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

February 13, 2006(February 7, 2006)

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

Cash Bonus Plan for 2006

On February 7, 2006, the Compensation Committee of the Board of Directors (the “Compensation Committee”) adopted performance goals to be used to determine cash bonuses for 2006 under the Hexcel Corporation Management Incentive Compensation Plan (“MICP”) for all MICP participants.  The financial performance goals are based on the attainment of certain levels of consolidated EBITDA and, in the case of our business unit presidents, business unit EBITDA.

Each of our five most highly compensated executive officers (“Named Executive Officers” or “NEOs”) who participate in the MICP have a target cash bonus opportunity equal to a percentage of base salary: 100% for our Chairman, Chief Executive Officer and President; 55% for each of our Executive Vice President and Chief Financial Officer and our Senior Vice President, General Counsel and Secretary; 60% for the President of our Composites global business unit and 50% for the President of our Reinforcements global business unit.  Actual awards can range from zero to 200% of the target opportunity depending on the Compensation Committee’s assessment of the degree to which performance goals are achieved. The aggregate cash bonus award (1) for our Chief Executive Officer is based on attainment of consolidated EBITDA (80%) and individual performance objectives (20%), (2) for our Chief Financial Officer and our General Counsel, is based on attainment of consolidated EBITDA (70%) and individual performance objectives (30%), and (3) for the Presidents of our Composites and Reinforcements global business units, is based on attainment of consolidated EBITDA (50%), business unit EBITDA (20%), and individual performance objectives (30%).

Cash Awards to NEOs with respect to 2005

On February 7, 2006, the Compensation Committee approved the following cash awards for each of our NEOs in accordance with the MICP for 2005:

David E. Berges, Chairman, Chief Executive Officer and President	$	675,000
Stephen C. Forsyth, Executive Vice President and Chief Financial Officer	$	163,812
Ira J. Krakower, Senior Vice President, General Counsel and Secretary	$	126,224
William Hunt, President of Composites Global Business Unit	$	164,752
Joseph S. Shaulson, President of Reinforcements Global Business Unit	$	102,965

2

Annual Long-Term Equity Incentive Grants

On February 7, 2006 Hexcel made its annual long term incentive equity grants to all executives and a group of key employees.  Each NEO received stock options, restricted stock units (RSUs) and performance based awards (PBAs) pursuant to agreements with Hexcel.

The  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 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 or forfeiture under certain circumstances.

The PBA agreement provides for an opportunity to earn and receive shares of Hexcel common stock.  The actual number of shares of common stock awarded can vary from zero to 150% of the target amount depending on the Compensation Committee’s assessment of the degree to which the applicable performance goal is achieved.  The performance goal for the 2006 grant is cumulative consolidated EBITDA for the 2006-2007 fiscal years, which we refer to as the performance period.  The shares are distributed to the employee in January 2009, after a one year service period following the performance period.  Generally, if the employee voluntarily terminates his employment with Hexcel at any time during the performance period or the service period, he forfeits his entire PBA.  The PBA can vest or terminate at different times under certain circumstances.

A copy of the form of RSU agreement and form of PBA agreement are filed as exhibits 99.1 and 99.2.  A copy of the form of option agreement was filed as exhibit 99.1 to the Current Report on Form 8-K filed with the SEC on January 12, 2005.  The summaries above are qualified in their entirety by such forms of agreement.

Perquisites Allowance for Chief Executive Officer

On February 7, 2006, the Compensation Committee eliminated the perquisites allowance for David E. Berges, our Chairman, Chief Executive Officer and President. Previously, such amount was available to Mr. Berges for expenses related to a variety of items such as automobile expenses, financial planning and club dues.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(c)Exhibits

99.1Form of restricted stock unit agreement.

99.2Form of performance based award agreement

3

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
February 13, 2006
	/s/ Ira J. Krakower
	Ira J. Krakower
	Senior Vice President

4

Exhibit Index

Exhibit No.	Description
99.1	Form of restricted stock unit agreement
99.2	Form of performance based award agreement

5

EX-99.1

Exhibit 99.1

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.

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”

2

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 Section 4(c), if the Grantee’s employment terminates for any reason other than death, Disability or Retirement, the Grantee shall forfeit all RSUs.

(c)   Notwithstanding any other provision contained herein or in the Plan, 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.

3

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

4

demand specifically identifies the manner in which the Company believes that the Grantee 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

5

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

(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.

6

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

EX-99.2

Exhibit 99.2

PERFORMANCE BASED AWARD AGREEMENT
under the
Hexcel Corporation 2003 Incentive Stock Plan

This Performance Based Award 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 a Performance Based Award (“PBA”) 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. This PBA may result in the Grantee being granted up to that number of Performance Based Restricted Stock Units (“PBRSUs”) as indicated in the Notice of Grant.  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 PBA granted hereunder constitutes an Award within the meaning of the Plan.

2.Award of PBRSUs.  Subject to Sections 4 and 5, if, and only if, the Threshold Level of the Performance Measure is met for the Performance Period, the Grantee shall be awarded that number of PBRSUs in accordance with the PBRSU Award Schedule that appears on Annex B.

