UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K/A

(AMENDMENT NO. 1)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2002

or

/ / Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934

For the transition period from ____________ to ____________
Commission File Number 1-8472

HEXCEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

        Delaware                                   94-1109521
(STATE OF INCORPORATION)              (I.R.S. EMPLOYER IDENTIFICATION NO.)

                           281 Tresser Boulevard
                        Stamford, Connecticut 06901
           (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

Registrant's telephone number, including area code: (203) 969-0666

Securities registered pursuant to Section 12(b) of the Act:

Title of each class          Name of each exchange on which registered
-------------------          -----------------------------------------
   COMMON STOCK                       NEW YORK STOCK EXCHANGE
                                      PACIFIC STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act:
7% CONVERTIBLE SUBORDINATED NOTES DUE 2003
7% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2011
93/4% SENIOR SUBORDINATED NOTES DUE 2009

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A or any amendment to this Form 10-K/A. /X/

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes /X/ No / /

The aggregate market value as of June 30, 2002 of voting common stock held by non-affiliates of the registrant: $102,107,859

The number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

    Class                  Outstanding as of March 26, 2003
    -----                  --------------------------------
COMMON STOCK                          39,944,962

DOCUMENTS INCORPORATED BY REFERENCE:
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
(TO THE EXTENT SPECIFIED HEREIN) -- PART III.



EXPLANATORY NOTE

The purpose of this Amendment No. 1 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2003 is to provide disclosure regarding the successful completion of previously announced financing transactions and to present the related impact of such transactions on the Company's consolidated financial and liquidity position. As a result of these subsequent financing transactions, the Report of Independent Accountants has been modified to exclude language expressing any doubts about the Company's ability to continue as a going concern. This amendment also provides for the filing of the financial statements of BHA Aero Composite Parts Co. Ltd., the notes thereto, and the Report of Independent Accountants as required in accordance with Rule 3-09(a) of Regulation S-X. In addition, certain minor typographical errors have been corrected.

Except as otherwise expressly noted herein, this Amendment No. 1 to the Annual Report on Form 10-K does not reflect any other events occurring after the March 3, 2003 filing of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

The Items of the Annual Report on Form 10-K for the fiscal year ended December 31, 2002, which are amended herein are:

1. Item 1 - Business, has been amended to provide an update to the section entitled "Significant Transactions" for subsequent closure of certain financing transactions.

2. Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, has been amended to provide an update to the sections titled "Business Trends," "Significant Transactions" and "Financial Condition" for the completion of certain financing transactions.

3. Item 8 - Consolidated Financial Statements and Supplementary Data, has been amended to (i) describe the subsequent closure of certain financial transactions in Note 2 - "Refinancing of Capital Structure," (ii) update Note 8 for the impact of such financing transactions, and (iii) add a 2002 unaudited pro forma column on the accompanying consolidated balance sheets and Note 24 - "Subsequent Event - Pro Forma Consolidated Balance Sheet (Unaudited)" to illustrate the effects of the subsequent financial transactions, as if the transactions had occurred as of December 31, 2002..

4. Item 15(a).1 - Financial Statements, has been amended to include the financial statements of BHA Aero Composite Parts Co. Ltd., the notes thereto, and the Report of Independent Accountants.

PART I

ITEM 1. BUSINESS.

GENERAL DEVELOPMENT OF BUSINESS

Hexcel Corporation, founded in 1946, was incorporated in California in 1948, and reincorporated in Delaware in 1983. Hexcel Corporation and its subsidiaries (herein referred to as "Hexcel" or "the Company"), is the world's leading producer of advanced structural materials. The Company develops, manufactures and markets lightweight, high-performance reinforcement products, composite materials and composite structures for use in the commercial aerospace, space and defense, electronics, and industrial markets. The Company's products are used in a wide variety of end products, such as commercial and military aircraft, space launch vehicles and satellites, printed wiring boards, computers, cellular telephones, soft body armor, high-speed trains and ferries, cars and trucks, wind turbine blades, reinforcements for bridges and other structures, window blinds and a wide variety of recreational equipment.

The Company serves international markets through manufacturing facilities and sales offices located in the United States and Europe, and through sales offices located in Asia, Australia and South

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America. The Company is also an investor in six joint ventures, three of which manufacture and market reinforcement products in Europe, Asia and the United States; one of which manufactures and markets composite materials in Japan; and two of which manufacture composite structures and interiors in Asia.

SIGNIFICANT TRANSACTION - REFINANCING OF THE COMPANY'S CAPITAL STRUCTURE

On March 19, 2003, Hexcel successfully completed the refinancing of its capital structure through the simultaneous closings of three financing transactions: the completion of its previously announced sale of mandatorily redeemable convertible preferred stock for $125.0 million, the issuance of $125.0 million of 9-7/8% senior secured notes, due 2008, and the establishment of a new $115.0 million senior secured credit facility, also due 2008.

The proceeds from the sale of the convertible preferred stock have been used to provide for the redemption of $46.9 million principal amount of the Company's 7% convertible subordinated notes, due 2003, and to repay outstanding borrowings under the existing senior credit facility. Proceeds to be used to redeem the 7% convertible subordinated notes have been remitted to US Bank Trust, trustee for the notes, for the express purpose of retiring the outstanding principal balance of the notes, plus accrued interest.

The remaining advances under the existing senior credit facility, after the application of a portion of the equity proceeds, have been repaid with the proceeds from the issuance of the Company's new 9-7/8% senior secured notes and a new senior secured credit facility.

With the benefit of the financing transactions, the Company's next significant scheduled debt maturity will not occur until 2008, with annual debt and capital lease maturities ranging between $6.2 million and $12.5 million prior to 2008. Total debt as of March 19, 2003, after giving pro forma effect to these financing transactions and their related costs, was $531.6 million.

Each of the material agreements governing the issuance and terms of the convertible preferred stock, the issuance and terms of the senior secured notes and the terms of the new senior secured credit facility is filed as an exhibit to this Annual Report on Form 10-K/A.

MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

On March 19, 2003, Hexcel issued 125,000 shares of a series A convertible preferred stock and 125,000 shares of a series B convertible preferred stock for $125.0 million in cash. Upon issuance, the total number of Hexcel's outstanding common shares including potential shares issuable upon conversion of both of the new series of convertible preferred stocks increased from approximately 38.6 million shares to approximately 88.4 million shares. In addition, common shares authorized for issuance increased from 100.0 million shares to 200.0 million shares.

Hexcel issued 77,875 shares of series A convertible preferred stock and 77,875 shares of series B convertible preferred stock to affiliates of Berkshire Partners LLC and Greenbriar Equity Group LLC (the "Berkshire/Greenbriar Investors") for a cash payment of approximately $77.9 million. The series A and the series B convertible preferred stocks are mandatorily redeemable on January 22, 2010 for cash or for common stock at the Company's election. Both preferred stocks are convertible, at the option of the holder, into common stock at a conversion price of $3.00 per share, and will automatically be converted into common stock if the closing trading price of the common stock for any period of 60 consecutive trading days ending after March 19, 2006 exceeds $9.00 per share. The preferred stockholders are entitled to vote on an as converted basis with Hexcel's common stockholders. The series A preferred stock accrues dividends at a rate of 6% per annum following the third anniversary of the issuance. Dividends may be paid in cash or added to the accrued value of the preferred stock, at Hexcel's option. The series B preferred stock does not accrue dividends. After giving effect to the issuances, the Berkshire/Greenbriar Investors own approximately 35.2% of Hexcel's outstanding voting securities.

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Hexcel has separately issued 47,125 shares of series A convertible preferred stock and 47,125 shares of series B convertible preferred stock to investment funds controlled by affiliates of The Goldman Sachs Group, Inc. (the "Goldman Sachs Investors"), who currently own approximately 37.8% of Hexcel's outstanding common stock, for a cash payment of approximately $47.1 million. This issuance of preferred stock enabled the Goldman Sachs Investors to maintain their current percentage ownership interest in Hexcel's voting securities, consistent with their rights under the governance agreement entered into with Hexcel in 2000.

In conjunction with the aforementioned transactions, Hexcel and the Berkshire/Greenbriar Investors entered into a stockholders agreement, which gives the Berkshire/Greenbriar Investors the right to nominate up to two directors (of a total of ten) to Hexcel's board of directors and certain other rights. The Goldman Sachs Investors will continue to have the right to nominate up to three directors under the governance agreement entered into at the time of their investment in Hexcel in 2000. The stockholders agreement and the amended Goldman Sachs Investors governance agreement require that the approval of at least six directors, including at least two directors not nominated by the Berkshire/Greenbriar Investors or the Goldman Sachs Investors, be obtained for board actions generally. The stockholders agreement also prohibits the purchase of voting securities in excess of 39.5% of Hexcel's outstanding voting securities unless approved by Hexcel's board. The Berkshire/Greenbriar Investors and the Goldman Sachs Investors have agreed to an 18-month lock up on the securities being issued, except for certain registered offerings.

SENIOR SECURED NOTES, DUE 2008

The Company also issued, through a private placement under Rule 144A, $125.0 million of 9 7/8% senior secured notes at a price of 98.95% of face value. The senior secured notes, due October 1, 2008, are secured by a first priority security interest in substantially all of Hexcel's and its domestic subsidiaries' property, plant and equipment, intangibles, intercompany notes and other obligations receivable, and 100% of the outstanding voting stock of certain of Hexcel's domestic subsidiaries. In addition, the senior secured notes are secured by a pledge of 65% of the stock of Hexcel's French and UK first-tier holding companies. This pledge of foreign stock is on an equal basis with a substantially identical pledge of such stock given to secure the obligations under the Company's new senior secured credit facility, described below. The senior secured notes are also guaranteed by Hexcel's material domestic subsidiaries. Hexcel has the ability to incur additional debt that would be secured on an equal basis by the collateral securing the senior secured notes. The amount of additional secured debt that may be incurred is currently limited to $10.0 million, but may increase over time based on a formula relating to the total net book value of Hexcel's domestic property, plant and equipment.

The Company will pay interest on the notes on April 1st and October 1st of each year. The first payment will be made on October 1, 2003. The Company will have the option to redeem all or a portion of the notes at any time during the one-year period beginning April 1, 2006 at 104.938% of principal plus accrued and unpaid interest. This percentage decreases to 102.469% for the one-year period beginning April 1, 2007, and to 100.0% for the period beginning April 1, 2008. In addition, the Company may use the net proceeds from one or more equity offerings at any time prior to April 1, 2006 to redeem up to 35% of the aggregate principal amount of the notes at 109.875% of the principal amount, plus accrued and unpaid interest.

The indenture governing the senior secured notes contains many other terms and conditions, including limitations with respect to asset sales, incurrence of debt, granting of liens, the making of restricted payments and entering into transactions with affiliates.

Hexcel has agreed, under a registration rights agreement, to offer to all noteholders the opportunity to exchange their notes for new notes that are substantially identical to the existing notes except that the new notes will be registered with the Securities and Exchange Commission ("SEC") and will not have any restrictions on transfer. In the event that Hexcel cannot affect such an exchange, Hexcel will be required to file a shelf registration statement with the SEC to permit the noteholders to resell their notes generally without restriction.

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SENIOR SECURED CREDIT FACILITY

Also on March 19, 2003, Hexcel entered into a $115.0 million asset-backed senior secured credit facility with a new syndicate of lenders led by Fleet Capital Corporation as agent. The credit facility matures on March 31, 2008. Borrowers under the credit facility include, in addition to Hexcel Corporation, Hexcel's operating subsidiaries in the UK, Austria and Germany. The credit facility provides for borrowings of U.S. dollars, Pound Sterling and Euro currencies, including the issuance of letters of credit, with the amount available to each borrower dependent on the borrowing base of that borrower and its subsidiaries. For Hexcel Corporation and the UK borrower, the borrowing base is determined by an agreed percentage of eligible accounts receivable and eligible inventory, subject to certain reserves. The borrowing base of each of the Austrian and German borrowers is based on an agreed percentage of eligible accounts receivable, subject to certain reserves. In addition, the UK, Austrian and German borrowers have facility sublimits of $12.5 million, $7.5 million and $5.0 million, respectively. Borrowings under the new facility bear interest at a floating rate based on either the agent's defined "prime rate" plus a margin that can vary from 0.75% to 3.25% or LIBOR plus a margin that can vary from 2.25% to 3.25%. The margin in effect for a borrowing at any given time depends on the Company's fixed charge ratio and the currency denomination of such borrowing. The credit facility also provides for the payment of customary fees and expenses.

All obligations under the credit facility are secured by a first priority security interest in accounts receivable, inventory and cash and cash equivalents of Hexcel Corporation and its material domestic subsidiaries. In addition, all obligations under the credit facility are secured by a pledge of 65% of the stock of Hexcel's French and UK first-tier holding companies. This pledge of foreign stock is on an equal basis with a substantially identical pledge of such stock given to secure the obligations under the senior secured notes. The obligations of the UK borrower are secured by the accounts receivable, inventory, and cash and cash equivalents of the UK borrower. The obligations of the Austrian and German borrowers are secured by the accounts receivable of the Austrian and German borrowers, respectively.

Hexcel is required to maintain various financial ratios throughout the term of the credit facility. These financial covenants set maximum values for the Company's leverage (the ratios of total and senior debt to EBITDA), fixed charge coverage (the ratio of EBITDA, less capital expenditures and cash taxes, plus cash dividends, to the sum of cash interest and scheduled debt amortization), and capital expenditures (not to exceed specified annual expenditures). The credit facility also contains limitations on, among other things, incurring debt, granting liens, making investments, making restricted payments, entering into transactions with affiliates and prepaying subordinated debt. The credit facility also contains other customary terms relating to, among other things, representations and warranties, additional covenants and events of default.

On March 19, 2003, the Company borrowed $13.0 million and issued letters of credit totaling approximately $25.8 million under the new senior secured credit facility.

CLASSIFICATION OF DEBT AND CAPITAL LEASE OBLIGATIONS AS OF DECEMBER 31, 2002

As of December 31, 2002, the Company had a scheduled debt obligation due August 1, 2003, which, if made, would cause the Company to violate one or more financial covenants in the Company's existing debt agreements. The Company also required an amendment of its existing senior credit facility before the end of the first quarter of 2003 to maintain compliance with the financial covenants under that facility. As the anticipated refinancing of the Company's capital structure was not completed as of February 28, 2003 (the 2002 financial statement issuance date) and the Company had not obtained an amendment of the aforementioned financial covenants, all debt and capital lease obligations had been classified as current at December 31, 2002.

As a result of the March 19, 2003 refinancing transactions, the uncertainties surrounding the Company's ability to meet its scheduled 2003 debt maturities and comply with its debt covenants have been mitigated. Management believes the Company will comply with the new debt covenants and has adequate liquidity available to finance operations beyond December 31, 2003. Also as a result of the refinancing transactions, substantially all of the Company's debt will be reclassified to long-term at March 31, 2003 reflecting the new scheduled debt maturities. The next significant scheduled

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debt maturity will not occur until 2008, with annual debt and capital lease maturities ranging between $6.2 million and $12.5 million prior to 2008. Refer to Note 24, "Subsequent Event - Pro Forma Consolidated Balance Sheet (Unaudited)."

NARRATIVE DESCRIPTION OF BUSINESS AND BUSINESS SEGMENTS

Hexcel is a vertically integrated manufacturer of products within a single industry: Advanced Structural Materials. Hexcel's advanced structural materials business is organized around three strategic business segments: Reinforcements, Composites and Structures.

As part of the Company's November 2001 restructuring program, effective January 1, 2002, management responsibility for the Company's carbon fiber product line was transferred to the Composites business segment. As a result of this change in management responsibilities, the Company changed its business segment reporting to reflect the reclassification of this product line from the Reinforcements segment to the Composites segment. The Company also changed the names of its business segments to Reinforcements, Composites and Structures. The Company's three business segments were previously known as Reinforcement Products, Composite Materials and Engineered Products. Results for the years ended December 31, 2001 and 2000 have been reclassified for comparative purposes.

REINFORCEMENTS

The Reinforcements business segment manufactures and markets industrial fabrics and other specialty reinforcement products. The following table identifies the Reinforcements business segment's principal products and examples of the primary end-uses:

BUSINESS SEGMENT                        PRODUCTS                            PRIMARY END-USE
----------------------------------------------------------------------------------------------------------------
REINFORCEMENTS                  Industrial Fabrics and     -    Structural materials/components used in
                                Specialty Reinforcements        aerospace, wind energy, automotive, marine,
                                                                recreation and other industrial applications
                                                           -    Raw materials for prepregs and honeycomb
                                                           -    Soft body armor and other security applications
                                                           -    Electronic applications, including printed
                                                                wiring board substrates
                                                           -    Window screens and blinds
                                                           -    Civil engineering and construction applications
----------------------------------------------------------------------------------------------------------------

INDUSTRIAL FABRICS AND SPECIALTY REINFORCEMENTS: Industrial fabrics and specialty reinforcements are made from a variety of fibers, including several types of fiberglass as well as carbon, aramid, quartz, ceramic and other specialty fibers. These reinforcement products are sold to third-party customers for use in a wide range of applications, including a variety of structural materials and components used in aerospace, wind energy, marine, recreation and other industrial applications, soft body armor and other security products, printed wiring boards, window screens and other architectural products. They are also used internally to manufacture prepregs and other composite materials.

                            REINFORCEMENTS
---------------------------------------------------------------------------
           KEY CUSTOMERS                    MANUFACTURING FACILITIES
---------------------------------------------------------------------------
Armor Holdings                           Anderson, SC
Composites One                           Decines, France
Cytec Engineered Materials               Les Avenieres, France
DHB Industries                           Seguin, TX
Endicott Interconnect Technologies       Statesville, NC
Isola Laminate Systems                   Washington, GA
Nelco
Piad
Second Chance Body Armor
---------------------------------------------------------------------------

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The Reinforcements business segment's net sales to third party customers were $217.9 million in 2002, $245.7 million in 2001 and $331.7 million in 2000, which represented approximately 26%, 25% and 32% of the Company's net sales, respectively. In addition, approximately 24%, 27% and 20% of the Company's total production of reinforcement products was used internally to manufacture composite materials in 2002, 2001 and 2000, respectively.

The Company also has equity ownership interests in three joint ventures in the Reinforcements business segment: a 43.6% share in Interglas Technologies AG ("Interglas"), headquartered in Germany; a 33.3% share in Asahi-Schwebel Co., Ltd. ("Asahi-Schwebel"), headquartered in Japan, which in turn owns interests in two joint ventures in Taiwan - a 50% interest in Nittobo Asahi Glass and 51% interest in Asahi-Schwebel Taiwan; and a 50% share in Clark-Schwebel Tech-Fab Company ("CS Tech-Fab"), headquartered in the United States. Interglas and Asahi-Schwebel are fiberglass fabric producers serving the European and Asian electronics and telecommunications industries. CS Tech-Fab manufactures non-woven reinforcement materials for roofing, construction, sail cloth and other specialty applications.

In 2002, the Company agreed with its Asian Electronics venture partner to restructure its minority interest in Asahi-Schwebel. Under the terms of the agreement, the Company reduced its ownership interest in the joint venture from 43.3% to 33.3% and received cash proceeds of $10.0 million. The agreement also included, among other matters, a put option in favor of the Company to sell and a call option in favor of the Company's joint venture partner to purchase the Company's remaining ownership interest in the joint venture for $23.0 million. The options are simultaneously effective for a six-month period beginning July 1, 2003.

COMPOSITES

The Composites business segment manufactures and markets carbon fibers, prepregs, structural adhesives, honeycomb, specially machined honeycomb parts and composite panels, fiber reinforced thermoplastics, sheet moulding compounds, polyurethane systems and laminates.

The following table identifies the Composites business segment's principal products and examples of the primary end-uses:

BUSINESS SEGMENT                      PRODUCTS                            PRIMARY END-USE
--------------------------------------------------------------------------------------------------------------
COMPOSITES                    Carbon Fibers             -   Raw materials for industrial fabrics and prepregs
                                                        -   Filament  winding for various space,  defense and
                                                            industrial applications

                              Prepregs                  -   Composite structures
                                                        -   Commercial and military aircraft components
                                                        -   Satellites and launchers
                                                        -   Aeroengines
                                                        -   Wind turbine rotor blades
                                                        -   Yachts, trains and motor racing vehicles
                                                        -   Skis,  snowboards,  hockey sticks, tennis rackets
                                                            and bicycles

                              Structural Adhesives      -   Bonding  of  metals,   honeycomb   and  composite
                                                            materials
                                                        -   Aerospace,  ground  transportation and industrial
                                                            applications

                              Honeycomb,                -   Composite structures and interiors
                              Honeycomb Parts &         -   Semi-finished components used in:
                              Composite Panels                Helicopter blades
                                                              Aircraft surfaces (flaps, wing tips, elevators
                                                              and fairings)
                                                              High-speed ferries, truck and train components
                                                              Automotive components and impact protection
--------------------------------------------------------------------------------------------------------------

CARBON FIBERS: Carbon fibers are manufactured for sale to third party customers and for use by Hexcel in manufacturing certain reinforcements and composite materials. Carbon fibers are woven into carbon fabrics, used as reinforcement in conjunction with a resin matrix to produce pre-impregnated composite materials (referred to as "prepregs") and used in filament winding and advanced fiber placement to produce various other composite materials. Key product applications

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include structural components for commercial and military aircraft and space launch vehicles, as well as certain other applications such as recreational equipment.

PREPREGS: HexPly(R) prepregs are manufactured for sale to third party customers and for use in manufacturing composite laminates and monolithic structures, including finished components for aircraft structures and interiors. Prepregs are manufactured by combining high performance reinforcement fabrics or unidirectional fibers with a resin matrix to form a composite material with exceptional structural properties not present in either of the constituent materials. Industrial fabrics used in the manufacture of prepregs include glass, carbon, aramid, quartz, ceramic, polyethylene and other specialty reinforcements. Resin matrices include bismaleimide, cyanate ester, epoxy, phenolic, polyester, polyimide and other specialty resins.

OTHER FIBER-REINFORCED MATRIX MATERIALS: New fiber reinforced matrix developments include HexMC(R), a carbon fiber/epoxy sheet moulding compound that enables small to medium sized composite components to be mass produced. Hexcel's HexFIT(TM) film infusion material is a product that combines resin films and dry fiber reinforcements to save lay-up time in production and enables large contoured composite structures, such as wind turbine blades, to be manufactured. Resin Film Infusion and Resin Transfer Moulding products are enabling quality aerospace components to be manufactured using highly cost-effective processes.

STRUCTURAL ADHESIVES: Hexcel designs and markets a comprehensive range of Redux(R) film adhesives and a newly launched range of Redux paste adhesives. These structural adhesives, which bond metal to metal, composites and honeycomb structures, are widely used in the aerospace industry and for many industrial applications.

HONEYCOMB, HONEYCOMB PARTS AND COMPOSITE PANELS: HexWeb(R) honeycomb is a unique, lightweight, cellular structure generally composed of hexagonal nested cells. The product is similar in appearance to a cross-sectional slice of a beehive. Honeycomb is primarily used as a lightweight core material and is a highly efficient energy absorber. When sandwiched between composite or metallic facing skins, honeycomb significantly increases the stiffness of the structure, while adding very little weight.

Hexcel produces honeycomb from a number of metallic and non-metallic materials. Most metallic honeycomb is made from aluminum and is available in a selection of alloys, cell sizes and dimensions. Non-metallic honeycomb materials include fiberglass, carbon, thermoplastics, non-flammable aramid papers and other specialty materials.

Hexcel sells honeycomb as standard blocks and in slices cut from a block. Honeycomb is also supplied as sandwich panels, with facing skins bonded to either side of the core material. Hexcel also possesses advanced processing capabilities that enable the Company to design and manufacture complex fabricated honeycomb parts and bonded assemblies to meet customer specifications.

Aerospace is the largest market for honeycomb products. Hexcel also sells honeycomb for non-aerospace applications including high-speed trains and mass transit vehicles, automotive parts, energy absorption products, marine vessel compartments, portable shelters, business machine cabinets and other industrial uses. In addition, the Company produces honeycomb for its Structures business segment for use in manufacturing finished parts for airframe Original Equipment Manufacturers (OEMs).

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                              COMPOSITES
-----------------------------------------------------------------
          KEY CUSTOMERS               MANUFACTURING FACILITIES
-----------------------------------------------------------------
  Alenia                            Burlington, WA
  Alliant Techsystems               Casa Grande, AZ
  BAE Systems                       Dagneux, France
  Boeing                            Decatur, AL
  Bombardier                        Duxford, England
  CFAN                              Linz, Austria
  Cytec Engineered Materials        Livermore, CA
  Durakon Industries                Parla, Spain
  EADS (Airbus)                     Pottsville, PA
  Embraer-Empresa                   Salt Lake City, UT
  GKN                               Welkenraedt, Belgium
  Lockheed Martin
  Northrop Grumman
  United Technologies
  Vestas
-----------------------------------------------------------------

The Company operates sales offices in the United States located in Bedford, Texas; Danbury, Connecticut; Dublin, California; Redmond, Washington; and Novi, Michigan. In Europe, the Company operates sales offices at its manufacturing sites as well as Pasching, Austria; Stade, Germany; and Saronno, Italy. The Company also operates sales offices in Melbourne, Australia; Shanghai, China; and Sao Paulo, Brazil.

The Composites business segment's net sales to third party customers were $532.4 million in 2002, $638.8 million in 2001 and $594.5 million in 2000, which represented approximately 62%, 63% and 56% of the Company's net sales, respectively. Net sales for Composites are highly dependent upon commercial aircraft build rates as further discussed under the captions "Significant Customers," "Markets" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." In addition, about 3% of the Company's total production of composite materials is sold internally to the Reinforcements and Structures business units.

The Company also owns a 45% equity interest in DIC-Hexcel Limited, a joint venture with Dainippon Ink and Chemicals, Inc. This Composites joint venture is located in Komatsu, Japan, and produces and sells prepregs, honeycomb and decorative laminates using technology licensed from Hexcel and Dainippon Ink and Chemicals, Inc.

STRUCTURES

The Structures business segment manufactures and markets composite structures primarily for use in the aerospace industry. Composite structures are manufactured from a variety of composite and other materials, including prepregs, honeycomb and structural adhesives, using such manufacturing processes as autoclave processing, multi-axis numerically controlled machining, press laminating, heat forming and other composite manufacturing techniques. Composite structures include such items as flap track fairings, engine cowls, wing panels and other aircraft components.

The following table identifies the Structures business segment's principal products and examples of the primary end-uses:

BUSINESS SEGMENT          PRODUCTS                                 PRIMARY END-USE
--------------------------------------------------------------------------------------------------------------
STRUCTURES          Composite Structures   -  Aircraft structures and finished aircraft components, including:
                                                Flap track fairings
                                                Engine cowls
                                                Wing panels
                                                Flight deck panels
                                                Door liners
--------------------------------------------------------------------------------------------------------------

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The Structures business segment's net sales to third party customers were $100.5 million in 2002, $124.9 million in 2001 and $129.5 million in 2000, which represented approximately 12% of the Company's net sales in each year.

In April 2000, the Company sold its Bellingham aircraft interiors business. This business was responsible for the design, engineering and manufacture of commercial aircraft interior components and systems for airline refurbishment applications. After giving effect to the disposition of the Bellingham aircraft interiors business as if the transaction occurred at the beginning of 2000, net sales would have been $110.6 million in 2000.

                          STRUCTURES
----------------------------------------------------------------
          KEY CUSTOMERS               MANUFACTURING FACILITY
----------------------------------------------------------------
Boeing                             Kent, WA
EADS (Airbus)
Mitsubishi Heavy Industries
Raytheon Company
----------------------------------------------------------------

In addition, Hexcel has equity ownership interests in two joint ventures in the Structures business unit: BHA Aero Composite Parts Co., Ltd. ("BHA Aero") and Asian Composites Manufacturing Sdn. Bhd. ("Asian Composites"). In 1999, Hexcel formed BHA Aero with Boeing and Aviation Industries of China (now known as China Aviation Industry Corporation I) to manufacture composite parts for secondary structures and interior applications for commercial aircraft. Hexcel has a 33% equity ownership interest in this joint venture, which is located in Tianjin, China. Also in 1999, Hexcel formed Asian Composites with Boeing, Sime Link Sdn. Bhd., and Malaysia Helicopter Services Bhd. (now known as Naluri Berhadto), to manufacture composite parts for secondary structures for commercial aircraft. Hexcel has a 25% equity ownership interest in this joint venture, which is located in Alor Setar, Malaysia. Asian Composites began manufacturing and shipping products during the second half of 2001, while BHA Aero began shipping composite structures in the first half of 2002.

FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

Financial information and further discussion of Hexcel's business segments and geographic areas, including external sales and long-lived assets, are contained throughout the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in Note 19 to the accompanying consolidated financial statements of this Annual Report on Form 10-K/A.

SIGNIFICANT CUSTOMERS

Approximately 22%, 23% and 20% of Hexcel's 2002, 2001 and 2000 net sales, respectively, were to The Boeing Company ("Boeing") and related subcontractors. Of the 22% of sales to Boeing and its subcontractors in 2002, 17% and 5% related to commercial aerospace and space and defense market applications, respectively. Approximately 15%, 16% and 13% of Hexcel's 2002, 2001 and 2000 net sales, respectively, were to EADS, including the business division Airbus Industrie ("Airbus"), and its subcontractors. Of the 15% of sales to EADS and its subcontractors in 2002, 13% and 2% related to commercial aerospace and space and defense market applications, respectively.

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MARKETS

Hexcel's products are sold for a broad range of end uses. The following tables summarize net sales to third-party customers by market and by geography for each of the three years ended December 31:

                                        2002            2001          2000
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NET SALES BY MARKET
Commercial aerospace                     46%             53%           49%
Industrial                               30              25            22
Space and defense                        17              14            12
Electronics                               7               8            17
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   Total                                100%            100%          100%
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NET SALES BY GEOGRAPHY (a)
United States                            50%             52%           57%
U.S. exports                              6               7             5
International                            44              41            38
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   Total                                100%            100%          100%
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(a) Net Sales by Geography were based on the location in which the sale was manufactured.

COMMERCIAL AEROSPACE

Historically, the commercial aerospace industry has led the development of applications for advanced structural materials and components because it has the strongest need for the performance properties of these materials and is well positioned to maximize the economic benefits from their use. Accordingly, the demand for advanced structural material products is closely correlated to the demand for commercial aircraft.

Commercial aerospace activity fluctuates in relation to two principal factors. First, the number of revenue passenger miles flown by the airlines affects the size of the airline fleets and generally follows the level of overall economic activity. The second factor, which is less sensitive to the general economy, is the replacement and retrofit rates for existing aircraft. These rates, resulting mainly from obsolescence, are determined in part by the regulatory requirements established by various civil aviation authorities as well as public concern regarding aircraft age, safety and noise. These rates may also be affected by the desire of the various airlines for higher payloads and more fuel-efficient aircraft, which in turn is influenced by the price of fuel.

Reflecting the demand factors noted above, the number of commercial aircraft delivered by Boeing and Airbus declined by 48% from 1992 to 1995. At the lowest point during this period, Boeing and Airbus reported combined deliveries of 380 aircraft. Beginning in 1996, however, aircraft deliveries by Boeing and Airbus began to rise, growing to a combined record peak of 914 aircraft in 1999. Combined aircraft deliveries declined to 684 aircraft in 2002.

In light of the tragic events that occurred on September 11, 2001 and the negative impact on the commercial aerospace market, Boeing and Airbus significantly reduced their build rates for 2002 and 2003 from rates previously expected. Build rates are the number of aircraft the aircraft manufacturer plans to produce. They may differ from deliveries when the manufacturer is increasing or reducing its inventories of finished aircraft. This often happens when there are significant increases or reductions in demand for commercial aircraft. The impact of these changes on Hexcel will be influenced by two factors: the mix of aircraft produced and the inventory supply chain effects of reduced aircraft production. The dollar value of Hexcel's materials varies by aircraft type - twin aisle aircraft use more Hexcel materials and products than narrow body aircraft and newer designed aircraft use more Hexcel materials than older generations. On average, Hexcel delivers products into the supply chain about six months prior to aircraft delivery. Depending on the product, orders placed with Hexcel are received anywhere between one and eighteen months prior to delivery of the aircraft to the customer. With the impact of the changes in demand for commercial aircraft in 2001, our commercial aerospace revenues declined approximately 27% in 2002 compared with 2001.

10

Set forth below are historical deliveries as published by Boeing and Airbus:

                        1992   1993   1994   1995   1996   1997   1998   1999   2000   2001   2002
--------------------------------------------------------------------------------------------------
 Boeing (including
   McDonnell Douglas)    572    409    312    256    271    375    563    620    491    527    381
 Airbus                  157    138    123    124    126    182    229    294    311    325    303
--------------------------------------------------------------------------------------------------
 Total                   729    547    435    380    397    557    792    914    802    852    684
==================================================================================================

INDUSTRIAL MARKETS

Hexcel has focused its participation in industrial markets in areas where the application of advanced structural material technology offers significant benefits to the end user. As a result, the Company has chosen to focus on select opportunities where high performance is the key product criterion. Future opportunities and growth depend primarily upon the success of the individual programs and industries in which the Company has elected to participate. Within industrial markets, key applications include surface transportation (automobiles, mass transit and high-speed rail and marine applications), wind energy, soft body armor, recreational equipment (i.e. snowboards, tennis rackets, hockey sticks and bicycles) and civil engineering. Hexcel's participation in these markets is a valuable complement to its commercial and military aerospace businesses, and the Company is committed to pursuing the utilization of advanced structural material technology in its industrial markets.

SPACE AND DEFENSE

The space and defense markets have historically been innovators in and sources of significant demand for advanced structural materials. The aggregate demand by space and defense customers is primarily a function of military aircraft procurement by the United States and certain European governments, that utilize advanced structural materials. The Company is currently qualified to supply materials to a broad range of military aircraft and helicopter programs. These programs include the F/A-18E/F Hornet, the F-22 Raptor, and the Eurofighter/Typhoon, as well as the C-17, the V-22 Osprey tiltrotor aircraft, and the Tiger and NH90 helicopters. In addition, there are new programs in development such as the RAH-66 Comanche, the Joint Strike Fighter and the A400M military transport that may enter production later in the decade. The benefits that the Company obtains from these programs will depend upon which ones are funded and the extent of such funding.

Contracts to supply materials for military and some commercial projects contain provisions for termination at the convenience of the U.S. government or the buyer. In the case of such a termination, Hexcel is entitled to recover reasonable costs incurred plus a provision for profit on the incurred costs. In addition, the Company is subject to U.S. government cost accounting standards in accordance with applicable Federal Acquisition Regulations.

ELECTRONICS

The Company is one of the largest producers of high-quality, lightweight fiberglass fabric substrates used in the fabrication of multilayer printed wiring boards, which are integral to most advanced electronic products, including computers, networking equipment, telecommunications equipment, advanced cable television equipment, and automotive equipment. In addition to its wholly-owned U.S. and European businesses, the Company has ownership positions in the Interglas and Asahi-Schwebel joint ventures. Interglas and Asahi-Schwebel are manufacturers of similar products in Europe, Japan and Southeast Asia.

Starting in the first quarter of 2001, the industry experienced a severe downturn, and a corresponding inventory correction began working its way through the supply chain significantly impacting demand for fiberglass fabric substrates. As the downturn continued through 2001, competition intensified for the business that remained and pricing pressure increased. Depressed conditions in this sector have continued through 2002 and into 2003. Meanwhile, import quotas limiting Asian imports of fiberglass fabrics into the United States expired at the end of 2001 and the migration of lower layer count printed wiring board production to Asia has continued. Given excess production capacity throughout the industry, pricing remains under pressure. With these continuing industry conditions, the Company sees no evidence of a near-term recovery in this market.

11

Further discussion of Hexcel's markets, including certain risks, uncertainties and other factors with respect to "forward-looking statements" about those markets, is contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations."

BACKLOG

In recent years, Hexcel's customers have increasingly demanded shorter order lead times and "just-in-time" delivery performance. While the Company has many multi-year contracts with its major aerospace customers, most of these contracts specify the proportion of the customers' requirements that will be supplied by the Company and the terms under which the sales will occur, not the specific quantities to be procured. The Company's electronic and industrial customers have always desired to order their requirements on as short a lead-time as possible. The Company has recognized that over the last few years the twelve-month order backlog is no longer a meaningful trend indicator and, as a result, ceased monitoring it in the management of the business in 1999.

RAW MATERIALS AND PRODUCTION ACTIVITIES

Due to the vertically integrated nature of Hexcel's operations, the Company produces several materials used in the manufacture of certain industrial fabrics, composite materials and engineered products, as well as the polyacrylonitrile ("PAN") precursor material used in the manufacture of carbon fibers. Although the Company purchases most of the raw materials used in production from third parties, it consumed internally approximately 50% and 25% of its carbon fiber and industrial fabric production, respectively, in 2002. Several key materials are available from relatively few sources, and in many cases the cost of product qualification makes it impractical to develop multiple sources of supply. The unavailability of these materials, which the Company does not currently anticipate, could have a material adverse effect on the Company's consolidated results of operations.

Hexcel's production activities are generally based on a combination of "make-to-order" and "make-to-forecast" production requirements. The Company coordinates closely with key suppliers in an effort to avoid raw material shortages and excess inventories.

RESEARCH AND TECHNOLOGY; PATENTS AND KNOW-HOW

Hexcel's Research and Technology ("R&T") departments support the Company's businesses worldwide. Through R&T activities, the Company maintains expertise in chemical formulation and curatives, fabric forming and textile architectures, advanced composite structures, process engineering, application development, analysis and testing of composite materials, computational design, and other scientific disciplines related to the Company's worldwide business base. Additionally, Hexcel's R&T function performs a limited amount of contract research and development in the United States and Europe for strategically important customers and government agencies in other areas, such as carbon fiber, ceramics, high temperature polymers, advanced textiles, and composite structures manufacturing and testing.

Hexcel's products rely primarily on the Company's expertise in materials science, textiles, process engineering and polymer chemistry. Consistent with market demand, the Company has been placing more emphasis on cost effective product design and lean manufacturing in recent years. Towards this end, the Company has entered into formal and informal alliances, as well as licensing and teaming arrangements, with several customers, suppliers, external agencies and laboratories. The Company believes that it possesses unique capabilities to design, develop and manufacture composite materials and structures. The Company owns and maintains in excess of 100 patents worldwide, has licensed many key technologies, and has granted technology licenses and patent rights to several third parties in connection with joint ventures and joint development programs. It is the Company's policy to actively enforce its proprietary rights. The Company believes that the patents and know-how rights currently owned or licensed by the Company are adequate for the conduct of its business.

12

Hexcel spent $14.7 million for research and technology in 2002, $18.6 million in 2001 and $21.2 million in 2000. These expenditures were expensed as incurred. Although the Company reduced its level of research and technology spending in 2002, it will continue to maintain its high standard of customer service and make strategic investments in research and technology, as it deems appropriate.

ENVIRONMENTAL MATTERS

The Company is subject to federal, state and local laws and regulations designed to protect the environment and to regulate the discharge of materials into the environment. The Company believes that its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and of associated financial liability. To date, environmental control regulations have not had a significant adverse effect on the Company's overall operations. A discussion of environmental matters is contained in Item 3, "Legal Proceedings," and in Note 16 to the accompanying consolidated financial statements included in this Annual Report on Form 10-K/A.

SALES AND MARKETING

A staff of salaried market managers, product managers and salespeople sell and market Hexcel products directly to customers worldwide. The Company also uses independent distributors and manufacturer representatives for certain products, markets and regions.

COMPETITION

In the production and sale of advanced structural materials, Hexcel competes with numerous U.S. and international companies on a worldwide basis. The broad markets for the Company's products are highly competitive, and the Company has focused on both specific markets and specialty products within markets to obtain market share. In addition to competing directly with companies offering similar products, the Company competes with producers of substitute structural materials such as structural foam, wood, metal, and concrete. Depending upon the material and markets, relevant competitive factors include price, delivery, service, quality and product performance.

EMPLOYEES

As of December 31, 2002, Hexcel employed 4,245 full-time employees, 2,448 in the United States and 1,797 internationally. The number of full-time employees has declined from 5,376 and 6,072 as of December 31, 2001 and 2000, respectively, primarily due to Hexcel's business consolidation and restructuring programs. The Company's business consolidation and restructuring programs included the right-sizing of the Company in response to the forecasted reductions in commercial aircraft production, the continued weakness in the electronics market and the closure of manufacturing facilities. For further discussion, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" and to Note 4 to the accompanying consolidated financial statements of this Annual Report on Form 10-K/A.

OTHER INFORMATION

The Company's internet address is www.hexcel.com. The Company makes available, free of charge through its internet website, its Form 10-K's, 10-Q's and 8-K's, and any amendments to these forms, as soon as reasonably practicable after filing with the Securities and Exchange Commission.

13

ITEM 2. PROPERTIES

Hexcel owns and leases manufacturing facilities and sales offices located throughout the United States and in other countries, as noted below. The corporate offices and principal corporate support activities for the Company are located in leased facilities in Stamford, Connecticut. The Company's research and technology administration and principal laboratories are located in Dublin, California; Duxford, United Kingdom; and Les Avenieres, France.

The following table lists the manufacturing facilities of Hexcel by geographic location, approximate square footage, and principal products manufactured. This table does not include manufacturing facilities owned by entities in which the Company has a joint venture interest.

MANUFACTURING FACILITIES

                                   Approximate      Business
Facility Location                 Square Footage    Segment                Principal Products
-----------------                 --------------    --------               ------------------
United States:
   Anderson, South Carolina              432,000    Reinforcements         Industrial Fabrics
   Burlington, Washington                 73,000    Composites             Honeycomb Parts
   Casa Grande, Arizona                  307,000    Composites             Honeycomb and Honeycomb Parts
   Decatur, Alabama                      159,000    Composites             PAN Precursor (used to produce Carbon Fibers)
   Kent, Washington                      573,000    Structures             Composite Structures
   Livermore, California                 141,000    Composites             Prepregs
   Pottsville, Pennsylvania              134,000    Composites             Honeycomb Parts
   Salt Lake City, Utah                  457,000    Composites             Carbon Fibers; Prepregs
   Seguin, Texas                         204,000    Reinforcements         Industrial Fabrics; Specialty Fabrics
   Statesville, North Carolina           553,000    Reinforcements         Electronic Fabrics; Industrial Fabrics
   Washington, Georgia                   160,000    Reinforcements         Electronic Fabrics; Industrial Fabrics

International:
   Dagneux, France                       130,000    Composites             Prepregs
   Decines, France                        90,000    Reinforcements         Industrial Fabrics; Specialty Fabrics
   Duxford, United Kingdom               440,000    Composites             Prepregs; Honeycomb and Honeycomb Parts
   Les Avenieres, France                 411,000    Reinforcements         Electronic Fabrics; Industrial Fabrics;
                                                                             Specialty Fabrics
   Linz, Austria                         163,000    Composites             Prepregs
   Parla, Spain                           43,000    Composites             Prepregs
   Welkenraedt, Belgium                  223,000    Composites             Honeycomb and Honeycomb Parts

Hexcel leases the facilities located in Anderson, South Carolina; Washington, Georgia; Statesville, North Carolina; and the land on which the Burlington, Washington, facility is located. The Company also leases portions of the facilities located in Casa Grande, Arizona and Les Avenieres, France. The remaining facilities are owned by the Company.

At December 31, 2002, the facilities located in Burlington, Washington; Casa Grande, Arizona; Decatur, Alabama; Dublin; California; Kent, Washington; Livermore, California; Pottsville, Pennsylvania; Salt Lake City, Utah; and Seguin, Texas were subject to mortgages in support of the bank syndicate that provided the Company with its then existing senior credit facility. In connection with the Company's refinancing of its capital structure on March 19, 2003, the then existing senior credit facility was repaid. Mortgages on these same facilities were established in support of the collateral agent for the holders of the Company's new senior secured notes issued March 19, 2003. Refer to "Significant Transactions - Refinancing of the Company's Capital Structure" under Item 1 - Business, of this Annual Report on Form 10-K/A.

14

ITEM 3. LEGAL PROCEEDINGS

Hexcel is involved in litigation, investigations and claims arising out of the normal conduct of its business, including those relating to commercial transactions, as well as to environmental, employment, health and safety matters. The Company estimates and accrues its liabilities resulting from such matters based on a variety of factors, including outstanding legal claims and proposed settlements; assessments by internal and external counsel of pending or threatened litigation; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs. Such estimates exclude counterclaims against other third parties and are not discounted to reflect the time value of money due to the uncertainty in estimating the timing of the expenditures, which may extend over several years.

The Company believes that it has meritorious defenses and is taking appropriate actions against such matters. While it is impossible to ascertain the ultimate legal and financial liability with respect to certain contingent liabilities and claims, the Company believes, based upon its examination of currently available information, its experience to date, and advice from legal counsel, that the individual and aggregate liabilities resulting from the ultimate resolution of these contingent matters, after taking into consideration its existing insurance coverage and amounts already provided for, will not have a material adverse impact on the Company's consolidated results of operations, financial position or cash flows.

ENVIRONMENTAL CLAIMS AND PROCEEDINGS

The Company is subject to numerous federal, state, local and foreign laws and regulations that impose strict requirements for the control and abatement of air, water and soil pollutants and the manufacturing, storage, handling and disposal of hazardous substances and waste. These laws and regulations include the Federal Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA" or "Superfund"), the Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act, and analogous state laws and regulations. Regulatory standards under these environmental laws and regulations have tended to become increasingly stringent over time.

