, within two years after a Change in Control, (A) the Optionee’s employment is terminated by the Company other than by reason of Retirement, Cause, Disability or death or (B) the Optionee terminates the Optionee’s employment for Good Reason (as defined in the last Section hereof).

(d)  Forfeiture of Option on Certain Conditions.

(i)Notwithstanding anything to the contrary contained in this Agreement, should the Optionee while an employee or after termination of employment fail to comply with the “Protective Condition” (as defined in Section 4(d)(ii)), then the Option, to the extent not already exercised, shall immediately expire upon the Optionee’s failure to meet such condition.

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(ii)“Protective Condition” shall mean that the Optionee (A) complies with all terms and provisions of any obligation of confidentiality to the Company contained in a written agreement signed by the Optionee, and (B) does not engage, in any capacity, directly or indirectly, including but not limited to as employee, agent, consultant, manager, executive, owner or stockholder (except as a passive investor holding less than a 5% equity interest in any enterprise) in any business entity engaged in competition with the business conducted by the Company on the date of the Optionee’s termination of employment with the Company anywhere in the world (except that the Optionee may be employed by a competitor of the Company so long as the Optionee’s duties and responsibilities do not relate directly or indirectly to the business segment of the new employer which is competitive with the business conducted by the Company).

5.Adjustment Upon Changes in Capitalization.

(a)  The aggregate number of Option Shares and the Purchase Price shall be appropriately adjusted by the Committee for any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or consolidation of shares or other capital adjustment, or the payment of a stock dividend or other increase or decrease in such shares, effected without receipt of consideration by the Company, or other change in corporate or capital structure.  The Committee shall also make the foregoing changes and any other changes, including changes in the classes of securities available, to the extent reasonably necessary or desirable to preserve the intended benefits under this Employee Option Agreement in the event of any other reorganization, recapitalization, merger, consolidation, spin-off, extraordinary dividend or other distribution or similar transaction involving the Company.

(b)  Any adjustment under this Section 5 in the number of Option Shares and the Purchase Price shall apply to only the unexercised portion of the Option. If fractions of a share would result from any such adjustment, the adjustment shall be rounded down to the nearest whole number of shares.

6.Method of Exercising Option and Withholding.

(a)  The Option shall be exercised by the delivery by the Optionee to the Company at its principal office (or at such other address as may be established by the Committee) of written notice of the number of Option Shares with respect to which the Option is exercised, accompanied by payment in full of the aggregate Purchase Price for such Option Shares.  Payment for such Option Shares shall be made (i) in U.S. dollars by personal check, bank draft or money order payable to the order of the Company, or by money transfers or direct account debits to an account designated by the Company; (ii) through the delivery of shares of Common Stock with a Fair Market Value equal to the total payment due from the Optionee; (iii) pursuant to a “cashless exercise” program if such a program is established by the Company; or (iv) by any combination of the methods described in (i) through (iii) above.

(b)  The Company’s obligation to deliver shares of Common Stock upon the exercise of the Option shall be subject to the payment by the Optionee of applicable federal, state, local and other withholding tax, if any.  The Company or a Subsidiary shall, to the extent permitted by law, have the right to deduct from any payment of any kind

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otherwise due to the Optionee any federal, state, local or other taxes required to be withheld with respect to such payment.

7.Transfer.  Except as provided in this Section 7, the Option is not transferable otherwise than by will or the laws of descent and distribution, and the Option may be exercised during the Optionee’s lifetime only by the Optionee.  Any attempt to transfer the Option in contravention of this Section 7 is void ab initio.  The Option shall not be subject to execution, attachment or other process.  Notwithstanding the foregoing, the Optionee and, after the death of the Optionee the estate or any estate beneficiary of the Optionee, shall be permitted to transfer the Option to members of his or her immediate family (i.e., children, grandchildren or spouse), trusts for the benefit of such family members, and partnerships or other entities whose only partners or other equity owners are such family members; provided, however, that no consideration can be paid for the transfer of the Option and the transferee of the Option must agree to be subject to all conditions applicable to the Option prior to its transfer.

8.No Rights in Option Shares.  The Optionee shall have none of the rights of a stockholder with respect to the Option Shares unless and until shares of Common Stock are issued upon exercise of the Option.

9.No Right to Employment.  Nothing contained herein shall be deemed to confer upon the Optionee any right to remain as an employee of the Company.