(a)As soon as practicable after the end of the Performance Period, the Committee shall certify the degree of achievement of the Performance Measure for the Performance Period.  If, and only if, the Threshold Level of the Performance Measure has been met for the Performance Period, the Committee shall determine the number of PBRSUs to be granted to the Grantee, in accordance with the PBRSU Award Schedule that appears on Annex B.

(b)If PBRSUs are granted to the Grantee, the grant date shall be the date of certification by the Committee of the degree of achievement of the Performance Measure for the Performance Period.

(c)If the Threshold Level of the Performance Measure is not met for the Performance Period, the Grantee shall receive nothing and this PBA shall be null and void.

3.Vesting and Conversion of PBRSUs.  Subject to Sections 4 and 5, PBRSUs shall vest and be converted into an equivalent number of shares of Common Stock that will be

distributed to the Grantee as soon as practicable after the end of the Service Period.  Upon the distribution of the shares of Common Stock in respect of PBRSUs, 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.

(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.

(b)Subject to Section 5, if, during the Performance Period, the Grantee dies or terminates employment due to Disability or Retirement, or the Grantee’s employment is involuntarily terminated without Cause or the Grantee terminates employment for Good Reason, then, so long as the Threshold Level of the Performance Measure is met for the Performance Period, as soon as practicable after the Committee certifies the degree of achievement of the Performance Measure for the Performance Period the Grantee shall receive a certificate for that number of shares of Common Stock as determined by the following formula:

S = N * (Days Employed/730)

Where

S	=	Shares to be received by the Grantee
N	=	The number of PBRSUs the Grantee would have received, based on the degree of achievement of the Performance Measure for the Performance Period, had the Grantee been employed by the Company for the entire Performance Period
Days
Employed	=	The number of days the Grantee was employed during the Performance Period prior to the Grantee’s termination of employment

If the Threshold Level of the Performance Measure is not met for the Performance Period, the Grantee shall receive nothing and the PBA shall be null and void.

(c)Subject to Section 5, if, during the Service Period, the Grantee dies or terminates employment due to Disability or Retirement, or the Grantee’s employment is involuntarily terminated without Cause or the Grantee terminates employment for Good Reason, then immediately upon the Grantee’s termination of employment PBRSUs granted to the Grantee under Section 2 shall vest and be converted into an equivalent number of shares of Common Stock that will be immediately distributed to the Grantee in the form of a stock certificate.

(d)If, during either the Performance Period or the Service Period, the Grantee voluntarily terminates his employment other than for Good Reason or is terminated for Cause, the Grantee shall receive nothing and the PBA and any PBRSUs that have been granted hereunder shall be null and void.

2

5.Change in Control.

(a)If a Change in Control occurs during the Performance Period, (i) the Grantee will immediately be awarded that number of PBRSUs that Grantee would have been awarded at the end of the Performance Period if the degree of achievement of the Performance Measure for the Performance Period was exactly 100% of the Target Amount of the Performance Measure, and (ii) such PBRSUs shall vest and convert into shares as set forth in Section 3.

(b)If a Change in Control occurs during the Service Period, then any PBRSUs held by the Grantee shall vest and convert into shares as set forth in Section 3.

(c)If following a Change in Control and prior to the end of the Service Period the Grantee dies or terminates employment due to Disability or Retirement or the Grantee’s employment is involuntarily terminated without Cause or the Grantee terminates employment for Good Reason, then immediately upon the Grantee’s termination of employment all PBRSUs held by the Grantee shall vest and be converted into an equivalent number of shares of Common Stock that will be immediately distributed to the Grantee in the form of a stock certificate.

(d)If, in connection with a Change of Control in which Common Stock is exchanged for another security or other form of consideration the Qualifying Condition has not been met, then all PBRSUs held by the Grantee shall vest and be converted into an equivalent number of shares of Common Stock that will be immediately distributed to the Grantee.

6.Transferability of RSUs; No Incidents of Ownership; Dividends

(a)Except as provided in this Section 6(a), PBRSUs 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. Any attempt to transfer PBRSUs in contravention of this Section 6(a) is void ab initio. PBRSUs shall not be subject to execution, attachment or other process. Notwithstanding the foregoing, the Grantee shall be permitted to transfer PBRSUs 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 PBRSUs and the transferee of PBRSUs musts agree to be subject to all conditions applicable to PBRSUs (including all of the terms and conditions of this Agreement) prior to transfer.

(b)Except as set forth in Section 6(c), 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 PBRSUs until PBRSUs have vested and been converted into shares of Common Stock distributed to the Grantee.

(c)If one or more cash dividends are paid with respect to the Common Stock during the Performance Period or the Service Period and before PBRSUs have vested and converted into shares of Common Stock, then at the time PBRSUs vest and convert into shares of Common Stock that are distributed to the Grantee, the Grantee shall receive a cash payment equal to the amounts Grantee would have received had Grantee owned the shares

3

of Common Stock with respect to such PBRSUs on the record dates with respect to such dividends.

7.Forfeiture of RSUs on Certain Conditions.

(a)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 7(b)), then the PBA and any PBRSUs (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.