Hexcel has been named as a potentially responsible party with respect to several hazardous waste disposal sites that it does not own or possess, which are included on the Superfund National Priority List of the U.S. Environmental Protection Agency or on equivalent lists of various state governments. Because CERCLA provides for joint and several liability, the Company could be responsible for all remediation costs at such sites, even if it is one of many potentially responsible parties ("PRPs"). The Company believes, based on the amount and the nature of its waste, and the number of other financially viable PRPs, that its liability in connection with such matters will not be material.

Pursuant to the New Jersey Industrial Sites Recovery Act, Hexcel signed an administrative consent order and later entered into a Remediation Agreement to pay for the environmental remediation of a manufacturing facility it owns and formerly operated in Lodi, New Jersey. The ultimate cost of remediating the Lodi site will depend on developing circumstances.

Hexcel was party to a cost-sharing agreement regarding the operation of certain environmental remediation systems necessary to satisfy a post-closure care permit issued to a previous owner of the Company's Kent, Washington, site by the U.S. Environmental Protection Agency. Under the terms of the cost-sharing agreement, the Company was obligated to reimburse the previous owner for a portion of the cost of the required remediation activities. Management has determined that the cost-sharing agreement terminated in December 1998; however, the other party disputes this determination.

At its Livermore, California facility, Hexcel has received a series of notices of violation of air quality standards from the Bay Area Air Quality Management District. Hexcel has investigated and corrected the issues, and has cooperated with the District.

The Company's estimate of its liability as a PRP, of the remaining costs associated with its responsibility to remediate the Lodi, New Jersey, and Kent, Washington sites and for any fines and penalties that may be assessed relating to the Livermore, California notices of violation is accrued in its consolidated balance sheets.

15

OTHER PROCEEDINGS

Hexcel is aware of a grand jury investigation being conducted by the Antitrust Division of the United States Department of Justice with respect to the carbon fiber and carbon fiber prepreg industries. The Department of Justice appears to be reviewing the pricing of all manufacturers of carbon fiber and carbon fiber prepreg since 1993. The Company, along with other manufacturers of these products, has received a grand jury subpoena requiring production of documents to the Department of Justice. Toho Tenax Co. Ltd., one of their subsidiaries and one of their employees have been indicted for obstruction of justice; Toho and its subsidiary pleaded guilty to obstruction of justice and received a combined fine of $500,000. No other indictments have been issued in the case to date. The Company is not in a position to predict the direction or outcome of the investigation; however, it is cooperating with the Department of Justice.

In 1999, Hexcel was joined in a class action lawsuit alleging antitrust violations in the sale of carbon fiber, carbon fiber industrial fabrics and carbon fiber prepreg (Thomas & Thomas Rodmakers, Inc. et. al. v. Newport Adhesives and Composites, Inc., et. al., Amended and Consolidated Class Action Complaint filed October 4, 1999, United States District Court, Central District of California, Western Division, CV-99-07796-GHK (CTx)). The Company was one of many manufacturers joined in the lawsuit, which was spawned from the Department of Justice investigation. The Court has granted the Plaintiff's motion to certify the class. Discovery is continuing. The Company is not in a position to predict the outcome of the lawsuit, but believes that the lawsuit is without merit as to the Company.

Of the eleven companies that have opted out of the class in the Thomas & Thomas Rodmakers, Inc. case, one, Horizon Sports Technologies, Inc., has filed a case on its own behalf, with similar allegations (Horizon Sports Technologies, Inc., v. Newport Adhesives and Composites, Inc., et. al., First Amended Complaint filed October 15, 2002, United States District Court, Central District of California, Southern Division, SACV 02-911 DOC (MLGX)). The Company is not in a position to predict the outcome of the lawsuit, but believes that the lawsuit is without merit as to the Company.

The Company has also been joined as a party in numerous class action lawsuits in California and in Massachusetts spawned by the Thomas & Thomas Rodmakers, Inc. class action. These actions also allege antitrust violations and are brought on behalf of purchasers located in California and in Massachusetts, respectively, who indirectly purchased carbon fiber products. The California cases have been ordered to be coordinated in the Superior Court for the County of San Francisco and are currently referred to as Carbon Fibers Cases I, II and III, Judicial Council Coordinator Proceeding Numbers 4212, 4216 and 4222. The California cases are Lazio v. Amoco Polymers Inc., et.al., filed August 21, 2000; Proiette v. Newport Adhesives and Composite, Inc. et. al., filed September 12, 2001; Simon v. Newport Adhesives and Composite, Inc. et. al., filed September 21, 2001; Badal v. Newport Adhesives and Composite, Inc. et.al., filed September 26, 2001; Yolles v. Newport Adhesives and Composite, Inc. et.al., filed September 26, 2001; Regier v. Newport Adhesives and Composite, Inc. et.al., filed October 2, 2001; and Connolly v. Newport Adhesives and Composite, Inc. et.al., filed October 4, 2001; Elisa Langsam v Newport Adhesives and Composites, Inc, et al., filed October 4, 2001; Jubal Delong et al. v Amoco Polymers, Inc. et al., filed October 26, 2001; and Louis V. Ambrosio v Amoco Polymers, Inc. et. al., filed October 25, 2001. The Massachusetts case is Ostroff v. Newport Adhesives and Composites, Inc. et. al., filed June 7, 2002 in the Superior Court Department of the Trial Court of Middlesex, Massachusetts, Civil Action No. 02-2385. The Company is not in a position to predict the outcome of these lawsuits, but believes that the lawsuits are without merit as to the Company.

In 1999, a QUI TAM case was filed under seal by executives of Horizon Sports Technologies, Inc. alleging that Boeing and other prime contractors to the United States Government and certain carbon fiber and carbon fiber prepreg manufacturers, including the Company, submitted claims for payment to the U.S. Government which were false or fraudulent because the defendants knew of the alleged conspiracy to fix prices of carbon fiber and carbon prepreg described in the above cases (Beck, on behalf of the United States of America, v. Boeing Defense and Space Group, Inc., et. al., filed July 27, 1999, in the United States District Court for the Southern District of California, Civil Action No. 99 CV 1557 JM JAH). The case was unsealed in 2002 when the U.S. advised that it was unable to decide whether to intervene in the case based on the information available to it at that time and the

16

Relators served the Company and other defendants. The Company is not in a position to predict the outcome of the lawsuit, but believes that the lawsuit is without merit as to the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

17

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Hexcel common stock is traded on the New York and Pacific Stock Exchanges. The range of high and low sales prices of Hexcel common stock on the New York Stock Exchange Composite Tape is contained in Note 23 to the accompanying consolidated financial statements of this Annual Report on Form 10-K/A and is incorporated herein by reference.

Hexcel did not declare or pay any dividends in 2002, 2001 or 2000. The payment of dividends is generally prohibited under the terms of certain of the Company's debt agreements.

On February 25, 2003, there were 1,363 holders of record of Hexcel common stock.

ITEM 6. SELECTED FINANCIAL DATA

The information required by Item 6 is contained on page 33 of this Annual Report on Form 10-K/A under the caption "Selected Financial Data" and is incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information required by Item 7 is contained on pages 34 to 60 of this Annual Report on Form 10-K/A under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by Item 7A is contained under the heading "Market Risks" on pages 56 to 58 of this Annual Report on Form 10-K/A and is incorporated herein by reference.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 is contained on pages 61 to 120 of this Annual Report on Form 10-K/A under "Consolidated Financial Statements and Supplementary Data" and is incorporated herein by reference. The Report of the Independent Accountants is contained on page 63 of this Annual Report on Form 10-K/A under the caption "Report of Independent Accountants" and is incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

18

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:

The information required by Item 10 will be contained in Hexcel's definitive proxy statement for the 2003 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2002. Such information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 will be contained in Hexcel's definitive proxy statement for the 2003 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2002. Such information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 will be contained in Hexcel's definitive proxy statement for the 2003 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2002. Such information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 will be contained in Hexcel's definitive proxy statement for the 2003 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2002. Such information is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

As of a date within 90 days of the filing date of this report, the Company's Chief Executive Officer and Chief Financial Officer evaluated the Company's disclosure controls and procedures (as defined in Rule 13a-14 and Rule 15d-14 under the Securities Exchange Act of 1934). Based on their evaluation, they have concluded that the Company's disclosure controls and procedures are effective to ensure that material information relating to the Company, including its consolidated subsidiaries, would be made known to them, so as to be reflected in periodic reports that the Company files or submits under the Securities and Exchange Act of 1934.

There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company's internal controls. As a result, no corrective actions were required or undertaken.

19

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

a. 1. FINANCIAL STATEMENTS

i. The consolidated financial statements of Hexcel, the notes thereto, and the Report of Independent Accountants are listed on page 61 of this Annual Report on Form 10-K/A and are incorporated herein by reference.

ii. The financial statements of BHA Aero Composite Parts Co. Ltd., the notes thereto, and the Independent Auditors' Report are listed on page 61 of this Annual Report on Form 10-K/A and are incorporated herein by reference.

2. FINANCIAL STATEMENT SCHEDULES

The financial statement schedule and the Report of Independent Accountants required by Item 15(a)(2) are listed on page 61 of this Annual Report on Form 10-K and are incorporated herein by reference.

b. REPORTS ON FORM 8-K

Current Report on Form 8-K dated October 23, 2002, relating to third quarter of 2002 financial results.

Current Report on Form 8-K dated December 20, 2002, relating to announcement of signed agreements to issue equity securities and planned refinancing of existing senior credit facility.

c.  EXHIBITS

EXHIBIT NO.                      DESCRIPTION
-----------                      -----------

2.1            Asset Purchase Agreement dated March 31, 2000 between Hexcel
               Corporation and Britax Cabin Interiors, Inc. (incorporated herein
               by reference to Exhibit 2.1 to Hexcel's Current Report on Form
               8-K dated May 10, 2000).

3.1            Restated Certificate of Incorporation of Hexcel Corporation
               (incorporated herein by reference to Exhibit 1 to Hexcel's
               Registration Statement on Form 8-A dated July 9, 1996,
               Registration No. 1-08472).

3.2            Certificate of Amendment of the Restated Certificate of
               Incorporation of Hexcel Corporation.

3.3            Amended and Restated Bylaws of Hexcel Corporation.

4.1            Indenture dated as of January 21, 1999 between Hexcel Corporation
               and The Bank of New York, as trustee, relating to the issuance of
               the 93/4% Senior Subordinated Notes due 2009 (incorporated herein
               by reference to Exhibit 4.1 to the Company's Registration
               Statement on Form S-4 (No. 333-71601), filed on February 2,
               1999).

4.2            Indenture dated as of July 24, 1996 between Hexcel Corporation
               and First Trust of California, National Association, as trustee,
               relating to the 7% Convertible Subordinated Notes due 2003 of the
               Company (incorporated herein by reference to Exhibit 4 to
               Hexcel's Quarterly Report on Form 10-Q for the quarter ended June
               30, 1996).

4.3            Indenture dated as of August 1, 1986 between Hexcel and the Bank
               of California, N.A., as trustee, relating to the 7% Convertible
               Subordinated Notes due 2011 of the Company (incorporated herein
               by reference to Exhibit 4.3 to the Company's Annual Report on
               Form 10-K for the fiscal year ended December 31, 1997).

                                       20

4.3(a)         Instrument of Resignation, Appointment and Acceptance, dated as
               of October 1, 1993 (incorporated herein by reference to Exhibit
               4.10 to the Company's Annual Report on Form 10-K for the fiscal
               year ended December 31, 1993).

4.4            Indenture, dated as of March 19, 2003 among Hexcel Corporation,
               the Guarantors named therein and Wells Fargo Bank Minnesota,
               National Association, as trustee, relating to the 9.875% Senior
               Secured Notes due 2008.

4.5            Certificate of Designation of Series A Convertible Preferred
               Stock of Hexcel Corporation.

4.6            Certificate of Designation of Series B Convertible Preferred
               Stock of Hexcel Corporation.

10.1           Credit and Guaranty Agreement, dated as of March 19, 2003, by and
               among Hexcel Corporation, Hexcel Composites Limited, Hexcel
               Composites GmbH (Austria), Hexcel Composites GmbH (Germany), the
               Guarantors named therein, the lenders from time to time party
               thereto, Fleet Capital Corporation, as Administrative Agent,
               Fleet National Bank, London U.K. branch, trading as FleetBoston
               Financial, as Fronting Bank and Issuing Bank, Fleet National
               Bank, as Issuing Bank, and Fleet Securities Inc., as Lead
               Arranger.

10.2           Security Agreement, dated as of March 19, 2003, by and among
               Hexcel Corporation, Clark-Schwebel Corporation, Hexcel Pottsville
               Corporation, Clark-Schwebel Holding Corp., CS Tech-Fab Holding,
               Inc. and Fleet Capital Corporation, as Administrative Agent.

10.3*          Hexcel Corporation 2003 Incentive Stock Plan.

10.4*          Hexcel Corporation Incentive Stock Plan as amended and restated
               January 30, 1997 (incorporated herein by reference to Exhibit 4.3
               to the Company's Registration Statement on Form S-8, Registration
               No. 333-36163).

10.4(a)*       Hexcel Corporation Incentive Stock Plan as amended and restated
               January 30, 1997 and further amended December 10, 1997
               (incorporated herein by reference to Exhibit 10.5(a) to the
               Company's Annual Report on Form 10-K for the fiscal year ended
               December 31, 1997).

10.4(b)*       Hexcel Corporation Incentive Stock Plan, as amended and restated
               on January 30, 1997, and further amended on December 10, 1997 and
               March 25, 1999 (incorporated herein by reference to Exhibit 4.3
               of the Company's Registration Statement on Form S-8 filed on July
               26, 1999).

10.4(c)*       Hexcel Corporation Incentive Stock Plan, as amended and restated
               on January 30, 1997, and further amended on December 10, 1997,
               March 25, 1999 and December 2, 1999 (incorporated by reference to
               Exhibit 10.3(c) of the Company's Annual Report on Form 10-K for
               the fiscal year ended December 31, 1999).

10.4(d)*       Hexcel Corporation Incentive Stock Plan, as amended and restated
               on February 3, 2000 (incorporated herein by reference to Annex A
               of the Company's Proxy Statement dated March 31, 2000).

10.4(e)*       Hexcel Corporation Incentive Stock Plan, as amended and restated
               on December 19, 2000 (incorporated herein by reference to Exhibit
               10.3(e) to the Company's Annual Report on Form 10-K for the
               fiscal year ended December 31, 2000).

10.4(f)*       Hexcel Corporation Incentive Stock Plan, as amended and restated
               on December 19, 2000 and further amended on January 10, 2002
               (incorporated herein by reference to Exhibit 10.3(f) to the
               Company's Annual Report on Form 10-K for the fiscal year ended
               December 31, 2001).

                                       21

10.5*          Hexcel Corporation 1998 Broad Based Incentive Stock Plan
               (incorporated herein by reference to Exhibit 4.3 of the Company's
               Form S-8 filed on June 19, 1998, Registration No. 333-57223).

10.5(a)*       Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as
               amended on February 3, 2000 (incorporated by reference to Exhibit
               10.1 to Hexcel's Quarterly Report on Form 10-Q for the Quarter
               ended June 30, 2000).

10.5(b)*       Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as
               amended on February 3, 2000, and further amended on February 1,
               2001 (incorporated herein by reference to Exhibit 10.4(b) to the
               Company's Annual Report on Form 10-K for the fiscal year ended
               December 31, 2000).

10.5(c)*       Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as
               amended on February 3, 2000, and further amended on February 1,
               2001 and January 10, 2002 (incorporated herein by reference to
               Exhibit 10.4(c) to the Company's Annual Report on Form 10-K for
               the fiscal year ended December 31, 2001).

10.5(d)*       Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as
               amended on February 3, 2000, and further amended on February 1,
               2001, January 10, 2002 and December 12, 2002 (incorporated herein
               by reference to Exhibit 10.4(d) to the Company's Annual Report on
               Form 10-K for the fiscal year ended December 31, 2002).

10.6*          Hexcel Corporation Management Stock Purchase Plan (incorporated
               herein by reference to Exhibit 10.9 to Hexcel's Quarterly Report
               on Form 10-Q for the Quarter ended June 30, 1997).

10.6(a)*       Hexcel Corporation Management Stock Purchase Plan, as amended on
               March 25, 1999 (incorporated herein by reference to Exhibit 4.3
               of the Company's Registration Statement on Form S-8 filed on July
               26, 1999).

10.6(b)*       Hexcel Corporation Management Stock Purchase Plan, as amended on
               March 25, 1999 and December 2, 1999 (incorporated by reference to
               Exhibit 10.5(b) of the Company's Annual Report on Form 10-K for
               the fiscal year ended December 31, 1999).

10.6(c)*       Hexcel Corporation Management Stock Purchase Plan, as amended and
               restated on February 3, 2000 (incorporated herein by reference to
               Annex B of the Company's Proxy Statement dated March 31, 2000).

10.6(d)*       Hexcel Corporation Management Stock Purchase Plan, as amended and
               restated on December 19, 2000 (incorporated herein by reference
               to Exhibit 10.5(d) to the Company's Annual Report on Form 10-K
               for the fiscal year ended December 31, 2000).

10.6(e)*       Hexcel Corporation Management Stock Purchase Plan, as amended and
               restated on March 19, 2003.

10.7*          Hexcel Corporation Management Incentive Compensation Plan, as
               amended and restated on December 19, 2000 and as further amended
               on February 27, 2002 (incorporated herein by reference to Exhibit
               10.6 to the Company's Annual Report on Form 10-K for the fiscal
               year ended December 31, 2001).

10.8*          Hexcel Corporation Long-Term Incentive Plan (incorporated herein
               by reference to Exhibit 10.7 to the Company's Annual Report on
               Form 10-K for the fiscal year ended December 31, 2001).

10.9*          Form of Employee Option Agreement (2003) (incorporated herein by
               reference to Exhibit 10.8 to the Company's Annual Report on Form
               10-K for the fiscal year ended December 31, 2002).

                                       22

10.10*         Form of Employee Option Agreement (2002) (incorporated herein by
               reference to Exhibit 10.8 to the Company's Annual Report on Form
               10-K for the fiscal year ended December 31, 2001).

10.11*         Form of Employee Option Agreement (2000) (incorporated herein by
               reference to Exhibit 10.7 to the Company's Annual Report on Form
               10-K for the fiscal year ended December 31, 2000).

10.12*         Form of Employee Option Agreement Special Executive Grant (2000)
               dated December 20, 2000 (incorporated by reference to Exhibit
               10.8 of the Company's Annual Report on Form 10-K for the fiscal
               year ended December 31, 2000).

10.13*         Form of Employee Option Agreement Special Executive Grant (1999)
               dated December 2, 1999 (incorporated by reference to Exhibit 10.7
               of the Company's Annual Report on Form 10-K for the fiscal year
               ended December 31, 1999).

10.14*         Form of Employee Option Agreement (1999) dated December 2, 1999
               (incorporated by reference to Exhibit 10.8 of the Company's
               Annual Report on Form 10-K for the fiscal year ended December 31,
               1999).

10.15*         Form of Employee Option Agreement (1999) (incorporated herein by
               reference to Exhibit 10.1 of the Company's Quarterly Report on
               Form 10-Q for the Quarter ended March 31, 1999).

10.16*         Form of Employee Option Agreement (1998) (incorporated herein by
               reference to Exhibit 10.4 of the Company's Quarterly Report on
               Form 10-Q for the Quarter ended September 30, 1998).

10.17*         Form of Employee Option Agreement (1997) (incorporated herein by
               reference to Exhibit 10.4 to Hexcel's Quarterly Report on Form
               10-Q for the Quarter ended June 30, 1997).

10.18*         Form of Employee Option Agreement (1996) (incorporated herein by
               reference to Exhibit 10.5 to Hexcel's Quarterly Report on Form
               10-Q for the Quarter ended March 31, 1996).

10.19*         Form of Employee Option Agreement (1995) (incorporated herein by
               reference to Exhibit 10.6 to Hexcel's Quarterly Report on Form
               10-Q for the Quarter ended March 31, 1996).

10.20*         Form of Retainer Fee Option Agreement for Non-Employee Directors
               (2003) (incorporated herein by reference to Exhibit 10.19 the
               Company's Annual Report on Form 10-K for the fiscal year ended
               December 31, 2002).

10.21*         Form of Retainer Fee Option Agreement for Non-Employee Directors
               (2000) (incorporated by reference to Exhibit 10.16 of the
               Company's Annual Report on Form 10-K for the fiscal year ended
               December 31, 2000).

10.22*         Form of Retainer Fee Option Agreement for Non-Employee Directors
               (1999) (incorporated by reference to Exhibit 10.14 of the
               Company's Annual Report on Form 10-K for the fiscal year ended
               December 31, 1999).

10.23*         Form of Retainer Fee Option Agreement for Non-Employee Directors
               (1998) (incorporated herein by reference to Exhibit 10.11 to
               Hexcel's Annual Report on Form 10-K for the fiscal year ended
               December 31, 1998).

10.24*         Form of Retainer Fee Option Agreement for Non-Employee Directors
               (1997) (incorporated herein by reference to Exhibit 10.8 to
               Hexcel's Annual Report on Form 10-K

                                       23

               for the fiscal year ended December 31, 1997).

10.25*         Form of Option Agreement (Directors) (incorporated herein by
               reference to Exhibit 10.13 to Hexcel's Annual Report on Form 10-K
               for the fiscal year ended December 31, 1995).

10.26*         Form of Supplemental Compensation Option Agreement (Directors)
               (incorporated herein by reference to Exhibit 10.23 to Hexcel's
               Annual Report on Form 10-K for the fiscal year ended December 31,
               2001).

10.27*         Form of Performance Accelerated Restricted Stock Unit Agreement
               (December 20, 2000) (incorporated herein by reference to Exhibit
               10.22 to the Company's Annual Report on Form 10-K for the fiscal
               year ended December 31, 2000).

10.28*         Form of Performance Accelerated Restricted Stock Unit Agreement
               (Special Executive Grant December 2, 1999) (incorporated by
               reference to Exhibit 10.19 of the Company's Annual Report on Form
               10-K for the fiscal year ended December 31, 1999).

10.29*         Form of Performance Accelerated Restricted Stock Unit Agreement
               (December 2, 1999) (incorporated by reference to Exhibit 10.20 of
               the Company's Annual Report on Form 10-K for the fiscal year
               ended December 31, 1999).

10.30*         Form of Performance Accelerated Restricted Stock Unit Agreement
               (1999) (incorporated herein by reference to Exhibit 10.2 to
               Hexcel's Quarterly Report on Form 10-Q for the Quarter ended
               March 31, 1999).

10.31*         Form of Performance Accelerated Restricted Stock Unit Agreement
               (1998) (incorporated herein by reference to Exhibit 10.2 to
               Hexcel's Quarterly Report on Form 10-Q for the Quarter ended
               March 31, 1998).

10.32*         Form of Performance Accelerated Restricted Stock Unit Agreement
               (1997) (incorporated herein by reference to Exhibit 10.5 to
               Hexcel's Quarterly Report on Form 10-Q for the Quarter ended June
               30, 1997).

10.33*         Form of Performance Accelerated Restricted Stock Unit Agreement
               (1996) (incorporated herein by reference to Exhibit 10.9 to
               Hexcel's Quarterly Report on Form 10-Q for the Quarter ended
               March 31, 1996).

10.34*         Form of Restricted Stock Unit Agreement (2003) (incorporated
               herein by reference to Exhibit 10.33 to the Company's Annual
               Report on Form 10-K for the fiscal year ended December 31, 2002).

10.35*         Form of Restricted Stock Unit Agreement (2002) (incorporated
               herein by reference to Exhibit 10.31 to Hexcel's Annual Report on
               Form 10-K for the fiscal year ended December 31, 2001).

10.36*         Form of Reload Option Agreement (1997) (incorporated herein by
               reference to Exhibit 10.8 of Hexcel's Quarterly Report on Form
               10-Q for the Quarter ended June 30, 1997).

10.37*         Form of Reload Option Agreement (1996) (incorporated herein by
               reference to Exhibit 10.10 to Hexcel's Quarterly Report on Form
               10-Q for the Quarter ended March 31, 1996).

10.38*         Form of Exchange Performance Accelerated Stock Option Agreement
               (incorporated Herein by reference to Exhibit 10.3 to Hexcel's
               Quarterly Report on Form 10-Q for the Quarter ended September 30,
               1998).

10.39*         Form of Performance Accelerated Stock Option Agreement (Director)
               (incorporated herein by reference to Exhibit 10.6 to Hexcel's
               Quarterly Report on Form 10-Q for the Quarter ended June 30,
               1997).

                                       24

10.40*         Form of Performance Accelerated Stock Option (Employee)
               (incorporated herein by reference to Exhibit 10.7 to Hexcel's
               Quarterly Report on Form 10-Q for the Quarter ended June 30,
               1997).

10.41*         Form of Grant of Restricted Stock Unit Agreement (incorporated
               herein by reference to Exhibit 10.3 to Hexcel's Quarterly Report
               on Form 10-Q for the Quarter ended March 31, 1999).

10.42*         Form of Grant of Restricted Stock Unit Agreement (incorporated
               herein by reference to Exhibit 10.10 to Hexcel's Quarterly Report
               on Form 10-Q for the Quarter ended June 30, 1997).

10.43*         Hexcel Corporation 1997 Employee Stock Purchase Plan, as amended
               and restated as of March 19, 2003.

10.44*         Employment Agreement dated as of July 30, 2001 between Hexcel
               Corporation and David E. Berges (incorporated by reference herein
               to Exhibit 10.37 to Hexcel's Registration Statement on Form S-4
               (No. 333-66582), filed on August 2, 2001).

10.44(a)*      Amendment, dated December 12, 2002, to Employment Agreement dated
               as of July 30, 2001 between Hexcel Corporation and David E.
               Berges (incorporated herein by reference to Exhibit 10.43(a) to
               the Company's Annual Report on Form 10-K for the fiscal year
               ended December 31, 2002).

10.44(b)*      Employee Option Agreement dated as of July 30, 2001 between
               Hexcel Corporation and David E. Berges (incorporated by reference
               herein to Exhibit 10.37(a) to Hexcel's Registration Statement on
               Form S-4 (No. 333-66582), filed on August 2, 2001).

10.44(c)*      Employment Option Agreement (performance-based option) dated as
               of July 30, 2001 between Hexcel Corporation and David E. Berges
               (incorporated by reference herein to Exhibit 10.37(b) to Hexcel's
               Registration Statement on Form S-4 (No. 333-66582), filed on
               August 2, 2001).

10.44(d)*      Restricted Stock Agreement dated as of July 30, 2001 between
               Hexcel Corporation and David E. Berges (incorporated by reference
               herein to Exhibit 10.37(c) to Hexcel's Registration Statement on
               Form S-4 (No. 333-66582), filed on August 2, 2001).

10.44(e)*      Supplemental Executive Retirement Agreement dated as of July 30,
               2001 between Hexcel Corporation and David E. Berges (incorporated
               by reference herein to Exhibit 10.37(d) to Hexcel's Registration
               Statement on Form S-4 (No. 333-66582), filed on August 2, 2001).

10.44(f)*      Letter Agreement dated August 1, 2001 between Hexcel Corporation
               and David E. Berges (incorporated by reference herein to Exhibit
               10.37(e) to Hexcel's Registration Statement on Form S-4 (No.
               333-66582), filed on August 2, 2001).

10.44(g)*      Letter Agreement dated August 28, 2001 between Hexcel Corporation
               and David E. Berges (incorporated herein by reference to Exhibit
               10.7 to the Company's Quarterly Report on Form 10-Q for the
               quarter ended September 30, 2001).

10.45*         Letter dated December 2, 1999 from Hexcel Corporation to Stephen
               C. Forsyth, regarding the Company's Management Incentive
               Compensation Plan for 1999 (incorporated by reference to Exhibit
               10.35 of the Company's Annual Report on Form 10-K for the fiscal
               year ended December 31, 1999).

10.45(a)*      Supplemental Executive Retirement Agreement dated as of May 10,
               2000 between Hexcel Corporation and Stephen C. Forsyth
               (incorporated herein by reference to Exhibit 10.5 of the
               Company's Quarterly Report on Form 10-Q for the Quarter ended
               June 30, 2000).

                                       25

10.45(b)*      Amendment to Agreements, dated as of October 11, 2000 by and
               between Hexcel Corporation and Stephen C. Forsyth (incorporated
               herein by reference to Exhibit 10.8 of the Company's Quarterly
               Report on Form 10-Q for the Quarter ended September 30, 2000).

10.45(c)*      Amendment to Amendments to Agreements, dated as of November 21,
               2000, by and between Hexcel Corporation and Stephen C. Forsyth
               (incorporated herein by reference to Exhibit 10.39(c) to the
               Company's Annual Report on Form 10-K for the fiscal year ended
               December 31, 2000).

10.45(d)*      First Amendment to Supplemental Executive Retirement Agreement
               dated as of July 30, 2001 between Hexcel Corporation and Stephen
               C. Forsyth (incorporated herein by reference to Exhibit 10.43(d)
               to the Company's Annual Report on Form 10-K for the fiscal year
               ended December 31, 2001).

10.46*         Letter dated December 2, 1999 from Hexcel Corporation to Ira J.
               Krakower, regarding the Company's Management Incentive
               Compensation Plan for 1999 (incorporated herein by reference to
               Exhibit 10.40 to the Company's Annual Report on Form 10-K for the
               fiscal year ended December 31, 2000).

10.46(a)*      Supplemental Executive Retirement Agreement dated as of May 10,
               2000 between Hexcel and Ira J. Krakower (incorporated herein by
               reference to Exhibit 10.6 of the Company's Quarterly Report on
               Form 10-Q for the Quarter ended June 30, 2000).

10.46(b)*      Amendment to Agreements, dated as of October 11, 2000 by and
               between Hexcel Corporation and Ira J. Krakower (incorporated
               herein by reference to Exhibit 10.7 of the Company's Quarterly
               Report on Form 10-Q for the Quarter ended September 30, 2000).

10.46(c)*      First Amendment to Supplemental Executive Retirement Agreement
               dated as of July 30, 2001 between Hexcel Corporation and Ira J.
               Krakower (incorporated herein by reference to Exhibit 10.44(c) to
               the Company's Annual Report on Form 10-K for the fiscal year
               ended December 31, 2001).

10.47*         Form of Executive Severance Agreement between Hexcel and certain
               executive officers dated as of February 3, 1999 (incorporated
               herein by reference to Exhibit 10.6 to the Company's Quarterly
               Report on Form 10-Q for the Quarter ended March 31, 1999).

10.48*         Form of Executive Severance Agreement between Hexcel and certain
               executive officers dated as of February 3, 1999 (incorporated
               herein by reference to Exhibit 10.7 to the Company's Quarterly
               Report on Form 10-Q for the Quarter ended March 31, 1999).

10.49*         Amendment to Agreements, dated as of October 11, 2000 by and
               between Hexcel Corporation and William Hunt (incorporated herein
               by reference to Exhibit 10.14 of the Company's Quarterly Report
               on Form 10-Q for the Quarter ended September 30, 2000).

10.49(a)*      Amendment to Amendments to Agreements, dated as of November 21,
               2000, by and between Hexcel Corporation and William Hunt
               (incorporated herein by reference to Exhibit 10.45(a) to the
               Company's Annual Report on Form 10-K for the fiscal year ended
               December 31, 2000).

10.50*         Amendment to Agreements, dated as of October 11, 2000 by and
               between Hexcel Corporation and David Tanonis (incorporated herein
               by reference to Exhibit 10.12 of the Company's Quarterly Report
               on Form 10-Q for the Quarter ended September 30, 2000).

10.51*         Amendment to Agreements, dated as of October 11, 2000 by and
               between Hexcel Corporation and Joseph Shaulson (incorporated
               herein by reference to Exhibit 10.9 of the Company's Quarterly
               Report on Form 10-Q for the Quarter ended September 30, 2000).

                                       26

10.51(a)*      Amendment to Amendments to Agreements, dated as of November 21,
               2000, by and between Hexcel Corporation and Joseph Shaulson
               (incorporated herein by reference to Exhibit 10.48(a) to the
               Company's Annual Report on Form 10-K for the fiscal year ended
               December 31, 2000).

10.52          Lease Agreement, dated as of September 15, 1998, by and among
               Clark-Schwebel Corporation (a wholly-owned subsidiary of Hexcel)
               as lessee, CSI Leasing Trust as lessor, and William J. Wade as
               co-trustee for CSI Leasing Trust (incorporated herein by
               reference to Exhibit 10.2 of the Company's Quarterly Report on
               Form 10-Q for the Quarter ended September 30, 1998).

10.53          Amended and Restated Governance Agreement, dated as of March 19,
               2003, among LXH L.L.C., LXH II, L.L.C., GS Capital Partners 2000
               L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital
               Partners 2000 Employee Fund, L.P., GS Capital Partners 2000 GmbH
               & Co. Beteiligungs KG, Stone Street Fund 2000, L.P. and Hexcel
               Corporation.

10.54          Stockholders Agreement, dated as of March 19, 2003, among
               Berkshire Fund V, Limited Partnership, Berkshire Fund VI, Limited
               Partnership, Berkshire Fund V Investment Corp., Berkshire Fund VI
               Investment Corp., Berkshire Investors LLC, Greenbriar
               Co-Investment Partners L.P, Greenbriar Equity Fund, L.P. and
               Hexcel Corporation.

10.55          Amended and Restated Registration Rights Agreement, dated as of
               March 19, 2003, by and among Hexcel Corporation, LXH, L.L.C., LXH
               II, L.L.C., GS Capital Partners 2000 L.P., GS Capital Partners
               2000 Offshore, L.P., GS Capital Partners 2000 Employee Fund,
               L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG and
               Stone Street Fund 2000, L.P.

10.56          Registration Rights Agreement, dated as of March 19, 2003, among
               Hexcel Corporation, Berkshire Fund V, Limited Partnership,
               Berkshire Fund VI, Limited Partnership, Berkshire Investors LLC,
               Greenbriar Co-Investment Partners L.P. and Greenbriar Equity
               Fund, L.P.

10.57          Agreement, dated October 11, 2000, by and among Hexcel
               Corporation, LXH, L.L.C. and LXH II, L.L.C. (incorporated herein
               by reference to Exhibit 10.1 to the Company's Current Report on
               Form 8-K dated October 13, 2000).

10.58          Consent and Termination Agreement, dated as of October 11, 2000,
               by and between Hexcel Corporation and Ciba Specialty Chemicals
               Holding Inc. (incorporated herein by reference to Exhibit 10.2 to
               the Company's Current Report on Form 8-K dated October 13, 2000).

10.59          Purchase Agreement, dated as of June 15, 2001, among Hexcel
               Corporation and Credit Suisse First Boston Corporation, Deutsche
               Banc Alex. Brown Inc., Goldman, Sachs & Co. and J.P. Morgan
               Securities Inc (incorporated herein by reference to Exhibit 10.56
               to the Company's Annual Report on Form 10-K for the fiscal year
               ended December 31, 2001).

10.60          Stock Purchase Agreement, dated as of December 18, 2002, by and
               among Hexcel Corporation, Berkshire Investors LLC, Berkshire Fund
               V, Limited Partnership, Berkshire Fund VI, Limited Partnership,
               Greenbriar Equity Fund, L.P. and Greenbriar Co-Investment
               Partners, L.P. (incorporated herein by reference to Exhibit 99.1
               to the Company's Current Report on Form 8-K dated December 20,
               2002).

10.61          Stock Purchase Agreement, dated as of December 18, 2002, by and
               among Hexcel Corporation, GS Capital Partners 2000, L.P., GS
               Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000
               Employee Fund, L.P., GS Capital Partners 2000 GmbH & Co.
               Beteiligungs KG and Stone Street Fund 2000, L.P. (incorporated
               herein by reference to Exhibit 99.2 to the Company's Current
               Report on Form 8-K dated December 20, 2002).

                                       27

10.62          Purchase Agreement, dated as of March 7, 2003, among Goldman,
               Sachs & Co., Fleet Securities, Inc. and Hexcel Corporation.

10.63          Exchange and Registration Rights Agreement dated as of March 19,
               2003 among Hexcel Corporation, Clark-Schwebel Holding Corp.,
               Clark-Schwebel Corporation, Hexcel Pottsville Corporation and CS
               Tech-Fab Holding, Inc.

10.64          Pledge and Security Agreement, dated as of March 19, 2003,
               between Hexcel Corporation, Clark-Schwebel Holding Corp.,
               Clark-Schwebel Corporation, Hexcel Pottsville Corporation, CS
               Tech-Fab Holding, Inc. and Hexcel International, and HSBC Bank
               USA, as Joint Collateral Agent.

10.65          Collateral Agency Agreement, dated as of March 19, 2003, by and
               among Hexcel Corporation, HSBC Bank USA, as Joint Collateral
               Agent, Well Fargo Bank Minnesota, National Association, as
               trustee, and the representatives of the holders of Parity Lien
               Debt who may become a party thereto.

10.66          Intercreditor and Agency Agreement dated as of March 19, 2003, by
               and among HSBC Bank USA, as Joint Collateral Agent, Fleet Capital
               Corporation, as Intercreditor Agent and Security Trustee, Fleet
               Capital Corporation, as Administrative Agent under the Existing
               Credit Facility, Well Fargo Bank Minnesota, National Association,
               as trustee, and each other Credit Facility Agent that may become
               a party thereto.

12.1           Statement regarding the computation of ratio of earnings to fixed
               charges for the Company (incorporated herein by reference to
               Exhibit 12.1 to the Company's Annual Report on Form 10-K for the
               fiscal year ended December 31, 2002).

21.1           Subsidiaries of the Company (incorporated herein by reference to
               Exhibit 21.1 to the Company's Annual Report on Form 10-K for the
               fiscal year ended December 31, 2002).

23.1           Consent of Independent Accountants - PricewaterhouseCoopers LLP.

23.2           Consent of Independent Accountants - Deloitte Touche Tohmatsu
               Certified Public Accountants Ltd.

24.1           Power of Attorney (included on signature page).

99.1           Certification of Chief Executive Officer Pursuant to 18 U.S.C.
               Section 1350, as Adopted Pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002.

99.2           Certification of Chief Financial Officer Pursuant to 18 U.S.C.
               Section 1350, as Adopted Pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002.

----------

* Indicates management contract or compensatory plan or arrangement.

28

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF STAMFORD, STATE OF CONNECTICUT.

HEXCEL CORPORATION

        March 31, 2003                              /s/ DAVID E. BERGES
-------------------------------             ------------------------------------
            (Date)                                    David E. Berges
                                                  Chief Executive Officer

KNOWN TO ALL PERSONS BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS STEPHEN C. FORSYTH, HIS ATTORNEY-IN-FACT, WITH THE POWER OF SUBSTITUTION, FOR HIM IN ANY AND ALL CAPACITIES, TO SIGN ANY AMENDMENTS TO THIS REPORT, AND TO FILE THE SAME, WITH EXHIBITS THERETO AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT, OR HIS SUBSTITUTE OR SUBSTITUTES, MAY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

              SIGNATURE                                  TITLE                              DATE
              ---------                                  -----                              ----
         /s/ DAVID E. BERGES                        Chairman of the                    March 31, 2003
------------------------------------       Board of Directors, President and
          (David E. Berges)                     Chief Executive Officer
                                             (PRINCIPAL EXECUTIVE OFFICER)


       /s/ STEPHEN C. FORSYTH                 Executive Vice President and             March 31, 2003
------------------------------------            Chief Financial Officer
        (Stephen C. Forsyth)                 (PRINCIPAL FINANCIAL OFFICER)


        /s/ WILLIAM J. FAZIO                      Corporate Controller                 March 31, 2003
------------------------------------         (PRINCIPAL ACCOUNTING OFFICER)
         (William J. Fazio)


         /s/ JOEL S. BECKMAN                            Director                       March 31, 2003
------------------------------------
          (Joel S. Beckman)


     /s/ H. ARTHUR BELLOWS, JR.                         Director                       March 31, 2003
------------------------------------
      (H. Arthur Bellows, Jr.)


        /s/ JAMES J. GAFFNEY                            Director                       March 31, 2003
------------------------------------
         (James J. Gaffney)

29

        /s/ SANJEEV K. MEHRA                            Director                       March 31, 2003
------------------------------------
         (Sanjeev K. Mehra)


           /s/ LEWIS RUBIN                              Director                       March 31, 2003
------------------------------------
            (Lewis Rubin)


         /s/ ROBERT J. SMALL                            Director                       March 31, 2003
------------------------------------
          (Robert J. Small)


        /s/ MARTIN L. SOLOMON                           Director                       March 31, 2003
------------------------------------
         (Martin L. Solomon)

30

CERTIFICATIONS

I, David E. Berges, certify that:

1. I have reviewed this annual report on Form 10-K/A (Amendment No. 1) of Hexcel Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

         March 31, 2003                             /s/ DAVID E. BERGES
----------------------------------         -------------------------------------
             (Date)                                   David E. Berges
                                            Chairman of the Board of Directors,
                                           President and Chief Executive Officer

31

I, Stephen C. Forsyth, certify that:

1. I have reviewed this annual report on Form 10-K/A (Amendment No. 1) of Hexcel Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors:

a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

         March 31, 2003                               /s/ STEPHEN C. FORSYTH
----------------------------------                  ----------------------------
             (Date)                                      Stephen C. Forsyth
                                                    Executive Vice President and
                                                       Chief Financial Officer

32

SELECTED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)

The following table summarizes selected financial data as of and for the five years ended December 31:

                                                             2002         2001         2000         1999         1998
------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS (a):
 Net sales                                                $    850.8   $  1,009.4   $  1,055.7   $  1,151.5   $  1,089.0
 Cost of sales                                                 689.5        818.6        824.3        909.0        817.7
                                                          --------------------------------------------------------------
   Gross margin                                                161.3        190.8        231.4        242.5        271.3

 Selling, general and administrative expenses                   85.9        120.9        123.9        128.7        117.9
 Research and technology expenses                               14.7         18.6         21.2         24.8         23.7
 Business consolidation and restructuring expenses               0.5         58.4         10.9         20.1         12.7
 Impairment of goodwill and other purchased
   intangibles                                                     -        309.1            -            -            -
                                                          --------------------------------------------------------------
   Operating income (loss)                                      60.2       (316.2)        75.4         68.9        117.0

 Litigation gain                                                 9.8            -            -            -            -
 Interest expense                                              (62.8)       (64.8)       (68.7)       (73.9)       (38.7)
 Gain (loss) on early retirement of debt                         0.5         (2.7)           -            -            -
 Gain on sale of Bellingham aircraft interiors business            -            -         68.3            -            -
                                                          --------------------------------------------------------------
   Income (loss) before income taxes                             7.7       (383.7)        75.0         (5.0)        78.3
 Provision for (benefit from) income taxes                      11.3         40.5         26.3         (1.7)        28.4
                                                          --------------------------------------------------------------
   Income (loss) before equity in earnings (losses)             (3.6)      (424.2)        48.7         (3.3)        49.9
 Equity in earnings (losses) of and write-downs of
   an investment in affiliated companies                       (10.0)        (9.5)         5.5        (20.0)         0.5
                                                          --------------------------------------------------------------
   Net income (loss)                                      $    (13.6)  $   (433.7)  $     54.2   $    (23.3)  $     50.4
                                                          ==============================================================
 Net income (loss) per share: (b)
   Basic                                                  $    (0.35)  $   (11.54)  $     1.47   $    (0.64)  $     1.38
   Diluted                                                $    (0.35)  $   (11.54)  $     1.32   $    (0.64)  $     1.24
 Weighted average shares outstanding:
   Basic                                                        38.4         37.6         36.8         36.4         36.7
   Diluted                                                      38.4         37.6         45.7         36.4         45.7
                                                          --------------------------------------------------------------
FINANCIAL POSITION:
 Total assets                                             $    708.1   $    789.4   $  1,211.4   $  1,261.9   $  1,404.2
 Working capital                                          $   (530.8)  $     80.5   $    128.1   $    117.3   $    219.6
 Long-term notes payable and capital lease obligations    $        -   $    668.5   $    651.5   $    736.6   $    838.1
 Stockholders' equity (deficit) (c)                       $   (127.4)  $   (132.6)  $    315.7   $    270.1   $    302.4
                                                          --------------------------------------------------------------
OTHER DATA:
 Depreciation and amortization                            $     47.2   $     63.2   $     58.7   $     61.3   $     47.5
 Capital expenditures                                     $     14.9   $     38.8   $     39.6   $     35.6   $     66.5
 Shares outstanding at year-end, less treasury stock            38.5         38.2         37.1         36.6         36.4
                                                          --------------------------------------------------------------

(a) The comparability of the data may be affected by acquisitions and divestitures. The Company acquired Clark-Schwebel, a manufacturer of high-quality fiberglass fabrics used to make printed wiring boards and high performance specialty products used in insulation, filtration, wall and facade claddings, soft body armor and reinforcements for composite materials in 1998. The acquisition was accounted for using the purchase method of accounting. The Bellingham aircraft interiors business was sold in April 2000.

(b) Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No.142, "Goodwill and Other Intangible Assets," ("FAS 142"). Prior to adopting FAS 142, goodwill was amortized on a straight-line basis over estimated economic lives, ranging from 15 years to 40 years. As a result of adopting FAS 142, goodwill is no longer amortized, but instead is tested for impairment at the reporting unit level at least annually and whenever events or changes in circumstances indicate that goodwill might be impaired. Amortization of goodwill and other purchased intangibles was $12.5 million in 2001 and $13.1 million in 2000.

(c) No cash dividends were declared per common stock during any of the five years ended December 31, 2002.