10.Governing Law/Jurisdiction.  This Employee Option Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to principles of conflict of laws.

11.Resolution of Disputes.  Any disputes arising under or in connection with this Employee Option Agreement shall be resolved by binding arbitration before a single arbitrator, to be held in New York in accordance with the commercial rules and procedures of the American Arbitration Association.  Judgment upon the award rendered by the arbitrator shall be final and subject to appeal only to the extent permitted by law.  Each party shall bear such party’s own expenses incurred in connection with any arbitration; provided, however, that the cost of the arbitration, including without limitation, reasonable attorneys’ fees of the Optionee, shall be borne by the Company in the event the Optionee is the prevailing party in the arbitration. Anything to the contrary notwithstanding, each party hereto has the right to proceed with a court action for injunctive relief or relief from violations of law not within the jurisdiction of an arbitrator.

12.Notices.  Any notice required or permitted under this Employee Option Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Optionee at the last address specified in Optionee’s employment records, or such other address as the Optionee may designate in writing to the Company, or to the Company, Attention:  Corporate Secretary, or such other address as the Company may designate in writing to the Optionee.

13.Failure To Enforce Not a Waiver.  The failure of either party hereto to enforce at any time any provision of this Employee Option Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

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14.Counterparts.  This Employee Option Agreement may be executed in two or more counterparts, each of which shall be an original but all of which together shall represent one and the same agreement.

15.Miscellaneous.  This Employee Option Agreement cannot be changed or terminated orally.  This Employee Option Agreement and the Plan contain the entire agreement between the parties relating to the subject matter hereof.  The section headings herein are intended for reference only and shall not affect the interpretation hereof.

16.Definitions.  For purposes of this Employee Option Agreement:

(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.  The term “Control” shall have the meaning specified in Rule 12b-2 under the Exchange Act;

(II)  “Beneficial Owner” (and variants thereof) shall have the meaning given in Rule 13d-3 promulgated under the Exchange Act;

(III)  “Cause” shall mean (A) the willful and continued failure by the Optionee to substantially perform the Optionee’s duties with the Company (other than any such failure resulting from the Optionee’s incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Optionee by the Company, which demand specifically identifies the manner in which the Company believes that the Optionee has not substantially performed the Optionee’s duties, or (B) the willful engaging by the Optionee in conduct which is demonstrably and materially injurious to the Company or its Subsidiaries, monetarily or otherwise.  For purposes of clauses (A) and (B) of this definition, no act, or failure to act, on the Optionee’s part shall be deemed “willful” unless done, or omitted to be done, by the Optionee not in good faith and without the reasonable belief that the Optionee’s act, or failure to act, was in the best interest of the Company;

(IV)  “Change in Control” shall mean any of the following events:

(1)  any Person is or becomes the Beneficial Owner, directly or indirectly, of 40% or more of either (a) the then outstanding Common Stock of the Company (the “Outstanding Common Stock”) or (b) 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: (i) any acquisition by the Company or any of its Controlled Affiliates, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Controlled Affiliates and (iii) any Person who becomes such a Beneficial Owner in connection with a transaction described in the exclusion within paragraph (3) below; or

(2)  a change in the composition of the Board such that the individuals who, as of the effective date of this Employee Option Agreement, constitute the Board (such individuals shall be hereinafter referred to as the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a director subsequent to such effective date, whose election, or nomination for election by the Company’s stockholders, was made or approved pursuant to the

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terms of each then existing Stockholders Agreement or by a vote of at least a majority of the Incumbent Directors (or directors whose election or nomination for election was previously so approved) shall be considered a member of the Incumbent Board; but, provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person or legal entity other than the Board shall not be considered a member of the Incumbent Board; or

(3)  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 (a) pursuant to which all or substantially all of the individuals and entities who are the Beneficial Owners, respectively, of the Outstanding Common Stock and Total Voting Power immediately prior to such Corporate Transaction will Beneficially Own, directly or indirectly, more than 50%, respectively, of the outstanding common stock and the combined voting power of the then outstanding 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 company 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 (b) 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 company 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

(4)  the approval by the stockholders of the Company of a complete liquidation or dissolution of the Company;

(V)  “Disability” (or becoming “Disabled”) shall mean that, as a result of the Optionee’s incapacity due to physical or mental illness or injury, he or she shall not have performed all or substantially all of his or her usual duties as an employee of the Company for a period of more than one-hundred-fifty (150) days in any period of one-hundred-eighty (180) consecutive days;