(b)“Protective Condition” shall mean that the Grantee (A) complies with all terms and provisions of any obligation of confidentiality to the Company and/or one of its Subsidiaries 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).

8.Equitable Adjustment.

The aggregate number of shares of Common Stock subject to PBRSUs 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.

9.Taxes.  Upon the conversion into shares of Common Stock of some or all PBRSUs, absent a notification by the Grantee to the Company which is received by the Company at least three business days prior to the date of such conversion to the effect that the Grantee will pay to the Company or a Subsidiary by check or wire transfer any taxes (“Withholding Taxes”) the Company reasonably determines it or a Subsidiary is required to withhold under applicable tax laws with respect to PBRSUs which are the subject of such conversion, the Company will reduce the number of shares of Common Stock to be distributed to the Grantee in connection with such conversion by a number of shares of Common Stock the Fair Market Value on the date of such conversion of which is equal to the total amount of Withholding Taxes.  In the event the Grantee elects to pay to the Company or a Subsidiary the Withholding Taxes with respect to the conversion of some or all PBRSUs by check or wire transfer, the Company’s obligation to deliver shares of Common Stock shall be subject to the payment in available funds by the Grantee of all Withholding Taxes with respect to PBRSUs which are the subject of such conversion.  The Company or a Subsidiary shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the

4

Grantee any federal, state, local or other taxes required to be withheld with respect to such payment.

10.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.

11.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.

12.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.

13.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.

14.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.

15.Miscellaneous.  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.

16.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 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

5

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 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

6

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)“Good Reason” for termination by the Grantee of the Grantee’s employment shall mean the occurrence (without the Grantee’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 Grantee’s employment:

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

(2)a reduction by the Company in the Grantee’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 Grantee’s principal place of employment to a location more than fifty (50) miles from the Grantee’s principal place of employment immediately prior to the Change in Control or the Company’s requiring the Grantee 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 Grantee’s present business travel obligations;

(4)the failure by the Company to pay to the Grantee any portion of the Grantee’s current compensation, or to pay to the Grantee 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 Grantee participates immediately prior to the Change in Control which is material to the Grantee’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 Grantee’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 Grantee’s participation relative to other participants, as existed immediately prior to the Change in Control; or

7

(6)the failure by the Company to continue to provide the Grantee with benefits substantially similar to those enjoyed by the Grantee under any of the Company’s pension, savings, life insurance, medical, health and accident, or disability plans in which the Grantee 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 Grantee of any material fringe benefit enjoyed by the Grantee at the time of the Change in Control, or the failure by the Company to provide the Grantee with the number of paid vacation days to which the Grantee 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 Grantee’s right to terminate the Grantee’s employment for Good Reason shall not be affected by the Grantee’s incapacity due to physical or mental illness. The Grantee’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.

For purposes of any determination regarding the existence of Good Reason, any claim by the Grantee 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;

(h)“Performance Measure” is defined on Annex B;

(i)“Performance Period” shall mean the period beginning on January 1, 2006 and ending on December 31, 2007;

(j)“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;

(k)“Qualifying Condition” shall mean, with respect to a Change of Control in which Common Stock is exchanged for another security or other form of consideration, that:

(i)upon such Change of Control, but subject to the fulfillment of the other terms and conditions of the PBRSUs, the holders of PBRSUs shall be entitled to receive such other security or consideration to the same extent the holders would have been entitled to receive such security or consideration had the PBRSUs converted into Common Stock immediately prior to the Change of Control;

(ii)the other terms and conditions of the PBRSUs remain substantially unchanged; and

(iii)such other security is listed on at least one “exchange” (as such term is defined in Section 3(a) of the Exchange Act) intended for use by the public.

8

(l)“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);

(m)“Service Period” shall mean the period beginning on January 1, 2008 and ending on December 31, 2008;

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

(o)“Target Amount of the Performance Measure” is defined on Annex B;

(p)“Threshold Level” is defined on Annex B; and

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

9

Annex A

NOTICE OF GRANT
PERFORMANCE BASED AWARD
HEXCEL CORPORATION 2003 INCENTIVE STOCK PLAN

The following employee of Hexcel Corporation, a Delaware corporation, or a Subsidiary, has been granted a Performance Based Award 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

Maximum Number of PBRSUs which may be Granted as a result of this Performance Based Award (“Maximum PBRSU Amount”)

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

Annex B

The “Performance Measure” shall be [insert definition of performance measure].

The “Target Amount of the Performance Measure” shall be                                .

The “Threshold Level” of the Performance Measure shall be                                 (equal to 60% of the Target Amount of the Performance Measure).

The “Target Amount of PBRSUs” to be awarded is 66-2/3% of the Maximum PBRSU Amount (as defined on Annex A).

PBRSU Award Schedule

Degree of Attainment of Target Amount of Performance Measure	Percentage of Target Amount of PBRSUs to be Awarded
[     ]% or more	150%
100%	100%
[     ]%	50%
less than [     ]%	0

Interpolation shall be used, on a ratable basis, to determine the number of PBRSUs to be awarded when the degree of attainment of the Target Amount of the Performance Measure is between two percentages in the left hand column above.

11