33

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS OVERVIEW

                                                                           YEAR ENDED DECEMBER 31,
                                                                   ----------------------------------------
(IN MILLIONS, EXCEPT PER SHARE DATA)                                  2002            2001          2000
-----------------------------------------------------------------------------------------------------------
  Net sales (a)                                                   $    850.8      $ 1,009.4      $  1,055.7
  Gross margin %                                                        19.0%          18.9%           21.9%
  Operating income                                                $     60.2      $  (316.2)     $     75.4
  Operating income %                                                     7.1%             -             7.1%
  Provision for income taxes (b)                                  $     11.3      $    40.5      $     26.3
  Litigation gain                                                 $      9.8      $       -      $        -
  Equity in earnings (losses) of and write-downs of
    an investment in affiliated companies                         $    (10.0)     $    (9.5)     $      5.5
  Net income (loss)                                               $    (13.6)     $  (433.7)     $     54.2
  Diluted earnings (loss) per share                               $    (0.35)     $  (11.54)     $     1.32
-----------------------------------------------------------------------------------------------------------

(a) Giving effect to the April 26, 2000 sale of the Bellingham aircraft interiors business as if the transaction had occurred on January 1, 2000, net sales would have been $1,036.8 million in 2000.

(b) Reflects the impact of ceasing to record the tax benefits from U.S. operating losses commencing during the second quarter of 2001. In addition, 2001 results reflect the impact of the write-down of U.S. deferred tax assets in the fourth quarter of 2001. The 2000 results include $24.0 million of provision for income taxes on the April 2000 gain from the sale of the Bellingham aircraft interiors business.

BUSINESS TRENDS

The Company has experienced major changes in two of the significant markets for its products during 2001 and 2002. Towards the end of the first quarter of 2001, the Company experienced a significant reduction in the demand for its woven fiberglass fabrics used as substrates for printed wiring boards. In 2001, net sales from such electronics applications declined $104.2 million or 58% compared to 2000. During 2002, sales declined a further $18.7 million to $58.3 million, as the full annual effect of the changes in the industry were evident.

The tragic events of September 11 precipitated a significant reduction in the production of new build commercial aircraft. In late 2001, both Airbus and Boeing announced reductions in build rates that were implemented by the middle of 2002. As the Company delivers on average six months ahead of its customer's delivery of an aircraft, the Company experienced reduced revenues commencing in the first quarter, 2002. Full year 2002 net sales to the commercial aerospace sector were $147.8 million or 27.4% lower than 2001 at $391.1 million.

The Company has responded to these major changes in its two largest historic markets by implementing a major restructuring program it announced in November 2001. This program targeted reducing the Company's fixed costs ahead of the changes in the demand for its products. The program also provided for the cost of reducing variable costs as customer demand declined. These cost reductions have predominantly been accomplished by a sharp reduction in the Company's work force. Headcount has declined from a high of over 6,200 during the third quarter, 2001 to 4,245 as of December 31, 2002. This right sizing of the Company has enabled it to stabilize operating profitability despite the significant reduction in net sales.

The changes in business performance and outlook required that the Company obtain an amendment to the financial maintenance covenants under its existing senior credit facility to accommodate its anticipated performance in 2002. The Company's bank syndicate and the Company entered into an amendment of the financial covenants on January 25, 2002. The Company has since been in compliance with those covenants. With the benefit of reductions in capital expenditures and working capital as well as the receipt of proceeds from a litigation settlement and the sale of a portion of an equity interest in an affiliated company, the Company reduced its total debt during 2002 by $64.2 million despite incurring cash restructuring costs of $24.3 million.

34

Although the Company has stabilized operating profitability and reduced its total debt during 2002, a significant amount of debt remains outstanding. The remaining $46.9 million of 7% convertible subordinated notes are due for redemption on August 1, 2003 and the revolving credit and overdraft lines under the existing senior credit facility are due on September 14, 2004. The Company has therefore sought new equity capital and announced on December 18, 2002 that it has entered into definitive agreements providing for a new equity financing through the issuance of a total of 125,000 shares of a series A convertible preferred stock and 125,000 shares of a series B convertible preferred stock for $125.0 million in cash. The intent is to right-size the capital structure of the Company to its current business circumstances.

On March 19, 2003, Hexcel successfully completed the refinancing of its capital structure through the simultaneous closings of three financing transactions: the completion of its previously announced sale of mandatorily redeemable convertible preferred stock for $125.0 million, the issuance of $125.0 million of 9-7/8% senior secured notes, due 2008, and the establishment of a new $115.0 million senior secured credit facility, also due 2008.

The proceeds from the sale of the convertible preferred stock have been used to provide for the redemption of $46.9 million principal amount of the Company's 7% convertible subordinated notes, due 2003, and to repay outstanding borrowings under the existing senior credit facility. Proceeds to be used to redeem the 7% convertible subordinated notes have been remitted to US Bank Trust, trustee for the notes, for the express purpose of retiring the outstanding principal balance of the notes, plus accrued interest.

The remaining advances under the existing senior credit facility, after the application of a portion of the equity proceeds, have been repaid with the proceeds from the issuance of the Company's new 9-7/8% senior secured notes and a new senior secured credit facility.

With the benefit of the financing transactions, the Company's next significant scheduled debt maturity will not occur until 2008, with annual debt and capital lease maturities ranging between $6.2 million and $12.5 million prior to 2008. Total debt as of March 19, 2003, after giving pro forma effect to these financing transactions and their related costs, was $531.6 million.

LITIGATION SETTLEMENT:

In June 2002, the Company benefited from a judgment entered in litigation with Hercules Corporation arising from a contract dispute in connection with the 1996 purchase of the Hercules' Composites Products Division. Hexcel received approximately $11.1 million from Hercules in satisfaction of a judgment entered after Hercules had exhausted all appeals from a lower court decision in favor of Hexcel in the New York Courts. The net cash proceeds from the settlement were used to reduce outstanding debt under the senior credit facility.

SALE OF OWNERSHIP IN A JOINT VENTURE:

In 2002, the Company agreed with its Asian Electronics venture partner to restructure its minority interest in Asahi-Schwebel Co., Ltd.
("Asahi-Schwebel"). Under the terms of the agreement, the Company reduced its ownership interest in the joint venture from 43.3% to 33.3% and received cash proceeds of $10.0 million. The agreement also included, among other matters, a put option in favor of the Company to sell and a call option in favor of the Company's joint venture partner to purchase the Company's remaining ownership interest in the joint venture for $23.0 million. The options are simultaneously effective for a six-month period beginning July 1, 2003. Reflecting these terms, the Company wrote-down the carrying value of its remaining equity investment in this joint venture to its estimated fair market value of $23.0 million, recording a non-cash impairment charge of $4.0 million. There was no tax benefit recognized on the write-down. The net cash proceeds from this sale were used to reduce outstanding debt under the senior credit facility.

35

RESULTS OF OPERATIONS

2002 COMPARED TO 2001

NET SALES: Consolidated net sales for 2002 were $850.8 million, a decrease of 15.7% when compared to 2001 net sales of $1,009.4 million, reflecting lower sales to the commercial aerospace and electronics markets. Net sales to the commercial aerospace market declined by 27.4% as build rates of new commercial aircraft were reduced. Net sales to the electronics market were 24.3% lower than in 2001, reflecting the full year impact of a severe electronics industry downturn that was first seen late in the first quarter of 2001. The reduction in net sales to these markets was partially offset by continued growth in revenues to industrial and space and defense markets of 1.5% and 2.9%, respectively. Had the same U.S. dollar, British pound and Euro exchange rates applied in 2002 as in 2001, consolidated net sales for 2002 would have been approximately $837.6 million, reflecting the weakening of the U.S. dollar over the twelve months.

Hexcel has three reportable segments: Reinforcements, Composites and Structures. Although these strategic business units provide customers with different products and services, they often overlap within four end markets:
Commercial Aerospace, Industrial, Space & Defense, and Electronics. The Company finds it meaningful to evaluate the performance of its segments through the four end markets. Further discussion and additional financial information about the Company's segments may be found in Note 19 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

The following table summarizes net sales to third-party customers by segment and end market in 2002 and 2001:

                                                                   UNAUDITED
                                  ----------------------------------------------------------------------------
                                  COMMERCIAL                       SPACE &
(IN MILLIONS)                      AEROSPACE      INDUSTRIAL       DEFENSE       ELECTRONICS          TOTAL
--------------------------------------------------------------------------------------------------------------
2002 NET SALES
  Reinforcements                  $     49.0      $   110.6       $       -       $     58.3      $      217.9
  Composites                           256.6          143.3           132.5                -             532.4
  Structures                            85.5              -            15.0                -             100.5
--------------------------------------------------------------------------------------------------------------
   Total                          $    391.1      $   253.9       $   147.5       $     58.3      $      850.8
                                          46%            30%             17%               7%              100%
--------------------------------------------------------------------------------------------------------------
2001 NET SALES (a)
  Reinforcements                  $     54.5      $    114.2      $       -       $     77.0      $      245.7
  Composites                           374.1           136.0          128.7                -             638.8
  Structures                           110.3               -           14.6                -             124.9
--------------------------------------------------------------------------------------------------------------
   Total                          $    538.9      $    250.2      $   143.3       $     77.0      $    1,009.4
                                          53%             25%            14%               8%              100%
--------------------------------------------------------------------------------------------------------------

(a) As part of a restructuring program, the Company changed the responsibility and reporting of one of its product lines effective January 1, 2002. Hexcel's business segment reporting has therefore been revised in 2002. Coincident with this change, Hexcel revised the names of its reporting business segments to Reinforcements, Composites and Structures. The 2001 results have been restated for comparative purposes.

Commercial aerospace net sales decreased 27.4% to $391.1 million for 2002, as compared to net sales of $538.9 million for 2001. This decrease in comparable net sales reflects a reduction in commercial aircraft build rates by Airbus and Boeing during 2002 and into the first half of 2003. Boeing delivered 381 aircraft in 2002, down from 527 in 2001, and projects that its deliveries in 2003 will be reduced by approximately 25% to a level between 270 and 290 aircraft. Airbus' 2002 aircraft deliveries were 303, slightly lower than the 325 aircraft delivered in 2001. Airbus has indicated its 2003 deliveries and production will be approximately 300 aircraft. This guidance suggests that combined Boeing and Airbus commercial aircraft deliveries in 2003 will be about 15% lower than in 2002. The impact on the Company's commercial aerospace revenues of the further forecasted reduction in aircraft deliveries in 2003 will likely be smaller. As the Company delivers its products on average six months ahead of the delivery of an aircraft, it has been experiencing customer demand that approximates the 2003 forecasted deliveries for several months. The Company's commercial aerospace revenues in the second half of 2003 will start to reflect its customers anticipated deliveries

36

of commercial aircraft in 2004. In addition to the number of aircraft produced, the Company's commercial aerospace revenues are influenced by the mix of aircraft that are produced, as twin aisle aircraft use more of the Company's products than narrow body aircraft and newly designed aircraft use more than older generations. Unlike many aerospace suppliers, Hexcel's sales to this market are almost entirely driven by new aircraft build rates with no material aftermarket content.

Airbus is well into the launch of their new jumbo aircraft, the Airbus A380. Hexcel's deliveries of material for this aircraft have already begun to support certification and test requirements. While the Airbus A380 is not expected to enter service until approximately 2006, the design of the plane indicates that it will be the largest commercial aerospace consumer of composite materials per aircraft. About 19% of its dry weight is expected to be from composites, a significant increase above the level found even in today's most advanced wide body aircrafts, the Boeing 777 and the Airbus A340-500/600.

Industrial net sales of $253.9 million for 2002 were slightly higher than the $250.2 million recorded in 2001. This year-on-year increase was highlighted by strong growth in demand for composite materials used in wind energy applications and continued strength in demand for the Company's products used in other non-aerospace applications, including architectural, automotive, civilian body armor, rail and marine, and various recreational equipment. While sales of the Company's reinforcement fabrics used in soft body armor applications increased slightly in 2002, sales to U.S. military applications began to decline in the second half of 2002, due largely to the timing of the placement of new contracts with the Company's customers for military body armor programs. Due to the lack of clarity in military soft body armor demand, the Company's Industrial revenues may fluctuate for several quarters even though the prospects for growth from wind energy and other applications remain strong.

Space and defense net sales for 2002 of $147.5 million were 2.9% higher than the 2001 net sales of $143.3 million. In general, sales associated with military aircraft and helicopters continue to trend upwards as the new generation of military aircraft in the United States and Europe ramp up in production. Approved and projected defense procurement budgets in the United States and Europe support this outlook. The Company is currently qualified to supply materials to a broad range of military aircraft and helicopters. These programs include the F/A-18E/F (Hornet), the F-22 (Raptor), the European Fighter Aircraft (Typhoon), the C-17, the V-22 (Osprey) tilt rotor aircraft, the Tiger and the NH90 helicopters. The benefits that the Company will derive from these programs will depend upon which of these programs are funded and the extent of such funding.

Electronics net sales of $58.3 million for 2002 were 24.3% lower than net sales of $77.0 million in 2001. Revenues continue to be affected by a severe industry downturn in the global electronics market first seen in the first quarter of 2001 that has had a prolonged negative impact on the demand for the Company's fiberglass fabric substrates used in the fabrication of printed wiring boards. In addition, import quotas limiting Asian imports of fiberglass fabrics into the U.S. expired at the end of 2001 and migration of lower layer count printed wiring board production from the United States to Asia has continued. With excess industry production capacity, pricing remains under pressure. With these industry conditions continuing, the Company sees no evidence of a near-term recovery in this market.

GROSS MARGIN: Gross margin for 2002 was $161.3 million, or 19.0% of net sales, compared to gross margin of $190.8 million, or 18.9% of net sales, in 2001. The $29.5 million decline in gross margin reflected the impact of the year-on-year sales declines in the commercial aerospace and electronics markets. While gross margins declined, the Company actually improved gross margin as a percentage of net sales by exceeding its goals for reductions in factory fixed costs in the previously announced restructuring programs.

Although the gross margin in the Reinforcements segment declined $1.6 million compared to 2001 due to the electronics market declined, gross margin as a percentage of sales actually improved 130 basis points to 16.9% in 2002, as raw material prices and manufacturing costs reductions more than offset lower revenues. Gross margins earned by the Composites and the Structures segments declined $23.6 million and $4.2 million, respectively, when compared to 2001. Manufacturing cost

37

reductions were able to hold percentage gross margins steady in the Composites segment. The Structures segment's gross margin as a percentage of sales declined 250 basis points, as it ramped up the transition of existing programs to build composite structures for commercial aircraft for its Asian joint ventures and received new programs from Boeing.

SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses were $85.9 million, or 10.1% of net sales, in 2002 compared with $120.9 million, or 12.0% of net sales, in 2001. Excluding compensation expenses associated with the former CEO's retirement of $4.7 million in 2001 and the impact of the adoption of FAS 142 on goodwill amortization, SG&A expenses in 2001 were $103.7 million, or 10.3% of net sales. The net year-on-year reduction of $17.8 million, or 17.2%, after adjustments, reflects the impact of the Company's restructuring programs to reduce expenses to mitigate the reduction in sales in the commercial aerospace and electronics markets. Goodwill amortization in 2001 was $12.5 million.

RESEARCH AND TECHNOLOGY ("R&T") EXPENSES: R&T expenses were $14.7 million, or 1.7% of net sales, in 2002 compared to $18.6 million, or 1.8% of net sales, in 2001. Over the past two years the Company has concentrated its R&T efforts on developing new materials to meet the emerging needs of our customers, as well as expanding the range of applications for reinforcements and composite materials.

OPERATING INCOME: Operating income for 2002 was $60.2 million, or 7.1% of net sales, compared with an operating loss of $316.2 million in 2001. Excluding business consolidation and restructuring expenses of $0.5 million and $58.4 million incurred in 2002 and 2001, respectively, a $309.1 million impairment of goodwill and other purchased intangibles in 2001, $4.7 million of compensation expenses associated with the former CEO's retirement in 2001, and $12.5 million in amortization expense incurred in 2001, operating income would have been $60.7 million, or 7.1% of net sales, for 2002 compared with $68.5 million, or 6.8% of net sales, for 2001. This $7.8 million decline in operating income, after these adjustments, reflects the year-on-year decrease in gross margins offset, in part, by reductions in SG&A and R&T expenses.

Operating income, after excluding the segments' attributable share of the aforementioned items, in the Reinforcements segment increased $3.7 million, as compared with 2001, to $19.1 million reflecting the benefits obtained from restructuring programs during the year. The Composites segment's operating income, after such exclusions, decreased by $13.0 million, as declines in net sales outpaced cost reductions. With the impact of the transition of programs to its Asian joint ventures and the start up of new programs received from Boeing, the Structures segment's operating income was $1.8 million lower than in 2001. The Company did not allocate corporate operating expenses of $26.7 million and $30.0 million to operating segments in 2002 and 2001, respectively.

LITIGATION GAIN: In 2002, the Company recognized a litigation gain of $9.8 million (net of related fees and expenses) in connection with a contract dispute with Hercules, Inc. that arose out of the acquisition of Hercules' Composites Products Division in 1996. The net cash proceeds received from Hercules Inc. of $11.1 million were in satisfaction of the judgment entered in favor of the Company after Hercules had exhausted all appeals from a lower court decision in the New York courts.

INTEREST EXPENSE: Interest expense for 2002 was $62.8 million compared to $64.8 million in 2001. Included in interest expense for 2002 and 2001 was approximately $1.8 million and $1.0 million, respectively, of fees and expenses incurred in connection with bank amendments. Excluding these fees and expenses, interest expense was $61.0 million in 2002 and $63.8 million in 2001. This $2.8 million reduction in interest expense year-on-year reflects the reductions in total debt in the last twelve months, the benefit of the reductions in LIBOR, net of the increase in the spread over LIBOR that the Company pays on its advances under its senior credit facility. For additional information, see Note 8 to the accompanying consolidated financial statements of this Annual Report on Form 10-K/A.

GAIN (Loss) ON EARLY RETIREMENT OF DEBT: In 2002, the Company recognized a $0.5 million gain on the early retirement of debt, related to the repurchase of $1.8 million of its 7% convertible subordinated debentures, due 2011, in satisfaction of an annual sinking fund requirement. The debt was repurchased at market prices, which resulted in a gain.

38

A loss of $2.7 million was recorded in 2001 as a result of the early retirement of $67.5 million aggregate principal amount of the Company's outstanding 7% convertible subordinated notes, due 2003, and the redemption of the entire principal amount of $25.0 million of the Company's increasing rate senior subordinated notes, due 2003. With the adoption of Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections," on January 1, 2002, the $2.7 extraordinary loss on early retirement of debt reported in 2001 was reclassified as a separate line item below operating income in the consolidated statements of operations. There was no tax benefit recognized on the loss because of limitations on the Company's ability to realize the tax benefits.

PROVISION FOR INCOME TAXES: The Company's tax provision of $11.3 million for 2002 primarily reflects taxes on foreign income. The Company will continue to establish a non-cash valuation allowance attributable to currently generated U.S. net operating losses until such time as the U.S. operations have returned to consistent profitability.

The Company had a tax provision of $40.5 million in 2001, reflecting the impact of reduced tax benefits recorded for U.S. operating losses resulting from a change in business outlook and the inclusion in its tax provision of a $30.7 million valuation allowance for previously reported U.S. deferred tax assets. Due to a sharp decline in electronics revenues, the Company determined during the second quarter of 2001 to increase its tax provision rate through the establishment of a non-cash valuation allowance attributable to currently generated U.S. net operating losses until such time as the U.S. operations return to consistent profitability. Due to the effect of significant events that have occurred since the end of the second quarter, including the delay in the anticipated recovery in the electronics market, anticipated reductions in commercial aircraft production, and a general weakening of the economy, along with the sizable impairments to certain long-lived assets in the fourth quarter of 2001, the Company reduced its estimates for future U.S. taxable income during the carryforward period. As a result, the Company concluded that it was appropriate to establish a full valuation allowance on its U.S. deferred tax assets, which resulted in a $32.6 million valuation allowance for previously reported tax assets. For additional information, see Note 12 to the accompanying consolidated financial statements of this Annual Report on Form 10-K/A.

EQUITY IN LOSSES OF AND WRITE-DOWN OF AN INVESTMENT IN AFFILIATED COMPANIES: Equity in losses of affiliated companies was $10.0 million in 2002, slightly larger than equity in losses of $9.5 million in 2001. Excluding the $4.0 million write-down of its investment in Asahi-Schwebel in 2002 and a $7.8 million write-down of its investment in Interglas Technologies AG ("Interglas") in 2001, equity in losses were $6.0 million in 2002 compared to $1.7 million in 2001. The increase in equity losses was due to the impact of the continued electronics market conditions affecting the Company's Asian electronics joint venture and increased year-over-year losses reported by the Company's joint ventures in China and Malaysia as they ramp up production of aerospace composite structures.

In 2002, the Company wrote-down the carrying value of its remaining equity investment in Asahi-Schwebel to its estimated fair market value of $23.0 million resulting from an agreement with the Company's joint venture partner to restructure its minority interest. The $7.8 million write-down of Interglas in 2001 was the result of an assessment that an other-than-temporary decline in value in the investment had occurred due to a severe industry downturn and the resulting impact on the financial condition of this company. The amount of the write-down was determined based on available market information and appropriate valuation methodologies. The Company did not record deferred tax benefits on the write-downs because of limitations imposed by foreign tax laws and the Company's ability to realize the tax benefits.

NET LOSS AND NET LOSS PER SHARE:

(IN MILLIONS, EXCEPT PER SHARE DATA)                       2002           2001
--------------------------------------------------------------------------------
Net loss                                                 $ (13.6)       $ (433.7)
Diluted net loss per share                               $ (0.35)       $ (11.54)
Diluted weighted average shares outstanding                 38.4            37.6
--------------------------------------------------------------------------------

The Company's convertible subordinated notes, due 2003, its convertible subordinated debentures, due 2011 and all of its stock options were excluded from the 2002 and 2001 computation

39

of diluted net loss per share, as they were antidilutive. Refer to Note 14 to the accompanying consolidated financial statements of this Annual Report on Form 10-K for the calculation and number of shares used for diluted net loss per share.

2001 COMPARED TO 2000

NET SALES: Consolidated net sales were $1,009.4 million in 2001, a 4.4% decline from $1,055.7 million in 2000. Giving effect to the sale of the Bellingham aircraft interiors business, that occurred on April 26, 2000, as if the transaction had occurred on January 1, 2000, net sales for 2000 would have been $1,036.8 million, resulting in a decline of 2.6%. The decline was due to a severe industry downturn and inventory correction in the electronics market for the Company's fiberglass fabric substrates, with net sales to that market down $104.2 million, or 57.5%, year-on-year. The downturn was partially offset by modest growth in the Composites segment of $44.3 million, or 7.5%, continued expansion in non-electronic markets for Reinforcements of $18.2 million, or 12.1%, and increased revenues, excluding the Bellingham business, for Structures of $14.3 million, or 12.9%. Net sales in 2000 generated by the Bellingham aircraft interiors business prior to its sale were $18.9 million. Had the same U.S. dollar, British pound and Euro exchange rates applied in 2001 as in 2000, consolidated net sales would have been approximately $1,019.5 million in 2001.

The following table summarizes net sales to third-party customers by segment and end market in 2001 and 2000:

                                                                   UNAUDITED
                                 -----------------------------------------------------------------------------
                                  COMMERCIAL                      SPACE &
(IN MILLIONS)                      AEROSPACE      INDUSTRIAL      DEFENSE        ELECTRONICS          TOTAL
--------------------------------------------------------------------------------------------------------------
2001 NET SALES (a)
  Reinforcements                 $    54.5       $    114.2      $        -      $      77.0     $       245.7
  Composites                         374.1            136.0           128.7                -             638.8
  Structures                         110.3                -            14.6                -             124.9
--------------------------------------------------------------------------------------------------------------
   Total                         $   538.9       $    250.2      $    143.3      $      77.0     $     1,009.4
                                        53%              25%             14%               8%              100%
--------------------------------------------------------------------------------------------------------------
2000 NET SALES (a)
  Reinforcements                 $    53.6       $     96.9      $        -      $     181.2     $       331.7
  Composites                         343.8            130.9           119.8                -             594.5
  Structures (b)                     120.3                -             9.2                -             129.5
--------------------------------------------------------------------------------------------------------------
   Total                         $   517.7       $    227.8      $    129.0      $     181.2     $     1,055.7
                                        49%              22%             12%              17%              100%
--------------------------------------------------------------------------------------------------------------

(a) As part of a restructuring program, the Company changed the responsibility and reporting of one of its product lines effective January 1, 2002. Hexcel's business segment reporting has therefore been revised in 2002. Coincident with this change, Hexcel revised the names of its reporting business segments to Reinforcements, Composites and Structures. The 2001 and 2000 results have been restated for comparative purposes.

(b) Giving effect to the sale of the Bellingham aircraft interiors business, that occurred on April 26, 2000, as if it had occurred on January 1, 2000, net sales for 2000 would have been $1,036.8 million. The Bellingham business had $18.9 million of sales to the commercial aerospace market in 2000. This business was a component of the Company's Structures segment until this business was sold.

Commercial aerospace net sales increased 4.1% to $538.9 million in 2001 compared with $517.7 million in 2000. Excluding $18.9 million in net sales generated by the Bellingham aircraft interiors business, net sales increased 8.0% from $498.8 million. The increase in comparable net sales reflected higher build rates and product mix of commercial aircraft produced at Airbus, Boeing and several regional aircraft manufacturers. Airbus and Boeing delivered a combined 852 commercial aircraft in 2001, a 6.5% improvement over the 800 delivered in 2000. The Company's net sales are impacted by the mix of aircraft that are produced, as twin aisle aircraft use more of the Company's materials than narrow body aircraft and newly designed aircraft use more of the Company's materials than older generations.

Industrial net sales increased 9.8% to $250.2 million in 2001 from $227.8 million in 2000. The increase reflected strong sales growth in reinforcement fabrics used in the manufacture of soft body

40

armor and in composite materials used for wind energy applications. The Company also continued to obtain growth through new automotive applications driven by new programs that use the Company's honeycomb core to provide impact protection and lightweight structural products. Growth in this market was bound by slightly lower net sales to recreational markets tracking macroeconomic trends in consumer spending and travel.

Space and defense net sales in 2001 were $143.3 million, which reflected a $14.3 million, or 11.1%, increase from comparable sales in 2000. Sales associated with military aircraft and helicopters continued to trend upwards as the new generation of military aircraft in the United States and Europe ramped up in production. The Company is qualified to supply materials to a broad range of military aircraft and helicopter product programs. These programs, which utilize significantly greater amounts of Hexcel products than previous generations, include the F/A-18E/F (Hornet), the F-22 (Raptor), the European Fighter Aircraft (Typhoon) as well as the C-17, the V-22 (Osprey) tilt rotor aircraft, the RAH-66 (Comanche) and the NH90 helicopters. The benefits that the Company obtains from these programs in a fiscal period often depend upon which ones are funded and the extent of such funding.

Electronics net sales were $77.0 million in 2001, a decrease of 57.5% from net sales of $181.2 million in 2000. This decline reflected the impact of a severe industry downturn and inventory correction in the global electronics industry that impacted the demand for the Company's fiberglass fabric substrates used in the fabrication of printed wiring boards. The origins of this downturn had many causes including the end of the so called "tech boom," a sharp reduction in telecommunications infrastructure investments and declining macroeconomic trends. Lower demand resulted in finished goods producers and their subcontractors seeking to liquidate their excess electronics inventories by cutting back on their purchases, which affected the entire supply chain. The Company first saw the impact of this downturn in its U.S. operations in the latter part of the first quarter of 2001. In the second quarter of 2001, U.S. demand weakened further and the Company's European operations, together with its joint venture interests in Europe and Asia, saw the same precipitative decline in customer demand. These reduced demand conditions persisted for the balance of 2001 with sales revenues down in excess of 65% for the second, third and fourth quarters compared to the same quarters in 2000. As the downturn continued through 2001, competition intensified for the business that remained and pricing pressures increased.

GROSS MARGIN: Gross margin for 2001 was $190.8 million, or 18.9% of sales, versus $231.4 million, or 21.9% of sales, in 2000. The decrease primarily reflected the impact of the sharp decline in electronics sales in the Company's Reinforcements segment where gross margin fell approximately 7.7% to 15.6% of sales. While the Company had taken actions to significantly reduce costs in the electronics business, it was not able to reduce fixed costs pro-rata to the change in sales given the magnitude of the shortfall in revenues and its decision to retain manufacturing capacity to meet increased demand when, or if, the market recovers. Gross margins earned by the Company's Composites and Structures segments, as a percent of sales, declined approximately 1.0% to 3.0% below those earned in 2000 due to various factors including the impact of the company-wide focus on dramatically reducing inventories ahead of 2002's anticipated fall-off in commercial aerospace revenues, higher utility costs and changes in sales mix. The Company's inventories declined $23.7 million during 2001 to $131.7 million. Utility costs in the United States for 2001 increased by approximately $3.2 million compared to 2000.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative expenses were $120.9 million, or 12.0% of net sales, in 2001 compared with $123.9 million, or 11.7% of net sales, in 2000. SG&A expenses, excluding the $4.7 million of compensation expenses associated with the former CEO's retirement and giving effect to the sale of the Bellingham business as if it had occurred on January 1, 2000, were $116.2 million, or 11.5% of net sales, in 2001 compared with $121.3 million, or 11.7% of net sales, in 2000. This decrease reflected lower corporate expenses of $4.1 million, of which $2.2 million reflected costs incurred in connection with the change in control event in 2000. Amortization expense of $12.5 million and $13.1 million was included in SG&A expenses for 2001 and 2000, respectively.

41

RESEARCH AND TECHNOLOGY EXPENSES: Research and technology expenses were $18.6 million, or 1.8% of net sales, in 2001 compared to $21.2 million, or 2.0% of net sales, in 2000. Giving effect to the sale of the Bellingham aircraft interiors business as if it had occurred January 1, 2000, research and technology expenses would have been $19.5 million in 2000, or 1.9% of net sales. Nearly seventy percent of R&T expenses in 2001 related to developing new applications for composite materials.

OPERATING INCOME: Operating loss for 2001 was $316.2 million compared with operating income of $75.4 million for 2000. Excluding a $309.1 million impairment charged for goodwill and other purchased intangibles and $4.7 million of compensation expenses associated with the former CEO's retirement in 2001, along with business consolidation and restructuring expenses of $58.4 million and $10.9 million incurred during 2001 and 2000, respectively, operating income would have been $56.0 million, or 5.5% of net sales, in 2001 compared with $86.3 million, or 8.2% of net sales, in 2000.

INTEREST EXPENSE: Interest expense for 2001 was $64.8 million compared to $68.7 million in 2000. Although the Company slightly increased its average borrowings during 2001 compared to 2000, interest expense declined when compared to 2000 due to lower weighted average interest rates on the Company's senior credit facility resulting from the progressive reductions in LIBOR during the year. Included in interest expense in 2001 are bank amendment fees of approximately $1.0 million related to the May 2001 amendment of certain financial covenants under the then existing senior credit facility.

PROVISION FOR INCOME TAXES: The Company's tax provision of $40.5 million in 2001 reflected the impact of reduced tax benefits recorded for U.S. operating losses resulting from a change in business outlook for the Company and the inclusion in its tax provision of a $30.7 million valuation allowance for previously reported U.S. deferred tax assets. In 2000, the provision for income taxes was $26.3 million, which primarily related to a gain on the sale of the Bellingham aircraft interiors business.

EQUITY IN EARNINGS (LOSSES) OF AND WRITE-DOWNS OF AN INVESTMENT IN AFFILIATED COMPANIES: Equity in losses of affiliated companies was $9.5 million in 2001, including a $7.8 million write-down of the Company's investment in Interglas. Excluding the Interglas write-down, equity in losses of affiliated companies was $1.7 million compared with earnings of $5.5 million in 2000, reflecting the impact of the electronics industry downturn on the operating results of the Company's Reinforcements joint venture in Asia as well as start-up losses associated with the Structures joint ventures in China and Malaysia.

NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE:

(IN MILLIONS, EXCEPT PER SHARE DATA)                       2001          2000
-------------------------------------------------------------------------------
Net income (loss)                                       $ (433.7)      $   54.2
Diluted net income (loss) per share                     $ (11.54)      $   1.32
Diluted weighted average shares outstanding                 37.6           45.7
-------------------------------------------------------------------------------

The Company's convertible subordinated notes, due 2003, its convertible subordinated debentures, due 2011 and all of its stock options were excluded from the 2001 computation of diluted net loss per share, as they were antidilutive. Approximately 4.5 million stock options were excluded from the 2000 calculation of diluted net income per share as their exercise price was higher than the Company's average share price. Refer to Note 14 to the accompanying consolidated financial statements of this Annual Report on Form 10-K/A for the calculation and number of shares used for diluted net income
(loss) per share.

IMPAIRMENT OF GOODWILL AND OTHER PURCHASED INTANGIBLES

During the fourth quarter of 2001, the Company reviewed its long-lived assets, particularly goodwill and other purchased intangibles acquired in recent years, for impairment. The review was undertaken in response to changes in market conditions and the Company's revised outlook resulting from a sharp decline in demand for the Company's woven glass fabrics, primarily in the electronics market, and the announced reductions in commercial airline production due to the tragic events of

42

September 11, 2001. The Company also revised its forecasts of revenue growth for its acquired satellite business due to the continuing slowdown in commercial satellite launches following the financial failures of a number of satellite based telecommunication projects and the postponement of others. These adverse changes in market conditions have led to the lowering of revenue forecasts associated with certain businesses in the Reinforcements and Composites segments.

Based on this review, the Company determined that the long-lived assets of the fabrics business acquired from Clark-Schwebel in 1998 and the satellite business acquired from Fiberite, Inc. in 1997 were not fully recoverable. The Company recorded non-cash impairment charges of $292.1 million and $17.0 million related to the goodwill and other purchased intangibles associated with the Clark-Schwebel and Fiberite acquisitions, respectively. The amounts of the impairment charges were calculated as the excess of the carrying value of the assets over their fair values. Fair values were determined using discounted future cash flow models, market valuations and third party appraisals, where appropriate. There were no tax benefits recognized on the impairments because of limitations on the Company's ability to realize the tax benefits.

BUSINESS CONSOLIDATION AND RESTRUCTURING PROGRAMS

NOVEMBER 2001 PROGRAM

In November 2001, the Company announced a program to restructure its business operations in accordance with a revised business outlook for build rate reductions in commercial aircraft production, the continued depressed business conditions in the electronics market and the weakness in the general economy. The program targeted a 20% reduction in cash fixed costs, or $60.0 million, compared to previous spending rates and included company-wide reductions in managerial, professional, indirect manufacturing and administrative employees along with organizational rationalization. In connection with the program, the Company recognized charges of $47.9 million in the fourth quarter of 2001. During 2002, the Company continued the implementation of this program, reducing its workforce, since announcement, by approximately 25% to 4,245 employees and achieving a cash fixed cost reduction of 22.8% for the full year 2002 as compared to 2001.

In 2002, the Company recognized a net change in estimated business consolidation and restructuring expenses related to this program of $0.7 million. This resulted from a $1.8 million reduction of previously accrued liabilities as employee severance and other benefit costs were lower than previously expected, offset in part, by a $1.1 million increase in restructuring liabilities for facility lease termination costs. An additional $1.2 million was expensed as incurred in 2002.

JULY 2001 PROGRAM

As a result of the weakness in the electronics market, the Company initiated cost reduction actions in July 2001. These actions incorporated steps to furlough employees, idle manufacturing and cut non-essential expenditures, by effecting a reduction in the work force of approximately 275 employees primarily in the Reinforcements and Composites business segments. In connection with the program, the Company recognized a charge of $3.9 million in the third quarter of 2001. During 2002, the Company reviewed its remaining liability under the program and recognized a change in estimated business consolidation and restructuring expenses of $0.6 million, as employee severance and other benefit costs were lower than previously expected.

DECEMBER 1998 AND SEPTEMBER 1999 PROGRAMS

As a result of several substantial business acquisitions, the Company initiated business consolidation programs in December 1998 and September 1999. The primary purpose of these programs was to integrate acquired assets and operations into the Company, and to close or restructure insufficiently profitable facilities and activities. Due to aerospace industry requirements to "qualify" specific equipment and manufacturing processes for certain products, some business consolidation actions have taken up to three years to complete. These qualification requirements increase the complexity, cost and time of moving equipment and rationalizing manufacturing activities. In connection with these business consolidation programs, the Company closed three manufacturing facilities, vacated approximately 560 thousand square feet of manufacturing space, and eliminated more than 700 manufacturing, marketing and administrative positions.

43

In 2000, the Company added two further actions to the September 1999 business consolidation program. The Company decided to close the two smaller of its four U.S. prepreg manufacturing facilities - one in Lancaster, Ohio and another in Gilbert, Arizona. The Gilbert, Arizona facility was closed in 2001 and the closure of the Lancaster, Ohio facility was completed in 2002. The manufacturing output from these two plants is now being produced by the two remaining U.S. prepreg facilities in Livermore, California and Salt Lake City, Utah. In connection with the program, including the program revisions, the Company recognized a charge of $14.3 million in 2000.

In addition, during 2000, Hexcel amended its September 1999 business consolidation program in response to the manufacturing constraints caused by a stronger than expected increase in sales and production for its electronic woven glass fabrics and its ballistic protection products. Based on these improved market conditions and a manufacturing capacity review, the Company decided to expand its capacity by purchasing additional looms and revising the previous decision to consolidate a number of weaving activities at two of the Company's facilities. As a result of the decision not to proceed to consolidate production, the Company reversed a total of $3.4 million of business consolidation expenses that were previously recognized in 1999, including $3.1 million in non-cash write-downs of machinery and equipment that was to have been sold or scrapped as a result of the consolidation.

In 2002, the Company recognized a change in estimated business consolidation expenses related to this program of $0.5 million, as actual employee severance was lower than previously expected. Business consolidation expenses for equipment relocation and re-qualification costs, expensed as incurred, were $1.6 million and $6.5 million in 2002 and 2001, respectively. Equipment relocation and re-qualification costs primarily related to the planned closure of the Lancaster, Ohio and Gilbert, Arizona pre-preg manufacturing facilities. In addition, the Company recognized a benefit on the sale of a previously idled Cleveland, Georgia facility of $0.5 million by reversing expenses previously accrued in 1999.

The aggregate business consolidation and restructuring activities for the three years ended December 31, 2002, consisted of the following:

                                                                  EMPLOYEE        FACILITY &
(IN MILLIONS)                                                     SEVERANCE       EQUIPMENT           TOTAL
-------------------------------------------------------------------------------------------------------------
BALANCE AS OF JANUARY 1, 2000                                     $     3.5      $       0.6        $     4.1
Business consolidation expenses:
    Current period expenses                                             3.7             10.6             14.3
    Reversal of 1999 business consolidation expenses                   (0.3)            (3.1)            (3.4)
-------------------------------------------------------------------------------------------------------------
  Net business consolidation expenses                                   3.4              7.5             10.9
Cash expenditures                                                      (3.9)            (7.9)           (11.8)
Non-cash items:
    Reversal of 1999 business consolidation expenses                      -              3.1              3.1
    Non-cash usage, including asset write-downs                        (0.6)            (3.0)            (3.6)
-------------------------------------------------------------------------------------------------------------
  Total non-cash items                                                 (0.6)             0.1             (0.5)
-------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2000                                   $     2.4      $       0.3        $     2.7
Business consolidation and restructuring expenses                      34.5             23.9             58.4
Cash expenditures                                                      (6.4)            (5.6)           (12.0)
Non-cash usage, including asset write-downs                               -            (15.7)           (15.7)
-------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2001                                   $    30.5      $       2.9        $    33.4
Business consolidation and restructuring expenses
    Current period expenses                                               -              2.8              2.8
    Reversal of 1999 business consolidation expenses                      -             (0.5)            (0.5)
    Change in estimated expenses                                       (2.9)             1.1             (1.8)
-------------------------------------------------------------------------------------------------------------
  Net business consolidation and restructuring expenses                (2.9)             3.4              0.5
Cash expenditures                                                     (20.5)            (3.8)           (24.3)
Currency translation adjustment                                         0.9                -              0.9
Non-cash items:
    Reversal of 1999 business consolidation expenses                      -              0.5              0.5
    Non-cash usage, including asset write-downs                           -             (0.5)            (0.5)
-------------------------------------------------------------------------------------------------------------
  Total non-cash items                                                    -                -                -
-------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2002                                   $     8.0      $       2.5        $    10.5
=============================================================================================================

44

As of December 31, 2002, the December 1998, September 1999 and July 2001 programs have been substantially completed, while the November 2001 program will be substantially completed in 2003. Management will continue to closely monitor spending under the November 2001 program and evaluate opportunities that may exist for future actions, as the Company continues to right-size the business in response to existing conditions in the markets it serves.

RETIREMENT AND OTHER POSTRETIREMENT BENEFIT PLANS

Hexcel maintains qualified and nonqualified defined benefit retirement plans covering certain U.S. and European employees, as well as retirement savings plans covering eligible U.S. employees, and participates in a union sponsored multi-employer pension plan covering certain U.S. employees with union affiliates. In addition, Hexcel also provides certain postretirement health care and life insurance benefits to eligible U.S. retirees.

Hexcel accounts for its defined benefit retirement plans and its postretirement benefit plans using actuarial models required by Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions," and No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," respectively. These actuarial models require the use of certain assumptions, such as the expected long-term rate of return, discount rate, rate of compensation increase, healthcare cost trend rates, and retirement and mortality rates, to determine the net periodic costs of such plans. These assumptions are reviewed and set annually at the beginning of each year. In addition, these models use an "attribution approach" that generally spreads individual events, such as plan amendments and changes in actuarial assumptions, over the service lives of the employees in the plan. That is, employees render service over their service lives on a relatively smooth basis and therefore, the income statement effects of retirement and postretirement benefit plans are earned in, and should follow, the same pattern.

Hexcel uses its long-term historical actual return experience, its expected investment mix of the plans' assets, and future estimates of long-term investment returns to develop its expected rate of return assumption used in the net periodic cost calculations of its U.S. and European defined benefit retirement plans. Due to the difficulty involved in predicting the market performance of certain assets, there will almost always be a difference in any given year between the Company's expected return on plan assets and the actual return. Following the attribution approach, each year's difference is spread over a number of future years. Over time, the expected long-term returns are designed to approximate the actual long-term returns and therefore result in a pattern of income and expense recognition that more closely matches the pattern of the services provided by the employees. As actual returns experience over the past three years were less than the expected returns for certain of the Company's defined benefit retirement plans, the shortfall between actual and expected returns will be recognized in the net periodic pension cost calculations over a number of subsequent years, along with any other differences arising in future years. In addition, as a result of a review of recent asset returns and expected future trends, the Company reduced its expected long-term return on the U.S. defined benefit retirement plan assets from a historical 9.0% to 7.5% for the 2003 plan year. This change, along with minor adjustments in the expected long-term rate of return on plan assets for certain European defined benefit retirement plans, is expected to result in additional net periodic pension costs in 2003.

Hexcel annually sets its discount rate assumption for retirement-related benefits accounting to reflect the rates available on high-quality, fixed-income debt instruments. Recent changes in discount rates have not had any significant impact on the Company's net periodic costs for the three years ended December 31, 2002. The discount rate assumption to be used to calculate net periodic retirement related costs in 2003 is 6.75% compared to a discount rate of 7.25% used in 2002. The rate of compensation increase, which is another significant assumption used in the actuarial model for pension accounting, is determined by the Company based upon its long-term plans for such increases and assumed inflation. Rates used by the Company have remained relatively constant over the past three years and are expected to remain constant for 2003. For the postretirement health care and life insurance benefits plan, the Company reviews external data and its historical trends for health care costs to determine the health care cost trend rates. Retirement and mortality rates are based primarily on actual plan experience.

45

Actual results that differ from the Company's assumptions are accumulated and amortized over future periods and, therefore, generally affect the net periodic costs and recorded obligations in such future periods. While management believes that the assumptions used are appropriate, significant changes in, economic or other conditions, employee demographics, retirement and mortality rates, and investment performance may materially impact such costs and obligations. For more information regarding costs and assumptions for the Company's retirement and other postretirement benefit plans, see Note 11 to the accompanying consolidated financial statements of this Annual Report on Form 10-K/A.

Effective December 31, 2000, the Company made certain changes to its U.S. defined benefit and retirement savings plans that were intended to improve the flexibility and visibility of future retirement benefits for employees. These changes included an increase in the amount that the Company will contribute to individual 401(k) retirement savings accounts and an offsetting curtailment of the Company's U.S. qualified defined benefit retirement plan. Beginning January 1, 2001, the Company started to contribute an additional 2% to 3% of each eligible employee's salary to an individual 401(k) retirement savings account, depending on the employee's age. This increased the maximum contribution to individual employee savings accounts to between 5% and 6% per year, before any profit sharing contributions. Offsetting the estimated incremental cost of this additional benefit, participants in the Company's U.S. qualified defined benefit retirement plan no longer accrued benefits under this plan after December 31, 2000, and no new employees will become participants. However, employees retained all benefits earned under this plan as of that date. The 2000 results included $5.1 million of non-cash pre-tax income (equivalent to $3.3 million of after-tax income) attributable to the curtailment of this defined benefit retirement plan.