(VI)  “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time;

(VII)  “Good Reason” for termination by the Optionee of the Optionee’s employment shall mean the occurrence (without the Optionee’s express written consent) of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraphs (1), (5) or (6) below, such act or failure to act is corrected prior to the date of termination of the Optionee’s employment:

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(1)  a significant adverse alteration in the nature or status of the Optionee’s responsibilities, position or authority from those in effect immediately prior to the Change in Control;

(2)  a reduction by the Company in the Optionee’s annual base salary as in effect on the date hereof or as the same may be increased from time to time;

(3)  the relocation of the Optionee’s principal place of employment to a location more than fifty (50) miles from the Optionee’s principal place of employment immediately prior to the Change in Control or the Company’s requiring the Optionee to work anywhere other than at such principal place of employment (or permitted relocation thereof) except for required travel on the Company’s business to an extent substantially consistent with the Optionee’s present business travel obligations;

(4)  the failure by the Company to pay to the Optionee any portion of the Optionee’s current compensation, or to pay to the Optionee any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due;

(5)  the failure by the Company to continue in effect any compensation plan in which the Optionee participates immediately prior to the Change in Control which is material to the Optionee’s total compensation, or any substitute plans adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Optionee’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount or timing of payment of benefits provided and the level of the Optionee’s participation relative to other participants, as existed immediately prior to the Change in Control; or

(6)  the failure by the Company to continue to provide the Optionee with benefits substantially similar to those enjoyed by the Optionee under any of the Company’s pension, savings, life insurance, medical, health and accident, or disability plans in which the Optionee was participating immediately prior to the Change in Control (except for across-the-board changes similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Optionee of any material fringe benefit enjoyed by the Optionee at the time of the Change in Control, or the failure by the Company to provide the Optionee with the number of paid vacation days to which the Optionee is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the Change in Control.

The Optionee’s right to terminate the Optionee’s employment for Good Reason shall not be affected by the Optionee’s incapacity due to physical or mental illness. The Optionee’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

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For purposes of any determination regarding the existence of Good Reason, any claim by the Optionee that Good Reason exists shall be presumed to be correct unless the Company establishes to the Board by clear and convincing evidence that Good Reason does not exist;

(VIII)“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) of the Exchange Act;

(IX)“Retirement” shall mean termination of the Optionee’s employment, other than by reason of death or Cause, either (A) at or after age 65 or (B) at or after age 55 after five (5) years of employment by the Company (or a Subsidiary thereof);

(X)“Stockholders Agreement” shall mean any stockholders agreement, governance agreement or other similar agreement between the Company and a holder or holders of Voting Securities; and

(XI)“Voting Securities” means Common Stock and any other securities of the Company entitled to vote generally in the election of directors of the Company.

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Annex A

NOTICE OF GRANT

EMPLOYEE STOCK OPTION

HEXCEL CORPORATION 2003 INCENTIVE STOCK PLAN

The following employee of Hexcel Corporation, a Delaware corporation or a Subsidiary, has been granted an option to purchase shares of the Common Stock of Hexcel, $.01 par value, in accordance with the terms of this Notice of Grant and the Employee Option Agreement to which this Notice of Grant is attached.

The following is a summary of the principal terms of the option which has been granted.  The terms below shall have the meanings ascribed to them below when used in the Employee Option Agreement.

Optionee

Address of Optionee

Foreign Sub Plan, if applicable

Grant Date

Purchase Price

Aggregate Number of Shares

Granted (the “Option Shares”)

IN WITNESS WHEREOF, the parties hereby agree to the terms of this Notice of Grant and the Employee Option Agreement to which this Notice of Grant is attached and execute this Notice of Grant and Employee Option Agreement as of the Grant Date.

	HEXCEL CORPORATION
Optionee
	By:
		Ira J. Krakower
		Sr. Vice President

EX-99.2

Exhibit 99.2

RESTRICTED STOCK UNIT AGREEMENT

under the

Hexcel Corporation 2003 Incentive Stock Plan

This Restricted Stock Unit Agreement (the “Agreement”), is entered into as of the Grant Date, by and between Hexcel Corporation, a Delaware corporation (the “Company”), and the Grantee.

Pursuant to the Hexcel Corporation 2003 Incentive Stock Plan (the “Plan”), the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) has determined that the Grantee shall be granted Restricted Stock Units (“RSUs”) upon the terms and subject to the conditions hereinafter contained.  Capitalized terms used but not defined herein shall have the meanings assigned to them in the Plan.