SIGNIFICANT CUSTOMERS

Approximately 22%, 23% and 20% of the Company's 2002, 2001 and 2000 net sales, respectively, were to Boeing and its subcontractors. Of the 22% of sales to Boeing and its subcontractors in 2002, 17% and 5% related to commercial aerospace and space and defense market applications, respectively. Approximately 15%, 16% and 13% of the Company's 2002, 2001 and 2000 net sales, respectively, were to EADS, including Airbus, and its subcontractors. Of the 15% of sales to EADS and its subcontractors in 2002, 13% and 2% related to commercial aerospace and space and defense market applications, respectively.

SIGNIFICANT TRANSACTIONS

REFINANCING OF THE COMPANY'S CAPITAL STRUCTURE

On March 19, 2003, Hexcel successfully completed the refinancing of its capital structure through the simultaneous closings of three financing transactions: the completion of its previously announced sale of mandatorily redeemable convertible preferred stock for $125.0 million, the issuance of $125.0 million of 9-7/8% senior secured notes, due 2008, and the establishment of a new $115.0 million senior secured credit facility, also due 2008.

The proceeds from the sale of the convertible preferred stock have been used to provide for the redemption of $46.9 million principal amount of the Company's 7% convertible subordinated notes, due 2003, and to repay outstanding borrowings under the existing senior credit facility. Proceeds to be used to redeem the 7% convertible subordinated notes have been remitted to US Bank Trust, trustee for the notes, for the express purpose of retiring the outstanding principal balance of the notes, plus accrued interest.

The remaining advances under the existing senior credit facility, after the application of a portion of the equity proceeds, have been repaid with the proceeds from the issuance of the Company's new 9-7/8% senior secured notes and a new senior secured credit facility.

With the benefit of the financing transactions, the Company's next significant scheduled debt maturity will not occur until 2008, with annual debt and capital lease maturities ranging between $6.2

46

million and $12.5 million prior to 2008. Total debt as of March 19, 2003, after giving pro forma effect to these financing transactions and their related costs, was $531.6 million.

Each of the material agreements governing the issuance and terms of the convertible preferred stock, the issuance and terms of the senior secured notes and the terms of the new senior secured credit facility is filed as an exhibit to this Annual Report on Form 10-K/A.

MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

On March 19, 2003, Hexcel issued 125,000 shares of a series A convertible preferred stock and 125,000 shares of a series B convertible preferred stock for $125.0 million in cash. Upon issuance, the total number of Hexcel's outstanding common shares including potential shares issuable upon conversion of both of the new series of convertible preferred stocks increased from approximately 38.6 million shares to approximately 88.4 million shares. In addition, common shares authorized for issuance increased from 100.0 million shares to 200.0 million shares.

Hexcel issued 77,875 shares of series A convertible preferred stock and 77,875 shares of series B convertible preferred stock to affiliates of Berkshire Partners LLC and Greenbriar Equity Group LLC (the "Berkshire/Greenbriar Investors") for a cash payment of approximately $77.9 million. The series A and the series B convertible preferred stocks are mandatorily redeemable on January 22, 2010 for cash or for common stock at the Company's election. Both preferred stocks are convertible, at the option of the holder, into common stock at a conversion price of $3.00 per share, and will automatically be converted into common stock if the closing trading price of the common stock for any period of 60 consecutive trading days ending after March 19, 2006 exceeds $9.00 per share. The preferred stockholders are entitled to vote on an as converted basis with Hexcel's common stockholders. The series A preferred stock accrues dividends at a rate of 6% per annum following the third anniversary of the issuance. Dividends may be paid in cash or added to the accrued value of the preferred stock, at Hexcel's option. The series B preferred stock does not accrue dividends. After giving effect to the issuances, the Berkshire/Greenbriar Investors own approximately 35.2% of Hexcel's outstanding voting securities.

Hexcel has separately issued 47,125 shares of series A convertible preferred stock and 47,125 shares of series B convertible preferred stock to investment funds controlled by affiliates of The Goldman Sachs Group, Inc. (the "Goldman Sachs Investors"), who currently own approximately 37.8% of Hexcel's outstanding common stock, for a cash payment of approximately $47.1 million. This issuance of preferred stock enabled the Goldman Sachs Investors to maintain their current percentage ownership interest in Hexcel's voting securities, consistent with their rights under the governance agreement entered into with Hexcel in 2000.

In conjunction with the aforementioned transactions, Hexcel and the Berkshire/Greenbriar Investors entered into a stockholders agreement, which gives the Berkshire/Greenbriar Investors the right to nominate up to two directors (of a total of ten) to Hexcel's board of directors and certain other rights. The Goldman Sachs Investors will continue to have the right to nominate up to three directors under the governance agreement entered into at the time of their investment in Hexcel in 2000. The stockholders agreement and the amended Goldman Sachs Investors governance agreement require that the approval of at least six directors, including at least two directors not nominated by the Berkshire/Greenbriar Investors or the Goldman Sachs Investors, be obtained for board actions generally. The stockholders agreement also prohibits the purchase of voting securities in excess of 39.5% of Hexcel's outstanding voting securities unless approved by Hexcel's board. The Berkshire/Greenbriar Investors and the Goldman Sachs Investors have agreed to an 18-month lock up on the securities being issued, except for certain registered offerings.

SENIOR SECURED NOTES, DUE 2008

The Company also issued, through a private placement under Rule 144A, $125.0 million of 9 7/8% senior secured notes at a price of 98.95% of face value. The senior secured notes, due October 1, 2008, are secured by a first priority security interest in substantially all of Hexcel's and its domestic subsidiaries' property, plant and equipment, intangibles, intercompany notes and other obligations receivable, and 100% of the outstanding voting stock of certain of Hexcel's domestic subsidiaries. In addition, the senior secured notes are secured by a pledge of 65% of the stock of

47

Hexcel's French and UK first-tier holding companies. This pledge of foreign stock is on an equal basis with a substantially identical pledge of such stock given to secure the obligations under the Company's new senior secured credit facility, described below. The senior secured notes are also guaranteed by Hexcel's material domestic subsidiaries. Hexcel has the ability to incur additional debt that would be secured on an equal basis by the collateral securing the senior secured notes. The amount of additional secured debt that may be incurred is currently limited to $10.0 million, but may increase over time based on a formula relating to the total net book value of Hexcel's domestic property, plant and equipment.

The Company will pay interest on the notes on April 1st and October 1st of each year. The first payment will be made on October 1, 2003. The Company will have the option to redeem all or a portion of the notes at any time during the one-year period beginning April 1, 2006 at 104.938% of principal plus accrued and unpaid interest. This percentage decreases to 102.469% for the one-year period beginning April 1, 2007, and to 100.0% for the period beginning April 1, 2008. In addition, the Company may use the net proceeds from one or more equity offerings at any time prior to April 1, 2006 to redeem up to 35% of the aggregate principal amount of the notes at 109.875% of the principal amount, plus accrued and unpaid interest.

The indenture governing the senior secured notes contains many other terms and conditions, including limitations with respect to asset sales, incurrence of debt, granting of liens, the making of restricted payments and entering into transactions with affiliates.

Hexcel has agreed, under a registration rights agreement, to offer to all noteholders the opportunity to exchange their notes for new notes that are substantially identical to the existing notes except that the new notes will be registered with the Securities and Exchange Commission ("SEC") and will not have any restrictions on transfer. In the event that Hexcel cannot affect such an exchange, Hexcel will be required to file a shelf registration statement with the SEC to permit the noteholders to resell their notes generally without restriction.

SENIOR SECURED CREDIT FACILITY

Also on March 19, 2003, Hexcel entered into a $115.0 million asset-backed senior secured credit facility with a new syndicate of lenders led by Fleet Capital Corporation as agent. The credit facility matures on March 31, 2008. Borrowers under the credit facility include, in addition to Hexcel Corporation, Hexcel's operating subsidiaries in the UK, Austria and Spain. The credit facility provides for borrowings of U.S. dollars, Pound Sterling and Euro currencies, including the issuance of letters of credit, with the amount available to each borrower dependent on the borrowing base of that borrower. For Hexcel Corporation and the UK borrower, the borrowing base is determined by an agreed percentage of eligible accounts receivable and eligible inventory, subject to certain reserves. The borrowing base of each of the Austrian and German borrowers is based on an agreed percentage of eligible accounts receivable, subject to certain reserves. In addition, the UK, Austrian and German borrowers have facility sublimits of $12.5 million, $7.5 million and $5.0 million, respectively. Borrowings under the new facility bear interest at a floating rate based on either the agent's defined "prime rate" plus a margin that can vary from 0.75% to 3.25% or LIBOR plus a margin that can vary from 2.25% to 3.25%. The margin in effect for a borrowing at any given time depends on the Company's fixed charge ratio and the currency denomination of such borrowing. The credit facility also provides for the payment of customary fees and expenses.

All obligations under the credit facility are secured by a first priority security interest in accounts receivable, inventory and cash and cash equivalents of Hexcel Corporation and its material domestic subsidiaries. In addition, all obligations under the credit facility are secured by a pledge of 65% of the stock of Hexcel's French and UK first-tier holding companies. This pledge of foreign stock is on an equal basis with a substantially identical pledge of such stock given to secure the obligations under the senior secured notes. The obligations of the UK borrower are secured by the accounts receivable, inventory, and cash and cash equivalents of the UK borrower. The obligations of the Austrian and German borrowers are secured by the accounts receivable of the Austrian and German borrowers, respectively.

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Hexcel is required to maintain various financial ratios throughout the term of the credit facility. These financial covenants set maximum values for the Company's leverage (the ratios of total and senior debt to EBITDA), fixed charge coverage (the ratio of EBITDA, less capital expenditures and cash taxes, plus cash dividends, to the sum of cash interest and scheduled debt amortization), and capital expenditures (not to exceed specified annual expenditures). The credit facility also contains limitations on, among other things, incurring debt, granting liens, making investments, making restricted payments, entering into transactions with affiliates and prepaying subordinated debt. The credit facility also contains other customary terms relating to, among other things, representations and warranties, additional covenants and events of default.

On March 19, 2003, the Company borrowed $13.0 million and issued letters of credit totaling approximately $25.8 million under the new senior secured credit facility.

CLASSIFICATION OF DEBT AND CAPITAL LEASE OBLIGATIONS AS OF DECEMBER 31, 2002

As of December 31, 2002, the Company had a scheduled debt obligation due August 1, 2003, which, if made, would cause the Company to violate one or more financial covenants in the Company's existing debt agreements. The Company also required an amendment of its existing senior credit facility before the end of the first quarter of 2003 to maintain compliance with the financial covenants under that facility. As the anticipated refinancing of the Company's capital structure was not completed as of February 28, 2003 (the 2002 financial statement issuance date) and the Company had not obtained an amendment of the aforementioned financial covenants, all debt and capital lease obligations had been classified as current at December 31, 2002.

As a result of the March 19, 2003 refinancing transactions, the uncertainties surrounding the Company's ability to meet its scheduled 2003 debt maturities and comply with its debt covenants have been mitigated. Management believes the Company will comply with the new debt covenants and has adequate liquidity available to finance operations beyond December 31, 2003. Also as a result of the refinancing transactions, substantially all of the Company's debt will be reclassified to long-term at March 31, 2003 reflecting the new scheduled debt maturities. The next significant scheduled debt maturity will not occur until 2008, with annual debt and capital lease maturities ranging between $6.2 million and $12.5 million prior to 2008. Refer to Note 24, "Subsequent Event - Pro Forma Consolidated Balance Sheet (Unaudited)."

PURCHASE OF APPROXIMATELY 14.5 MILLION SHARES OF HEXCEL COMMON STOCK BY AN INVESTOR GROUP

On December 19, 2000, the Goldman Sachs Investors completed the purchase of approximately 14.5 million of the approximately 18 million shares of Hexcel common stock owned by subsidiaries of Ciba Specialty Chemicals Holding, Inc. The shares acquired by the Goldman Sachs Investors represented approximately 39% of the Company's outstanding common stock. In addition, the Company and the Goldman Sachs Investors entered into a governance agreement that became effective on December 19, 2000. Under this governance agreement, the Goldman Sachs Investors have the right to, among other things, designate up to three directors to sit on the Company's board of directors. Upon the closing of the new preferred stock issuances, the Goldman Sachs Investors and the Company will amend the governance agreement, which will continue to give the Goldman Sachs Investors the right to designate up to three members to sit on the Company's board of directors.

In connection with this transaction, Hexcel incurred $2.2 million of costs, all of which were included in "selling, general, and administrative expenses" during the fourth quarter of 2000. These costs and expenses included legal, consulting, and regulatory compliance expenses, as well as a non-cash charge attributable to the accelerated vesting of certain stock-based compensation and to certain amendments to an executive retirement plan.

SALE OF THE BELLINGHAM AIRCRAFT INTERIORS BUSINESS

On April 26, 2000, Hexcel sold its Bellingham aircraft interiors business to Britax Cabin Interiors, Inc., a wholly owned subsidiary of Britax International plc, for cash proceeds of $113.3 million. The sale resulted in a pre-tax gain of $68.3 million and an after-tax gain of $44.3 million, or $0.97 per diluted share. Net proceeds from the sale were used to repay $111.6 million of outstanding term debt under the Company's Senior Credit Facility.

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The Bellingham business generated net sales of $18.9 million for the period from January 1 through April 26, 2000, and contributed $0.6 million of operating income in the corresponding periods. The Bellingham business was engaged in the manufacture and sale of airline interior refurbishment products and its operating results were reflected as a component of the Company's Structures business segment up to the date of disposal.

FINANCIAL CONDITION

LIQUIDITY: As of December 31, 2002, the Company had cash and cash equivalents of $8.2 million and available undrawn commitments under its existing senior credit facility of $87.9 million. The Company's total debt, net of cash, was $613.5 million, a decrease of $60.8 million from $674.3 million as of December 31, 2001. The decrease in net debt reflected cash generated from (a) reductions in capital expenditures compared to prior years; (b) significant reductions in working capital, as accounts receivable and inventory balances were managed lower to match sales and cost reduction programs; (c) collection of a litigation settlement; and (d) the sale of an ownership interest of an affiliated company. This reduction in net debt during 2002 was achieved despite incurring business consolidation and restructuring cash payments of $24.3 million, cash interest payments of $59.3 million and cash taxes of $8.4 million.

CREDIT FACILITY: Hexcel had a global credit facility (the "Senior Credit Facility") with a syndicate of banks to provide for ongoing working capital and other financing requirements. The Senior Credit Facility, which consisted of revolving credit, overdraft and term loan facilities, provided Hexcel with committed lines of approximately $297.6 million as of December 31, 2002, subject to certain limitations. These commitments consisted of funded term loans of $106.8 million, revolving credit and overdraft facilities of $160.8 million, and letter of credit facilities of $30.0 million. As of December 31, 2002, drawings under the revolving credit facility were $72.9 million, leaving available, undrawn commitments under the facilities of $87.9 million. As of December 31, 2002, letters of credit issued under the facility approximated $24.2 million, of which $11.1 million supports a loan to the Company's BHA Aero joint venture. The Company was subject to various financial covenants and restrictions under the Senior Credit Facility, including limitations on incurring debt, granting liens, selling assets, repaying subordinated indebtedness, redeeming capital stock and paying dividends. The Senior Credit Facility was scheduled to expire in 2004, except for approximately $55.8 million of term loans that are due for repayment in 2005. The Senior Credit Facility was paid in full on March 19, 2003.

Effective January 25, 2002, Hexcel entered into an amendment of the Senior Credit Facility. The amendment provided for revised financial covenants through 2002; a 100 basis point increase in the interest spread payable over LIBOR for advances under the facility; and an immediate decrease in the commitment of revolving credit and overdraft facilities from a cumulative amount of $205.0 million to $190.0 million, with a further reduction to $182.0 million on or before September 30, 2002. The amendment also provided for a 25 basis point increase on January 1, 2003 if the Company did not reduce the commitment by a further $25.0 million, prior to that date. The 2002 revised, relaxed covenants were derived from the Company's 2002 business plan projections plus a modest cushion. The Senior Credit Facility financial covenants set certain maximum values for the Company's leverage (the ratios of total and senior debt to an adjusted EBITDA), and certain minimum values for its interest coverage (the ratio of an adjusted EBITDA to cash interest expense) and fixed charge coverage (the ratio of an adjusted EBITDA less capital expenditures to the sum of certain fixed expenses). The Senior Credit Facility agreement defined adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, business consolidation and restructuring expenses and certain other non-cash income and expense. Adjusted EBITDA as defined by this agreement was $109.4 million in 2002 and $119.2 million in 2001. In addition, during the term of the amendment, all net proceeds generated through asset sales, and most other liquidity events, in each case to the extent in excess of $2.5 million, and 100% of all net proceeds generated from litigation settlements and judgments, must be used to prepay loans under the Senior Credit Facility. Hexcel agreed to limit capital expenditures to $25.0 million during 2002, with a $10.0 million limit during any quarter in 2002. At December 31, 2002, the Company was in compliance with the covenants, as amended, under its Senior Credit Facility and has met all its required commitment reductions.

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In connection with the credit agreement amendment, Hexcel also granted additional collateral. The Company had previously granted a security interest in most of its U.S. accounts receivable, inventory, property, plant, equipment and real estate. It had also pledged some or all of the shares of certain subsidiaries. Under the terms of the amendment, Hexcel granted to the banks a security interest in additional U.S. accounts receivable, inventory, property, plant, equipment and real estate, as well as its intellectual property. In addition, each of a group of Hexcel's European subsidiaries granted a security interest in its accounts receivable that secures certain local borrowings advanced to that subsidiary.

The Senior Credit Facility had been subject to several previous amendments to accommodate, among other things, the planned sale of assets, the planned investments in additional manufacturing capacity for selected products, the impact of the decline of the Company's operating results on certain financial covenants, the purchase by an investor group of approximately 14.5 million shares of Hexcel common stock held by a significant shareholder of the Company, a restructuring of the ownership of certain of the Company's European subsidiaries, the issuance of additional senior subordinated debt and the early redemption of certain term debt. In connection with the 2002 and previous amendments, included in interest expense in 2002 and 2001 are fees and expenses incurred of approximately $1.8 million and $1.0 million, respectively.

The January 25, 2002 amendment relaxed the 2002 quarterly financial covenants to accommodate the impact of the downturn in the commercial aerospace and electronics markets. Under the terms of the amendment, the financial covenants effective beginning with the quarter ending March 31, 2003 are those that applied before the amendment. As these market conditions experienced in 2002 are expected to continue during 2003, the Company needed to obtain a further amendment of the facility before the end of the first quarter of 2003 to accommodate its projected financial performance for that quarter and be in compliance with the financial covenants as provided in the Senior Credit Facility agreement, or refinance the facility. The Company executed a refinancing of the facility on March 19, 2003.

OPERATING ACTIVITIES: Net cash provided by operating activities was $65.9 million in 2002, reflecting positive working capital management and a reduced net loss, after excluding depreciation of $47.2 million and equity in losses and write-downs of an investment in affiliated companies of $10.0 million. Reductions in accounts receivable and inventory balances generated operating cash flows of $35.6 million and $25.8 million, respectively. The Company was able to generate substantial operating cash flows even after incurring restructuring cash payments of $24.3 million and accounts payable and accrued liabilities decreasing by $15.7 million during the year.

Net cash flows provided by operating activities were $35.0 million in 2001. Although the Company's net loss for the year was $433.7 million, its operating earnings generated $22.8 million of cash in 2001 after excluding non-cash equity losses of $9.5 million, $309.1 million of non-cash impairment charges for goodwill and other purchased intangibles, $63.2 million of non-cash depreciation and amortization charges, $27.6 million of non-cash charges in deferred tax assets, $0.7 million of non-cash extraordinary charges and $46.4 million of non-cash and unpaid business consolidation and restructuring expenses. During 2001, working capital management resulted in reductions in accounts receivable and inventory balances. These reductions along with reductions in other assets were offset in part by increases in accounts payable and accrued expenses resulting in an increase in cash of $12.2 million.

In 2000, net cash provided by operating activities was $33.0 million with the major sources of cash provided by net income, excluding the after-tax gain from the sale of the Bellingham aircraft interiors business, of $9.9 million and non-cash depreciation and amortization of $58.7 million. However, these sources of operating cash flow were offset by $5.5 million of non-cash income from affiliated companies and $5.1 million of non-cash income from the curtailment of a U.S. defined benefit retirement plan. In addition, increases in accounts receivable and inventories used a total of $24.7 million of cash.

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INVESTING ACTIVITIES: Net cash used for investing activities was $2.3 million in 2002. Cash used for capital expenditures of $14.9 million was offset, in part, by the Company receiving $10.0 million from a partial sale of an ownership interest in an affiliated company, $1.5 million from the sale of other assets, and $1.1 million net from other investing activities.

Net cash used for investing activities was $38.3 million in 2001, primarily reflecting capital expenditures of $38.8 million and the receipt of $0.8 million dividend from an affiliated company.

Net cash provided by investing activities was $68.8 million in 2000, reflecting net cash proceeds from the sale of the Bellingham aircraft interiors business of $113.3 million and from the sale of other assets of $3.4 million, partially offset by $39.6 million of capital expenditures and $8.3 million of investments in joint venture affiliates in China and Malaysia.

FINANCING ACTIVITIES: Net cash used for financing activities was $67.3 million in 2002, as the Company used excess cash to repay a portion of its Senior Credit Facility, and long-term debt and capital lease obligations.

Net cash provided by financing activities was $8.6 million in 2001, largely due to net borrowings of $12.5 million. During 2001, the Company issued an additional $100.0 million of 9.75% senior subordinated notes, due 2009, at a price of 98.5% at face value. Net proceeds from the issuance were used to redeem $67.5 million aggregate principal amount of the Company's outstanding convertible subordinated notes, due 2003, and to pay the entire principal amount of $25.0 million of the increasing rate senior subordinated note, due 2003. In addition, the Company paid $3.5 million of debt issuance costs.

Net cash used for financing activities was $95.0 million in 2000, as net cash proceeds from the sale of the Bellingham aircraft interiors business were used to reduce outstanding indebtedness under the Company's Senior Credit Facility.

FINANCIAL OBLIGATIONS AND COMMITMENTS: As of December 31, 2002, scheduled current maturities of notes payable and capital lease obligations were $61.9 million with a substantial debt repayment of $46.9 million due on August 1, 2003 upon the maturity of the Company's 7% convertible subordinated notes. Scheduled amortization under the Company's existing Senior Credit Facility was approximately $8.6 million in 2003. Capital lease amortization and operating lease rental payments in 2003 will approximate $6.2 million and $2.9 million, respectively. Limited credit and overdraft facilities of $0.2 million provided to certain of the Company's European subsidiaries by lenders outside of the Senior Credit Facility are primarily uncommitted facilities that are terminable at the discretion of the lenders.

Prior to the refinancing transactions completed on March 19, 2003, the Company had a scheduled debt obligation due August 1, 2003, which, if made, would have caused the Company to violate one or more financial covenants defined in the Company's then existing debt agreements. The Company also required an amendment of its existing Senior Credit Facility before the end of the first quarter of 2003 to maintain compliance with its financial covenants. As the anticipated refinancing of the Company's capital structure was not completed as of February 28, 2003 (the 2002 financial statement issuance date) and the Company had not obtained an amendment of the aforementioned financial covenants, all notes payable and capital lease obligations have been classified as current at December 31, 2002. Refer to Notes 2, 8 and 9 to the accompanying consolidated financial statements of this Annual Report on Form 10-K/A for further information regarding the classification of notes payable and capital lease obligations.

The Senior Credit Facility consisted of revolving credit and overdraft facilities and term loan borrowings. Revolving credit borrowings under the facility of $72.9 million are repayable in 2004. Term loan borrowings totaling $106.8 million at December 31, 2002 are repayable in installments of $8.6 million in 2003, $42.4 million in 2004 and $55.8 million in 2005.

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The 7% convertible subordinated debentures, due 2011, are repayable under mandatory redemptions of $1.8 million per annum through 2011, with the principal balance due at maturity. The Company satisfied the 2003 annual sinking fund requirement in the fourth quarter of 2002. The debt was repurchased at market prices, which resulted in a $0.5 million gain on the early retirement of debt. In accordance with the requirements of FAS 145, the gain has been reported as a separate line item below operating income in the consolidated statements of operations. The $340.0 million principal amount of the 9.75% senior subordinated notes is repayable in full in 2009.

The Company entered into a $50.0 million capital lease in 1998 for property, plant and equipment used in the acquired Clark-Schwebel business. The lease expires in September 2006 and includes various purchase options. The last fixed price purchase option is on September 30, 2003 for an amount of $24.9 million. If the Company does not exercise its purchase option, on the lease expiration date, the Company will have the option to purchase the leased assets at the greater of $5.0 million or the fair value of the assets as of that date. The Company has also entered into several capital leases for buildings and warehouses with expirations through 2009. In addition, certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.

On June 29, 2001, the Company issued $100.0 million of senior subordinated notes, due 2009, at a price of 98.5% of face value. Net proceeds from the issuance were used to redeem $67.5 million aggregate principal amount of the Company's outstanding convertible subordinated notes, due 2003, and to pay the entire principal amount of $25.0 million of the Company's increasing rate senior subordinated note, due 2003. The refinancing reduced the Company's 2003 debt maturities from $149.5 million to $57.6 million. The net impact of the refinancing is estimated to increase annual interest expense by approximately $2.4 million before tax. The cash costs associated with the issuance and early retirements amounted to approximately $6.5 million.

In 1999, the Company, Boeing and Aviation Industries of China (now known as China Aviation Industry Corporation I) formed a joint venture, BHA Aero Composite Parts Co., Ltd ("BHA Aero"), to manufacture composite parts for secondary structures and interior applications for commercial aircraft. Hexcel has a 33.3% equity interest in this joint venture, which is located in Tianjin, China. In addition, in 1999, the Company formed another joint venture, Asian Composites Manufacturing Sdn. Bhd. ("Asian Composites"), with Boeing, Sime Link Sdn. Bhd., and Malaysia Helicopter Services Bhd. (now known as Naluri Berhadto), to manufacture composite parts for secondary structures for commercial aircraft. Hexcel has a 25% equity ownership interest in this joint venture, which is located in Alor Setar, Malaysia. Asian Composites began shipping engineered products to customers during the second half of 2001, while BHA Aero began deliveries in early 2002. During 2000, Hexcel made cash equity investments totaling $8.3 million in these joint ventures. No additional cash equity investments were made during 2002 and 2001. As of December 31, 2002 and 2001, the Company had an outstanding letter of credit of $11.1 million in support of a loan to BHA Aero.

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The following table summarizes the scheduled maturities of financial obligations and expiration dates of commitments for the years ended 2003 through 2007 and thereafter (see Notes 2 and 8 to the accompanying consolidated financial statements of this Annual Report on Form 10-K/A for discussion on the December 31, 2002 debt classification):

(IN MILLIONS)                               2003       2004         2005         2006       2007     Thereafter     TOTAL
----------------------------------------------------------------------------------------------------------------------------
Senior Credit Facility                   $     8.6   $   115.3   $     55.8   $       -   $       -   $       -   $    179.7
European credit and overdraft
  facilities                                   0.2           -            -           -           -           -          0.2
9.75% senior subordinated notes(a)               -           -            -           -           -       340.0        340.0
7.0% convertible subordinated notes           46.9           -            -           -           -           -         46.9
7.0% convertible subordinated
  debentures                                     -         1.8          1.8         1.8         1.8        15.5         22.7
Capital leases                                 6.2         6.6          7.0        10.7         0.3         2.6         33.4
----------------------------------------------------------------------------------------------------------------------------
  SUBTOTAL                                    61.9       123.7         64.6        12.5         2.1       358.1        622.9
Operating leases                               2.9         2.5          2.6         1.7         0.7         2.0         12.4
----------------------------------------------------------------------------------------------------------------------------
TOTAL FINANCIAL OBLIGATIONS(b)           $    64.8   $   126.2   $     67.2   $    14.2   $     2.8   $   360.1   $    635.3
============================================================================================================================

Letters of credit                        $    25.9   $       -   $        -   $       -   $       -   $       -   $     25.9
Other commitments                              1.5           -            -           -           -           -          1.5
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMMITMENTS                        $    27.4   $       -   $        -   $       -   $       -   $       -   $     27.4
============================================================================================================================

(a) At December 31, 2002, the unamortized discount on the additional $100.0 million of 9.75% senior subordinated notes, issued June 29, 2002, was approximately $1.2 million.

(b) Due to the subsequent closure of certain financing transactions, scheduled maturities have significantly changed. See Notes 2 and 24 to the accompanying consolidated financial statements of this Annual Report on Form 10-K/A for further discussion on such financing transactions and their impact on scheduled maturities.

Total letters of credit issued and outstanding were $25.9 million as of December 31, 2002, of which $11.1 million was issued in support of a loan to BHA Aero. While the letters of credit issued on behalf of the Company will expire under their terms in 2003, most, if not all, will be re-issued.

The Company's ability to make scheduled payments of principal, or to pay interest on, or to refinance its indebtedness, including its public notes, or to fund planned capital expenditures, will depend on its future performance and conditions in the financial markets. The Company's future performance is subject to economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. The Company has significant leverage and there can be no assurance that the Company will generate sufficient cash flow from its operations, or that it can incur sufficient future borrowings, to enable the Company to service its indebtedness, including its public notes, or to fund its other liquidity needs.

For further information regarding the Company's financial obligations and commitments, see Notes 2, 8, 9 and 16 to the accompanying consolidated financial statements of this Annual Report on Form 10-K/A.

CRITICAL ACCOUNTING POLICIES

Hexcel's discussion and analysis of its financial condition and results of operations are based upon Hexcel's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the consolidated financial statements requires Hexcel to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses. Although Hexcel evaluates its estimates, which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, on an on-going basis, actual results may differ from these estimates under different assumptions or conditions. Hexcel believes the following items are the Company's critical accounting policies and more significant estimates and assumptions used in the preparation of its consolidated financial statements.

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Hexcel estimates the collectibility of its accounts receivable from customers by establishing allowances for doubtful accounts. A considerable amount of judgment is necessary to assess the realizability of these receivables and the credit-worthiness of each customer. If the financial condition of Hexcel's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Hexcel states inventories at the lower of cost or market. This requires Hexcel to write-down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value to reflect assumptions about future demand and market conditions. If actual future demand and market conditions are less favorable than anticipated, additional inventory write-downs may be required.

Hexcel provides for an estimated amount of product warranty at the time revenue is recognized. This estimated amount is provided by product and based on actual warranty experience. While Hexcel engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component and material suppliers, Hexcel's product warranty obligations are affected by product failure rates and material usage. Should actual product failure rates and material usage differ from the Company's estimates, revisions to the estimated product warranty costs would be required.

Hexcel records significant reserves in connection with its business consolidation and restructuring programs. These reserves include estimates for employee severance costs, the settlement of contractual obligations, the fair value of certain assets held for sale and the timing of facility closures. Management closely monitors these actions and the related costs, and believes such estimates to be reasonable. However, if actual results differ from these estimates, it would have an impact on Hexcel's financial performance in the period such revision was made. In addition, certain of the expenses associated with the Company's business consolidation programs, including equipment moving and relocation costs, can not be accrued under accounting principles generally accepted in the United States of America and are expensed as incurred.

Hexcel has recorded goodwill as a result of prior business acquisitions. Goodwill recorded represents the excess of purchase price over the fair value of the identifiable net assets of an acquired business. Effective January 1, 2002, Hexcel adopted Statement of Financial Accounting Standards No.142, "Goodwill and Other Intangible Assets," ("FAS 142"). Prior to adopting FAS 142, goodwill was amortized on a straight-line basis over estimated economic lives, ranging from 15 years to 40 years. As a result of adopting FAS 142, goodwill is no longer amortized but instead is tested for impairment at the reporting unit level at least annually and whenever events or changes in circumstances indicate that goodwill might be impaired. A reporting unit is the lowest level of an entity that is a business and can be distinguished from other activities, operations, and assets of the entity. If, during the annual impairment review, the book value of the reporting unit exceeds the fair value, the implied fair value of the reporting unit's goodwill is compared with the carrying amount of the unit's goodwill. If the carrying amount exceeds the implied fair value, goodwill is written down to its implied value. FAS 142 requires management to estimate the fair value of each reporting unit, as well as the fair value of the assets and liabilities of each reporting unit, other than goodwill. The implied fair value of goodwill is determined as the difference between the fair value of a reporting unit, taken as a whole, and the fair value of the assets and liabilities of such reporting unit. No impact to the Company's consolidated financial statements was identified upon completion of the transitional impairment test required by FAS 142. The Company's annual impairment testing date will be during the fourth quarter of each year. In 2001, the Company recognized an impairment charge of $309.1 on goodwill and other purchased intangibles acquired through previous acquisitions (see Note 3 to the accompanying consolidated financial statements of this Annual Report on Form 10-K).

Hexcel has significant other long lived assets. Hexcel reviews these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The assessment of possible impairment is based on the Company's ability to recover the carrying value of the assets from the estimated undiscounted future net cash flows, before interest and taxes, of the related operations. If these cash flows are less than the carrying value of such assets, an impairment loss is recognized for the difference between estimated fair value and carrying value. The

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measurement of impairment requires estimates of these cash flows and fair value. The calculation of fair value may be determined based either on discounted cash flows or third party appraised values depending on the nature of the asset.

Hexcel records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While Hexcel has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, these factors are highly subjective and are subject to change based upon market conditions, the Company's ability to execute its restructuring programs and other factors. In 2001, Hexcel recorded a valuation allowance against nearly all of its deferred tax assets. In the event Hexcel were to determine that it would be able to realize its deferred tax assets in the future, an adjustment to the valuation allowance on deferred tax assets would increase income in the period such determination was made. Likewise, should Hexcel determine that it would not be able to realize all or part of its remaining net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.

Hexcel holds equity interests in affiliated companies having operations or technology in areas within its strategic focus, one of which is publicly traded. Hexcel records an investment impairment charge when it believes an investment has experienced a decline in value that is other than temporary. This judgmental decision reflects many factors. Future adverse changes in market conditions or poor operating results of underlying investments could result in further losses or an inability to recover the carrying value of the investments, thereby possibly requiring an impairment charge in the future. The Company recorded investment impairment charges of $4.0 million in 2002 and $7.8 million in 2001, relating to its investments in Asahi-Schwebel Co. Ltd. and Interglas Technologies AG, respectively.

Hexcel has designated certain derivative financial instruments as foreign exchange hedges of future sales transactions at certain foreign subsidiaries. Unrealized losses on these foreign exchange contracts have not been recognized in the Company's consolidated statement of operations based on management's determination that the forecasted sales are probable of occurring and that the hedges have been effective in mitigating the foreign exchange risks associated with these future sales. The hedging contracts cover only a portion of the forecasted sales, and therefore, management considers the likelihood of not reaching the designated level of forecasted sales to be low. However, if the designated levels of forecasted sales are not achieved in the timeframe that management anticipates, Hexcel would need to report the unrealized losses on these derivative instruments in income.

Hexcel is involved in litigation, investigations and claims arising out of the normal conduct of its business, including those relating to commercial transactions, as well as to environmental, health and safety matters. The Company estimates and accrues its liabilities resulting from such matters based on a variety of factors, including outstanding legal claims and proposed settlements; assessments by internal and external counsel of pending or threatened litigation; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs. The Company believes it has adequately accrued for these potential liabilities; however, facts and circumstances may change that could cause the actual liability to exceed the estimates, or that may require adjustments to the recorded liability balances in the future.

MARKET RISKS

As a result of its global operating and financing activities, Hexcel is exposed to various market risks that may affect its consolidated results of operations and financial position. These market risks include fluctuations in interest rates, which impact the amount of interest the Company must pay on certain variable-rate debt, and fluctuations in currency exchange rates, which impact the U.S. dollar value of transactions, assets and liabilities denominated in foreign currencies. The Company's primary currency exposures are in Europe, where the Company has significant business activities. To a lesser extent, the Company is also exposed to fluctuations in the prices of certain commodities, such as electricity, natural gas, aluminum and certain chemicals.

Hexcel attempts to net individual exposures on a consolidated basis, when feasible, to take advantage of natural offsets. In addition, the Company employs and foreign currency forward

56

exchange contracts for the purpose of hedging certain specifically identified net currency exposures. The use of these financial instruments is intended to mitigate some of the risks associated with fluctuations in currency exchange rates, but does not eliminate such risks. The Company does not use financial instruments for trading or speculative purposes.

INTEREST RATE RISKS

Hexcel's long-term debt bears interest at both fixed and variable rates. As a result, the Company's consolidated results of operations are affected by interest rate changes on its variable rate debt. Assuming a 10% favorable and a 10% unfavorable change in the underlying weighted average interest rates of the Company's variable rate debt, interest expense for 2002 of $62.8 million would have been $61.5 million and $64.1 million, respectively.

Hexcel's financial results are affected by interest rate changes on its variable rate debt. In order to partially mitigate this interest rate risk, the Company entered into a five-year interest rate cap agreement in 1998. The agreement provided for a maximum fixed rate of 5.5% on the applicable London interbank rate used to determine the interest on a notional amount of $50.0 million of variable rate debt under the Senior Credit Facility. The fair value and carrying amount of this contract at December 31, 2001, along with hedge ineffectiveness for the period ended October 29, 2002 and the year ended December 31, 2001, were not material. The interest rate cap agreement expired on October 29, 2002.

CURRENCY EXCHANGE RISKS

Hexcel has significant business activities in Europe. The Company operates seven manufacturing facilities in Europe, which generated approximately 44% of 2002 consolidated net sales. The Company's European business activities primarily involve three major currencies - the U.S. dollar, the British pound, and the Euro. The Company also conducts business or has joint venture investments in Japan, China, Malaysia, Australia and Brazil, and sells products to customers throughout the world. The majority of the Company's transactions with customers and joint venture affiliates outside of Europe are denominated in U.S. dollars, thereby limiting the Company's exposure to short-term currency fluctuations involving these countries. However, the value of the Company's investments in these countries could be impacted by changes in currency exchange rates over time, as could the Company's ability to profitably compete in international markets.

Hexcel attempts to net individual currency positions at its various European operations, to take advantage of natural offsets and reduce the need to employ foreign currency forward exchange contracts. The Company also enters into short-term foreign currency forward exchange contracts, usually with a term of ninety days or less, to hedge net currency exposures resulting from specifically identified transactions. Consistent with the nature of the economic hedge provided by such contracts, any unrealized gain or loss would be offset by corresponding decreases or increases, respectively, of the underlying transaction being hedged.

FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS

A number of the Company's European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries' functional currencies, being either the Euro or the British pound sterling. During 2001, Hexcel entered into a number of foreign currency forward exchange contracts to exchange U.S. dollars for Euros at fixed rates on specified dates through March 2005. The aggregate notional amount of these contracts was $58.0 million and $83.9 million at December 31, 2002 and 2001, respectively. The purpose of these contracts is to hedge a portion of the forecasted transactions of European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide the Company with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing the Company's exposure to fluctuations in currency exchange rates. For the years ended December 31, 2002 and 2001, hedge ineffectiveness was immaterial and the fair value of the foreign currency cash flow hedges recognized in "comprehensive income (loss)" was a net gain of $9.3 million and a net loss of $5.9 million, respectively. Approximately $2.0 million of the amounts recorded in other comprehensive income are expected to be reclassified into earnings in fiscal 2003 as the hedged sales are recorded.

57

Assuming a 10% increase in the value of the Euro relative to the U.S. dollar, the aggregate fair value of these contracts would constitute a $9.2 million asset of the Company. Alternatively, assuming a 10% decrease in the value of the Euro relative to the U.S. dollar, the aggregate fair value of these contracts would represent a $2.4 million liability of the Company.

UTILITY PRICE RISKS

The Company has exposure to utility price risks as a result of volatility in the cost and supply of energy and in natural gas prices. To minimize this risk, the Company enters into fixed price contracts at certain of the manufacturing locations for a portion of its energy usage for periods of up to three years. Although these contracts would reduce the risk to the Company during the contract period, future volatility in the supply and pricing of energy and natural gas could have an impact on the consolidated results of operations of the Company.

OTHER RISKS

As of December 31, 2002, the aggregate fair values of the Company's senior subordinated notes, due 2009, convertible subordinated notes, due 2003, and the convertible subordinated debentures, due 2011, were approximately $295.8 million, $46.2 million and $13.6 million, respectively. The convertible debt securities are convertible into Hexcel common stock at a price of $15.81 and $30.72 per share, respectively. Fair values were estimated on the basis of quoted market prices, although trading in these debt securities is limited and may not reflect fair value. The fair values are subject to fluctuations based on the Company's performance, its credit rating, and changes in interest rates for debt securities with similar terms. Due to the conversion feature in the convertible securities, changes in the value of the Company's stock may affect the fair value of these convertible securities.

Assuming that all other factors remain constant, the fair values of Hexcel's convertible subordinated notes, due 2003, and the convertible subordinated debentures, due 2011, would not be significantly impacted by a 10% change, either favorable or unfavorable, in the market price of the Company's common stock.

Although fair value may be a proxy for the cost to repay the Company's indebtedness, the trust indentures for the Company's senior subordinated notes, due 2009; convertible subordinated notes, due 2003; and convertible subordinated debentures, due 2011 require that the Company repay the principal value of the indebtedness at maturity.

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" ("FAS 145"). Among other matters, FAS 145 rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt," which required all gains and losses from extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. As a result, the criteria in Accounting Principles Board Opinion 30 will now be used to classify those gains and losses. The Company adopted FAS 145 as of January 1, 2002. As a result, a $2.7 extraordinary loss on early retirement of debt recorded in 2001 was reclassified as a separate line item below operating income in its consolidated statements of operations.

In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("FAS 146"). FAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured, initially at fair value, only when the liability is incurred; therefore, nullifying Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)" ("EITF 94-3") that required a liability for an exit cost to be recognized at the date of an entity's commitment to an exit plan. This change in accounting would be expected to result in a delayed recognition of certain types of costs, especially facility closure costs. The provisions of FAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002. Since FAS 146 is effective only for new exit or

58

disposal activities, adoption of this standard will not affect amounts currently reported in the Company's consolidated financial statements. However, the adoption of FAS 146 could affect the types and timing of costs included in any future business consolidation and restructuring programs, if implemented. The Company adopted FAS 146 as of January 1, 2003.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." FAS 148 amends FAS 123 and APB Opinion No. 28, "Interim Financial Reporting" to present alternative methods of transition for an entity that voluntarily adopts the fair value based method of accounting for stock-based employee compensation, and provides modifications to the disclosure provisions to require prominent disclosure about the effects on reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation in quarterly and annual financial statements. At this time, the Company has not voluntarily adopted the fair value method of FAS 123. However, appropriate disclosures about the effects on reported net income of the Company's accounting policy with respect to stock-based employee compensation are provided.

In November 2002, the FASB issued Financial Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," ("FIN 45"). FIN 45 requires a guarantor to disclose (a) the nature of the guarantee, including the approximate term of the guarantee, how the guarantee arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments under the guarantee; (c) the carrying amount of the liability, if any, for the guarantor's obligations under the guarantee; and (d) the nature and extent of any recourse provisions or available collateral that would enable the guarantor to recover the amounts paid under the guarantee. FIN 45 also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability at fair value for the obligations it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or conditions occur. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. As the disclosure requirements in FIN 45 are effective for financial statements ending after December 15, 2002, the Company included the new disclosure herein.

FIN 45 also addresses the disclosure requirements regarding product warranties. Instead of disclosing the maximum potential amount of future payments under the product warranty guarantee, a guarantor is required to disclose its accounting policy and methodology used in determining its liability for product warranties, as well as, a tabular reconciliation of the changes in the guarantor's product warranty liability for the reporting period.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

This annual report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to future prospects, developments and business strategies. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will," and similar terms and phrases, including references to assumptions. Such statements are based on current expectations, are inherently uncertain, and are subject to changing assumptions.

Such forward-looking statements include, but are not limited to: (a) estimates of commercial aerospace production and delivery rates, including those of Airbus and Boeing; (b) expectations regarding growth in sales to regional and business aircraft manufacturers, and to the aircraft aftermarket; (c) expectations regarding the growth in the production of military aircraft, helicopters and launch vehicle programs in 2003 and beyond; (d) expectations regarding the recovery of demand for electronics fabrics used in printed wiring boards, as well as future business trends in the electronics fabrics industry;
(e) expectations regarding the demand for soft body armor made of aramid and specialty fabrics; (f) expectations regarding growth in sales of composite materials for

59

wind energy, automotive and other industrial applications; (g) estimates of changes in net sales by market compared to 2002; (h) expectations regarding the Company's equity in the earnings (losses) of joint ventures, as well as joint venture investments and loan guarantees; (i) expectations regarding working capital trends and capital expenditures; (j) the availability and sufficiency of the Senior Secured Credit Facility and other financial resources to fund the Company's worldwide operations in 2003 and beyond and (k) the impact of various market risks, including fluctuations in the interest rates underlying the Company's variable-rate debt, fluctuations in currency exchange rates, fluctuations in commodity prices, and fluctuations in the market price of the Company's common stock.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. Such factors include, but are not limited to, the following: changes in general economic and business conditions; changes in current pricing and cost levels; changes in political, social and economic conditions and local regulations, particularly in Asia and Europe; foreign currency fluctuations; changes in aerospace delivery rates; reductions in sales to any significant customers, particularly Airbus or Boeing; changes in sales mix; changes in government defense procurement budgets; changes in military aerospace programs technology; industry capacity; competition; disruptions of established supply channels; manufacturing capacity constraints; and the availability, terms and deployment of capital.

If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated or projected. In addition to other factors that affect Hexcel's operating results and financial position, neither past financial performance nor the Company's expectations should be considered reliable indicators of future performance. Investors should not use historical trends to anticipate results or trends in future periods. Further, the Company's stock price is subject to volatility. Any of the factors discussed above could have an adverse impact on the Company's stock price. In addition, failure of sales or income in any quarter to meet the investment community's expectations, as well as broader market trends, can have an adverse impact on the Company's stock price. The Company does not undertake an obligation to update its forward-looking statements or risk factors to reflect future events or circumstances.

60

CONSOLIDATED FINANCIAL STATEMENTS

Description                                                                                                    Page
---------------------------------------------------------------------------------------------------------------------
Management Responsibility for Consolidated Financial Statements                                                 62
Report of Independent Accountants                                                                               63
Consolidated Financial Statements Hexcel Corporation and Subsidiaries:
   Consolidated Balance Sheets as of December 31, 2002 and 2001                                                 64
   Consolidated Statements of Operations for each of the three years ended December 31, 2002                    65
   Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Income (Loss)
      for each of the three years ended December 31, 2002                                                       66
   Consolidated Statements of Cash Flows for each of the three years ended December 31, 2002                    67
   Notes to the Consolidated Financial Statements                                                             68-103

Independent Auditors' Report                                                                                   104
Financial Statements BHA Aero Composite Parts Co. Ltd.:
   Balance Sheets as of December 31, 2002 and 2001                                                             105
   Statements of Operations for each of the three years ended December 31, 2002                                106
   Statements of Owners' Equity for each of the three years ended December 31, 2002                            107
   Statements of Cash Flows for each of the three years ended December 31, 2002                                108
   Notes to the Financial Statements                                                                         109-118

Report of Independent Accountants on Financial Statement Schedule                                              119
Schedule of Valuation and Qualifying Accounts                                                                  120

61

MANAGEMENT RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS

Hexcel management has prepared and is responsible for the consolidated financial statements and the related financial data contained in this report. These financial statements, which include estimates, were prepared in accordance with accounting principles generally accepted in the United States of America. Management uses its best judgment to ensure that such statements reflect fairly the consolidated financial position, results of operations and cash flows of the Company.

Hexcel maintains accounting and other control systems which management believes provide reasonable assurance that financial records are reliable for purposes of preparing financial statements, and that assets are safeguarded and accounted for properly. Underlying this concept of reasonable assurance is the premise that the cost of control should not exceed benefits derived from control.

The Audit Committee of the Board of Directors reviews and monitors the financial reports and accounting practices of Hexcel. These reports and practices are reviewed regularly by management and by the Company's independent accountants, PricewaterhouseCoopers LLP, in connection with the audit of the Company's consolidated financial statements. The Audit Committee, composed solely of outside directors, meets periodically, separately and jointly, with management and the independent accountants.

/s/ DAVID E. BERGES
----------------------------------
David E. Berges
CHIEF EXECUTIVE OFFICER


/s/ STEPHEN C. FORSYTH
----------------------------------
Stephen C. Forsyth
CHIEF FINANCIAL OFFICER


/s/ WILLIAM J. FAZIO
----------------------------------
William J. Fazio
CHIEF ACCOUNTING OFFICER

62

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Hexcel Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholders' equity (deficit) and comprehensive income (loss) and of cash flows present fairly, in all material respects, the financial position of Hexcel Corporation and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2002.

/s/ PRICEWATERHOUSECOOPERS LLP
------------------------------

PricewaterhouseCoopers LLP
Stamford, Connecticut
February 28, 2003, except for Notes 2 and 8 which are as of March 19, 2003

63

HEXCEL CORPORATION AND SUBSIDIARIES                                   Unaudited
CONSOLIDATED BALANCE SHEETs                                           Pro Forma
AS OF DECEMBER 31,                                                  (see Note 24)
-----------------------------------------------------------------------------------------------------------------
(IN MILLIONS, EXCEPT PER SHARE DATA)                                        2002            2002             2001
-----------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
  Cash and cash equivalents                                          $      12.6     $       8.2      $      11.6
  Accounts receivable, net                                                 117.3           117.3            140.5
  Inventories, net                                                         113.6           113.6            131.7
  Prepaid expenses and other assets                                          9.2             9.2              4.4
-----------------------------------------------------------------------------------------------------------------
  Total current assets                                                     252.7           248.3            288.2

Net property, plant and equipment                                          309.4           309.4            329.2
Goodwill, net                                                               74.4            74.4             72.4
Investments in affiliated companies                                         34.0            34.0             56.9
Other assets                                                                46.9            42.0             42.7
-----------------------------------------------------------------------------------------------------------------
Total assets                                                         $     717.4     $     708.1      $     789.4
=================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Notes payable and current maturities of capital lease
  obligations                                                       $        6.2     $     621.7      $      17.4
  Accounts payable                                                          54.9            54.9             58.6
  Accrued compensation and benefits                                         37.6            37.6             42.6
  Accrued interest                                                          15.9            19.1             18.8
  Business consolidation and restructuring liabilities                      10.5            10.5             33.4
  Other accrued liabilities                                                 35.3            35.3             33.7
-----------------------------------------------------------------------------------------------------------------
  Total current liabilities                                                160.4           779.1            204.5

Long-term notes payable and capital lease obligations                      512.4               -            668.5
Long-term retirement obligations                                            48.1            48.1             31.3
Other non-current liabilities                                                8.3             8.3             17.7
-----------------------------------------------------------------------------------------------------------------
  Total liabilities                                                        729.2           835.5            922.0
-----------------------------------------------------------------------------------------------------------------

Commitments and contingencies (see Note 16)

Mandatorily redeemable convertible preferred stock,
  125,000 series A shares and 125,000 series B shares
  authorized, issued and outstanding                                        96.4               -                -

Stockholders' equity (deficit):
  Preferred stock, no par value, 20.0 shares of stock
     authorized, no shares issued or outstanding                               -               -                -
  Common stock, $0.01 par value, 100.0 shares of stock
     authorized, shares issued of 39.8 at December 31, 2002
     and 39.4 at December 31, 2001                                           0.4             0.4              0.4
  Additional paid-in capital                                               311.6           288.2            287.7
  Accumulated deficit                                                     (385.7)         (381.5)          (367.9)
  Accumulated other comprehensive loss                                     (21.2)          (21.2)           (39.7)
-----------------------------------------------------------------------------------------------------------------
                                                                           (94.9)         (114.1)          (119.5)
  Less- Treasury stock, at cost, 1.3 shares at December 31, 2002
     and 1.2 shares at December 31, 2001                                   (13.3)          (13.3)           (13.1)
-----------------------------------------------------------------------------------------------------------------
  Total stockholders' equity (deficit)                                    (108.2)         (127.4)          (132.6)
-----------------------------------------------------------------------------------------------------------------

Total liabilities and stockholders' equity (deficit)                $      717.4     $     708.1      $     789.4
=================================================================================================================

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

64

HEXCEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,

(IN MILLIONS, EXCEPT PER SHARE DATA)                                      2002             2001            2000
---------------------------------------------------------------------------------------------------------------
Net sales                                                            $   850.8      $   1,009.4     $   1,055.7

Cost of sales                                                            689.5            818.6           824.3
---------------------------------------------------------------------------------------------------------------
  Gross margin                                                           161.3            190.8           231.4

Selling, general and administrative expenses                              85.9            120.9           123.9
Research and technology expenses                                          14.7             18.6            21.2
Business consolidation and restructuring expenses                          0.5             58.4            10.9
Impairment of goodwill and other purchased intangibles                       -            309.1               -
---------------------------------------------------------------------------------------------------------------
  Operating income (loss)                                                 60.2           (316.2)           75.4

Litigation gain                                                            9.8                -               -
Interest expense                                                         (62.8)           (64.8)          (68.7)
Gain (loss) on early retirement of debt                                    0.5             (2.7)              -
Gain on sale of Bellingham aircraft interiors business                       -                -            68.3
---------------------------------------------------------------------------------------------------------------
  Income (loss) before income taxes                                        7.7           (383.7)           75.0

Provision for income taxes                                                11.3             40.5            26.3
---------------------------------------------------------------------------------------------------------------
  Income (loss) before equity in earnings (losses)                        (3.6)          (424.2)           48.7
  Equity in earnings (losses) of and write-downs of
    an investment in affiliated companies                                (10.0)            (9.5)            5.5
---------------------------------------------------------------------------------------------------------------
  Net income (loss)                                                  $   (13.6)     $    (433.7)    $      54.2
===============================================================================================================

Net income (loss) per share:
  Basic                                                              $   (0.35)     $    (11.54)    $      1.47
  Diluted                                                            $   (0.35)     $    (11.54)    $      1.32

Weighted average shares:
  Basic                                                                   38.4             37.6            36.8
  Diluted                                                                 38.4             37.6            45.7
===============================================================================================================

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

65

HEXCEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE
INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

                                           COMMON STOCK
                                         ------------------   RETAINED     ACCUMULATED
                                                ADDITIONAL    EARNINGS        OTHER                     TOTAL
                                                 PAID-IN    (ACCUMULATED  COMPREHENSIVE  TREASURY    STOCKHOLDERS'    COMPREHENSIVE
(IN MILLIONS)                            PAR     CAPITAL      DEFICIT)    INCOME (LOSS)   SHARES    EQUITY (DEFICIT)  INCOME (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 1, 2000                $  0.4  $    273.6   $   11.6       $    (4.8)   $  (10.7)    $   270.1

 Net income                                                      54.2                                      54.2        $      54.2
 Currency translation adjustment                                                (10.2)                    (10.2)             (10.2)
 Minimum pension obligation                                                      (5.0)                     (5.0)              (5.0)
                                                                                                                       -----------
    Comprehensive income                                                                                               $      39.0
                                                                                                                       ===========
 Activity under stock plans and other                  7.1                                   (0.5)          6.6
--------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2000              $  0.4  $    280.7   $   65.8       $   (20.0)   $  (11.2)    $   315.7

 Net loss                                                      (433.7)                                   (433.7)       $    (433.7)
 Currency translation adjustment                                                (12.1)                    (12.1)             (12.1)
 Net unrealized loss on financial
   instruments                                                                   (5.9)                     (5.9)              (5.9)
 Minimum pension obligation                                                      (1.7)                     (1.7)              (1.7)
                                                                                                                       -----------
    Comprehensive loss                                                                                                 $    (453.4)
                                                                                                                       ===========
 Activity under stock plans and other                  7.0                                   (1.9)          5.1
--------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001              $  0.4  $    287.7   $ (367.9)      $   (39.7)   $  (13.1)    $  (132.6)

 Net loss                                                       (13.6)                                    (13.6)       $     (13.6)
 Currency translation adjustment                                                 19.6                      19.6               19.6
 Net unrealized gain on financial
   instruments                                                                    9.3                       9.3                9.3
 Minimum pension obligation                                                     (10.4)                    (10.4)             (10.4)
                                                                                                                       -----------
    Comprehensive loss                                                                                                 $      (4.9)
                                                                                                                       ===========
 Activity under stock plans and other                  0.5                                   (0.2)          0.3
--------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002              $  0.4  $    288.2   $ (381.5)      $   (21.2)   $  (13.3)    $  (127.4)
====================================================================================================================

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

66

HEXCEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

(IN MILLIONS)                                                              2002             2001              2000
------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                                   $   (13.6)      $   (433.7)        $    54.2
  Reconciliation to net cash provided by operations:
   Depreciation                                                            47.2             50.7              45.6
   Amortization of goodwill and other intangibles assets                      -             12.5              13.1
   Deferred income taxes                                                    1.7             27.6               8.6
   Business consolidation and restructuring expenses                        0.5             58.4              10.9
   Business consolidation and restructuring payments                      (24.3)           (12.0)            (11.8)
   Impairment of goodwill and other purchased intangibles                     -            309.1                 -
   Loss (gain) on early retirement of debt                                 (0.5)             0.7                 -
   Gain on sale of Bellingham aircraft interiors business                     -                -             (68.3)
   Gain on curtailment of pension plan                                        -                -              (5.1)
   Equity in (earnings) losses of and write-downs of
     an investment in affiliated companies                                 10.0              9.5              (5.5)
   Changes in assets and liabilities:
     Decrease (increase) in accounts receivable                            35.6              4.6              (7.7)
     Decrease (increase) in inventories                                    25.8             20.6             (17.0)
     Decrease (increase) in prepaid expenses and other assets              (1.7)             1.1              (0.4)
     Increase (decrease) in accounts payable and accrued
       liabilities                                                        (15.7)           (19.2)             10.7
     Changes in other non-current assets and long-term liabilities          0.9              5.1               5.7
------------------------------------------------------------------------------------------------------------------
   Net cash provided by operating activities                               65.9             35.0              33.0
------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                                                    (14.9)           (38.8)            (39.6)
  Proceeds from sale of an ownership in an affiliated company              10.0                -                 -
  Proceeds from sale of Bellingham aircraft interiors business                -                -             113.3
  Proceeds from sale of other assets                                        1.5                -               3.4
  Dividends from (investments in) affiliated companies                      1.6              0.8              (8.3)
  Other                                                                    (0.5)            (0.3)                -
------------------------------------------------------------------------------------------------------------------
   Net cash provided by (used for) investing activities                    (2.3)           (38.3)             68.8
------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds (repayments) of credit facilities, net                         (57.4)            24.6              29.5
  Proceeds from issuance of long-term debt                                    -             98.5                 -
  Repayments of long-term debt and capital lease obligations               (9.9)          (110.6)           (126.0)
  Debt issuance costs                                                         -             (3.5)             (0.9)
  Activity under stock plans and other                                        -             (0.4)              2.4
------------------------------------------------------------------------------------------------------------------
   Net cash provided by (used for) financing activities                   (67.3)             8.6             (95.0)
------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents                0.3              1.2              (1.9)
------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                       (3.4)             6.5               4.9
Cash and cash equivalents at beginning of year                             11.6              5.1               0.2
------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                              $     8.2       $     11.6         $     5.1
==================================================================================================================

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of Hexcel Corporation and its subsidiaries ("Hexcel" or "the Company"), after elimination of intercompany transactions and accounts. Investments in affiliated companies in which the Company's interests are generally between 20% and 50%, and where the Company does not control the financial and operating decisions, are accounted for using the equity method of accounting.

Hexcel is a leading producer of advanced structural materials. The Company develops, manufactures and markets lightweight, high-performance reinforcement products, composite materials and composite structures for use in commercial aerospace, space and defense, electronics, and industrial applications. The Company's materials are used in a wide variety of end products, such as commercial and military aircraft, space launch vehicles and satellites, printed wiring boards, computers, cellular telephones, soft body armor, high-speed trains and ferries, cars and trucks, wind turbine blades, reinforcements for bridges and other structures, window blinds, skis, snowboards and other recreational equipment.

The Company serves international markets through manufacturing facilities and sales offices located in the United States and Europe, and through sales offices located in Asia, Australia and South America. The Company is also an investor in six joint ventures; three of which manufacture and market reinforcement products in Europe, Asia and the United States; one manufactures and markets composite materials in Japan; and two manufacture composite structures in Asia.

As discussed in Note 22, Hexcel sold its Bellingham aircraft interiors business on April 26, 2000. As a result of this transaction, the statements of operations, of stockholders' equity (deficit) and comprehensive income (loss), and of cash flows include the financial position, results of operations and cash flows of the Bellingham aircraft interiors business as of such dates and for such periods that the business was owned.

USE OF ESTIMATES

The preparation of the consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Estimates are used for, but not limited to, allowances for doubtful accounts, inventory allowances, product warranty, depreciation and amortization, business consolidation and restructuring costs, impairment of long-lived assets, employee benefits, taxes, and contingencies. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. These investments consist primarily of Eurodollar time deposits and are stated at cost, which approximates fair value.

INVENTORIES

Inventories are valued at the lower of cost or market, with cost determined using the first-in, first-out and average cost methods. The Company provides allowances for obsolete and unmarketable inventory. As of December 31, 2002 and 2001, inventory allowances were $21.3 million and $25.1 million, respectively.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost and depreciated over estimated useful lives using accelerated and straight-line methods. The estimated useful lives range from 10 to 40 years for buildings and improvements and from 3 to 20 years for machinery and equipment. Repairs and

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maintenance are expensed as incurred, while major replacements and betterments are capitalized and depreciated over the estimated life of the related asset.

GOODWILL AND OTHER PURCHASED INTANGIBLES

Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets of an acquired business. Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No.142, "Goodwill and Other Intangible Assets," ("FAS 142"). Prior to adopting FAS 142, goodwill was amortized on a straight-line basis over estimated economic lives, ranging from 15 to 40 years. As a result of adopting FAS 142, goodwill is no longer amortized, but instead is tested for impairment at the reporting unit level at least annually and whenever events or changes in circumstances indicate that goodwill might be impaired. A reporting unit is the lowest level of an entity that is a business and can be distinguished from other activities, operations, and assets of the entity. If, during the annual impairment review, the book value of the reporting unit exceeds the fair value, the implied fair value of the reporting unit's goodwill is compared with the carrying amount of the unit's goodwill. If the carrying amount exceeds the implied fair value, goodwill is written down to its implied value. FAS 142 requires management to estimate the fair value of each reporting unit, as well as the fair value of the assets and liabilities of each reporting unit, other than goodwill. The implied fair value of goodwill is determined as the difference between the fair value of a reporting unit, taken as a whole, and the fair value of the assets and liabilities of such reporting unit. No impact to the Company's consolidated financial statements was identified upon completion of the transitional impairment test required by FAS 142. The Company's annual impairment testing date will be during the fourth quarter of each year. In 2001, the Company recognized an impairment charge of $309.1 million on goodwill and other purchased intangibles acquired through previous acquisitions (see Note 3).

IMPAIRMENT OF LONG-LIVED ASSETS

Other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The assessment of possible impairment is based on the Company's ability to recover the carrying value of the assets from the estimated undiscounted future net cash flows, before interest and taxes, of the related operations. If these cash flows are less than the carrying value of such assets, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires estimates of these cash flows and fair value. The calculation of fair value may be determined based either on discounted cash flows or third party appraised values depending on the nature of the asset.

INVESTMENTS

The Company has investments in affiliated companies with equity interests ranging from 25% to 50%. Hexcel does not control the financial and operating decisions of these companies and, therefore, accounts for its share of their operating performance using the equity method of accounting. Future adverse changes in market conditions or poor operating results of the underlying investments could result in losses and the inability to recover the carrying value of the investments, thereby possibly requiring an impairment charge. The Company reviews its investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable. The Company records an investment impairment charge when the decline in value is considered to be other than temporary. The Company recorded an impairment of $4.0 million in 2002 and $7.8 million in 2001, relating to its investments in Asahi-Schwebel Co. Ltd. and Interglas Technologies AG, respectively (see Note 7).

DEBT FINANCING COSTS

Debt financing costs are deferred and amortized to interest expense over the life of the related debt, which ranges from 7 to 10 years. At December 31, 2002 and 2001, deferred debt financing costs were $11.7 million and $15.5 million, net of accumulated amortization of $14.5 million and $10.7 million, respectively, and are included in "other assets" in the consolidated balance sheets.

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STOCK-BASED COMPENSATION

Stock-based compensation is accounted for under the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Accordingly, compensation expense is not recognized when options are granted at the fair market value on the date of grant. However, the Company does recognize compensation expense for restricted stock and similar stock-based plans over the defined vesting periods. As of December 31, 2002, the Company had several on-going stock-based compensation plans, including stock options, restricted stock and various forms of restricted stock unit awards, which are described further in Note 13.

The Company has elected to continue following APB 25 to account for its stock-based compensation plans. The effects on net income (loss) and net income
(loss) per share as if the Company had applied the fair value method of accounting for stock-based compensation in accordance with Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123") for the years ended December 31, 2002, 2001 and 2000 are as follows:

(IN MILLIONS, EXCEPT PER SHARE DATA)                                         2002             2001            2000
------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS):
  Net income (loss), as reported                                        $   (13.6)      $   (433.7)      $    54.2
  ADD: Stock-based compensation expense included in
    reported net income, net of tax                                           0.8              2.0             4.5
  DEDUCT:  Stock-based compensation expense determined
    under fair value based method for all awards, net of tax                 (6.0)            (5.9)           (9.8)
------------------------------------------------------------------------------------------------------------------
  Pro forma net income (loss)                                           $   (18.8)      $   (437.6)      $    48.9

NET INCOME (LOSS) PER SHARE: Basic net income (loss) per share:
    As reported                                                         $   (0.35)      $   (11.54)      $    1.47
    Pro forma                                                           $   (0.49)      $   (11.64)      $    1.33

  Diluted net income (loss) per share:
    As reported                                                         $   (0.35)      $   (11.54)      $    1.32
    Pro forma                                                           $   (0.49)      $   (11.64)      $    1.21
------------------------------------------------------------------------------------------------------------------

CURRENCY TRANSLATION

The assets and liabilities of international subsidiaries are translated into U.S. dollars at year-end exchange rates, and revenues and expenses are translated at average exchange rates during the year. Cumulative currency translation adjustments are included in "accumulated other comprehensive loss" in the stockholders' equity section of the consolidated balance sheets. Realized gains and losses from currency exchange transactions are recorded in "selling, general and administrative expenses" in the consolidated statements of operations and were not material to Hexcel's consolidated results of operations in 2002, 2001 or 2000.

REVENUE RECOGNITION

Product sales are recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured, which is generally at the time of shipment. Revenues derived from design, installation and support services are recognized when the service is provided, or alternatively, when the product to which the service relates is delivered to the customer. The Company accrues for sales returns and allowances based on its historical experience at the time of sale.

PRODUCT WARRANTY

The Company provides for an estimated amount of product warranty at the time revenue is recognized. This estimated amount is provided by product and based on historical warranty experience.

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SHIPPING AND HANDLING COSTS

The Company recognizes shipping and handling costs as incurred as a component of "cost of sales" in the consolidated statements of operations. Shipping or handling costs billed to the customer for reimbursement purposes were not significant.

RESEARCH AND TECHNOLOGY

Research and technology costs are expensed as incurred.

INCOME TAXES

The Company provides for income taxes using the liability approach prescribed by the Financial Accounting Standards Board ("FASB") in Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). Under the liability approach, deferred income tax assets and liabilities reflect tax carryforwards and the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets require a valuation allowance when it is more likely than not that some portion of the deferred tax assets may not be realized. The realization of deferred tax assets is dependent upon the timing and magnitude of future taxable income prior to the expiration of the deferred tax assets' attributes. When events and circumstances so dictate, the Company evaluates the realizability of its deferred tax assets and the need for a valuation allowance by forecasting future taxable income. In 2001, the Company established a full valuation allowance on its U.S. deferred tax assets. The amount of the deferred tax assets considered realizable, however, could change if estimates of future U.S. taxable income during the carry-forward period improve (see Note 12).

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject Hexcel to significant concentrations of credit risk consist primarily of trade accounts receivable. The Company's sales to two customers and their related subcontractors accounted for approximately 37%, 39% and 33% of the Company's 2002, 2001 and 2000 net sales, respectively. The Company performs ongoing credit evaluations of its customers' financial condition but generally does not require collateral or other security to support customer receivables. The Company establishes an allowance for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends and other financial information. As of December 31, 2002 and 2001, the allowance for doubtful accounts was $5.1 million and $8.5 million, respectively. Bad debt expense was a net credit of $(0.9) million in 2002, $3.4 million in 2001 and $0.7 million in 2000.

DERIVATIVE FINANCIAL INSTRUMENTS

Hexcel uses various financial instruments, including foreign currency forward exchange contracts and interest rate cap agreements, to manage its risk to market fluctuations by generating cash flows that offset, in relation to their amount and timing, the cash flows of certain foreign currency denominated transactions or underlying debt instruments. The Company designates its foreign currency forward exchange contracts as cash flow hedges against forecasted foreign currency denominated transactions and reports the effective portions of changes in fair value of the instruments in "other comprehensive income" until the underlying hedged transactions affect income. The Company designates its interest rate cap agreements as cash flow hedges against specific debt instruments and recognizes interest differentials as adjustments to interest expense as the differentials may occur. The most recent effective interest rate cap agreement expired on October 29, 2002. The Company does not use financial instruments for trading or speculative purposes.

Effective January 1, 2001, Hexcel adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"), and its corresponding amendments under Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," ("FAS 138"). FAS 133 requires an entity to recognize all derivatives as either assets or liabilities on its balance sheet and measure those instruments at fair value. Gains or losses resulting from changes in the fair values of those derivatives are accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The adoption of FAS 133 and FAS 138 did not have a material effect on the Company's consolidated financial position or results of operations (see Note 15).

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SELF-INSURANCE

Hexcel is self-insured up to specific levels for certain liabilities. Accruals are established based on actuarial assumptions and historical claim experience, and include estimated amounts for incurred but not reported claims. Effective January 1, 2002, Hexcel expanded its self-insured medical program to cover the majority of U.S. non-union employees, in order to more effectively manage its medical costs. The program includes "stop loss" insurance, which caps Hexcel's risk at $250,000 per individual per annum. By its nature, as compared to traditional insurance plans, self-insured medical coverage may increase the monthly volatility in cash flows of the Company.

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" ("FAS 145"). Among other matters, FAS 145 rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt," which required all gains and losses from extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. As a result, the criteria in Accounting Principles Board Opinion 30 will now be used to classify those gains and losses. The Company adopted FAS 145 as of January 1, 2002. As a result, a $2.7 million extraordinary loss on early retirement of debt recorded in 2001 was reclassified as a separate line item below operating income in the consolidated statements of operations (see Note 8).

In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("FAS 146"). FAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured, initially at fair value, only when the liability is incurred; therefore, nullifying Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)" ("EITF 94-3") that required a liability for an exit cost to be recognized at the date of an entity's commitment to an exit plan. This change in accounting would be expected to result in a delayed recognition of certain types of costs, especially facility closure costs. The provisions of FAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002. Since FAS 146 is effective only for new exit or disposal activities, adoption of this standard will not affect amounts currently reported in the Company's consolidated financial statements. However, the adoption of FAS 146 could affect the types and timing of costs included in any future business consolidation and restructuring programs. The Company adopted FAS 146 as of January 1, 2003.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," ("FAS 148"). FAS 148 amends FAS 123 and Accounting Principles Board Opinion No. 28, "Interim Financial Reporting" to present alternative methods of transition for an entity that voluntarily adopts the fair value based method of accounting for stock-based employee compensation, and provides modifications to the disclosure provisions to require prominent disclosure about the effects on reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation in quarterly and annual financial statements. At this time, the Company has not voluntarily adopted the fair value method of accounting under FAS 123. However, appropriate disclosures about the effects on reported net income of the Company's accounting policy with respect to stock-based employee compensation are provided above.

In November 2002, the FASB issued Financial Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," ("FIN 45"). FIN 45 requires a guarantor to disclose (a) the nature of the guarantee, including the approximate term of the guarantee, how the guarantee arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments under the guarantee; (c) the carrying amount of the liability, if any, for the guarantor's obligations under the guarantee; and (d) the nature and extent of any recourse provisions or available collateral that would enable the guarantor to recover the amounts paid under the guarantee. FIN 45 also clarifies that a guarantor is required to recognize, at the inception of a

72

guarantee, a liability at fair value for the obligations it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or conditions occur. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. As the disclosure requirements in FIN 45 are effective for financial statements with periods ending after December 15, 2002, the Company has included the new disclosures herein.

FIN 45 also addresses the disclosure requirements regarding product warranties. Instead of disclosing the maximum potential amount of future payments under the product warranty guarantee, a guarantor is required to disclose its accounting policy and methodology used in determining its liability for product warranties, as well as, a tabular reconciliation of the changes in the guarantor's product warranty liability for the reporting period (see Note 16).

RECLASSIFICATIONS

Certain prior year amounts in the accompanying consolidated financial statements and related notes have been reclassified to conform to the 2002 presentation.

NOTE 2 - REFINANCING OF CAPITAL STRUCTURE

On March 19, 2003, Hexcel successfully completed the refinancing of its capital structure through the simultaneous closings of three financing transactions: the completion of its previously announced sale of mandatorily redeemable convertible preferred stock for $125.0 million, the issuance of $125.0 million of 9-7/8% senior secured notes, due 2008, and the establishment of a new $115.0 million senior secured credit facility, also due 2008.

The proceeds from the sale of the convertible preferred stock have been used to provide for the redemption of $46.9 million principal amount of the Company's 7% convertible subordinated notes, due 2003, and to repay outstanding borrowings under the existing senior credit facility. Proceeds to be used to redeem the 7% convertible subordinated notes have been remitted to US Bank Trust, trustee for the notes, for the express purpose of retiring the outstanding principal balance of the notes, plus accrued interest.

The remaining advances under the existing senior credit facility, after the application of a portion of the equity proceeds, have been repaid with the proceeds from the issuance of the Company's new 9-7/8% senior secured notes and a new senior secured credit facility.

MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

On March 19, 2003, Hexcel issued 125,000 shares of a series A convertible preferred stock and 125,000 shares of a series B convertible preferred stock for $125.0 million in cash. Upon issuance, the total number of Hexcel's outstanding common shares including potential shares issuable upon conversion of both of the new series of convertible preferred stocks increased from approximately 38.6 million shares to approximately 88.4 million shares. In addition, common shares authorized for issuance increased from 100.0 million shares to 200.0 million shares.

Hexcel issued 77,875 shares of series A convertible preferred stock and 77,875 shares of series B convertible preferred stock to affiliates of Berkshire Partners LLC and Greenbriar Equity Group LLC (the "Berkshire/Greenbriar Investors") for a cash payment of approximately $77.9 million. The series A and the series B convertible preferred stocks are mandatorily redeemable on January 22, 2010 for cash or for common stock at the Company's election. Both preferred stocks are convertible, at the option of the holder, into common stock at a conversion price of $3.00 per share, and will automatically be converted into common stock if the closing trading price of the common stock for any period of 60 consecutive trading days ending after March 19, 2006 exceeds $9.00 per share. The

73

preferred stockholders are entitled to vote on an as converted basis with Hexcel's common stockholders. The series A preferred stock accrues dividends at a rate of 6% per annum following the third anniversary of the issuance. Dividends may be paid in cash or added to the accrued value of the preferred stock, at Hexcel's option. The series B preferred stock does not accrue dividends.

Hexcel has separately issued 47,125 shares of series A convertible preferred stock and 47,125 shares of series B convertible preferred stock to investment funds controlled by affiliates of The Goldman Sachs Group, Inc. (the "Goldman Sachs Investors") for a cash payment of approximately $47.1 million.

In conjunction with the aforementioned transactions, Hexcel and the Berkshire/Greenbriar Investors entered into a stockholders agreement, which gives the Berkshire/Greenbriar Investors the right to nominate up to two directors (of a total of ten) to Hexcel's board of directors and certain other rights. The Goldman Sachs Investors will continue to have the right to nominate up to three directors under the governance agreement entered into at the time of their investment in Hexcel in 2000. The stockholders agreement and the amended Goldman Sachs Investors governance agreement require that the approval of at least six directors, including at least two directors not nominated by the Berkshire/Greenbriar Investors or the Goldman Sachs Investors, be obtained for board actions generally. The stockholders agreement also prohibits the purchase of voting securities in excess of 39.5% of Hexcel's outstanding voting securities unless approved by Hexcel's board. The Berkshire/Greenbriar Investors and the Goldman Sachs Investors have agreed to an 18-month lock up on the securities being issued, except for certain registered offerings.

SENIOR SECURED NOTES, DUE 2008

The Company also issued, through a private placement under Rule 144A, $125.0 million of 9 7/8% senior secured notes at a price of 98.95% of face value. The senior secured notes, due October 1, 2008, are secured by a first priority security interest in substantially all of Hexcel's and its domestic subsidiaries' property, plant and equipment, intangibles, intercompany notes and other obligations receivable, and 100% of the outstanding voting stock of certain of Hexcel's domestic subsidiaries. In addition, the senior secured notes are secured by a pledge of 65% of the stock of Hexcel's French and UK first-tier holding companies. This pledge of foreign stock is on an equal basis with a substantially identical pledge of such stock given to secure the obligations under the Company's new senior secured credit facility, described below. The senior secured notes are also guaranteed by Hexcel's material domestic subsidiaries. Hexcel has the ability to incur additional debt that would be secured on an equal basis by the collateral securing the senior secured notes. The amount of additional secured debt that may be incurred is currently limited to $10.0 million, but may increase over time based on a formula relating to the total net book value of Hexcel's domestic property, plant and equipment.

The Company will pay interest on the notes on April 1st and October 1st of each year. The first payment will be made on October 1, 2003. The Company will have the option to redeem all or a portion of the notes at any time during the one-year period beginning April 1, 2006 at 104.938% of principal plus accrued and unpaid interest. This percentage decreases to 102.469% for the one-year period beginning April 1, 2007, and to 100.0% for the period beginning April 1, 2008. In addition, the Company may use the net proceeds from one or more equity offerings at any time prior to April 1, 2006 to redeem up to 35% of the aggregate principal amount of the notes at 109.875% of the principal amount, plus accrued and unpaid interest.

The indenture governing the senior secured notes contains many other terms and conditions, including limitations with respect to asset sales, incurrence of debt, granting of liens, the making of restricted payments and entering into transactions with affiliates.

Hexcel has agreed, under a registration rights agreement, to offer to all noteholders the opportunity to exchange their notes for new notes that are substantially identical to the existing notes except that the new notes will be registered with the Securities and Exchange Commission ("SEC") and will not have any restrictions on transfer. In the event that Hexcel cannot affect such an exchange, Hexcel will be required to file a shelf registration statement with the SEC to permit the noteholders to resell their notes generally without restriction.

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An affiliate of Goldman Sachs Investors, a related party, performed underwriting services in connection with the Company's private placement offering of senior secured notes, and received $2.3 million for such services rendered.

SENIOR SECURED CREDIT FACILITY

Also on March 19, 2003, Hexcel entered into a $115.0 million asset-backed senior secured credit facility with a new syndicate of lenders led by Fleet Capital Corporation as agent. The credit facility matures on March 31, 2008. Borrowers under the credit facility include, in addition to Hexcel Corporation, Hexcel's operating subsidiaries in the UK, Austria and Germany. The credit facility provides for borrowings of U.S. dollars, Pound Sterling and Euro currencies, including the issuance of letters of credit, with the amount available to each borrower dependent on the borrowing base of that borrower and its subsidiaries. For Hexcel Corporation and the UK borrower, the borrowing base is determined by an agreed percentage of eligible accounts receivable and eligible inventory, subject to certain reserves. The borrowing base of each of the Austrian and German borrowers is based on an agreed percentage of eligible accounts receivable, subject to certain reserves. In addition, the UK, Austrian and German borrowers have facility sublimits of $12.5 million, $7.5 million and $5.0 million, respectively. Borrowings under the new facility bear interest at a floating rate based on either the agent's defined "prime rate" plus a margin that can vary from 0.75% to 3.25% or LIBOR plus a margin that can vary from 2.25% to 3.25%. The margin in effect for a borrowing at any given time depends on the Company's fixed charge ratio and the currency denomination of such borrowing. The credit facility also provides for the payment of customary fees and expenses.

All obligations under the credit facility are secured by a first priority security interest in accounts receivable, inventory and cash and cash equivalents of Hexcel Corporation and its material domestic subsidiaries. In addition, all obligations under the credit facility are secured by a pledge of 65% of the stock of Hexcel's French and UK first-tier holding companies. This pledge of foreign stock is on an equal basis with a substantially identical pledge of such stock given to secure the obligations under the senior secured notes. The obligations of the UK borrower are secured by the accounts receivable, inventory, and cash and cash equivalents of the UK borrower. The obligations of the Austrian and German borrowers are secured by the accounts receivable of the Austrian and German borrowers, respectively.

Hexcel is required to maintain various financial ratios throughout the term of the credit facility. These financial covenants set maximum values for the Company's leverage (the ratios of total and senior debt to EBITDA), fixed charge coverage (the ratio of EBITDA, less capital expenditures and cash taxes, plus cash dividends, to the sum of cash interest and scheduled debt amortization), and capital expenditures (not to exceed specified annual expenditures). The credit facility also contains limitations on, among other things, incurring debt, granting liens, making investments, making restricted payments, entering into transactions with affiliates and prepaying subordinated debt. The credit facility also contains other customary terms relating to, among other things, representations and warranties, additional covenants and events of default.

On March 19, 2003, the Company borrowed $13.0 million and issued letters of credit totaling approximately $25.8 million under the new senior secured credit facility.

CLASSIFICATION OF DEBT AND CAPITAL LEASE OBLIGATIONS AS OF DECEMBER 31, 2002

As of December 31, 2002, the Company had a scheduled debt obligation due August 1, 2003, which, if made, would cause the Company to violate one or more financial covenants in the Company's existing debt agreements. The Company also required an amendment of its existing senior credit facility before the end of the first quarter of 2003 to maintain compliance with the financial covenants under that facility. As the anticipated refinancing of the Company's capital structure was not completed as of February 28, 2003 (the 2002 financial statement issuance date) and the Company had not obtained an amendment of the aforementioned financial covenants, all debt and capital lease obligations had been classified as current at December 31, 2002.

As a result of the March 19, 2003 refinancing transactions, the uncertainties surrounding the Company's ability to meet its scheduled 2003 debt maturities and comply with its debt covenants have been mitigated. Management believes the Company will comply with the new debt covenants and has

75

adequate liquidity available to finance operations beyond December 31, 2003. Also as a result of the refinancing transactions, substantially all of the Company's debt will be reclassified to long-term at March 31, 2003 reflecting the new scheduled debt maturities. Refer to Note 24, "Subsequent Event - Pro Forma Consolidated Balance Sheet (Unaudited)."

NOTE 3 - GOODWILL AND OTHER PURCHASED INTANGIBLES

Upon the Company's adoption of FAS 142 as of January 1, 2002, amortization of goodwill ceased. Although no amortization expense was recognized in 2002, the consolidated statements of operations include amortization expense of $12.5 million in 2001 and $13.1 million in 2000.

Net income (loss) and net income (loss) per share for the years ended December 31, 2002, 2001 and 2000, adjusted to exclude amortization expense, net of tax, are as follows:

(IN MILLIONS)                                                               2002             2001            2000
-----------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS):
   Net income (loss)                                                $     (13.6)    $     (433.7)      $     54.2
   Goodwill amortization, net of tax                                          -             11.2              8.5
-----------------------------------------------------------------------------------------------------------------
Adjusted net income (loss)                                          $     (13.6)    $     (422.5)      $     62.7
-----------------------------------------------------------------------------------------------------------------

BASIC NET INCOME (LOSS) PER SHARE:
   Net income (loss)                                                $     (0.35)    $     (11.54)      $     1.47
   Goodwill amortization, net of tax                                          -             0.30             0.23
-----------------------------------------------------------------------------------------------------------------
Adjusted basic net income (loss) per share                          $     (0.35)    $     (11.24)      $     1.70
-----------------------------------------------------------------------------------------------------------------

DILUTED NET INCOME (LOSS) PER SHARE:
   Net income (loss)                                                $     (0.35)    $     (11.54)      $     1.32
   Goodwill amortization, net of tax                                          -             0.30             0.19
-----------------------------------------------------------------------------------------------------------------
Adjusted diluted net income (loss) per share                        $     (0.35)    $     (11.24)      $     1.51
=================================================================================================================

The gross carrying amount and accumulated amortization of goodwill, by the Company's reportable segments, as of December 31, 2002 and 2001, are as follows:

                                   DECEMBER 31, 2002                                DECEMBER 31, 2001
                      ---------------------------------------------     ------------------------------------------
                          GROSS                                             GROSS
                         CARRYING       ACCUMULATED                       CARRYING       ACCUMULATED
(IN MILLIONS)             AMOUNT        AMORTIZATION       NET             AMOUNT        AMORTIZATION       NET
------------------------------------------------------------------------------------------------------------------
Reinforcements          $   69.9          $   29.8        $  40.1        $    69.6        $   29.7        $   39.9
Composites                  31.1              13.4           17.7             27.9            12.0            15.9
Structures                  23.5               6.9           16.6             23.5             6.9            16.6
------------------------------------------------------------------------------------------------------------------
Goodwill                $  124.5          $   50.1        $  74.4        $   121.0        $   48.6        $   72.4
==================================================================================================================

Changes in the net carrying amount of goodwill for the years ended December 31, 2002, 2001 and 2000, by reportable segment, are as follows:

(IN MILLIONS)                                       REINFORCEMENTS       COMPOSITES      STRUCTURES       TOTAL
------------------------------------------------------------------------------------------------------------------
BALANCE AS OF JANUARY 1, 2000                        $    350.3          $    36.9       $    24.0      $    411.2
Amortization of goodwill and other
   purchased intangibles                                   (9.1)              (2.7)           (1.3)          (13.1)
Sale of Bellingham aircraft interiors business                -                  -            (4.9)           (4.9)
Currency translation adjustment and other                     -               (1.5)              -            (1.5)
------------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2000                      $    341.2          $    32.7       $    17.8      $    391.7
Amortization of goodwill and other
   purchased intangibles                                   (9.1)              (2.2)           (1.2)          (12.5)
Impairment of goodwill and other
   purchased intangibles                                 (292.1)             (17.0)              -          (309.1)
Acquired goodwill                                             -                2.9               -             2.9
Currency translation adjustment                            (0.1)              (0.5)              -            (0.6)
------------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2001                      $     39.9          $    15.9       $    16.6      $     72.4
Currency translation adjustment                             0.2                1.8               -             2.0
==================================================================================================================
BALANCE AS OF DECEMBER 31, 2002                      $     40.1          $    17.7       $    16.6      $     74.4
==================================================================================================================

As of December 31, 2002 and 2001, other purchased intangibles had no carrying value.

76

IMPAIRMENT OF GOODWILL AND OTHER PURCHASED INTANGIBLES

During the fourth quarter of 2001, the Company reviewed its long-lived assets under FASB Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," particularly goodwill and other purchased intangibles acquired in recent years, for impairment. The review was undertaken in response to changes in market conditions and the Company's revised business outlook resulting from a sharp decline in demand for the Company's woven glass fabrics, primarily in the electronics market, and the announced reductions in commercial airline production following the tragic events of September 11, 2001. The Company also revised its forecasts of revenue growth for its acquired satellite business due to the continuing slow down in commercial satellite launches following the financial failure of a number of satellite based telecommunication projects and the postponement of others. These adverse changes in market conditions led to the lowering of revenue forecasts associated with certain businesses in the Reinforcements and Composites segments.

Based on this review, the Company determined that the long-lived assets, including goodwill, of the fabrics business acquired from Clark-Schwebel in 1998 and the satellite business acquired from Fiberite in 1997 were not fully recoverable. The Company recorded non-cash impairment charges of $292.1 million and $17.0 million related to the goodwill and other purchased intangibles associated with the Clark-Schwebel and Fiberite acquisitions, respectively. The amounts of the impairment charges were calculated as the excess of the carrying value of the assets over their fair values. Fair values were determined using discounted future cash flow models, market valuations and third party appraisals, where appropriate. There were no tax benefits recognized on the impairments because of limitations on the Company's ability to realize the tax benefits.

NOTE 4 - BUSINESS CONSOLIDATION AND RESTRUCTURING PROGRAMS

The aggregate business consolidation and restructuring activities for the three years ended December 31, 2002, consisted of the following:

                                                                       EMPLOYEE       FACILITY &
(IN MILLIONS)                                                          SEVERANCE       EQUIPMENT          TOTAL
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF JANUARY 1, 2000                                         $     3.5       $     0.6         $     4.1
Business consolidation expenses:
    Current period expenses                                                 3.7            10.6              14.3
    Reversal of 1999 business consolidation expenses                       (0.3)           (3.1)             (3.4)
-----------------------------------------------------------------------------------------------------------------
  Net business consolidation expenses                                       3.4             7.5              10.9
Cash expenditures                                                          (3.9)           (7.9)            (11.8)
Non-cash items:
    Reversal of 1999 business consolidation expenses                          -             3.1               3.1
    Non-cash usage, including asset write-downs                            (0.6)           (3.0)             (3.6)
-----------------------------------------------------------------------------------------------------------------
  Total non-cash items                                                     (0.6)            0.1              (0.5)
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2000                                       $     2.4       $     0.3         $     2.7
Business consolidation and restructuring expenses                          34.5            23.9              58.4
Cash expenditures                                                          (6.4)           (5.6)            (12.0)
Non-cash usage, including asset write-downs                                   -           (15.7)            (15.7)
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2001                                       $    30.5       $     2.9         $    33.4
Business consolidation and restructuring expenses
    Current period expenses                                                   -             2.8               2.8
    Reversal of 1999 business consolidation expenses                          -            (0.5)             (0.5)
    Change in estimated expenses                                           (2.9)            1.1              (1.8)
-----------------------------------------------------------------------------------------------------------------
  Net business consolidation and restructuring expenses                    (2.9)            3.4               0.5
Cash expenditures                                                         (20.5)           (3.8)            (24.3)
Currency translation adjustment                                             0.9               -               0.9
Non-cash items:
    Reversal of 1999 business consolidation expenses                          -             0.5               0.5
    Non-cash usage, including asset write-downs                               -            (0.5)             (0.5)
-----------------------------------------------------------------------------------------------------------------
  Total non-cash items                                                        -               -                 -
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2002                                       $     8.0       $     2.5         $    10.5
=================================================================================================================

77

NOVEMBER 2001 PROGRAM

In November 2001, the Company announced a program to restructure its business operations in accordance with a revised business outlook for build rate reductions in commercial aircraft production, the continued depressed business conditions in the electronics market and the weakness in the general economy. The program targeted a 20% reduction in cash fixed costs, or $60.0 million, compared to previous spending rates and included company-wide reductions in managerial, professional, indirect manufacturing and administrative employees along with organizational rationalization. In connection with the program, the Company recognized charges of $47.9 million in the fourth quarter of 2001. During 2002, the Company continued the implementation of this program in 2002, reducing its workforce, since announcement, by approximately 25% to 4,245 employees.