1.Notice of Grant; Incorporation of Plan. A Notice of Grant is attached hereto as Annex A and incorporated by reference herein. Unless otherwise provided herein, capitalized terms used in this Agreement and set forth in the Notice of Grant shall have the meanings ascribed to them in the Notice of Grant and capitalized terms used in this Agreement and set forth in the Plan shall have the meanings ascribed to them in the Plan. The Plan is incorporated by reference and made a part of this Agreement, and this Agreement shall be subject to the terms of the Plan, as the Plan may be amended from time to time, provided that any such amendment of the Plan must be made in accordance with Section IX of the Plan. The RSUs granted herein constitute an Award within the meaning of the Plan.

2.Terms of Restricted Stock Units.  The grant of RSUs provided in Section 1 hereof shall be subject to the following terms, conditions and restrictions:

(a)The Grantee shall not possess any incidents of ownership (including, without limitation, dividend and voting rights) in shares of the Common Stock in respect of the RSUs until such RSUs have vested and been distributed to the Grantee in the form of shares of Common Stock.

(b)Except as provided in this Section 2(b), the RSUs and any interest therein may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution, prior to the distribution of the Common Stock in respect of such RSUs and subject to the conditions set forth in the Plan and this Agreement. Any attempt to transfer RSUs in contravention of this Section is void ab initio. RSUs shall not be subject to execution, attachment or other process. Notwithstanding the foregoing, the Grantee shall be permitted to transfer RSUs to members of his or her immediate family (i.e., children, grandchildren or spouse), trusts for the benefit of such family members, and partnerships or other entities whose only partners or equity owners are such family members; provided, however, that no consideration can be paid for the transfer of the RSUs and the transferee of the RSUs musts agree to be subject to all conditions applicable to the RSUs (including all of the terms and conditions of this Agreement) prior to transfer.

(c)Forfeiture of RSUs on Certain Conditions.

(i)Notwithstanding anything to the contrary contained in this Agreement, should the Grantee while an employee or after termination of employment fail to comply with the “Protective Condition” (as defined in Section 2(c)(ii)), then the RSUs, to the extent not already converted into shares of Common Stock distributed to the Grantee, shall immediately expire upon the Grantee’s failure to meet such condition.

(ii)“Protective Condition” shall mean that the Grantee (A) complies with all terms and provisions of any obligation of confidentiality to the Company contained in a written agreement signed by the Grantee, and (B) does not engage, in any capacity, directly or indirectly, including but not limited to as employee, agent, consultant, manager, executive, owner or stockholder (except as a passive investor holding less than a 5% equity interest in any enterprise) in any business entity engaged in competition with the business conducted by the Company on the date of the Grantee’s termination of employment with the Company anywhere in the world (except that the Grantee may be employed by a competitor of the Company so long as the Grantee’s duties and responsibilities do not relate directly or indirectly to the business segment of the new employer which is competitive with the business conducted by the Company).

3.Vesting and Conversion of RSUs.  Subject to Section 4, the RSUs shall vest and be converted into an equivalent number of shares of Common Stock that will be immediately distributed to the Grantee at the rate of 33-1/3% of the RSUs on each of the first three anniversaries of the Grant Date (each such 33-1/3% portion of the RSUs being a “Tranche”); provided that if (i) the Grantee delivers to the Company an irrevocable written election to defer conversion of one or more Tranches until either (a) subject to the following sentence, the earlier of (I) the third anniversary of the Grant Date and (II) such date as Grantee’s service as an employee of the Company or any Subsidiary of the Company terminates or (b) subject to the following sentence, such date as Grantee’s service as an employee of the Company or any Subsidiary of the Company terminates, and (ii) such written election is received by the Corporate Secretary of Hexcel within thirty (30) days after the date of grant of the RSUs, then such Tranche(s) shall be converted into an equivalent number of shares of Common Stock at the time indicated in such written election (but such written election will not affect the vesting of the RSUs).  Notwithstanding the foregoing, if, in connection with the Grantee’s termination of employment, the Grantee shall be deemed to be a “specified employee” within the meaning of section 409A(a)(2)(B)(i) of the Code and the regulations issued thereunder from time to time, the date described in each of clause (i)(a)(II) and (i)(b) of the preceding sentence shall be deemed to be the date which is six months after such termination of the Grantee’s service as an employee.  Upon the distribution of the shares of Common Stock in respect of the RSUs, the Company shall issue to the Grantee or the Grantee’s personal representative a stock certificate representing such shares of Common Stock, free of any restrictions.

4.Termination of Employment; Change of Control.

(a)For purposes of the grant hereunder, any transfer of employment by the Grantee among the Company and its Subsidiaries shall not be considered a termination of employment.  If the Grantee dies or terminates employment due to Disability (as defined in the last Section hereof), all RSUs shall immediately vest, be converted into shares of Common Stock and be distributed to the Grantee. Notwithstanding the preceding sentence, if, in connection with such termination, the Grantee shall be deemed to be a “specified employee”

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within the meaning of section 409A(a)(2)(B)(i) of the Code, and the regulations issued thereunder from time to time, such conversion and distribution shall not occur until the date which is six months after such termination (or, if earlier, the date of the Grantee’s death); provided, however, that, if the Grantee is deemed a “specified employee” and becomes “disabled” within the meaning of section 409A(a)(2)(A)(ii) of the Code, and the regulations issued thereunder from time to time, such conversion and distribution shall occur upon the later to occur of the date of termination and the date the Grantee becomes so disabled.  If the Grantee’s employment with the Company terminates due to the Grantee’s Retirement (as defined in the last Section hereof), all RSUs shall continue to vest (and be converted into an equivalent number of shares of Common Stock that will be distributed to the Grantee) in accordance with Section 3 above. If the Grantee dies during the three year period immediately following the Retirement of the Grantee, then all RSUs shall immediately vest, be converted into shares of Common Stock and be distributed to the Grantee’s personal representative.

(b)Subject to Sections 4(a) and 4(c), if the Grantee voluntarily terminates his employment with the Company, or if the Grantee’s employment with the Company is involuntarily terminated other than for Cause (as defined in the last Section hereof), all vested RSUs shall immediately be converted into shares of Common Stock and distributed to the Grantee and the Grantee shall forfeit all RSUs that have not vested. If the Grantee’s employment with the Company is involuntarily terminated for Cause, the Grantee shall forfeit all RSUs, whether or not vested.

(c)Notwithstanding any other provision contained herein or in the Plan or in any election made pursuant to Section 3 hereof to defer the conversion of one or more Tranches, in the event of a Change in Control (as defined in the last Section hereof), all RSUs shall immediately vest, be converted into shares of Common Stock and be distributed to the Grantee.

5.Equitable Adjustment.

The aggregate number of shares of Common Stock subject to the RSUs shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or consolidation of shares or other capital adjustment, or the payment of a stock dividend or other increase or decrease in such shares, effected without the receipt of consideration by the Company, or other change in corporate or capital structure. The Committee shall also make the foregoing changes and any other changes, including changes in the classes of securities available, to the extent reasonably necessary or desirable to preserve the intended benefits under this Agreement in the event of any other reorganization, recapitalization, merger, consolidation, spin-off, extraordinary dividend or other distribution or similar transaction involving the Company.

6.     Taxes.  The Grantee shall pay to the Company or a Subsidiary promptly upon request any taxes the Company reasonably determines it or a Subsidiary is required to withhold under applicable tax laws with respect to the vesting and/or conversion of the RSUs. Such payment shall be made as provided in Section VIII(f) of the Plan.

7.     No Guarantee of Employment.  Nothing set forth herein or in the Plan shall confer upon the Grantee any right of continued employment for any period by the Company, or shall interfere in any way with the right of the Company to terminate such employment.

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8.Notices.  Any notice required or permitted under this Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Grantee at the last address specified in Grantee’s employment records, or such other address as the Grantee may designate in writing to the Company, or to the Company, Attention:  Corporate Secretary, or such other address as the Company may designate in writing to the Grantee.

9.Failure To Enforce Not a Waiver.  The failure of either party hereto to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

10.Governing Law.  This Agreement shall be governed by and construed according to the laws of the State of Delaware, without regard to the conflicts of laws provisions thereof.

11.Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be an original but all of which together shall represent one and the same agreement.

12.Miscellaneous.

(a)This Agreement cannot be changed or terminated orally. This Agreement and the Plan contain the entire agreement between the parties relating to the subject matter hereof. The section headings herein are intended for reference only and shall not affect the interpretation hereof.