In 2002, the Company recognized a net change in estimated business consolidation and restructuring expenses related to this program of $0.7 million. This resulted from a $1.8 million reduction of previously accrued liabilities as employee severance and other benefit costs were lower than previously expected, offset in part, by a $1.1 million increase in restructuring liabilities for facility lease termination costs. An additional $1.2 million was expensed as incurred in 2002.

Business consolidation and restructuring activities for this program consisted of the following:

                                                                       EMPLOYEE       FACILITY &
(IN MILLIONS)                                                         SEVERANCE       EQUIPMENT           TOTAL
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2000                                       $       -       $       -         $       -
Business consolidation and restructuring expenses                          30.8            17.1              47.9
Cash expenditures                                                          (3.2)              -              (3.2)
Non-cash usage, including asset write-downs                                   -           (14.3)            (14.3)
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2001                                       $    27.6       $     2.8         $    30.4
Business consolidation and restructuring expenses
    Current period expenses                                                   -             1.2               1.2
    Change in estimated expenses                                           (1.8)            1.1              (0.7)
-----------------------------------------------------------------------------------------------------------------
  Net business consolidation and restructuring expenses                    (1.8)            2.3               0.5
Cash expenditures                                                         (18.9)           (2.1)            (21.0)
Non-cash usage, including asset write-downs                                   -            (0.5)             (0.5)
Currency translation adjustment                                             0.9               -               0.9
=================================================================================================================
BALANCE AS OF DECEMBER 31, 2002                                       $     7.8       $     2.5         $    10.3
=================================================================================================================

JULY 2001 PROGRAM

As a result of the weakness in the electronics market, the Company initiated cost reduction actions in July 2001. These actions incorporated steps to furlough employees, idle manufacturing facilities and cut non-essential expenditures, by effecting a reduction in the work force of approximately 275 employees primarily in the Reinforcements and Composites business segments. In connection with the program, the Company recognized a charge of $3.9 million in 2001. During 2002, the Company reviewed its remaining liability under the program and recognized a change in estimated business consolidation and restructuring expenses of $0.6 million, as employee severance and other benefit costs were lower than previously expected.

Business consolidation and restructuring activities for this program consisted of the following:

                                                                      EMPLOYEE        FACILITY &
(IN MILLIONS)                                                         SEVERANCE       EQUIPMENT           TOTAL
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2000                                       $       -       $       -         $       -
Business consolidation and restructuring expenses                           3.6             0.3               3.9
Cash expenditures                                                          (2.1)           (0.2)             (2.3)
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2001                                       $     1.5       $     0.1         $     1.6
Change in estimated expenses                                               (0.6)              -              (0.6)
Cash expenditures                                                          (0.9)           (0.1)             (1.0)
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2002                                       $       -       $       -         $       -
=================================================================================================================

78

DECEMBER 1998 AND SEPTEMBER 1999 PROGRAMS

As a result of several substantial business acquisitions, the Company initiated business consolidation programs in December 1998 and September 1999. The primary purpose of these programs was to integrate acquired assets and operations into the Company, and to close or restructure insufficiently profitable facilities and activities. Due to aerospace industry requirements to "qualify" specific equipment and manufacturing processes for certain products, some business consolidation actions have taken up to three years to complete. These qualification requirements increase the complexity, cost and time of moving equipment and rationalizing manufacturing activities. In connection with these business consolidation programs, the Company closed three manufacturing facilities, vacated approximately 560 thousand square feet of manufacturing space, and eliminated more than 700 manufacturing, marketing and administrative positions.

In 2000, the Company added two further actions to the September 1999 business consolidation program. The Company decided to close the two smaller of its four U.S. prepreg manufacturing facilities - one in Lancaster, Ohio and another in Gilbert, Arizona. The Gilbert, Arizona facility was closed in 2001 and the closure of the Lancaster, Ohio facility was completed in 2002. The manufacturing output from these two plants is now being produced by the two remaining U.S. prepreg facilities in Livermore, California and Salt Lake City, Utah. In connection with the program, including the program revisions, the Company recognized a charge of $14.3 million in 2000.

In addition, during 2000, Hexcel amended its September 1999 business consolidation program in response to the manufacturing constraints caused by a stronger than expected increase in sales and production for its electronic woven glass fabrics and its ballistic protection products. Based on these improved market conditions and a manufacturing capacity review, the Company decided to expand its capacity by purchasing additional looms and revising the previous decision to consolidate a number of weaving activities at two of the Company's facilities. As a result of the decision not to proceed to consolidate production, the Company reversed a total of $3.4 million of business consolidation expenses that were previously recognized in 1999, including $3.1 million in non-cash write-downs of machinery and equipment that was to have been sold or scrapped as a result of the consolidation.

In 2002, the Company recognized a change in estimated business consolidation expenses related to this program of $0.5 million, as actual employee severance was lower than previously expected. Business consolidation expenses for equipment relocation and re-qualification costs, expensed as incurred, were $1.6 million and $6.5 million in 2002 and 2001, respectively. Equipment relocation and re-qualification costs primarily related to the planned closure of the Lancaster, Ohio and Gilbert, Arizona prepreg manufacturing facilities. In addition, the Company recognized a benefit on the sale of a previously idled Cleveland, Georgia facility of $0.5 million by reversing expenses previously accrued in 1999.

79

Business consolidation activities for the December 1998 and September 1999 programs consisted of the following:

                                                                       EMPLOYEE       FACILITY &
(IN MILLIONS)                                                          SEVERANCE      EQUIPMENT           TOTAL
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF JANUARY 1, 2000 (a)                                     $     3.5       $     0.6         $     4.1
Business consolidation expenses:
   Current period expenses                                                  3.7            10.6              14.3
   Reversal of 1999 business consolidation expenses                        (0.3)           (3.1)             (3.4)
-----------------------------------------------------------------------------------------------------------------
  Net business consolidation expenses                                       3.4             7.5              10.9
Cash expenditures                                                          (3.9)           (7.9)            (11.8)
Non-cash items:
   Reversal of 1999 business consolidation expenses                           -             3.1               3.1
   Non-cash usage, including asset write-downs                             (0.6)           (3.0)             (3.6)
-----------------------------------------------------------------------------------------------------------------
  Total non-cash items                                                     (0.6)            0.1              (0.5)
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2000                                       $     2.4       $     0.3         $     2.7
Business consolidation expenses                                             0.1             6.5               6.6
Cash expenditures                                                          (1.1)           (5.4)             (6.5)
Non-cash usage, including asset write-downs                                   -            (1.4)             (1.4)
-----------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2001                                       $     1.4       $       -         $     1.4
Business consolidation expenses
    Current period expenses                                                   -             1.6               1.6
    Reversal of 1999 business consolidation expenses                          -            (0.5)             (0.5)
    Change in estimated expenses                                           (0.5)              -              (0.5)
-----------------------------------------------------------------------------------------------------------------
  Net business consolidation expenses                                      (0.5)            1.1               0.6
Cash expenditures                                                          (0.7)           (1.6)             (2.3)
Non-cash reversal of 1999 business consolidation expenses                     -             0.5               0.5
=================================================================================================================
BALANCE AS OF DECEMBER 31, 2002                                       $     0.2       $       -         $     0.2
=================================================================================================================

(a) The December 1998 program had an accrued liability balance of $1.0 million for employee severance at January 1, 2000, which was utilized during 2000.

As of December 31, 2002, the December 1998, September 1999 and July 2001 programs have been essentially completed, while the November 2001 program will be substantially completed in 2003. Management will continue to closely monitor spending under the November 2001 program and evaluate opportunities that may exist for future actions, as the Company continues to right-size the business in response to existing conditions in the markets it serves.

NOTE 5 - INVENTORIES

                                                               DECEMBER 31,
(IN MILLIONS)                                             2002              2001
--------------------------------------------------------------------------------
Raw materials                                      $      40.7       $      59.1
Work in progress                                          37.6              35.2
Finished goods                                            35.3              37.4
--------------------------------------------------------------------------------
Inventories                                        $     113.6       $     131.7
================================================================================

NOTE 6 - NET PROPERTY, PLANT AND EQUIPMENT

                                                               DECEMBER 31,
(IN MILLIONS)                                             2002             2001
-------------------------------------------------------------------------------
Land                                               $      21.1       $     23.5
Buildings                                                140.2            132.7
Equipment                                                470.7            443.8
Construction in Progress                                  10.8             17.0
-------------------------------------------------------------------------------
Property, plant and equipment                            642.8            617.0
Less accumulated depreciation                           (333.4)          (287.8)
-------------------------------------------------------------------------------
Net property, plant and equipment                  $     309.4       $    329.2
===============================================================================

80

NOTE 7 - INVESTMENTS IN AFFILIATED COMPANIES

In 1999, Hexcel, Boeing International Holdings, Ltd. and Aviation Industries of China (now known as China Aviation Industry Corporation I) formed a joint venture, BHA Aero Composite Parts Co., Ltd. ("BHA Aero"), to manufacture composite parts for secondary structures and interior applications for commercial aircraft. Hexcel has a 33.3% equity ownership interest in this joint venture, which is located in Tianjin, China. In addition, in 1999, Hexcel formed another joint venture, Asian Composites Manufacturing Sdn. Bhd. ("Asian Composites"), with Boeing Worldwide Operations Limited, Sime Link Sdn. Bhd., and Malaysia Helicopter Services Bhd. (now known as Naluri Berhadto), to manufacture composite parts for secondary structures for commercial aircraft. Hexcel has a 25% equity ownership interest in this joint venture, which is located in Alor Setar, Malaysia. Asian Composites began shipping composite structures to customers during the second half of 2001, while BHA Aero began deliveries in the first half of 2002. During 2000, Hexcel made cash equity investments totaling $8.3 million in these two joint ventures. No additional cash equity investments were made during 2002 and 2001. As of December 31, 2002 and 2001, the Company had an outstanding letter of credit of $11.1 million in support of a loan to BHA Aero (see Note 16).

The Company also has equity ownership interests in three joint ventures which manufacture reinforcement products: a 43.6% share in Interglas Technologies AG ("Interglas"), headquartered in Germany; a 33.3% share in Asahi-Schwebel Co., Ltd. ("Asahi-Schwebel"), headquartered in Japan, which in turn owns interests in two joint ventures in Taiwan - a 50% interest in Nittobo Asahi Glass and a 51% interest in Asahi-Schwebel Taiwan; and a 50% share in Clark-Schwebel Tech-Fab Company ("CS Tech-Fab"), headquartered in the United States. Interglas and Asahi-Schwebel are fiberglass fabric producers serving the European and Asian manufacturers of printed circuit board laminates and other reinforcement product applications. CS Tech-Fab manufactures non-woven reinforcement materials for roofing, construction, sail cloth and other specialty applications.

In 2002, the Company agreed with its Asian Electronics venture partner to restructure its minority interest in Asahi-Schwebel. Under the terms of the agreement, the Company reduced its ownership interest in the joint venture from 43.3% to 33.3% and received cash proceeds of $10.0 million. The agreement also included, among other matters, a put option in favor of the Company to sell and a call option in favor of the Company's joint venture partner to purchase the Company's remaining ownership interest in the joint venture for $23.0 million. The options are simultaneously effective for a six-month period beginning July 1, 2003. Reflecting these terms, the Company wrote-down the carrying value of its remaining equity investment in this joint venture to its estimated fair market value of $23.0 million, recording a non-cash impairment charge of $4.0 million. There was no tax benefit recognized on the write-down.

In 2001, the Company wrote-down its investment in Interglas by $7.8 million. The write-down was the result of an assessment that an other-than-temporary decline in value of the investment had occurred due to a severe industry downturn and the resulting impact on the financial condition of this company. The amount of the write-down was determined based on available market information and appropriate valuation methodologies. The Company did not record deferred tax benefits on the write-down because of limitations imposed by foreign tax laws and the Company's ability to realize the tax benefits.

Lastly, Hexcel owns a 45% equity interest in DIC-Hexcel Limited ("DHL"), a joint venture with Dainippon Ink and Chemicals, Inc. ("DIC"). This joint venture is located in Komatsu, Japan, and produces and sells prepregs, honeycomb and decorative laminates using technology licensed from Hexcel and DIC. Hexcel is contingently liable to pay DIC up to $1.5 million with respect to DHL's debt under certain defined circumstances through January 31, 2004, unless renewed. This contingent liability will cease upon DHL's repayment of the underlying loan.

81

Summarized condensed combined financial information for these joint ventures as of December 31, 2002 and 2001 and for the three years ended December 31, 2002 is as follows:

(IN MILLIONS)                                                                                 DECEMBER 31,
SUMMARIZED CONDENSED COMBINED BALANCE SHEETS                                               2002            2001
------------------------------------------------------------------------------------------------------------------
Current assets                                                                         $     106.0      $    132.0
Noncurrent assets                                                                            209.7           213.3
------------------------------------------------------------------------------------------------------------------
  Total assets                                                                         $     315.7      $    345.3

Current liabilities                                                                    $      66.8      $     52.0
Noncurrent liabilities                                                                        99.2            87.0
------------------------------------------------------------------------------------------------------------------
  Total liabilities                                                                          166.0           139.0

Minority Interest                                                                             20.3            21.3

Partners' equity                                                                             129.4           185.0
------------------------------------------------------------------------------------------------------------------
  Total liabilities and partners' equity                                               $     315.7      $    345.3
==================================================================================================================

                                                                                For the Year Ended December 31,
SUMMARIZED CONDENSED COMBINED STATEMENTS OF OPERATIONS                           2002          2001           2000
------------------------------------------------------------------------------------------------------------------
Net sales                                                                   $   232.7      $  276.5      $   337.3
Cost of sales                                                                   207.5         204.5          250.2
------------------------------------------------------------------------------------------------------------------
    Gross profit                                                                 25.2          72.0           87.1
Other costs and expenses                                                         78.6          76.0           79.8
------------------------------------------------------------------------------------------------------------------
  Net income (loss)                                                         $   (53.4)     $   (4.0)     $     7.3
==================================================================================================================

NOTE 8 - NOTES PAYABLE

                                                                                               DECEMBER 31,
(IN MILLIONS)                                                                              2002            2001
------------------------------------------------------------------------------------------------------------------
Senior Credit Facility                                                                 $     179.7      $    233.9
European credit and overdraft facilities                                                       0.2             3.5
Senior subordinated notes, due 2009 (net of unamortized discount
 of $1.2 and $1.4 as of December 31, 2002 and 2001)                                          338.8           338.6
Convertible subordinated notes, due 2003                                                      46.9            46.9
Convertible subordinated debentures, due 2011                                                 22.7            24.5
Various notes payable                                                                            -             0.1
------------------------------------------------------------------------------------------------------------------
Total notes payable                                                                          588.3           647.5
Capital lease obligations                                                                     33.4            38.4
------------------------------------------------------------------------------------------------------------------
Total notes payable and capital lease obligations                                      $     621.7      $    685.9
==================================================================================================================

Notes payable and current maturities of capital lease obligations                      $     621.7      $     17.4
Long-term notes payable and capital lease obligations, less current maturities                   -           668.5
------------------------------------------------------------------------------------------------------------------
Total notes payable and capital lease obligations                                      $     621.7      $    685.9
==================================================================================================================

SENIOR CREDIT FACILITY

Hexcel had a global credit facility (the "Senior Credit Facility") with a syndicate of banks to provide for ongoing working capital and other financing requirements. The Senior Credit Facility, which consisted of revolving credit, overdraft and term loan facilities, provided Hexcel with committed lines of approximately $297.6 million as of December 31, 2002, subject to certain limitations. These commitments consisted of funded term loans of $106.8 million, revolving credit and overdraft facilities of $160.8 million, and letter of credit facilities of $30.0 million. As of December 31, 2002, drawings under the revolving credit facility were $72.9 million, leaving undrawn commitments under the facilities of $87.9 million. As of December 31, 2002, letters of credit issued under the facility approximated $24.2 million, of which $11.1 million supports a loan to the Company's BHA Aero joint venture. The Company was subject to various financial covenants and restrictions under the Senior Credit Facility, including limitations on incurring debt, granting liens, selling assets, repaying subordinated indebtedness, redeeming capital stock and paying dividends. The Senior Credit Facility was scheduled to expire in 2004, except for approximately $55.8 million of

82

term loans that are due for repayment in 2005. The Senior Credit Facility was paid in full on March 19, 2003 (see Note 2).

Effective January 25, 2002, Hexcel entered into an amendment of the Senior Credit Facility. The amendment provided for revised financial covenants through 2002; a 100 basis point increase in the interest spread payable over LIBOR for advances under the facility; and an immediate decrease in the commitment of revolving credit and overdraft facilities from a cumulative amount of $205.0 million to $190.0 million, with a further reduction to $182.0 million on or before September 30, 2002. The amendment also provided for a 25 basis point increase on January 1, 2003 if the Company did not reduce the commitment by a further $25.0 million, prior to that date. The Senior Credit Facility financial covenants set certain maximum values for the Company's leverage (the ratios of total and senior debt to an Adjusted EBITDA), and certain minimum values for its interest coverage (the ratio of an Adjusted EBITDA to cash interest expense) and fixed charge coverage (the ratio of an Adjusted EBITDA less capital expenditures to the sum of certain fixed expenses). In addition, during the term of the amendment, all net proceeds generated through asset sales, and most other liquidity events, in each case to the extent in excess of $2.5 million, and 100% of all net proceeds generated from litigation settlements and judgments, must be used to prepay loans under the Senior Credit Facility. Hexcel also agreed to limit capital expenditures to $25.0 million during 2002, with a $10.0 million limit during any quarter in 2002. At December 31, 2002, the Company was in compliance with the covenants, as amended, under its Senior Credit Facility.

In connection with the credit agreement amendment, Hexcel also agreed to grant additional collateral. The Company had previously granted a security interest in most of its U.S. accounts receivable, inventory, property, plant, equipment and real estate. It had also pledged some or all of the shares of certain subsidiaries. Under the terms of the amendment, Hexcel granted to the banks a security interest in additional U.S. accounts receivable, inventory, property, plant, equipment and real estate, as well as its intellectual property. In addition, each of a group of Hexcel's European subsidiaries granted a security interest in its accounts receivable that secured certain local borrowings advanced to that subsidiary.

The Senior Credit Facility had been subject to several previous amendments to accommodate, among other things, the planned sale of assets, the planned investments in additional manufacturing capacity for selected products, the impact of the decline of the Company's operating results on certain financial covenants, the purchase by an investor group of approximately 14.5 million shares of Hexcel common stock held by a significant shareholder of the Company, a restructuring of the ownership of certain of the Company's European subsidiaries, the issuance of additional senior subordinated debt and the early redemption of certain term debt. In connection with the 2002 and previous amendments, included in interest expense in 2002 and 2001 are fees and expenses incurred of approximately $1.8 million and $1.0 million, respectively.

The January 25, 2002 amendment relaxed the 2002 quarterly financial covenants to accommodate the impact of the downturn in the commercial aerospace and electronics markets. Under the terms of the amendment, the financial covenants effective beginning with the quarter ending March 31, 2003 were to be those that applied before the amendment. As these market conditions experienced in 2002 are expected to continue during 2003, the Company needed to obtain a further amendment of the facility before the end of the first quarter of 2003 to accommodate its projected financial performance for that quarter and to be in compliance with the financial covenants as provided in the Senior Credit Facility agreement, or refinance the facility. The Company executed a refinancing of the facility on March 19, 2003 (see Note 2).

83

The weighted average interest rate on the Senior Credit Facility was 7.71%, 8.50% and 11.55% for the years ended December 31, 2002, 2001 and 2000, respectively. During the three years ended December 31, 2002, interest rates have been in the following ranges:

                                                                                 IN EXCESS OF THE BASE RATE OF
                                          IN EXCESS OF THE APPLICABLE            THE ADMINISTRATIVE AGENT FOR
                                             LONDON INTERBANK RATE                        THE LENDERS
                                          ---------------------------            -----------------------------
January 2002 to December 2002                    2.00% - 4.25%                           1.25% - 3.25%
May 2001 to January 2002                         1.00% - 3.25%                           0.25% - 2.25%
March 2000 to May 2001                           0.75% - 3.00%                           0.00% - 2.00%
Prior to March 2000                              0.75% - 2.50%                           0.00% - 1.50%
--------------------------------------------------------------------------------------------------------------

The Senior Credit Facility was subject to a commitment fee varying from approximately 0.20% to 0.50% per annum of the total facility.

At December 31, 2001, Hexcel had an interest rate cap agreement outstanding which covered a notional amount of $50.0 million of the Senior Credit Facility, providing a maximum fixed rate of 5.50% on the applicable London interbank rate. The agreement expired on October 29, 2002 (see Note 15).

EUROPEAN CREDIT AND OVERDRAFT FACILITIES

In addition to the Senior Credit Facility, certain of Hexcel's European subsidiaries have access to limited credit and overdraft facilities provided by various local banks. These credit and overdraft facilities are primarily uncommitted facilities that are terminable at the discretion of the lenders. The interest rates on these credit and overdraft facilities for the three years ended December 31, 2002, ranged from 1.5% to 6.6%.

SENIOR SUBORDINATED NOTES, DUE 2009

On January 21, 1999, the Company issued $240.0 million of 9.75% senior subordinated notes, due 2009. On June 29, 2001, the Company offered an additional $100.0 million under the same indenture at a price of 98.5% of face value. The senior subordinated notes are general unsecured obligations of Hexcel.

Net proceeds from the subsequent offering were used to redeem $67.5 million aggregate principal amount of the Company's outstanding 7% convertible subordinated notes, due 2003, and to pay the entire principal amount of $25.0 million of the increasing rate senior subordinated note, due 2003. As a result of the redemption, the Company recognized a $2.7 million loss on the early retirement debt. With the adoption of FAS 145 on January 1, 2002, the $2.7 million extraordinary loss on early retirement of debt recorded in 2001 was reclassified as a separate line item below operating income in the consolidated statements of operations. There was no tax benefit recognized on the loss because of limitations on the Company's ability to realize the tax benefits.

CONVERTIBLE SUBORDINATED NOTES, DUE 2003

The convertible subordinated notes carry an annual interest rate of 7.00% and are convertible into Hexcel common stock at any time on or before August 1, 2003, unless previously redeemed, at a conversion price of $15.81 per share, subject to adjustment under certain conditions. The convertible subordinated notes are redeemable, in whole or in part, at the Company's option at any time, at various redemption prices set forth in the convertible notes indenture, plus accrued interest. On June 29, 2001, $67.5 million aggregate principal amount of the convertible subordinated notes was redeemed.

CONVERTIBLE SUBORDINATED DEBENTURES, DUE 2011

The convertible subordinated debentures carry an annual interest rate of 7.00% and are convertible into shares of Hexcel common stock prior to maturity, unless previously redeemed, at a conversion price of $30.72 per share. Mandatory redemption of the convertible debentures was scheduled to begin in 2002 through annual sinking fund requirements of $1.1 million in 2002 and $1.8

84

million in each year thereafter. The Company satisfied the 2002 annual sinking fund requirement in 2001. In 2002, the Company recognized a $0.5 million gain on the early retirement of debt, relating to the repurchase of $1.8 million in satisfaction of the 2003 sinking fund requirement. The debt was repurchased at market prices, which resulted in a gain. In accordance with the requirements of FAS 145, the gain has been reported as a separate line item below operating income in the consolidated statements of operations.

INCREASING RATE SENIOR SUBORDINATED NOTE, DUE 2003

The increasing rate senior subordinated note, due 2003 was a general unsecured obligation payable to certain subsidiaries of Ciba Specialty Chemicals Holding, Inc. Effective February 1999, the interest rate on the note was 10.50% per annum, a rate which increased by 0.50% per annum each February thereafter until the repayment of principal. The average interest rate on the note was 11.42% in 2001 and 10.96% in 2000. The note was redeemed in full on June 29, 2001 with the proceeds of the $100.0 million issuance of 9.75% senior subordinated notes, due 2009.

AGGREGATE MATURITIES OF NOTES PAYABLE

The table below reflects aggregate scheduled maturities of notes payable, excluding capital lease obligations (see Note 9):

Payable during the years ending December 31:                  (IN MILLIONS)
---------------------------------------------------------------------------
2003                                                           $     55.7
2004                                                                117.1
2005                                                                 57.6
2006                                                                  1.8
2007                                                                  1.8
Thereafter                                                          355.5
---------------------------------------------------------------------------
Total notes payable                                            $    589.5
===========================================================================

The aggregate maturities of notes payable in 2003 include European credit and overdraft facilities of $0.2 million, which are repayable on demand. At December 31, 2002, the unamortized discount on the additional $100.0 million senior subordinated notes, due 2009, issued on June 29, 2001, was $1.2 million.

DEBT CLASSIFICATION AS OF DECEMBER 31, 2002

As described in Note 2, as the anticipated refinancing of the capital structure was not completed as of February 28, 2003 (the 2002 financial statement issuance date) and the Company had not obtained an amendment of the aforementioned financial covenants, all debt had been classified as current at December 31, 2002.

ESTIMATED FAIR VALUES OF NOTES PAYABLE

The Senior Credit Facility and the various European credit facilities outstanding as of December 31, 2002 and 2001 are variable-rate debt obligations. Accordingly, the estimated fair values of each of these debt obligations approximate their respective book values. The approximate, aggregate fair values of the Company's other notes payable as of December 31, 2002 and 2001 were as follows:

(IN MILLIONS)                                                           2002              2001
------------------------------------------------------------------------------------------------
Senior subordinated notes, due 2009                               $    295.8         $   190.4
Convertible subordinated notes, due 2003                                46.2              27.0
Convertible subordinated debentures, due 2011                           13.6              15.5
================================================================================================

The aggregate fair values of the above notes payable were estimated on the basis of quoted market prices; however, trading in these securities is limited and may not reflect actual fair value.

85

NOTE 9 - LEASING ARRANGEMENTS

Assets, accumulated depreciation, and related liability balances under capital leasing arrangements, as of December 31, 2002 and 2001, were:

(IN MILLIONS)                                                   2002              2001
--------------------------------------------------------------------------------------
Property, plant and equipment                         $        55.3       $       61.1
Less accumulated depreciation                                 (31.4)             (26.3)
--------------------------------------------------------------------------------------
Net property, plant and equipment                     $        23.9       $       34.8
======================================================================================

Capital lease obligations                             $        33.4       $       38.4
Less current maturities                                        (6.2)              (5.6)
--------------------------------------------------------------------------------------
Long-term capital lease obligations, net              $        27.2       $       32.8
======================================================================================

Certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases. Rental expense under operating leases was $3.8 million in 2002, $5.4 million in 2001, and $7.0 million in 2000.

Scheduled future minimum lease payments as of December 31, 2002 were:

                                                                           TYPE OF LEASE
(IN MILLIONS)                                                       ------------------------------
  Payable during years ending December 31:                           CAPITAL          OPERATING
--------------------------------------------------------------------------------------------------
 2003                                                               $      8.7        $      2.9
 2004                                                                      8.7               2.5
 2005                                                                      8.5               2.6
 2006                                                                     11.4               1.7
 2007                                                                      0.5               0.7
 Thereafter                                                                3.4               2.0
--------------------------------------------------------------------------------------------------
 Total minimum lease payments                                       $     41.2        $     12.4
==================================================================================================

 Less amounts representing interest                                        7.8
--------------------------------------------------------------------------------
 Present value of future minimum capital lease payments                   33.4
 Less current obligations under capital leases                             6.2
--------------------------------------------------------------------------------
 Long-term obligations under capital lease                          $     27.2
================================================================================

CLASSIFICATION AS OF DECEMBER 31, 2002

As described in Note 2, the anticipated refinancing of the capital structure was not completed as of February 28, 2003 (the 2002 financial statement issuance date) and the Company has not obtained an amendment of the aforementioned financial covenants; therefore, all capital lease obligations have been classified as current at December 31, 2002.

NOTE 10 - RELATED PARTIES

CHANGE IN CONTROL

On December 19, 2000, the Goldman Sachs Investors completed a purchase of approximately 14.5 million of the approximately 18 million shares of Hexcel common stock owned by subsidiaries of Ciba Specialty Chemicals Holding, Inc. The shares acquired by the Goldman Sachs Investors represented approximately 39% of the Hexcel's outstanding common stock. In addition, the Company and the Goldman Sachs Investors entered into a governance agreement that became effective on December 19, 2000. Under this governance agreement, the Goldman Sachs Investors have the right to, among other things, designate up to three directors to sit on the Company's board of directors.

Hexcel incurred $2.2 million of costs in connection with this transaction, all of which were included in "selling, general, and administrative expenses" in 2000. These costs and expenses included legal, consulting, and regulatory compliance expenses, as well as a non-cash charge attributable to the accelerated vesting of certain stock-based compensation and to certain amendments to an executive retirement plan. Under the terms of the Company's various stock option and

86

management incentive plans, the transaction constituted a "change in control" event, resulting in all outstanding stock options becoming vested and exercisable. The former Chief Executive Officer waived the vesting of his stock options by such event. In addition, nine of the most senior executive officers other than the former Chief Executive Officer agreed to defer the vesting of their stock options such that any of their stock options that would have otherwise vested immediately (or would have otherwise vested by their terms) vested one year after the closing with respect to half of such options, and two years after the closing with respect to the remaining half of such options, subject to earlier vesting in certain circumstances. As a result, approximately 1.3 million stock options, with exercise prices ranging from $2.41 to $29.63 per share, and a weighted average exercise price of $8.99 per share, vested and became exercisable on December 19, 2000 (see Note 13).

In addition, due to the change in control event, shares of the Hexcel's common stock underlying a total of approximately 0.8 million restricted stock units and performance accelerated restricted stock units (collectively, "stock units") were distributed. However, the former Chief Executive Officer waived the vesting of his stock units, and nine of the most senior executive officers other than the former Chief Executive Officer agreed to defer the distribution of shares underlying their stock units (although not the vesting of such stock units), such that any shares of common stock that would have otherwise been distributed immediately would be distributed one year after the closing with respect to half of such stock units, and two years after the closing with respect to the remaining half of such stock units, subject to earlier distribution under certain circumstances (see Note 13).

NOTE 11 - RETIREMENT AND OTHER POSTRETIREMENT BENEFIT PLANS

Hexcel maintains qualified and nonqualified defined benefit retirement plans covering certain U.S. and European employees, as well as retirement savings plans covering eligible U.S. employees. The defined benefit retirement plans are generally based on years of service and employee compensation under either a career average or final pay benefits method, except as described below. The Company also participates in a union sponsored multi-employer pension plan covering certain U.S. employees with union affiliations.

In addition to defined benefit and retirement savings plan benefits, Hexcel also provides certain postretirement health care and life insurance benefits to eligible U.S. retirees. Depending upon the plan, benefits are available to eligible employees who retire on or after age 58 or 65 after rendering a minimum of 15 years or 25 years of service to Hexcel.

Under the retirement savings plans, eligible U.S. employees can contribute up to 16% of their compensation to an individual retirement savings account. Hexcel makes matching contributions equal to 50% of employee contributions, not to exceed 3% of employee compensation. The Company also makes profit sharing contributions when it meets or exceeds certain performance targets, which are set annually.

Effective December 31, 2000, the Company made certain changes to its U.S. retirement benefit plans that were intended to improve the flexibility and visibility of future retirement benefits for employees. These changes included an increase in the amount that the Company will contribute to individual 401(k) retirement savings accounts and an offsetting curtailment of the Company's U.S. qualified defined benefit retirement plan. Beginning January 1, 2001, the Company started to contribute an additional 2% to 3% of each eligible employee's salary to an individual 401(k) retirement savings account, depending on the employee's age. This increases the maximum contribution to individual employee savings accounts to between 5% and 6% per year, before any profit sharing contributions. Offsetting the estimated incremental cost of this additional benefit, participants in the Company's U.S. qualified defined benefit retirement plan no longer accrued benefits under this plan after December 31, 2000, and no new employees will become participants. However, employees retained all benefits earned under this plan as of that date. The Company recognized a non-cash curtailment gain of $5.1 million (an after-tax gain of approximately $3.3 million) in 2000 as a result of the amendment to its defined benefit retirement plan.

87

The net periodic expense for all of these defined benefit and retirement savings plans, for the three years ended December 31, 2002, was:

(IN MILLIONS)                                                                        2002          2001       2000
--------------------------------------------------------------------------------------------------------------------
Defined benefit retirement plans                                                 $    6.8      $    4.1  $    (1.2)
Union sponsored multi-employer pension plan                                           0.2           0.3        0.3
Retirement savings plans-matching contributions                                       4.5           5.0        2.9
Retirement savings plans-profit sharing and incentive contributions                   6.5           7.0        5.0
--------------------------------------------------------------------------------------------------------------------
Net periodic expense                                                             $   18.0    $     16.4  $     7.0
--------------------------------------------------------------------------------------------------------------------

The net periodic cost of Hexcel's defined benefit retirement and U.S. postretirement plans for the three years ended December 31, 2002, were:

(IN MILLIONS)                                            U.S. PLANS                          EUROPEAN PLANS
DEFINED BENEFIT RETIREMENT PLANS               2002         2001          2000         2002         2001         2000
-----------------------------------------------------------------------------------------------------------------------
Service cost                               $    0.7     $    0.6      $    3.0     $    4.3     $    2.4     $    2.4
Interest cost                                   1.6          1.8           1.8          3.0          2.9          2.5
Expected return on plan assets                 (1.4)        (1.4)         (1.3)        (4.1)        (4.1)        (4.5)
Net amortization and deferral                   0.5          0.5           0.4          1.7            -         (0.2)
-----------------------------------------------------------------------------------------------------------------------
Sub-total                                       1.4          1.5           3.9          4.9          1.2          0.2
Curtailment and settlement (gain) loss          0.5          1.0          (5.3)           -          0.4            -
-----------------------------------------------------------------------------------------------------------------------
Net periodic pension cost (benefit)        $    1.9     $    2.5      $   (1.4)    $    4.9     $    1.6     $    0.2
=======================================================================================================================

POSTRETIREMENT PLANS - U.S. PLANS              2002         2001          2000
--------------------------------------------------------------------------------
Service cost                               $    0.1     $    0.2      $    0.2
Interest cost                                   0.8          1.0           1.0
Net amortization and deferral                  (0.5)        (0.4)         (0.4)
--------------------------------------------------------------------------------
Net periodic postretirement benefit cost   $    0.4     $    0.8      $    0.8
================================================================================

88

The benefit obligation, fair value of plan assets, funded status, and amounts recognized in the consolidated financial statements for Hexcel's defined benefit retirement plans and U.S. postretirement plans, as of and for the years ended December 31, 2002 and 2001, were:

                                                        DEFINED BENEFIT RETIREMENT PLANS
                                                ----------------------------------------------
                                                        U.S. PLANS              EUROPEAN PLANS        POSTRETIREMENT PLANS
(IN MILLIONS)                                        2002         2001         2002         2001         2002         2001
----------------------------------------------------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION:
  Benefit obligation - beginning of year        $    27.7   $     24.1   $     56.3   $     49.8   $     14.2   $     14.2
  Service cost                                        0.7          0.6          4.3          2.4          0.1          0.2
  Interest cost                                       1.6          1.8          3.0          2.9          0.8          1.0
  Plan participants' contributions                      -            -          0.5          0.7          0.4          0.1
  Amendments                                          0.6          1.8            -            -         (1.7)           -
  Actuarial loss (gain)                               1.0          3.6         (3.1)         2.4          0.7          0.2
  Benefits paid                                      (4.7)        (1.9)        (1.0)        (0.8)        (1.5)        (1.0)
  Curtailment and settlement (gain) loss             (1.0)        (2.3)           -          0.4            -         (0.5)
  Foreign exchange translation                          -            -          6.5         (1.5)           -            -
----------------------------------------------------------------------------------------------------------------------------
Benefit obligation - end of year                $    25.9   $     27.7   $     66.5   $     56.3   $     13.0   $     14.2
----------------------------------------------------------------------------------------------------------------------------

CHANGE IN PLAN ASSETS:
  Fair value of plan assets - beginning of
    year                                        $    14.5   $     14.7   $     51.9   $     60.4   $        -   $        -
  Actual return on plan assets                       (0.9)        (0.5)       (10.3)        (8.3)           -            -
  Employer contributions                              4.4          2.2          1.4          1.2          1.1          0.9
  Plan participants' contributions                      -            -          0.5          0.7          0.4          0.1
  Benefits paid                                      (4.7)        (1.9)        (1.0)        (0.8)        (1.5)        (1.0)
  Currency translation adjustments                      -            -          5.0         (1.7)           -            -
  Settlements                                        (1.5)           -            -          0.4            -            -
----------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets - end of year         $    11.8   $     14.5   $     47.5   $     51.9   $        -   $        -
----------------------------------------------------------------------------------------------------------------------------

RECONCILIATION OF FUNDED STATUS TO NET
  AMOUNT RECOGNIZED:
  Unfunded status                               $   (14.1)  $    (13.2)  $    (19.0)  $     (4.4)  $    (13.0)  $    (14.2)
  Unrecognized actuarial loss (gain)                  8.9          6.1         25.9         13.0         (2.9)         0.9
  Unrecognized prior service cost                     2.3          1.9            -            -         (1.9)        (5.2)
----------------------------------------------------------------------------------------------------------------------------
Net amount recognized                           $    (2.9)  $     (5.2)  $      6.9   $      8.6   $    (17.8)  $    (18.5)
----------------------------------------------------------------------------------------------------------------------------

AMOUNTS RECOGNIZED IN CONSOLIDATED BALANCE
  SHEETS:
  Prepaid benefit costs                         $       -   $        -   $      6.9   $      8.6   $        -   $        -
  Intangible asset                                    1.7          1.5            -            -            -            -
  Accrued benefit liability                         (13.6)       (13.4)       (11.3)           -        (17.8)       (18.5)
  Accumulated other comprehensive income
    (before tax for European Plans)                   9.0          6.7         11.3            -            -            -
----------------------------------------------------------------------------------------------------------------------------
Net amount recognized                           $    (2.9)  $     (5.2)  $      6.9   $      8.6   $    (17.8)  $    (18.5)
============================================================================================================================

The total accumulated benefit obligation for pension plans with accumulated benefit obligations in excess of plan assets was $66.3 million and $23.1 million as of December 31, 2002 and 2001, respectively. A minimum pension obligation was recorded to the extent such excesses exceed the liability recognized under Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions." Offsetting amounts were recorded in "intangible assets" to the extent of unrecognized prior service costs, with the remainder recorded in "accumulated other comprehensive income." Amortization of loss and other prior service costs is calculated on a straight-line basis over the expected future years of service of the plans' active participants. Assets for the defined benefit pension plans generally consist of publicly traded equity securities, bonds and cash investments.

As of December 31, 2002 and 2001, the prepaid benefit cost was included in "other assets" in the accompanying consolidated balance sheets. For the same periods, the accrued benefit costs for the U.S. defined retirement plans and postretirement benefit plans were included in "accrued compensation and benefits" and "other non-current liabilities," respectively, in the accompanying consolidated balance sheets.

89

Assumptions used to estimate the actuarial present value of benefit obligations at December 31, 2002, 2001, and 2000 were as follows:

(IN MILLIONS)                                                              2002             2001              2000
--------------------------------------------------------------------------------------------------------------------
U.S. defined benefit retirement plans:
  Discount rates                                                            6.8%             7.3%              7.5%
  Rate of increase in compensation                                          4.5%             4.5%              4.5%
  Expected long-term rate of return on plan assets                          9.0%             9.0%              9.0%

European defined benefit retirement plans:
  Discount rates                                                     5.3% - 6.0%      5.8% - 6.0%       5.8% - 6.0%
  Rates of increase in compensation                                  2.5% - 3.8%      2.5% - 4.0%       2.5% - 4.0%
  Expected long-term rates of return on plan assets                  5.0% - 7.8%      5.8% - 7.0%       6.5% - 7.0%

Postretirement benefit plans:
  Discount rates                                                            6.8%      7.0% - 7.3%       7.0% - 7.5%
====================================================================================================================

The per capita cost of covered health care benefits increased by 22.0% in 2002. The annual rate of increase in the per capita cost of covered health care benefits is assumed to be approximately 6.6% for medical and 5.0% for dental and vision for 2003. The medical rates are assumed to gradually decline to 5.3% by 2012, whereas dental and vision rates are assumed to remain constant at 5.0%.

The table below presents the impact of a one-percentage-point increase and a one-percentage-point decrease in the assumed health care cost trend on the total of service and interest cost components, and on the postretirement benefit obligation.

(IN MILLIONS)                                                           2002         2001
-------------------------------------------------------------------------------------------
One-percentage-point increase:
  Effect on total service and interest cost components             $     0.1    $     0.1
  Effect on postretirement benefit obligation                      $     0.8    $     1.1

One-percentage-point decrease:
  Effect on total service and interest cost components             $    (0.1)   $    (0.1)
  Effect on postretirement benefit obligation                      $    (0.7)   $    (0.9)
===========================================================================================

NOTE 12 - INCOME TAXES

Income (loss) before income taxes and the provision for income taxes, for the three years ended December 31, 2002, were as follows:

(IN MILLIONS)                                                             2002             2001               2000
--------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes:
   U.S.                                                           $      (22.5)      $   (411.9)     $        22.4
   International                                                          30.2             28.2               52.6
--------------------------------------------------------------------------------------------------------------------
Total income (loss) before income taxes                           $        7.7       $   (383.7)     $        75.0
====================================================================================================================

Provision for income taxes:
Current:
   U.S.                                                           $          -       $        -      $           -
   International                                                           9.6             12.9               17.7
--------------------------------------------------------------------------------------------------------------------
Current provision for income taxes                                         9.6             12.9               17.7
--------------------------------------------------------------------------------------------------------------------
Deferred:
   U.S.                                                                    0.5             30.7                9.0
   International                                                           1.2             (3.1)              (0.4)
--------------------------------------------------------------------------------------------------------------------
Deferred provision for income taxes                                        1.7             27.6                8.6
--------------------------------------------------------------------------------------------------------------------
Total provision for income taxes                                  $       11.3       $     40.5      $        26.3
====================================================================================================================

90

A reconciliation of the provision for income taxes at the U.S. federal statutory income tax rate of 35% to the effective income tax rate, for the three years ended December 31, 2002, is as follows:

(IN MILLIONS)                                                              2002            2001              2000
--------------------------------------------------------------------------------------------------------------------
Provision for taxes at U.S. federal statutory rate                 $        2.7      $   (134.3)     $       26.3
U.S. state taxes, less federal tax benefit                                    -               -               0.3
Impact of different international tax rates, permanent
  differences and other                                                     0.1            (3.1)             (0.2)
Valuation allowance                                                         8.5           177.9              (0.1)
--------------------------------------------------------------------------------------------------------------------
Total provision for income taxes                                   $       11.3      $     40.5      $       26.3
====================================================================================================================

In 2002, the Company received a dividend of $74.0 million from one of its foreign subsidiaries, which is taxable for U.S. income tax purposes. The taxable income resulting from the dividend is fully offset by net operating losses. The utilization of net operating losses results in a corresponding reduction in the valuation allowance.

The Company has made no U.S. income tax provision for approximately $80.4 million of undistributed earnings of international subsidiaries as of December 31, 2002. Such earnings are considered to be permanently reinvested.

DEFERRED INCOME TAXES

Deferred income taxes result from net operating loss carryforwards and temporary differences between the recognition of items for income tax purposes and financial reporting purposes. Principal components of deferred income taxes as of December 31, 2002 and 2001, were:

(IN MILLIONS)                                                 2002             2001
-------------------------------------------------------------------------------------
Net operating loss carryforwards                      $       55.4      $      70.0
Reserves and other, net                                       43.6             48.3
Accelerated depreciation                                     (27.0)           (23.5)
Accelerated amortization                                      94.9             92.3
Unfunded pension liability                                     6.7              2.4
Valuation allowance                                         (167.4)          (185.0)
-------------------------------------------------------------------------------------
  Net deferred tax asset                              $        6.2      $       4.5
=====================================================================================

Since 1999, the Company has generated taxable income in Europe offset by net operating loss ("NOL") carryforwards in the United States. The Company's U.S. operations have generated such losses, in part, because most of the Company's interest expense and goodwill amortization are serviced in the United States. Through the first quarter of 2001, the Company recognized the benefit of these NOL carryforwards by increasing the deferred tax asset carried on its balance sheet.

During the second quarter of 2001, the Company began to experience a sharp decline in revenues from its electronics market. As a result, the Company reevaluated its ability to continue to recognize a benefit for U.S. net operating losses generated, and determined to increase its tax provision rate through the establishment of a non-cash valuation allowance attributable to the currently generated U.S. net operating losses until such time as the U.S. operations return to consistent profitability. Due to the effect of significant events that have occurred since such time, including the delay in anticipated recovery in the electronics market, anticipated reductions in commercial aircraft production, and a general weakening of the economy, along with the sizable impairments on certain long-lived assets recognized in the fourth quarter of 2001, the Company reduced its estimates for future U.S. taxable income during the carryforward period. As such, the Company established a full valuation allowance on its U.S. deferred tax assets, which resulted in a tax provision of $32.6 million in the fourth quarter of 2001 to record a valuation allowance on previously reported tax assets.

Deferred tax assets require a valuation allowance when it is more likely than not that some portion of the deferred tax assets may not be realized. The realization of the deferred tax assets is dependent upon the timing and magnitude of future taxable income prior to the expiration of the deferred tax attributes. The amount of the deferred tax assets considered realizable, however, could change if estimates of future taxable U.S. income during the carry-forward period improve.