(b)Notwithstanding any term or provision of this Agreement (including any term or provision of the Plan incorporated herein by reference), the parties hereto agree that the provisions hereof may be modified unilaterally by the Company from time to time to the extent necessary (and only to the extent necessary) to prevent the implementation, application or existence (as the case may be) of any such provision from requiring the inclusion of any compensation deferred hereunder (or pursuant to a related deferral election) in the Grantee’s gross income pursuant to section 409A of the Code, and the regulations issued thereunder from time to time.  The Company shall give such notification of any modifications to the Grantee as soon as reasonably practicable.

13.Definitions.  For purposes of this Agreement:

(a)“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.  The term “Control” shall have the meaning specified in Rule 12b-2 under the Exchange Act;

(b)“Beneficial Owner” (and variants thereof) shall have the meaning given in Rule 13d-3 promulgated under the Exchange Act;

(c)“Cause” shall mean (i) the willful and continued failure by the Grantee to substantially perform the Grantee’s duties with the Company (other than any such failure resulting from the Grantee’s incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Grantee by the Company, which demand specifically identifies the manner in which the Company believes that the Grantee

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has not substantially performed the Grantee’s duties, or (ii) the willful engaging by the Grantee in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Grantee’s part shall be deemed “willful” unless done, or omitted to be done, by the Grantee not in good faith and without the reasonable belief that the Grantee’s act, or failure to act, was in the best interest of the Company;

(d)“Change in Control” shall mean any of the following events:

(i)any Person is or becomes the Beneficial Owner, directly or indirectly, of 40% or more of either (A) the then outstanding Common Stock of the Company (the “Outstanding Common Stock”) or (B) 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: (I) any acquisition by the Company or any of its Controlled Affiliates, (II) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Controlled Affiliates and (III) any Person who becomes such a Beneficial Owner in connection with a transaction described in the exclusion within paragraph (iii) below; or

(ii)a change in the composition of the Board such that the individuals who, as of the effective date of this Agreement, constitute the Board (such individuals shall be hereinafter referred to as the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a director subsequent to such effective date, whose election, or nomination for election by the Company’s stockholders, was made or approved pursuant to the terms of each then existing Stockholders 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

(iii)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 (A) pursuant to which all or substantially all of the individuals and entities who are the Beneficial Owners, respectively, of the Outstanding Common Stock and Total Voting Power immediately prior to such Corporate Transaction will Beneficially Own, directly or indirectly, more than 50%, respectively, of the outstanding common stock and the combined voting power of the then outstanding 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 company 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

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ownership immediately prior to such Corporate Transaction of the Outstanding Common Stock and Total Voting Power, as the case may be, and (B) 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 company 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

(iv)the approval by the stockholders of the Company of a complete liquidation or dissolution of the Company;

(e)“Disability” shall mean that, as a result of the Grantee’s incapacity due to physical or mental illness or injury, the Grantee shall not have performed all or substantially all of the Grantee’s usual duties as an employee of the Company for a period of more than one-hundred-fifty (150) days in any period of one-hundred-eighty (180) consecutive days;

(f)“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time;

(g)“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) of the Exchange Act;

(h)“Retirement” shall mean termination of the Grantee’s employment, other than by reason of death or Cause, either (A) at or after age 65 or (B) at or after age 55 after five (5) years of employment by the Company (or a Subsidiary thereof);

(i)“Stockholders Agreement” shall mean any stockholders agreement, governance agreement or other similar agreement between the Company and a holder or holders of Voting Securities; and

(j)“Voting Securities” means Common Stock and any other securities of the Company entitled to vote generally in the election of directors of the Company.

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Annex A

NOTICE OF GRANT

RESTRICTED STOCK UNITS

HEXCEL CORPORATION 2003 INCENTIVE STOCK PLAN

The following employee of Hexcel Corporation, a Delaware corporation, or a Subsidiary, has been granted restricted stock units in accordance with the terms of this Notice of Grant and the Agreement to which this Notice of Grant is attached.

The terms below shall have the meanings ascribed to them below when used in the Agreement.

Grantee

Address of Grantee

Grant Date

Aggregate Number of RSUs
Granted

IN WITNESS WHEREOF, the parties hereby agree to the terms of this Notice of Grant and the Agreement to which this Notice of Grant is attached and execute this Notice of Grant and the Agreement as of the Grant Date.

	HEXCEL CORPORATION
Grantee
		By:
		Ira J. Krakower
		Senior Vice President

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