91

NET OPERATING LOSS CARRYFORWARDS

As of December 31, 2002, Hexcel had net operating loss carryforwards for U.S. federal and Belgium income tax purposes of approximately $156.9 million and $7.2 million, respectively. If the Company issues the new preferred stock described in Note 2, the Company will likely experience an "ownership change" pursuant to IRC Section 382, which will limit the Company's ability to utilize net operating losses against future U.S. taxable income.

NOTE 13 - STOCKHOLDERS' EQUITY (DEFICIT)

COMMON STOCK OUTSTANDING

(NUMBER OF SHARES IN MILLIONS)                                               2002           2001             2000
--------------------------------------------------------------------------------------------------------------------
Common stock:
  Balance, beginning of year                                                 39.4           38.0             37.4
  Activity under stock plans                                                  0.4            1.4              0.6
--------------------------------------------------------------------------------------------------------------------
Balance, end of year                                                         39.8           39.4             38.0
--------------------------------------------------------------------------------------------------------------------

Treasury stock:
  Balance, beginning of year                                                  1.2            0.9              0.8
  Repurchased                                                                 0.1            0.3              0.1
--------------------------------------------------------------------------------------------------------------------
Balance, end of year                                                          1.3            1.2              0.9
--------------------------------------------------------------------------------------------------------------------
Common stock outstanding                                                     38.5           38.2             37.1
====================================================================================================================

STOCK-BASED INCENTIVE PLANS

Hexcel has various stock option and management incentive plans for eligible employees, officers, and directors. These plans provide for awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. Options to purchase common stock are generally granted at the fair market value on the date of grant. Substantially all of these options have a ten-year term and generally vest over a three-year period, except that the vesting period may be accelerated under certain circumstances. At December 31, 2002, the aggregate number of shares of stock issuable under these plans was 9.9 million shares.

As of December 31, 2002, 2001, and 2000, Hexcel had outstanding a total of 0.1 million, 0.2 million and 0.7 million of performance accelerated restricted stock units ("PARS"), respectively. PARS are convertible to an equal number of shares of Hexcel common stock and generally vest at the end of a seven-year period, subject to certain terms of employment and other circumstances that may accelerate the vesting period. Approximately 0.1 million, 0.6 million and 0.2 million PARS were converted into Hexcel common stock in 2002, 2001 and 2000, respectively. In 2001 and 2000, 0.1 million and 0.5 million PARS were granted and 0.1 million and 0.7 million PARS vested, respectively. No PARS were granted in 2002.

In 2002, Hexcel granted 0.3 million restricted stock units to eligible officers. Restricted stock units are convertible to an equal number of shares of Hexcel common stock and generally vest ratably over a three-year period. One-third of the restricted stock units were converted to stock in the first quarter of 2003. In addition, the Company's Chief Executive Officer received approximately 0.1 million shares of common stock in connection with his hiring in July 2001, restricted during a twenty-month vesting period.

Compensation expense of $0.8 million, $2.0 million and $4.5 million was recognized in 2002, 2001 and 2000, respectively, in regards to the PARS, restricted stock units and the Chief Executive Officer's restricted stock. In 2000, $2.4 million of compensation expense was recognized due to accelerated vesting of PARS as a result of the attainment of certain financial and other performance target, as well as the change in control event. Compensation expense is recognized based on the quoted market price of Hexcel common stock on the date of grant.

92

Stock option data for the years ended December 31, 2002, 2001 and 2000, was:

                                                                 NUMBER OF      WEIGHTED AVERAGE
(IN MILLIONS, EXCEPT PER SHARE DATA)                              OPTIONS        EXERCISE PRICE
--------------------------------------------------------------------------------------------------
Options outstanding as of January 1, 2000                            5.9          $      11.18
Options granted                                                      1.6          $       9.23
Options exercised                                                   (0.3)         $       6.52
Options expired or canceled                                         (0.5)         $      11.85
--------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 2000                          6.7          $      10.56
Options granted                                                      1.3          $      10.17
Options exercised                                                   (0.2)         $       6.02
Options expired or canceled                                         (0.4)         $      10.72
--------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 2001                          7.4          $      10.62
Options granted                                                      1.3          $       2.66
Options exercised                                                     -           $          -
Options expired or canceled                                         (0.8)         $      10.61
--------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 2002                          7.9          $       8.81
==================================================================================================

As previously discussed in Note 10, approximately 1.3 million of stock options, with exercise prices ranging from $2.41 to $29.63 per share, and having a weighted average exercise price of $8.99 per share, became vested as a result of the change in control event in 2000. The total number of options exercisable as of December 31, 2002, 2001 and 2000 were 5.7 million, 5.4 million and 3.9 million, respectively, at a weighted average exercise price per share of $10.45, $10.70 and $10.80, respectively.

The following table summarizes information about stock options outstanding as of December 31, 2002 (in millions, except per share data):

                                          OPTIONS OUTSTANDING                          OPTIONS EXERCISABLE
------------------------------------------------------------------------------------------------------------------
                                                WEIGHTED           WEIGHTED                            WEIGHTED
                              NUMBER OF         AVERAGE            AVERAGE           NUMBER OF         AVERAGE
    RANGE OF                   OPTIONS          REMAINING          EXERCISE           OPTIONS          EXERCISE
EXERCISE PRICES              OUTSTANDING     LIFE (IN YEARS)         PRICE          EXERCISABLE         PRICE
------------------------------------------------------------------------------------------------------------------
$   1.37  -  2.74                1.2              9.02             $    2.62             0.1          $    1.41
$   2.87  -  6.36                1.2              4.37             $    5.55             1.1          $    5.56
$   6.37  -  9.94                1.1              4.38             $    9.19             1.0          $    9.14
$    9.95 - 10.50                1.1              8.53             $   10.45             0.3          $   10.43
$   10.51 - 11.88                0.8              4.51             $   11.14             0.7          $   11.17
$   11.89 - 12.11                1.5              3.98             $   12.00             1.5          $   12.00
$   12.12 - 29.63                1.0              3.34             $   15.35             1.0          $   15.36
------------------------------------------------------------------------------------------------------------------
$    1.37 - 29.63                7.9              5.70             $    8.81             5.7          $   10.45
==================================================================================================================

The weighted average fair value of stock options granted during 2002, 2001 and 2000 was $1.96, $4.87 and $4.48, respectively, and estimated using the Black-Scholes model with the following weighted-average assumptions:

                                                  2002            2001            2000
----------------------------------------------------------------------------------------
Expected life (in years)                             5               4               4
Interest rate                                     2.78%           4.35%           6.50%
Volatility                                        88.6%           68.9%           40.1%
Dividend yield                                       -              -                -
========================================================================================

EMPLOYEE STOCK PURCHASE PLAN ("ESPP")

Hexcel maintains an ESPP, under which eligible employees may contribute up to 10% of their base earnings toward the quarterly purchase of the Company's common stock at a purchase price equal to 85% of the fair market value of the common stock on the purchase date. The maximum number of shares of common stock reserved for issuance under the ESPP is 0.5 million. During 2002, 2001 and 2000, an aggregate total of approximately 0.2 million shares of common stock were issued under the ESPP.

93

NOTE 14 - NET INCOME (LOSS) PER SHARE

Computations of basic and diluted net income (loss) per share for the years ended December 31, 2002, 2001 and 2000, are as follows:

(IN MILLIONS, EXCEPT PER SHARE DATA)                                       2002             2001              2000
--------------------------------------------------------------------------------------------------------------------
NET INCOME (loss):
   Net income (loss)                                                 $    (13.6)     $    (433.7)       $     54.2

Effect of dilutive securities:
Convertible subordinated notes, due 2003                                      -                -               5.1
Convertible subordinated debentures, due 2011                                 -                -               1.1
--------------------------------------------------------------------------------------------------------------------
  Adjusted net income (loss) for diluted purposes                    $    (13.6)     $    (433.7)       $     60.4
====================================================================================================================

BASIC NET INCOME (loss) PER SHARE:
Weighted average common shares outstanding                                 38.4             37.6              36.8

Basic net income (loss) per share                                    $    (0.35)     $    (11.54)       $     1.47
====================================================================================================================

DILUTED NET INCOME (loss) PER SHARE:
Weighted average common shares outstanding                                 38.4             37.6              36.8
Effect of dilutive securities:
   Stock options                                                              -                -               0.8
   Convertible subordinated notes, due 2003                                   -                -               7.2
   Convertible subordinated debentures, due 2011                              -                -               0.9
--------------------------------------------------------------------------------------------------------------------
Diluted weighted average common shares outstanding                         38.4             37.6              45.7

Diluted net income (loss) per share                                  $    (0.35)     $    (11.54)       $     1.32
====================================================================================================================

The convertible subordinated notes, due 2003, the convertible subordinated debentures, due 2011, and all of the stock options were excluded from the 2002 and 2001 computations of diluted net loss per share, as they were antidilutive. Approximately 4.5 million stock options were excluded from the 2000 calculation of diluted net income per share as their exercise price was higher than the Company's average stock price. The exercise price for these stock options ranged from approximately $9.19 to $29.63 per share, with the weighted average price being approximately $12.55 per share.

NOTE 15 - DERIVATIVE FINANCIAL INSTRUMENTS

INTEREST RATE CAP AGREEMENT

The Company's financial results are affected by interest rate changes on its variable rate debt. In order to partially mitigate this interest rate risk, the Company entered into a five-year interest rate cap agreement in 1998. The agreement provided for a maximum fixed rate of 5.5% on the applicable London interbank rate used to determine the interest on a notional amount of $50.0 million of variable rate debt under the Senior Credit Facility. The fair value and carrying amount of this contract at December 31, 2001, along with hedge ineffectiveness for the period ended October 29, 2002 and the year ended December 31, 2001, were not material. The interest rate cap agreement expired on October 29, 2002.

FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS

A number of the Company's European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries' functional currencies, being either the Euro or the British Pound Sterling. During 2001, Hexcel entered into a number of foreign currency forward exchange contracts to exchange U.S. dollars for Euros at fixed rates on specified dates through March 2005. The aggregate notional amount of these contracts was $58.0 million and $83.9 million at December 31, 2002 and 2001, respectively. The purpose of these contracts is to hedge a portion of the forecasted transactions of European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide the Company with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing the Company's exposure to fluctuations in currency exchange rates. For the years ended December 31, 2002 and 2001, hedge

94

ineffectiveness was immaterial and the fair value of the foreign currency cash flow hedges recognized in "comprehensive income (loss)" was a net gain of $9.3 million and a net loss of $5.9 million, respectively. Approximately $2.0 million of the amounts recorded in other comprehensive income is expected to be reclassified into earnings in fiscal 2003 as the hedged sales are recorded.

NOTE 16 - COMMITMENTS AND CONTINGENCIES

Hexcel is involved in litigation, investigations and claims arising out of the normal conduct of its business, including those relating to commercial transactions, as well as to environmental, employment and health and safety matters. The Company estimates and accrues its liabilities resulting from such matters based on a variety of factors, including outstanding legal claims and proposed settlements; assessments by internal and external counsel of pending or threatened litigation; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs. Such estimates exclude counterclaims against other third parties and are not discounted to reflect the time value of money due to the uncertainty in estimating the timing of the expenditures, which may extend over several years.

The Company believes that it has meritorious defenses and is taking appropriate actions against such matters. While it is impossible to ascertain the ultimate legal and financial liability with respect to certain contingent liabilities and claims, the Company believes, based upon its examination of currently available information, its experience to date, and advice from legal counsel, that the individual and aggregate liabilities resulting from the ultimate resolution of these contingent matters, after taking into consideration its existing insurance coverage and amounts already provided for, will not have a material adverse impact on the Company's consolidated results of operations, financial position or cash flows.

ENVIRONMENTAL CLAIMS AND PROCEEDINGS

Hexcel has been named as a potentially responsible party with respect to several hazardous waste disposal sites that it does not own or possess, which are included on the Superfund National Priority List of the U.S. Environmental Protection Agency or on equivalent lists of various state governments. Because CERCLA provides for joint and several liability, the Company could be responsible for all remediation costs at such sites, even if it is one of many potentially responsible parties ("PRPs"). The Company believes, based on the amount and the nature of its waste, and the number of other financially viable PRPs, that its liability in connection with such matters will not be material.

Pursuant to the New Jersey Industrial Sites Recovery Act, Hexcel signed an administrative consent order and a later Remediation Agreement to pay for the environmental remediation of a manufacturing facility it owns and formerly operated in Lodi, New Jersey. The ultimate cost of remediating the Lodi site will depend on developing circumstances.

Hexcel was party to a cost-sharing agreement regarding the operation of certain environmental remediation systems necessary to satisfy a post-closure care permit issued to a previous owner of the Company's Kent, Washington site by the U.S. Environmental Protection Agency. Under the terms of the cost-sharing agreement, the Company was obligated to reimburse the previous owner for a portion of the cost of the required remediation activities. Management has determined that the cost-sharing agreement terminated in December 1998; however, the other party disputes this determination.

At its Livermore, California facility, Hexcel has received a series of notices of violation of air quality standards from the Bay Area Air Quality Management District. Hexcel has investigated and corrected the issues and has cooperated with the District.

The Company's estimate of its liability as a PRP, of the remaining costs associated with its responsibility to remediate the Lodi, New Jersey, and Kent, Washington sites and for any fines and penalties that may be assessed relating to the Livermore, California notices of violation is accrued in the accompanying consolidated balance sheets.

95

OTHER PROCEEDINGS

Hexcel is aware of a grand jury investigation being conducted by the Antitrust Division of the United States Department of Justice with respect to the carbon fiber and carbon fiber prepreg industries. The Department of Justice appears to be reviewing the pricing of all manufacturers of carbon fiber and carbon fiber prepreg since 1993. The Company, along with other manufacturers of these products, has received a grand jury subpoena requiring production of documents to the Department of Justice. Toho Tenax Co. Ltd., one of their subsidiaries and one of their employees have been indicted for obstruction of justice; Toho and its subsidiary pleaded guilty to obstruction of justice and received a combined fine of $500,000. No other indictments have been issued in the case to date. The Company is not in a position to predict the direction or outcome of the investigation; however, it is cooperating with the Department of Justice.

In 1999, Hexcel was joined in a class action lawsuit alleging antitrust violations in the sale of carbon fiber, carbon fiber industrial fabrics and carbon fiber prepreg (Thomas & Thomas Rodmakers, Inc. et. al. v. Newport Adhesives and Composites, Inc., et. al., Amended and Consolidated Class Action Complaint filed October 4, 1999, United States District Court, Central District of California, Western Division, CV-99-07796-GHK (CTx)). The Company was one of many manufacturers joined in the lawsuit, which was spawned from the Department of Justice investigation. The Court has granted the Plaintiff's motion to certify the class. Discovery is continuing. The Company is not in a position to predict the outcome of the lawsuit, but believes that the lawsuit is without merit as to the Company.

Of the eleven companies that have opted out of the class in the Thomas & Thomas Rodmakers, Inc. case, one, Horizon Sports Technologies, Inc., has filed a case on its own behalf, with similar allegations (Horizon Sports Technologies, Inc., v. Newport Adhesives and Composites, Inc., et. al., First Amended Complaint filed October 15, 2002, United States District Court, Central District of California, Southern Division, SACV 02-911 DOC (MLGX)). The Company is not in a position to predict the outcome of the lawsuit, but believes that the lawsuit is without merit as to the Company.

The Company has also been joined as a party in numerous class action lawsuits in California and in Massachusetts spawned by the Thomas & Thomas Rodmakers, Inc. class action. These actions also allege antitrust violations and are brought on behalf of purchasers located in California and in Massachusetts, respectively, who indirectly purchased carbon fiber products. The California cases have been ordered to be coordinated in the Superior Court for the County of San Francisco and are currently referred to as Carbon Fibers Cases I, II and III, Judicial Council Coordinator Proceeding Numbers 4212, 4216 and 4222. The California cases are Lazio v. Amoco Polymers Inc., et.al., filed August 21, 2000; Proiette v. Newport Adhesives and Composite, Inc. et. al., filed September 12, 2001; Simon v. Newport Adhesives and Composite, Inc. et. al., filed September 21, 2001; Badal v. Newport Adhesives and Composite, Inc. et.al., filed September 26, 2001; Yolles v. Newport Adhesives and Composite, Inc. et.al., filed September 26, 2001; Regier v. Newport Adhesives and Composite, Inc. et.al., filed October 2, 2001; and Connolly v. Newport Adhesives and Composite, Inc. et.al., filed October 4, 2001; Elisa Langsam v Newport Adhesives and Composites, Inc, et al., filed October 4, 2001; Jubal Delong et al. v Amoco Polymers, Inc. et al., filed October 26, 2001; and Louis V. Ambrosio v Amoco Polymers, Inc. et. al., filed October 25, 2001. The Massachusetts case is Ostroff v. Newport Adhesives and Composites, Inc. et. al., filed June 7, 2002 in the Superior Court Department of the Trial Court of Middlesex, Massachusetts, Civil Action No. 02-2385. The Company is not in a position to predict the outcome of these lawsuits, but believes that the lawsuits are without merit as to the Company.

In 1999, a QUI TAM case was filed under seal by executives of Horizon Sports Technologies, Inc. alleging that Boeing and other prime contractors to the United States Government and certain carbon fiber and carbon fiber prepreg manufacturers, including the Company, submitted claims for payment to the U.S. Government which were false or fraudulent because the defendants knew of the alleged conspiracy to fix prices of carbon fiber and carbon prepreg described in the above cases (Beck, on behalf of the United States of America, v. Boeing Defense and Space Group, Inc., et. al., filed July 27, 1999, in the United States District Court for the Southern District of California, Civil Action No. 99 CV 1557 JM JAH). The case was unsealed in 2002 when the U.S. advised that it was unable to decide whether to intervene in the case based on the information available to it at that time and the Relators served the Company and other defendants. The Company is not in a position to predict the outcome of the lawsuit, but believes that the lawsuit is without merit as to the Company.

96

LETTERS OF CREDIT

Letters of credit are purchased guarantees that ensure the performance or payment to third parties in accordance with specified terms and conditions. The Company had $25.9 million and $19.4 million letters of credit outstanding at December 31, 2002 and 2001, respectively, of which $11.1 million was issued in support of a loan to the Company's BHA Aero joint venture in 2001.

LOAN GUARANTEES

The Company has a contingent liability to pay DIC up to $1.5 million with respect to DHL's debt (see Note 7).

PRODUCT WARRANTY

The Company provides for an estimated amount of product warranty at the time revenue is recognized. This estimated amount is provided by product and based on historical warranty experience. Warranty expense for the years ended December 31, 2002, 2001 and 2000, and accrued warranty cost, included in "other accrued liabilities" in the consolidated balance sheets at December 31, 2002 and 2001, was as follows:

                                                                    PRODUCT
(IN MILLIONS)                                                      WARRANTIES
-------------------------------------------------------------------------------
BALANCE AS OF JANUARY 1, 2000                                      $      6.6
Warranty expense                                                          3.2
Deductions and other                                                     (4.5)
-------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2000                                    $      5.3
Warranty expense                                                          6.0
Deductions and other                                                     (6.3)
-------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2001                                    $      5.0
Warranty expense                                                          2.9
Deductions and other                                                     (3.9)
-------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2002                                    $      4.0
===============================================================================

NOTE 17 - SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information, including non-cash financing and investing activities, for the years ended December 31, 2002, 2001 and 2000, consist of the following:

(IN MILLIONS)                                                 2002             2001              2000
-------------------------------------------------------------------------------------------------------
Cash paid for:
   Interest                                             $     59.3       $     62.0        $     63.3
   Taxes                                                $      8.4       $     20.4        $     11.5
-------------------------------------------------------------------------------------------------------
Non-cash items:
   Common stock issued under incentive plans            $      2.0       $      6.6        $      4.2
-------------------------------------------------------------------------------------------------------

97

NOTE 18 - COMPREHENSIVE INCOME (Loss)

Comprehensive income (loss) represents net income (loss) and other gains and losses affecting shareholders' equity (deficit) that are not reflected in the consolidated statements of operations. The components of accumulated other comprehensive loss as of December 31, 2002 and 2001 were as follows:

(IN MILLIONS)                                                             2002              2001
-----------------------------------------------------------------------------------------------------
Currency translation adjustments                                    $         (7.5)    $       (27.1)
Minimum pension obligations                                                  (17.1)             (6.7)
Net unrealized gains (losses) on financial instruments                         3.4              (5.9)
-----------------------------------------------------------------------------------------------------
Accumulated other comprehensive loss                                $        (21.2)    $       (39.7)
=====================================================================================================

NOTE 19 - SEGMENT INFORMATION

The financial results for Hexcel's business segments have been prepared using a management approach, which is consistent with the basis and manner in which Hexcel management internally segregates financial information for the purposes of assisting in making internal operating decisions. Hexcel evaluates performance based on operating income and generally accounts for intersegment sales based on arm's-length prices. Corporate and other expenses are not allocated to the business segments, except to the extent that the expenses can be directly attributable to the business segments. Accounting principles used in the segment information are generally the same as those used for the consolidated financial statements.

As part of the Company's November 2001 restructuring program, effective January 1, 2002, management responsibility for the Company's carbon fiber product line was transferred to the Composites business segment. As a result of this change in management responsibilities, the Company changed its business segment reporting to reflect the reclassification of this product line from the Reinforcements segment to the Composites segment. The Company also changed the names of its business segments to Reinforcements, Composites and Structures. The Company's three business segments were previously known as Reinforcement Products, Composite Materials and Engineered Products. Results for the years ended December 31, 2001 and 2000 have been reclassified for comparative purposes. Hexcel's business segments and related products are as follows:

REINFORCEMENTS: This segment manufactures and sells carbon, glass and aramid fiber fabrics. These reinforcement products comprise the foundation of most composite materials, parts and structures. The segment weaves electronic fiberglass fabrics that are a substrate for printed circuit boards. All of the Company's electronics sales come from reinforcement fabric sales. This segment also sells products for industrial applications such as decorative blinds and soft body armor. In addition, this segment sells to the Company's Composites business segment, and to other third-party customers in the commercial aerospace and space and defense markets.

COMPOSITES: This segment manufactures and sells carbon fibers and composite materials, including prepregs, honeycomb, structural adhesives, sandwich panels and specially machined honeycomb parts, primarily to the commercial aerospace and space and defense markets, as well as to industrial markets. This segment also sells to the Company's Structures business segment.

STRUCTURES: This segment manufactures and sells a range of lightweight, high-strength composite structures primarily to the commercial aerospace and space and defense markets. As discussed in Note 22, the Structures business segment includes the results of the Bellingham aircraft interiors business, up to the date of its disposal on April 26, 2000. The Bellingham business manufactured and sold composite interiors to the aircraft refurbishment market.

98

The following table presents financial information on the Company's business segments as of December 31, 2002, 2001 and 2000, and for the years then ended:

                                                                                          CORPORATE/
  (IN MILLIONS)                       REINFORCEMENTS     COMPOSITES       STRUCTURES     ELIMINATIONS        TOTAL
------------------------------------------------------------------------------------------------------------------------
Third-Party Sales
     2002                              $    217.9         $      532.4    $      100.5    $        -      $      850.8
     2001                                   245.7                638.8           124.9             -           1,009.4
     2000                                   331.7                594.5           129.5             -           1,055.7
------------------------------------------------------------------------------------------------------------------------
Intersegment sales
     2002                              $     70.3         $       17.2    $          -    $    (87.5)     $          -
     2001                                    90.2                 22.7               -        (112.9)                -
     2000                                    84.1                 21.3               -        (105.4)                -
------------------------------------------------------------------------------------------------------------------------
Operating income (loss)
     2002                              $     19.6         $       65.8    $        0.4    $    (25.6)     $       60.2
     2001                                  (304.6)                37.0            (4.5)        (44.1)           (316.2)
     2000                                    42.7                 62.2             4.1         (33.6)             75.4
------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization
     2002                              $     15.4         $       29.3    $        2.4    $      0.1      $       47.2
     2001                                    26.1                 32.1             4.1           0.9              63.2
     2000                                    23.9                 28.7             4.7           1.4              58.7
------------------------------------------------------------------------------------------------------------------------
Equity in earnings (losses) of and
  write-down of an investment in
  affiliated companies
     2002                              $     (5.2)        $          -    $       (4.8)   $        -      $      (10.0)
     2001                                    (6.5)                   -            (3.0)            -              (9.5)
     2000                                     5.9                    -            (0.4)            -               5.5
------------------------------------------------------------------------------------------------------------------------
Business consolidation and
  restructuring expenses (net
  credits)
     2002                              $     (0.5)        $        1.9    $        0.2    $     (1.1)     $        0.5
     2001                                    18.8                 24.5             5.7           9.4              58.4
     2000                                    (1.4)                11.1             1.3          (0.1)             10.9
------------------------------------------------------------------------------------------------------------------------
Business consolidation and
  restructuring payments
     2002                              $      7.9         $       11.2    $        1.6    $      3.6      $       24.3
     2001                                     2.7                  7.6             0.1           1.6              12.0
     2000                                     2.2                  7.1             1.9           0.6              11.8
------------------------------------------------------------------------------------------------------------------------
Segment assets
     2002                              $    245.4         $      435.5    $       80.8    $    (53.6)     $      708.1
     2001                                   272.3                433.4           101.6         (17.9)            789.4
     2000                                   605.7                482.4           102.0          21.3           1,211.4
------------------------------------------------------------------------------------------------------------------------
Investments in affiliated companies
     2002                              $     29.2        $           -    $        4.8    $        -      $       34.0
     2001                                    47.3                    -             9.6             -              56.9
     2000                                    59.6                    -            12.5             -              72.1
------------------------------------------------------------------------------------------------------------------------
Capital expenditures
     2002                              $      4.0        $        10.4    $        0.4    $      0.1      $       14.9
     2001                                    18.0                 19.3             0.6           0.9              38.8
     2000                                    13.5                 23.3             1.1           1.7              39.6
========================================================================================================================

99

GEOGRAPHIC DATA

Net sales and long-lived assets, by geographic area, consisted of the following for the three years ended December 31, 2002, 2001 and 2000:

(IN MILLIONS)                                                 2002              2001              2000
--------------------------------------------------------------------------------------------------------
NET SALES TO EXTERNAL CUSTOMERS:
United States                                         $      479.5      $      595.1       $     650.7
                                                      --------------------------------------------------
International
  France                                                     160.6             166.8             164.6
  United Kingdom                                              60.5              71.5              75.0
  Other                                                      150.2             176.0             165.4
--------------------------------------------------------------------------------------------------------
Total international                                          371.3             414.3             405.0
--------------------------------------------------------------------------------------------------------
Total consolidated net sales                          $      850.8      $    1,009.4       $   1,055.7
--------------------------------------------------------------------------------------------------------

LONG-LIVED ASSETS:
United States                                         $      225.3      $      254.2       $     281.4
                                                      --------------------------------------------------
International
  France                                                      34.3              30.4              33.4
  United Kingdom                                              35.3              30.7              33.6
  Other                                                       31.7              29.2              26.7
--------------------------------------------------------------------------------------------------------
Total international                                          101.3              90.3              93.7
--------------------------------------------------------------------------------------------------------
Total consolidated long-lived assets                  $      326.6      $      344.5       $     375.1
========================================================================================================

Net sales are attributed to geographic areas based on the location in which the sale originated. U.S. net sales include U.S. exports to non-affiliates of $54.2 million, $72.6 million and $47.7 million, for the years ended December 31, 2002, 2001 and 2000, respectively, of which, $12.1 million for the year ended December 31, 2000 were sales attributable to the Bellingham aircraft interiors business. Long-lived assets primarily consist of property, plant and equipment and other tangible assets.

SIGNIFICANT CUSTOMERS

To the extent that the end application of net sales can be identified, The Boeing Company and its subcontractors accounted for approximately 22%, 23% and 20% of 2002, 2001 and 2000 net sales, respectively. Similarly, EADS, including Airbus and its subcontractors accounted for approximately 15%, 16% and 13% of 2002, 2001 and 2000 net sales, respectively.

NOTE 20 - LITIGATION GAIN

In 2002, the Company recognized a litigation gain of $9.8 million (net of related fees and expenses) in connection with a contract dispute with Hercules, Inc. that arose out of the acquisition of Hercules' Composites Products Division in 1996. The net cash proceeds received from Hercules Inc. of $11.1 million were in satisfaction of the judgment entered in favor of the Company after Hercules had exhausted all appeals from a lower court decision in the New York courts.

NOTE 21 - NON-RECURRING EXPENSES

In connection with the retirement of the former Chief Executive Officer, the Company recorded compensation expenses of $4.7 million in 2001 as a result of the early vesting of certain deferred compensation and equity compensation awards together with a contractual termination payment. These expenses are included in "selling, general and administrative expenses" in the consolidated statement of operations.

NOTE 22 - GAIN ON SALE OF BELLINGHAM AIRCRAFT INTERIORS BUSINESS

On April 26, 2000, Hexcel sold its Bellingham aircraft interiors business to Britax Cabin Interiors, Inc., a wholly owned subsidiary of Britax International plc, for cash proceeds of $113.3 million. The sale resulted in a pre-tax gain of $68.3 million and an after-tax gain of approximately $44.3 million (or $0.97 per diluted share). Net proceeds from the sale were used to repay $111.6 million of

100

outstanding term debt under the Company's Senior Credit Facility. The consolidated financial statements and accompanying notes reflect Bellingham's operating results as a continuing operation in the Structures business segment up to the date of disposal. Net sales and operating income for the Bellingham business were $18.9 million and $0.6 million, respectively, in 2000.

NOTE 23 - QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly financial data for the years ended December 31, 2002 and 2001, were:

                                                             FIRST          SECOND           THIRD         FOURTH
(IN MILLIONS)                                               QUARTER         QUARTER         QUARTER        QUARTER
---------------------------------------------------------------------------------------------------------------------
2002
---------------------------------------------------------------------------------------------------------------------
Net sales                                                  $    222.1     $     221.2     $    201.0     $    206.5
Gross margin                                                     39.6            44.8           37.3           39.6
Business consolidation and restructuring
  expenses (net credits)                                          0.7             0.1           (0.1)          (0.2)
Operating income                                                 13.3            19.5           15.1           12.3
Litigation gain                                                     -             9.8              -              -
Loss (gain) on early retirement of debt                             -               -           (0.5)             -
Net income (loss)                                                (9.2)            5.3           (3.6)          (6.1)
---------------------------------------------------------------------------------------------------------------------

Net income (loss) per share:
  Basic                                                    $    (0.24)    $      0.14     $    (0.09)    $    (0.16)
  Diluted                                                  $    (0.24)    $      0.14     $    (0.09)    $    (0.16)
---------------------------------------------------------------------------------------------------------------------
Market price:
  High                                                     $     4.99     $      5.40     $     4.35     $     3.15
  Low                                                      $     2.14     $      3.50     $     2.36     $     1.25
---------------------------------------------------------------------------------------------------------------------

2001
---------------------------------------------------------------------------------------------------------------------
Net sales                                                  $    276.2     $     253.5     $    240.6     $    239.1
Gross margin                                                     60.1            51.7           43.8           35.2
Business consolidation and restructuring expenses                 1.1             1.8            4.4           51.1
Impairment of goodwill and other purchased
  intangibles                                                       -               -              -          309.1
Operating income (loss) (a)                                      22.6            11.4            7.2         (357.4)
Loss (gain) on early retirement of debt                             -             3.1              -           (0.4)
Net income (loss) (a)                                             5.5           (12.6)         (12.8)        (413.8)
---------------------------------------------------------------------------------------------------------------------

Net income (loss) per share:
  Basic                                                    $     0.15     $     (0.34)    $    (0.34)    $   (10.88)
  Diluted                                                  $     0.15     $     (0.34)    $    (0.34)    $   (10.88)
---------------------------------------------------------------------------------------------------------------------
Market price:
  High                                                     $    12.40     $     12.99     $    12.69     $     4.06
  Low                                                      $     8.76     $      8.90     $     3.96     $     1.98
=====================================================================================================================

(a) Operating and net loss for the second quarter of 2001 include compensation expenses of $4.7 million in connection with the retirement of the former Chief Executive Officer (see Note 21).

Hexcel has not declared or paid cash dividends per common stock during the periods presented.

NOTE 24 - SUBSEQUENT EVENT - PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)

The unaudited pro forma consolidated balance sheet as of December 31, 2002 has been prepared to illustrate the effect of (i) the issuance of $125.0 million mandatorily redeemable convertible preferred stock, (ii) the private placement under Rule 144A of $125.0 million 9-7/8% senior secured notes, due 2008, and
(iii) the establishment of a new $115.0 million senior secured credit facility, as if the transactions had occurred as of December 31, 2002. The proceeds from the sale of mandatorily redeemable convertible preferred stock have been used to provide for the redemption of the Company's 7%

101

convertible subordinated notes, due 2003, and to repay outstanding borrowings under the existing senior credit facility. The remaining advances under the existing senior credit facility, after the application of a portion of the equity proceeds, have been repaid with the proceeds from the issuance of the Company's new 9-7/8% senior secured notes and a new senior credit facility. The transactions closed on March 19, 2003 (see Note 2).

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2002

(IN MILLIONS, EXCEPT PER SHARE DATA)                                 HISTORICAL    ADJUSTMENTS      PRO FORMA
----------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
  Cash and cash equivalents                                          $      8.2    $      4.4  (a)  $     12.6
  Accounts receivable, net                                                117.3             -            117.3
  Inventories, net                                                        113.6             -            113.6
  Prepaid expenses and other assets                                         9.2             -              9.2
----------------------------------------------------------------------------------------------------------------
  Total current assets                                                    248.3           4.4            252.7

Net property, plant and equipment                                         309.4             -            309.4
Goodwill, net                                                              74.4             -             74.4
Investments in affiliated companies                                        34.0             -             34.0
Other assets                                                               42.0           4.9             46.9
----------------------------------------------------------------------------------------------------------------

Total assets                                                         $    708.1    $      9.3       $    717.4
================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Notes payable and current maturities of capital lease              $    621.7    $   (615.5) (a)  $      6.2
  obligations
  Accounts payable                                                         54.9             -             54.9
  Accrued compensation and benefits                                        37.6             -             37.6
  Accrued interest                                                         19.1          (3.2) (a)        15.9
  Business consolidation and restructuring liabilities                     10.5             -             10.5
  Other accrued liabilities                                                35.3             -             35.3
----------------------------------------------------------------------------------------------------------------
  Total current liabilities                                               779.1        (618.7)           160.4

Long-term notes payable and capital lease obligations                         -         512.4  (a)       512.4
Long-term retirement obligations                                           48.1             -             48.1
Other non-current liabilities                                               8.3             -              8.3
----------------------------------------------------------------------------------------------------------------
  Total liabilities                                                       835.5        (106.3)           729.2
----------------------------------------------------------------------------------------------------------------

Mandatorily redeemable convertible preferred stock,
  125,000 series A shares and 125,000 series B shares
  authorized, issued and outstanding                                          -          96.4  (b)        96.4

Stockholders' equity (deficit):
  Preferred stock, no par value, 20.0 shares of stock
    authorized, no shares issued or outstanding                               -             -                -
  Common stock, $0.01 par value, 100.0 shares of stock
    authorized, shares issued of 39.8 at December 31, 2002                  0.4             -              0.4
  Additional paid-in capital                                              288.2          23.4  (b)       311.6
  Accumulated deficit                                                    (381.5)         (4.2) (c)      (385.7)
  Accumulated other comprehensive loss                                    (21.2)            -            (21.2)
----------------------------------------------------------------------------------------------------------------
                                                                         (114.1)         19.2            (94.9)
  Less- Treasury stock, at cost, 1.3 shares at December 31, 2002          (13.3)            -            (13.3)
----------------------------------------------------------------------------------------------------------------
 Total stockholders' equity (deficit)                                    (127.4)         19.2           (108.2)
----------------------------------------------------------------------------------------------------------------

Total liabilities and stockholders' equity (deficit)                 $     708.1   $      9.3       $    717.4
================================================================================================================

(a) The Company received gross proceeds of $123.7 million from the issuance of 9-7/8% senior secured notes, due 2008, after discount of $1.3 million, along with $125.0 million of gross proceeds from the issuance of mandatorily redeemable convertible preferred stock. The proceeds from the issuance of the senior secured notes, together with a portion of the proceeds from the issuance of mandatorily redeemable convertible preferred stock, were used to repay

102

$179.9 million of the Company's existing Senior Credit Facility, accrued interest of $1.8 million on the existing Senior Credit Facility as of December 31, 2002 and a portion of total estimated transaction fees and expenses of $14.3 million (which includes the preferred stock issuance expenses of $5.2 million). The remaining portion of the proceeds from the issuance of the mandatorily redeemable convertible preferred stock was remitted to US Bank Trust, trustee for the Company's 7% Convertible Subordinated Notes due August 1, 2003, for the express purpose of retiring the remaining $46.9 million of such notes and paying the accrued interest thereon of $1.4 million as of December 31, 2002. Estimated excess cash proceeds of approximately $4.4 million will be used for general corporate purposes. A substantial portion of the Company's indebtedness has been reclassified as long-term to reflect scheduled debt payments after the refinancing transactions.

(b) The Company received net proceeds of $119.8 million, after issuance expenses of $5.2 million, from the issuance of 125,000 shares of series A preferred stock and 125,000 shares of series B preferred stock. In addition, a beneficial conversion feature of $23.4 million was recognized. The beneficial conversion feature is the implicit discount on the preferred stock computed based upon the conversion to the underlying common stock at the conversion price of $3.00 per share and the average market price of Hexcel common stock on March 19, 2003 of $2.93 per share.

(c) As the result of the repayment of the existing Senior Credit Facility and the 7% convertible subordinated notes, due 2003, the Company wrote-off $4.2 million unamortized discount and capitalized debt issuance costs.

103

INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS OF BHA AERO COMPOSITE PARTS CO., LTD.
(A Sino-foreign equity joint venture established in the People's Republic of China)

We have audited the accompanying balance sheets of BHA Aero Composite Parts Co., Ltd. (the "Company") as of December 31, 2002 and 2001, and the related statements of operations, owners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the BHA Aero Composite Parts Co., Ltd. at December 31, 2002 and 2001, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company's recurring losses from operations and accumulated deficit raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The accompanying statements of operations, owners' equity and cash flows for the year ended 2000 have been complied by us in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting information that is the representation of management in the form of financial statements. We have not audited or reviewed such financial statements and, accordingly do not express an opinion or any other form of assurance on them.

/s/ Deloitte Touche Tomatsu
---------------------------

Deloitte Touche Tohmatsu
Certified Public Accountants Ltd.
Beijing, China
March 2, 2003

104

BHA AERO COMPOSITE PARTS CO., LTD.
BALANCE SHEETS

                                                                 December 31,          December 31,
                                                                     2001           2002          2002
                                                                 ------------    -----------   -----------
                                                                     RMB             RMB           US$
ASSETS

Current assets:
  Cash                                                            104,374,290      3,516,469       424,833
  Account receivable - related party                                        -      5,423,054       655,172
  Other receivables - others                                        3,150,437      1,154,352       139,460
                    - related party                                         -        364,013        43,977
  Value-added tax receivable                                          696,125      3,512,760       424,385
  Prepaid expenses                                                     59,087        139,595        16,865
  Advance to suppliers                                                 34,196      2,271,093       274,376
  Inventories                                                      12,291,162     18,354,749     2,217,480
                                                                  -----------   ------------   -----------
     Total current assets                                         120,605,297     34,736,085     4,196,548
                                                                  -----------   ------------   -----------

Property, plant and equipment, net                                260,526,689    250,780,914    30,297,430
                                                                  -----------   ------------   -----------

TOTAL ASSETS                                                      381,131,986    285,516,999    34,493,978
                                                                  ===========   ============   ===========

LIABILITIES AND OWNERS' EQUITY

Current Liabilities:
  Accounts payable - trade                                            625,138      4,002,034       483,495
                   - related party                                          -         41,221         4,980
  Other payables - others                                          32,071,673      5,233,684       632,294
                 - related parties                                  1,494,514      9,646,676     1,165,438
  Accrued expenses                                                 16,745,053     11,105,218     1,341,647
                                                                  -----------   ------------   -----------
     Total current liabilities                                     50,936,378     30,028,833     3,627,854

Long-term Liabilities:
  Deferred tax liability                                              406,000        406,000        49,050
Long-term bank loans                                              216,022,240    233,416,680    28,199,616
                                                                  -----------   ------------   -----------
     Total long-term liabilities                                  216,428,240    233,822,680    28,248,666
                                                                  -----------   ------------   -----------

     Total liabilities                                            267,364,618    263,851,513    31,876,520
                                                                  -----------   ------------   -----------

Commitments (Note 12)

Owners' Equity:
  Paid in capital                                                 165,562,762    165,562,762    20,002,025
  Accumulated losses                                              (51,795,394)  (143,897,276)  (17,384,567)
                                                                  -----------   ------------   -----------
                                                                  113,767,368     21,665,486     2,617,458
                                                                  -----------   ------------   -----------

TOTAL LIABILITIES AND OWNERS' EQUITY                              381,131,986    285,516,999    34,493,978
                                                                  ===========    ===========   ===========

See accompanying notes to financial statements.

105

BHA AERO COMPOSITE PARTS CO., LTD.
STATEMENTS OF OPERATIONS

                                              Year ended      Year ended
                                             December 31,    December 31,        Year ended December 31,
                                                 2000            2001             2002            2002
                                             ------------    ------------      -----------     -----------
                                                  RMB            RMB               RMB             US$
                                              (unaudited)
Sales                                                    -              -       14,878,101       1,797,458
Cost of sales                                            -              -      (52,441,976)     (6,335,638)
                                                ----------    -----------      -----------     -----------
Gross loss                                               -              -      (37,563,875)     (4,538,180)

Operating expenses:
  Selling, general and administrative           (3,288,193)   (49,399,753)     (46,880,099)     (5,663,694)
                                                ----------    -----------      -----------     -----------

Loss from operations                            (3,288,193)   (49,399,753)     (84,443,974)    (10,201,874)
                                                ----------    -----------      -----------     -----------

Other income (expense):
  Interest income                                        -      2,405,474          669,453          80,878
  Interest expense                                       -       (541,730)      (7,640,625)       (923,082)
  Foreign exchange loss                                  -        (79,896)        (197,930)        (23,912)
  Other                                                  -       (485,296)        (488,806)        (59,054)
                                                ----------    -----------      -----------     -----------
                                                         -      1,298,552       (7,657,908)       (925,170)
                                                ----------    -----------      -----------     -----------

Net loss before income tax provision             3,288,193     48,101,201       92,101,882      11,127,044

Income tax provision - deferred                          -        406,000                -               -
                                                ----------    -----------      -----------     -----------

Net loss                                         3,288,193     48,507,201       92,101,882      11,127,044
                                                ==========    ===========      ===========     ===========

See accompanying notes to financial statements.

106

BHA AERO COMPOSITE PARTS CO., LTD.
STATEMENTS OF OWNERS' EQUITY

                                                                                Accumulated    Total owners'
                                                             Paid-in capital      losses          equity
                                                             ---------------   ------------    -------------
                                                                  RMB                RMB              RMB
Balance, January 1, 2000 (unaudited)                            66,516,090                -      66,516,090

Capital contribution (unaudited)                                99,046,672                -      99,046,672

Net loss (unaudited)                                                     -       (3,288,193)     (3,288,193)
                                                               -----------     ------------     -----------

Balance, January 1, 2001                                       165,562,762       (3,288,193)    162,274,569

Net loss                                                                 -      (48,507,201)    (48,507,201)
                                                               -----------     ------------     -----------

Balance, December 31, 2001                                     165,562,762      (51,795,394)    113,767,368

Net loss                                                                 -      (92,101,882)    (92,101,882)
                                                               -----------     ------------     -----------

Balance, December 31, 2002                                     165,562,762     (143,897,276)     21,665,486
                                                               ===========     ============     ===========

In US$                                                          20,002,025      (17,384,567)      2,617,458
                                                               ===========     ============     ===========

See accompanying notes to financial statements.

107

BHA AERO COMPOSITE PARTS CO., LTD.
STATEMENTS OF CASH FLOWS

                                                    December 31,      December 31,               December 31,
                                                       2000               2001              2002              2002
                                                    ------------      ------------      ------------      ------------
                                                        RMB                RMB               RMB               US$
                                                    (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                             (3,288,193)       (48,507,201)      (92,101,882)      (11,127,044)
Adjustments to reconcile net loss to net
 cash provided by operating activities:
  Depreciation and amortization                         265,193          2,416,887        18,641,555         2,252,130
  Gain on disposal of fixed assets                            -                  -           101,990            12,322

CHANGES IN OPERATING ASSETS AND LIABILITIES
  Account receivable - related party                          -                  -        (5,423,054)         (655,172)
  Other receivables - others                           (632,997)        (2,517,440)        1,996,085           241,151
                    - related parties                         -                  -          (364,013)          (43,977)
  Value-added tax receivable                                  -           (696,125)       (2,816,635)         (340,284)
  Prepaid expenses                                      (59,523)               436           (80,508)           (9,726)
  Advance to suppliers                                        -            (34,196)       (2,236,897)         (270,245)
  Inventories                                                 -        (12,291,162)       (6,063,587)         (732,556)
  Accounts payable - trade                                    -            625,138         3,376,896           407,971
                   - related party                            -                  -            41,221             4,980
  Other payables - others                             7,078,763            906,489        (1,257,055)         (151,868)
                 - related parties                            -                            8,152,162           984,882
  Accrued expenses                                    1,290,756         15,454,297        (5,639,835)         (681,362)
  Deferred tax liability                                      -            406,000                 -                 -
                                                    -----------       ------------      ------------      ------------
  Net cash used in operating activities               4,653,999        (44,236,877)      (83,673,557)      (10,108,798)
                                                    -----------       ------------      ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Capital contribution                               99,046,672                  -                 -                 -
  Purchase of property, plant and equipment         (27,643,083)      (209,984,751)      (34,697,037)       (4,191,830)
  Proceeds received from disposal of fixed assets             -                  -           118,333            14,296
                                                    -----------       ------------      ------------      ------------
  Net cash used in investing activities              71,403,589       (209,984,751)      (34,578,704)       (4,177,534)
                                                    -----------       ------------      ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Bank borrowings                                             -        216,022,240        17,394,440         2,101,463
                                                    -----------       ------------      ------------      ------------
  Net cash provided by financing activities                   -        216,022,240        17,394,440         2,101,463
                                                    -----------       ------------      ------------      ------------

Net increase (decrease) in cash                      76,057,588        (38,199,388)     (100,857,821)      (12,184,870)

Cash at beginning of year                            66,516,090        142,573,678       104,374,290        12,609,703
                                                    -----------       ------------      ------------      ------------

Cash at end of year                                 142,573,678        104,374,290         3,516,469           424,833
                                                    ===========       ============      ============      ============

Supplemental Cash Flow Information
Cash paid during the year:
  Interest                                                    -          1,922,079         7,250,911           876,000
                                                    ===========       ============      ============      ============

See accompanying notes to financial statements.

108

BHA AERO COMPOSITE PARTS CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

BHA Aero Composite Parts Co., Ltd. (the "Company") was incorporated in Tianjin, the People's Republic of China ("PRC") as a Sino-foreign equity joint venture with an operation period of 22 years commencing July 8, 1999. The Company is invested by Hexcel China Holdings Corporation ("Hexcel China"), Boeing International Holdings, Ltd. ("Boeing") and China Aviation Industry Corporation ("China Aviation"). Total registered capital of the Company is US$20,000,001, which is equivalent to RMB165,562,762, and each investor has equal share in the Company.

The Company is primarily engaged in the manufacturing of aero composite parts. Major raw materials were purchased from Hexcel Corporation and all sales have been made to Hexcel Corporation, in year 2002 and 2001. Hexcel Corporation is the holding company of Hexcel China.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). This basis of accounting differs from that used in the statutory financial statements of the Company, which are required to be prepared in accordance with the accounting principles and the relevant financial regulations as established by the Ministry of Finance of the PRC ("PRC GAAP"). There was no material difference except for capitalization of borrowing cost and recognition of deferred tax.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GOING CONCERN - The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements for the year ended December 31, 2002, the Company incurred a net loss of RMB92,101,882 (US$11,127,044) and cash flows used in operating activities totaled RMB83,673,557(US$10,108,798). These factors indicate that the Company may potentially be unable to continue as a going concern.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flows to meet its obligations on a timely basis, to obtain additional financing and ultimately to attain successful operations. Management believes the Company can meet its obligations and sustain operations from a combination of additional equity and/or debt financing, which it is currently seeking, and the release of new products.

109

BHA AERO COMPOSITE PARTS CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVENTORIES - Inventories are stated at the lower of cost (weighted average) or market.

PROPERTY, PLANT AND EQUIPMENT, NET - Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed over its estimate useful life using the straight-line method as follows:

Land use rights                            Over the shorter of lease term or operation period
Buildings                                                                            20 years
Machinery and production equipment                                                   10 years
System software and related
  electronic equipment                                                                5 years
Motor vehicles                                                                        5 years

The Company constructs certain of its production equipment. In addition to costs under the construction contracts, internal costs directly related to the construction of such equipment including interest and salaries of certain employees, are capitalized. No depreciation is charged on construction in progress until the assets are operational.

IMPAIRMENT OF LONG-LIVED ASSETS - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets the Company would recognize an impairment loss. There was no impairment in the carrying value of long-lived assets at December 31, 2002 and 2001.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments consist of cash, accounts receivable, accounts payable and bank borrowings. At December 31, 2002 and 2001, the fair value of such instruments approximated their financial statements carrying amounts.

REVENUE RECOGNITION - Revenue from products sold directly to the customer is recognized upon delivery. The Company does not record a provision for estimated returns and warranty costs at the time revenue is recognized. Estimated returns and warranty costs have not been material in any period presented.

FOREIGN CURRENCIES - Transactions in currencies other than RMB are translated at the approximate rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in currencies other than RMB are translated at the rates ruling on the balance sheet date. Exchange gains and losses are taken to the statement of operations.

110

BHA AERO COMPOSITE PARTS CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CONVENIENCE TRANSLATION INTO UNITED STATES DOLLARS - The financial statements are presented in Renminbi. The translation of Renminbi amounts into United States dollars has been made for the convenience of the reader and has been made at the rate of exchange quoted by the People's Bank of China on December 31, 2002 of RMB8.2773 to US$1.00. Such translation amounts should not be construed as representations that the Renminbi amounts could be readily converted into United States dollars at that rate or any other rate.

COMPREHENSIVE LOSS - SFAS No. 130, "Reporting Comprehensive Income" requires that an enterprise report by major components and as a single total, the change in its net assets from non-owner sources. Comprehensive loss equals net loss for both years ended December 31, 2002 and 2001.

CAPITALIZATION OF INTEREST - The Company capitalized interest costs based upon the cost of capital projects in progress during 2001. Capitalized interest of RMB2,708,650 (US$327,238) in 2001, has been added to the cost of the underlying assets during the period and is amortized over the respective useful lives of the assets. Amortization expenses relating to capitalized interest for the year was RMB135,432 (US$16,362), RMB11,286 and nil (unaudited) for 2002, 2001 and 2000, respectively.

INCOME TAXES - Deferred income taxes are provided using the asset and liability method. Under this method, deferred income taxes are recognized for all significant temporary differences between the tax and financial statement bases of assets and liabilities and for net operating loss and tax credit carry forwards. The tax consequences of those differences are classified as current or non-current based upon the classification of the related asset or liability in the financial statements. A valuation allowance is provided to reduce the amount of deferred tax asset if it is considered more likely than not that some portion of, or all of, the deferred tax asset will not be realized.

USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

SEGMENT INFORMATION - The company reports segment data pursuant to SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", which establishes annual and interim reporting standards for an enterprise's business segments and related disclosures about its products, services, geographic areas and major customers. The Company operates in one reportable segments (Note 13).

111

BHA AERO COMPOSITE PARTS CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECENTLY ISSUED ACCOUNTING STANDARDS - In June 2001, the Financial Accounting Standards Board issued ("FASB") issued SFAS No.141, "Business Combinations," and SFAS No.142, "Goodwill and Other Intangible Assets." SFAS No.141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. SFAS No.142 addresses the initial recognition and measurement of intangible assets acquired outside of a business combination and the accounting for goodwill and other intangible assets subsequent to their acquisition. SFAS No.142 provides that intangible assets with indefinite useful lives will not be amortized, but will be tested at least annually for impairment. The Company did not have goodwill or other intangible assets at December 31, 2002. Consequently, the adoption of SFAS No.142, effective January 1, 2002, did not have an impact on its financial statements.

In August 2001, FASB issued SFAS No.144, "Accounting for Impairment of Disposal of Long-Lived Assets". SFAS No.144 supersedes SFAS No.121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The adoption of SFAS No.144, effective January 1, 2002, did not have an impact on its financial statements.

In June 2002, the FASB issued SFAS No.146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses accounting for restructuring and similar costs. SFAS No.146 supersedes previous accounting guidance, principally Emerging Issue Task Force Issue ("EITF") No.94-3. The Company will adopt the provisions of SFAS No.146 for restructuring activities initiated after December 31, 2002. SFAS No.146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF No.94-3, a liability for an exit cost was recognized at the date of commitment to an exit plan. SFAS No.146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS No.146 may affect the timing of recognizing future restructuring costs as well as the amounts recognized. The Company does not believe the adoption of such interpretation will have a material impact on its results of operations or financial position.

In November 2002, the FASB issued Interpretation Number 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). This interpretation requires certain disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim and annual periods after December 15, 2002 and the Company has adopted those requirements for these financial statements. The initial recognition and initial measurement requirements of FIN 45 are effective prospectively for guarantees issued or modified after December 31, 2002. The Company does not believe the adoption of such interpretation will have a material impact on its results of operations or financial position.

112

BHA AERO COMPOSITE PARTS CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest Entities." This interpretation requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. It explains how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity. This interpretation applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The Company does not believe the adoption of such interpretation will have a material impact on its results of operations or financial position.

4. INVENTORIES

                                                          December 31,            December 31,
                                                              2001             2002         2002
                                                          ------------      ----------    ---------
                                                              RMB              RMB           US$
Raw materials                                              12,291,162       13,201,120    1,594,858
Work in progress                                                    -        3,963,747      478,870
Finished goods                                                      -        1,189,882      143,752
                                                           ----------       ----------    ---------
Inventories                                                12,291,162       18,354,749    2,217,480
                                                           ==========       ==========    =========

5. PROPERTY, PLANT AND EQUIPMENT, NET

                                                            December 31,                 December 31,
                                                                2001               2002                2002
                                                            ------------        -----------         ----------
                                                                 RMB                RMB                 US$
Land use rights                                               5,092,160           5,092,237            615,205
Buildings                                                   156,098,987         161,513,897         19,512,872
Machinery and production equipment                           88,363,675          84,550,008         10,214,686
System software and related electronic equipment              7,897,039          19,515,807          2,357,750
Motor vehicles                                                2,025,789           1,534,589            185,397
                                                            -----------         -----------         ----------
                                                            259,459,650         272,206,538         32,885,910
Less: Accumulated depreciation and amortization              (2,682,079)        (21,425,624)        (2,588,480)
                                                            -----------         -----------         ----------
                                                            256,777,571         250,780,914         30,297,430
Projects under construction                                   3,749,118                   -                  -
                                                            -----------         -----------         ----------
Property, plant and equipment, net                          260,526,689         250,780,914         30,297,430
                                                            ===========         ===========         ==========

The depreciation and amortization expense for 2002, 2001 and 2000 was RMB18,641,555 (US$2,252,130), RMB2,416,887 and RMB265,193 (unaudited), respectively.

113

BHA AERO COMPOSITE PARTS CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS

6. ACCRUED EXPENSES

                                               December 31,         December 31,
                                                   2001          2002           2002
                                               ------------   ----------     ---------
                                                   RMB            RMB           US$
Interest accrual                                1,328,300      1,718,015       207,557
Payroll accrual                                12,842,780      3,661,610       442,368
Other accruals                                  2,573,973      5,725,593       691,722
                                               ----------     ----------     ---------
Accrued expenses                               16,745,053     11,105,218     1,341,647
                                               ==========     ==========     =========

7. LONG TERM BANK LOANS

As of December 31, 2002, the Company had total long term credit facilities, composed of US dollar loan and RMB loan facilities, for working capital purposes totaling US$21,333,334 and RMB88,320,000 (equivalent to US$10,670,146) expiring in May 2004 and July 2004 respectively. The US dollar loan facilities are guaranteed by Hexcel China and Boeing and the RMB loan facilities are guaranteed by China Aviation. Unused facilities was US$2,533,334 and RMB10,516,560 (equivalent to US$1,270,530) as of December 31, 2002.

                                                           December 31,          December 31,
                                                               2001          2002           2002
                                                           ------------   -----------    ----------
                                                               RMB            RMB            US$
Loans drawn down from US dollar facilities bear
  interest at rate of LIBOR plus 0.5% per annum
  (2.417% weighted average in 2002) and due in
  May 2004                                                 144,012,840    155,613,240    18,800,000
Loans drawn down from RMB facilities bear interest at
  a rate of 4.437% per annum and due in July 2004.          72,009,400     77,803,440     9,399,616
                                                           -----------    -----------    ----------
                                                           216,022,240    233,416,680    28,199,616
                                                           ===========    ===========    ==========

8. TAXATION

INCOME TAX

The Company is governed by the Income Tax Law of the PRC (the "Income Tax Laws"). Under the Income Tax Laws, companies generally are subject to income tax at an effective rate of 33% (30% state income taxes plus 3% local income taxes) on income as reported in their statutory financial statements after appropriate tax adjustments unless the enterprise is located in specially designated regions or cities for which more favorable effective rates apply.

114

BHA AERO COMPOSITE PARTS CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS

8. TAXATION - Continued

Pursuant to the Income Tax Laws, companies approved as manufacturing enterprises with operation period more than 10 years are eligible for a two-year exemption from income tax followed by a 50% reduction of income tax for the next three years. Since the Company is located in Tianjin new technology development zone, it also enjoys a reduced income tax rate at 15% with approval.

No current year tax provision has been made as the Company does not has any taxable income in 2002 and 2001.

DEFERRED TAX

Significant components of the Company's deferred income tax liabilities are as follows:

                                                          December 31,       December 31,
                                                              2001         2002       2002
                                                          ------------  ----------  ---------
                                                              RMB          RMB         US$
Deferred tax liabilities:
Interest capitalization                                     (406,000)    (406,000)   (49,050)
                                                          ------------  ----------  ---------
Total deferred tax liabilities                              (406,000)    (406,000)   (49,050)
                                                          ============  ==========  =========

Significant components of deferred income tax assets are as follows:

                                                          December 31,            December 31,
                                                             2001             2002            2002
                                                        ---------------    -----------     ----------
                                                              RMB             RMB            US$
Deferred tax assets:
Net operating loss carry forwards                                  -        12,556,000      1,516,920
Inventory valuation                                                -         1,395,000        168,533
Depreciation and amortization                              8,114,000         8,968,000      1,083,445
                                                          ----------       -----------     ----------
Total deferred tax assets                                  8,114,000        22,919,000      2,768,898
Valuation allowance                                       (8,114,000)      (22,919,000)    (2,768,898)
                                                          ----------       -----------     ----------
Total net deferred tax assets                                      -                 -              -
                                                          ==========       ===========     ==========

At December 31, 2002, the Company had tax loss carry-forwards of approximately RMB83.71 million (US$10.11 million), which expire in 2007. The utilization of the carry forwards is dependant upon the future profitability of the Company. A full valuation allowance was taken by the Company due to the uncertainties of their eventual realization.

115

BHA AERO COMPOSITE PARTS CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS

9. VALUE ADDED TAX

The Company is subject to value added tax at a rate of 17% on product sales. Value added tax payable on sales is computed net of value added tax paid on purchases for all domestic sales. For all good produced for overseas sales purpose, the Company is entitled to an exemption on value added taxes on the sales amount and conversely the input value added tax levied on the raw materials purchased is allowed to be settled with any domestic sales incurred in the future. The Company did not generate any domestic sales in 2002, 2001 and 2000 therefore the Company has not recorded any value added tax payable.

10. DISTRIBUTION OF PROFITS

As stipulated by the relevant laws and regulations applicable to China's foreign investment enterprises, the Company is required to make appropriations from net income as determined under accounting principles generally accepted in the PRC ("PRC GAAP") to non-distributable reserves which include a general reserve, an enterprise expansion reserve and a employee welfare and bonus reserve.

The general reserve is used to offset future extraordinary losses as defined under PRC GAAP. The Company may, upon a resolution passed by the owners, convert the general reserve into capital. The employee welfare and bonus reserve is used for the collective welfare of the employees of the Company. The enterprise expansion reserve is used for the expansion of the Company and can be converted to capital subject to approval by the relevant authorities. The Company did not record any reserves in 2002, 2001 and 2000 as the Company incurred loss under PRC GAAP. Therefore was not required to record such reserves.

11. RELATED PARTY TRANSACTIONS

All sales generated in 2002 were made to Hexcel Corporation. The balance related to such sales is included in account receivable - related party balance.

The Company purchases raw materials from Hexcel Corporation. Total raw materials purchased from Hexcel Corporation in 2002, 2001 and 2000 was RMB1.68 million (US$0.20 million), Nil and Nil (unaudited), respectively. The balance related to such purchases are included in accounts payable - related party balance.

Other receivables from related party represented reimbursements paid on behalf of Hexcel Corporation, which are non-interest bearing, unsecured and repayable on demand.

116

BHA AERO COMPOSITE PARTS CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS

11. RELATED PARTY TRANSACTIONS - Continued

Other payables to investors are as follows:

                                  December 31,         December 31,
                                      2001          2002          2002
                                  ------------    ---------    ---------
                                      RMB           RMB           US$
Royalty fee payables:
    Hexcel Corporation                       -       80,559        9,733
    Boeing                                   -       40,279        4,866
China Aviation                               -       60,419        7,299
                                  ------------    ---------    ---------
                                             -      181,257       21,898
                                  ------------    ---------    ---------

Temporary advance:
    Hexcel Corporation                 275,991      275,991       33,344
                                  ------------    ---------    ---------

Reimbursements:
    Hexcel Corporation               1,218,523    7,139,157      862,498
    Boeing                                -       2,050,271      247,698
                                  ------------    ---------    ---------
                                     1,218,523    9,189,428    1,110,196
                                  ------------    ---------    ---------
                                     1,494,514    9,646,676    1,165,438
                                  ============    =========    =========

The reimbursements represents salaries and related benefits paid by the investors on behalf of the Company.

Pursuant to the royalty agreements signed between the Company and the investors. Royalty fee is calculated based on a fixed percentage of the cash collection of the Company's annual sales and is payable on a semi-annual basis. Accordingly, the Company has recorded RMB181,257 (US$21,898) in 2002 and Nil in 2001, and 2000 in royalty expenses.

At December 31, 2002 and 2001, the investors have guaranteed the Company's bank credit facilities and bank borrowings.

12. COMMITMENTS

Operating lease - As of December 31, 2002, the Company was committed under certain operating leases, requiring annual rental expense as follows:

                                         RMB         US$
2003                                  2,727,000    329,455
2004                                    365,000     44,097
                                      ---------    -------
                                      3,092,000    373,552
                                      =========    =======

117

BHA AERO COMPOSITE PARTS CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS

12. COMMITMENTS - Continued

The rent expense in 2002, 2001 and 2000 was RMB3,889,533 (US$469,904), RMB3,250,379 and RMB274,443 (unaudited), respectively.

Commitments - at December 31, 2002, the Company had purchase commitments to purchase machinery and equipment for approximately RMB200,000 (US$24,000) from a third party by April 30, 2003.

13. SEGMENT REPORTING

SFAS No. 131 requires disclosures regarding products and services, geographic areas, and major customers. The Company operates in one reportable segment. For the year ended December 31, 2002, the Company recorded revenue from a customer from the United States.

The Company generates revenue from one segment, products for aero composite parts. The Company's business activities and accounts receivable are with a sole customer, Hexcel Corporation. The Company will maintain allowances for estimated potential bad debt losses and will revise its estimates of collectibility on a periodic basis. There is no history of bad debt experience with Hexcel Corporation and collection of receivable is reasonably assured.

The Company's business growth is dependent on demand from Hexcel corporation. The slow down of airline industry globally will have a material adverse effect on the Company's business. The Company's customer base is concentrated and the loss of Hexcel Corporation could cause the Company's business to suffer.

14. EMPLOYEE RETIREMENT BENEFITS AND POST- RETIREMENT BENEFITS

The Company's employees in the PRC are entitled to retirement benefits calculated with reference to their basic salaries on retirement and their length of service in accordance with a government managed benefit plan. The government is responsible for the benefit liability to these retired employees. The Company has to contribute to the fund based on 25.7% of the employees' basic monthly salaries. The expense of such arrangements to the Company was approximately RMB1,187,111 (US$143,418), RMB764,406 and RMB50,158 (unaudited) for the years ended December 31, 2002, 2001 and 2000, respectively. The Company is not obligated under any other post-retirement plans and does not provide any post-employment benefits.

118

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of Hexcel Corporation:

Our audits of the consolidated financial statements referred to in our report dated February 28, 2003, except for Notes 2 and 8 which are as of March 19, 2003, appearing in this Annual Report on Form 10-K/A to Stockholders of Hexcel Corporation also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K/A. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Stamford, Connecticut

February 28, 2003, except for Notes 2 and 8 which are as of March 19, 2003

119

SCHEDULE II

HEXCEL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS

                                                    BALANCE AT     CHARGED                     BALANCE
                                                    BEGINNING     (CREDITED)    DEDUCTIONS    AT END OF
(IN MILLIONS)                                        OF YEAR      TO EXPENSE    AND OTHER       YEAR
--------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2002
  Allowance for doubtful accounts                   $      8.5     $   (0.9)    $   (2.5)      $   5.1
  Allowance for obsolete and unmarketable
    inventory                                             25.1           7.6       (11.4)         21.3
  Valuation allowance for deferred tax asset             185.0           8.5       (26.1)        167.4

YEAR ENDED DECEMBER 31, 2001
  Allowance for doubtful accounts                   $      7.0     $     3.4    $   (1.9)      $   8.5
  Allowance for obsolete and unmarketable
    inventory                                             30.7           6.3       (11.9)         25.1
  Valuation allowance for deferred tax asset               6.2         180.3        (1.5)        185.0

YEAR ENDED DECEMBER 31, 2000
  Allowance for doubtful accounts                   $      5.7     $     0.7    $    0.6       $   7.0
  Allowance for obsolete and unmarketable
    inventory                                             28.7          17.7       (15.7)         30.7
  Valuation allowance for deferred tax asset               6.4          (0.1)       (0.1)          6.2

120

EXHIBIT 3.2

CERTIFICATE OF AMENDMENT OF THE
RESTATED CERTIFICATE OF INCORPORATION OF
HEXCEL CORPORATION


Pursuant to Section 242 of the General Corporation Law of the State of Delaware

Hexcel Corporation, a Delaware Corporation (the "Corporation"), does hereby certify as follows:

FIRST: Article 4 of the Corporation's Restated Certificate of Incorporation is hereby amended to read in its entirety as set forth below:

4. CAPITALIZATION.

The total number of shares which the Corporation is authorized to issue is 220,000,000, consisting of 20,000,000 shares of Preferred Stock, without par value (hereinafter in this Certificate of Incorporation called the "Preferred Stock"), and 200,000,000 shares of Common Stock with a par value of $0.01 per share (hereinafter in this Certificate called the "Common Stock").

SECOND: The foregoing amendment was duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, Hexcel Corporation has caused this Certificate to be duly executed in its corporate name this 19th day of March, 2003.

HEXCEL CORPORATION

By:    /s/ David E. Berges
       ----------------------
Name:  David E. Berges
Title: Chairman, Chief Executive
         Officer and President


EXHIBIT 3.3

BYLAWS OF HEXCEL CORPORATION
A DELAWARE CORPORATION
AMENDED AND RESTATED AS OF MARCH 19, 2003

OFFICES

1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office of the Corporation is hereby fixed and located at 2 Stamford Plaza, Stamford, Connecticut. The Board of Directors is hereby granted full power and authority to change the place of said principal executive office from time to time.

2. OTHER OFFICES. The registered office of the Corporation in the State of Delaware is hereby fixed and located at 1209 Orange Street, Wilmington, Delaware, c/o The Corporation Trust Company. The Board of Directors is hereby granted full power and authority to change the place of said registered office within the State of Delaware from time to time. The Corporation may also have offices in such other places in the United States or elsewhere as the Board of Directors may from time to time designate or as the business of the Corporation may from time to time require.

STOCKHOLDERS

3. PLACE OF MEETINGS. Stockholders' meetings shall be held at such place, whether within or without the State of Delaware, as the Board of Directors shall, by resolution, designate.

4. ANNUAL MEETINGS. Annual meetings of stockholders shall be held on such dates and at such times as shall be designated from time to time by the Board of Directors and stated in the notice of such annual meeting. At such annual meetings directors shall be elected and such other business as may be properly brought before such meeting shall be conducted.

Written notice of each annual meeting shall be mailed to or delivered to each stockholder of record entitled to vote thereat not less than ten (10) days nor more than sixty (60) days before the date of such annual meeting. Such notice shall specify the place, the day, and the hour of such meeting, and the matters which the Board of Directors intends to present for action by the stockholders.

Except to the extent, if any, specifically provided to the contrary in the Certificate of Incorporation or these Bylaws, to be properly brought before an annual meeting, all business must be either (a) specified in the notice of annual meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the annual meeting by or at the direction of the Board of


Directors or (c) otherwise properly brought before the annual meeting by a stockholder of record who complies with the notice procedures set forth below. In addition to any other applicable requirements, for business (including the nomination of a person or persons for election to the Board of Directors) to be properly brought before any annual meeting by a stockholder, the stockholder must have given timely notice thereof, in proper form, to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting; PROVIDED, HOWEVER, that in the event the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the date on which notice of the date of the annual meeting was mailed or otherwise made public. To be in proper form, a stockholder's notice to the Secretary must be in writing and must set forth with respect to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of the stockholder proposing such business, (c) the class or series and number of shares of the capital stock of the Corporation that are owned beneficially or of record by the stockholder, (d) as to each person whom the stockholder proposes to nominate for election to the Board of Directors, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person and (iii) the class or series and number of shares of capital stock of the Corporation that are owned beneficially or of record by the person, (e) a description of all arrangements or understandings between such stockholder and any other person or persons (including their name(s)) in connection with the proposal of such business (or the nomination of any person or persons for election to the Board of Directors) by any stockholder and any material interest of such stockholder in such business (or nomination), (f) any other information that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies for the proposal (or the election of a person or persons to the Board of Directors) pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder if such stockholder were engaged in such a solicitation and (g) a representation that such stockholder or a representative thereof intends to appear in person at the annual meeting to bring such business before the meeting (or nominate a person or persons for election to the Board of Directors). Any such notice relating to the nomination of a person or persons for election to the Board of Directors must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

The Chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 4 and any such business not properly brought before the meeting shall not be transacted at the meeting.

5. SPECIAL MEETINGS. Special meetings of the stockholders may be called at any time and for any purpose or purposes by the Board of Directors, the Chairman of the Board, the

2

Chief Executive Officer or by a committee of the Board of Directors which has been duly designated by the Board of Directors and whose powers and authority, as provided in a resolution of the Board of Directors or in these Bylaws, include the power to call such meetings. If and to the extent that any special meeting of stockholders may be called by any other person or persons specified in any provision of the Certificate of Incorporation or any amendment thereto, or any certificate filed under Section 151(g) of the General Corporation Law of the State of Delaware (the "GCL") designating the number of shares of Preferred Stock to be issued and the rights, preferences, privileges and restrictions granted to and imposed on the holders of such designated Preferred Stock, then such special meeting may also be called by such person or persons in the manner, at the times and for the purposes so specified. Except in special cases where other express provision is made by statute, notice of such special meeting shall be given in the same manner as for an annual meeting of stockholders. Such notice shall also specify the general nature of the business to be transacted at the meeting, and no business shall be transacted at the special meeting except as specified in such notice (or any supplement thereto).

6. ADJOURNED MEETINGS AND NOTICE THEREOF. Any stockholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the chairman of such meeting or by the vote of a majority of the shares present in person or represented by proxy at such meeting, but in the absence of a quorum no other business may be transacted at such meeting.

Notice of an adjourned meeting need not be given if (a) the meeting is adjourned for thirty (30) days or less, (b) the time and place of the adjourned meeting are announced at the meeting at which the adjournment is taken, and (c) no new record date is fixed for the adjourned meeting. Otherwise, notice of the adjourned meeting shall be given as if the adjourned meeting were a new meeting.

7. VOTING. Except as otherwise provided by applicable law, the Certificate of Incorporation, any certificate filed under Section 151(g) of the GCL or these Bylaws, a stockholder shall be entitled to one vote for each share held of record on the record date fixed for the determination of the stockholders entitled to notice of and to vote at a meeting or, if no such date is fixed, the date determined in accordance with applicable law. If any share is entitled to more or less than one vote on any matter, all references herein to a majority or other proportion of shares shall refer to a majority or other proportion of the voting power of shares entitled to vote on such matter.

8. QUORUM. A majority of the outstanding shares entitled to vote, represented in person or by proxy, shall constitute a quorum for the transaction of business. No business may be transacted at a meeting in the absence of a quorum other than the adjournment of such meeting, except that if a quorum is present at the commencement of a meeting, business may be transacted until the meeting is adjourned even though the withdrawal of stockholders results in less than a quorum being present in person or by proxy at such meeting. If a quorum is present at a meeting, the affirmative vote of a majority of the shares present or represented by proxy at the meeting and

3

entitled to vote on any matter shall be the act of the stockholders unless the vote of a larger number is required by applicable law, the Certificate of Incorporation or these Bylaws. If a quorum is present at the commencement of a meeting but the withdrawal of stockholders results in less than a quorum being present in person or by proxy at such meeting, the affirmative vote of a majority of the shares required to constitute a quorum shall be the act of the stockholders unless the vote of a larger number is required by applicable law, the Certificate of Incorporation or these Bylaws.

9. PROXIES. A stockholder may be represented at any meeting of stockholders by a written proxy signed by the person entitled to vote or by such person's duly authorized attorney-in-fact. A proxy must bear a date within three
(3) years prior to the meeting, unless the proxy specifies a different length of time. A revocable proxy is revoked by a writing delivered to the Secretary of the Corporation stating that the proxy is revoked or by a subsequent proxy executed by, or by attendance at the meeting and voting in person by, the person executing the proxy.

10. CHAIRMAN AND SECRETARY AT MEETINGS. At any meeting of stockholders, the Chairman of the Board of Directors, or in his absence, a person designated by the Board of Directors, shall preside at and act as chairman of the meeting. The Secretary, or in his absence a person designated by the chairman of the meeting, shall act as secretary of the meeting.

11. INSPECTORS. The Board of Directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath to faithfully execute the duties of inspector. The inspector(s) shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares present or represented by proxy at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, count and tabulate all votes, ballots or consents, determine the results of any election or vote, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. At the request of the chairman of the meeting, the inspectors shall make a written report of any matters determined by them. No director or candidate for the office of director shall act as an inspector of an election of directors.

12. LIST OF STOCKHOLDERS. The Secretary of the Corporation shall prepare and make, at least ten (10) days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the

4

meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

DIRECTORS

13. POWERS. Subject to any limitations contained in the Certificate of Incorporation, these Bylaws or the GCL as to actions to be authorized or approved by the stockholders, and subject to the duties of directors as prescribed by these Bylaws, all corporate powers shall be exercised by or under the ultimate direction of, and the business and affairs of the Corporation shall be managed by, or under the ultimate direction of, the Board of Directors.

14. CERTAIN DEFINITIONS. For purposes of these Bylaws:

AN "AFFILIATE" of any Person means any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person. "CONTROL" has the meaning specified in Rule 12b-2 under the Exchange Act as in effect on March 19, 2003.

Any person shall be deemed to "BENEFICIALLY OWN", to have "BENEFICIAL OWNERSHIP" of, or to be "BENEFICIALLY OWNING" any securities (which securities shall also be deemed "BENEFICIALLY OWNED" by such Person) that such Person is deemed to "beneficially own" within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act, as in effect on March 19, 2003; PROVIDED, THAT, except for the rights set forth in Section 3.02 of the Governance Agreement or in Section 3.02 of the Stockholders Agreement, any Person shall be deemed to Beneficially Own any securities that such Person has the right to acquire, whether or not such right is exercisable immediately.

"BERKSHIRE/GREENBRIAR ADDITIONAL SHARES" means, as of any date of determination, shares of the Corporation's Common Stock the Beneficial Ownership of which may be acquired by the Berkshire/Greenbriar Investors pursuant to grants of stock options or other stock-based awards to the Berkshire/Greenbriar Directors by the Corporation pursuant to any stock option or stock incentive plan approved by the Board of Directors of the Corporation, including without limitation the Hexcel Incentive Stock Plan.

"BERKSHIRE/GREENBRIAR DIRECTORS" means Berkshire/Greenbriar Nominees who are elected or appointed to serve as members of the Board of Directors.

"BERKSHIRE/GREENBRIAR INVESTORS" means any of (i) Berkshire Fund V, Limited Partnership, a Massachusetts limited partnership ("Berkshire V"), (ii) Berkshire Fund VI, Limited Partnership, a Massachusetts limited partnership ("Berkshire VI"), (iii) Berkshire Investors LLC, a Massachusetts limited liability company ("Berkshire Investors"), (iv) Berkshire Fund V Investment Corp., a Massachusetts corporation ("Berkshire V Investment Corp.") (for so long as it Beneficially Owns Voting

5

Securities), (v) Berkshire Fund VI Investment Corp., a Massachusetts corporation ("Berkshire VI Investment Corp.") (for so long as it Beneficially Owns Voting Securities), (vi) Greenbriar Co-Investment Partners, L.P., a Delaware limited partnership ("Greenbriar Co-Investment"), (vii)Greenbriar Equity Fund, L.P., a Delaware limited partnership ("Greenbriar Fund"), or (viii) any investment entity controlled or under common control with either of Berkshire Partners LLC or Greenbriar Equity Group, LLC; PROVIDED, HOWEVER, that any such Person specified in clause (viii) that desires to acquire Voting Securities in accordance with the Stockholders Agreement shall, as a condition to acquiring any such Voting Securities, execute a joinder agreement in which it shall agree to be bound by the provisions of the Stockholders Agreement to the same extent as the Berkshire/Greenbriar Investors and shall thereafter be deemed to be an "Investor" for all purposes of the Stockholders Agreement unless such Person does not hold any Voting Securities.

"BERKSHIRE/GREENBRIAR NOMINEES" means such Persons as are so designated by the Berkshire/Greenbriar Investors, as such designations may change from time to time, to serve as members of the Board of Directors pursuant to Sections 17 and 18.

"BUYOUT TRANSACTION" means a tender offer, merger or any similar transaction that offers holders of Voting Securities (other than, if applicable, the Person proposing such transaction) the opportunity to dispose of the Voting Securities Beneficially Owned by such holders or otherwise contemplates the acquisition by any Person or Group of Voting Securities that would result in Beneficial Ownership by such Person or Group of a majority of the Voting Securities outstanding, or a sale of all or substantially all of the Corporation's assets.

"COMMON STOCK" means the common stock of the Corporation, par value $0.01 per share, and any equity securities issued or issuable in exchange for or with respect to such common stock by way of a stock dividend, stock split or combination of shares or in connection with a reclassification, recapitalization, merger, consolidation or other reorganization.

"CONVERTIBLE PREFERRED STOCK" means, collectively, the Series A Convertible Preferred Stock and the Series B Convertible Preferred Stock.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

"GOLDMAN ADDITIONAL SHARES" means, as of any date of determination, up to 255,381 shares of Common Stock (as equitably adjusted to reflect any stock split, combination, reorganization, recapitalization, reclassification or other similar event involving the Common Stock), in the aggregate, (i) the Beneficial Ownership of which may be acquired inadvertently from time to time by The Goldman Sachs Group, Inc. or its Affiliates acting in connection with their activities as a broker or dealer registered under Section 15 of the Exchange Act or as an asset manager (excluding

6

Affiliates formed for the purpose of effecting principal transactions) or (ii) the Beneficial Ownership of which may be acquired by the Goldman Investors pursuant to grants of stock options or other stock-based awards to the Goldman Directors by the Corporation pursuant to any stock option or stock incentive plan approved by the Board of Directors of the Corporation, including without limitation the Hexcel Incentive Stock Plan; PROVIDED, that if and for so long as The Goldman Sachs Group, Inc. and its Affiliates collectively Beneficially Own less than 30% of the Total Voting Power of the Corporation, the maximum number of Goldman Additional Shares shall be 400,000 (as equitably adjusted to reflect any stock split, combination, reorganization, recapitalization, reclassification or other similar event involving the Common Stock).

"GOLDMAN DIRECTORS" means Goldman Nominees who are elected or appointed to serve as members of the Board of Directors.

"GOLDMAN INVESTORS" means any of (i) the LXH Investors, (ii) the Limited Partnerships, or (iii) The Goldman Sachs Group, Inc. or any direct or indirect Subsidiary of the Goldman Sachs Group, Inc. formed for the purpose of effecting principal transactions; PROVIDED, HOWEVER, that any such Person specified in clause (iii) that desires to acquire Voting Securities in accordance with the Governance Agreement shall, as a condition to acquiring any such Voting Securities, execute a joinder agreement in which it shall agree to be bound by the provisions of the Governance Agreement to the same extent as the Goldman Investors and shall thereafter be deemed to be an "Investor" for all purposes of the Governance Agreement unless such Person does not hold any Voting Securities.

"GOLDMAN NOMINEES" means such Persons as are so designated by the Goldman Investors, as such designations may change from time to time, to serve as members of the Board of Directors pursuant to Sections 17 and 18.

"GOVERNANCE AGREEMENT" means the Amended and Restated Governance Agreement, dated as of March 19, 2003, among LXH, L.L.C., a Delaware limited liability company ("LXH"), LXH II, L.L.C., a Delaware limited liability company ("LXH II" and together with LXH, the "LXH Investors"), GS Capital Partners 2000 L.P., a Delaware limited partnership ("GS 2000"), GS Capital Partners 2000 Offshore, L.P., a Cayman Islands exempted limited partnership ("GS 2000 Offshore"), GS Capital Partners 2000 Employee Fund, L.P., a Delaware limited partnership ("GS 2000 Employee"), GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, a German limited partnership ("GS 2000 Germany"), Stone Street Fund 2000, L.P., a Delaware limited partnership ("Stone Street" and, collectively with GS 2000, GS 2000 Offshore, GS 2000 Employee and GS 2000 Germany, the "Limited Partnerships"), and the Corporation.

"GOVERNMENTAL ENTITY" means any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof.

"GROUP" has the meaning set forth in Section 13(d) of the Exchange Act as in

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effect on March 19, 2003.

"HEXCEL INCENTIVE STOCK PLAN" means the Hexcel Corporation Incentive Stock Plan, as amended and restated through March 19, 2003 and any subsequent amendment thereto or replacement thereof approved by the Board of Directors of the Corporation.

"INDEPENDENT DIRECTOR" means a director of the Corporation who is not an Investors' Director and who (i) is not and has never been an officer, employee, partner or director of any of the Investors or their respective Affiliates or associates (as defined in Rule 12b-2 under the Exchange Act), in each case other than the Corporation and (ii) has no affiliation or compensation, consulting or contractual relationship with any of the Investors or their respective Affiliates or associates (in each case other than the Corporation) such that a reasonable person would regard such director as likely to be unduly influenced by any of such Persons or any of their respective Affiliates or associates (in each case other than the Corporation).

"INITIAL BERKSHIRE/GREENBRIAR SHARES" means (i) the 77,875 shares of Series A Convertible Preferred Stock purchased by the Berkshire/Greenbriar Investors pursuant to the Stock Purchase Agreement, dated December 18, 2002, by and among the Corporation and the Berkshire/Greenbriar Investors (the "Berkshire/Greenbriar Purchase Agreement"), (ii) the 77,875 shares of Series B Convertible Preferred Stock purchased by the Berkshire/Greenbriar Investors pursuant to the Berkshire/Greenbriar Purchase Agreement and (iii) any shares of the Corporation's Common Stock issuable upon conversion of the shares of Series A Convertible Preferred Stock or Series B Convertible Preferred Stock (as equitably adjusted to reflect any stock split, combination, reorganization, recapitalization, reclassification or other similar event involving the Common Stock or Convertible Preferred Stock, as applicable).

"INITIAL GOLDMAN SHARES" means (i) the 47,125 shares of Series A Convertible Preferred Stock purchased by the Limited Partnerships pursuant to the Stock Purchase Agreement, dated December 18, 2002, by and among the Corporation and the Limited Partnerships (the "Goldman Purchase Agreement"),
(ii) the 47,125 shares of Series B Convertible Preferred Stock purchased by the Limited Partnerships pursuant to the Goldman Purchase Agreement and (iii) any shares of the Corporation's Common Stock issuable upon conversion of the shares of Series A Convertible Preferred Stock or Series B Convertible Preferred Stock (as equitably adjusted to reflect any stock split, combination, reorganization, recapitalization, reclassification or other similar event involving the Common Stock or Convertible Preferred Stock, as applicable).

"INVESTORS" means the Berkshire/Greenbriar Investors and the Goldman Investors.

"INVESTORS' DIRECTORS" means Berkshire/Greenbriar Directors and Goldman Directors.

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"INVESTORS' NOMINEES" means Berkshire/Greenbriar Nominees and Goldman Nominees.

"NON-BERKSHIRE/GREENBRIAR DIRECTOR" means a director of the Corporation who is not a Berkshire/Greenbriar Director and who (i) is not and has never been an officer, employee, partner or director of any of the Berkshire/Greenbriar Investors or their Affiliates or associates (as defined in Rule 12b-2 under the Exchange Act), in each case other than the Corporation, and (ii) has no affiliation or compensation, consulting or contractual relationship with any of the Berkshire/Greenbriar Investors or their Affiliates or associates (in each case other than the Corporation) such that a reasonable person would regard such director as likely to be unduly influenced by any of such Persons or any of their Affiliates or associates (in each case other than the Corporation)

"NON-GOLDMAN DIRECTOR" means a director of the Corporation who is not a Goldman Director and who (i) is not and has never been an officer, employee, partner or director of any of the Goldman Investors or their Affiliates or associates (as defined in Rule 12b-2 under the Exchange Act), in each case other than the Corporation, and (ii) has no affiliation or compensation, consulting or contractual relationship with any of the Goldman Investors or their Affiliates or associates (in each case other than the Corporation) such that a reasonable person would regard such director as likely to be unduly influenced by any of such Persons or any of their Affiliates or associates (in each case other than the Corporation)

"NYSE" means the New York Stock Exchange.

"ORIGINAL GOLDMAN SHARES" means the 14,561,000 shares of Common Stock Beneficially Owned by the Goldman Investors on March 19, 2003 (as equitably adjusted to reflect any stock split, combination, reorganization, recapitalization, reclassification or other similar event involving the Common Stock).

"PERSON" means any individual, Group, corporation, firm, partnership, joint venture, trust, business association, organization, Governmental Entity or other entity.

"SERIES A CONVERTIBLE PREFERRED STOCK" means the Series A Convertible Preferred Stock, without par value, of the Corporation.

"SERIES B CONVERTIBLE PREFERRED STOCK" means the Series B Convertible Preferred Stock, without par value, of the Corporation.

"SIGNIFICANT SUBSIDIARY" has the meaning set forth in Rule 1-02 of Regulation S-X under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder as in effect on March 19, 2003.

"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement, dated as of March 19, 2003, among the Berkshire/Greenbriar Investors and the

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Corporation.

"SUBSIDIARY" means, with respect to any Person, as of any date of determination, any other Person as to which such Person owns, directly or indirectly, or otherwise controls, more than 50% of the voting shares or other similar interests.

"TOTAL VOTING POWER OF THE CORPORATION" means the total number of votes that may be cast in the election of directors of the Corporation if all Voting Securities outstanding or treated as outstanding pursuant to the final two sentences of this definition were present and voted at a meeting held for such purpose. The percentage of the Total Voting Power of the Corporation Beneficially Owned by any Person is the percentage of the Total Voting Power of the Corporation that is represented by the total number of votes that may be cast in the election of directors of the Corporation by Voting Securities Beneficially Owned by such Person. In calculating such percentage, each share of Convertible Preferred Stock shall be outstanding or shall be treated as outstanding for all purposes of this Agreement without regard to the Person holding such share until such time as such share of Convertible Preferred Stock is redeemed or repurchased by the Company or converted into Common Stock in accordance with the Certificate of Designations of the Series A Convertible Preferred Stock or the Certificate of Designations of the Series B Convertible Preferred Stock, as applicable. In calculating such percentage, the Voting Securities Beneficially Owned by any Person that are not outstanding but are subject to issuance upon exercise or exchange of rights of conversion or any options, warrants or other rights Beneficially Owned by such Person shall be deemed to be outstanding for the purpose of computing the percentage of the Total Voting Power of the Corporation represented by Voting Securities Beneficially Owned by such Person, but shall not be deemed to be outstanding for the purpose of computing the percentage of the Total Voting Power of the Corporation represented by Voting Securities Beneficially Owned by any other Person.

"VOTING SECURITIES" means the Common Stock, the Convertible Preferred Stock and any other securities of the Corporation or any Subsidiary of the Corporation entitled to vote generally in the election of directors of the Corporation or such Subsidiary of the Corporation.

15. NUMBER OF DIRECTORS. (a) Except as provided in Subsection 6.1 of the Certificate of Incorporation and subject to compliance with Section 17, the authorized number of directors of this Corporation shall be not less than three (3) nor more than fifteen (15), with the exact number of directors within such range specified in subsection (b) below, or, if not so specified, with the exact number of directors within such range fixed from time to time by resolution of the Board of Directors.

(b) It is hereby specified that this Corporation shall have ten (10) directors, one of whom shall be designated the Chairman of the Board. The Chairman of the Board shall be designated by a majority of the members of the Board of Directors.

16. ELECTION. (a) Directors shall hold office until the annual meeting next following their election and until their successors are nominated, elected

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and qualified pursuant to these Bylaws; subject, however, to their prior resignation, death or removal as provided by the Certificate of Incorporation, these Bylaws or applicable law.

Subject to the Certificate of Incorporation and Subsections (b), (c),
(d) and (e) hereof, any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the number of directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, even if less than a quorum; and any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be elected and qualified or until their earlier death, resignation or removal.

(b) If at any time a member of the Board of Directors resigns (pursuant to this Section 16 or otherwise) or is removed in accordance with applicable law or these By-laws, a new member shall be designated to replace such member until the next election of directors. If, consistent with Section 17, the replacement director is to be (i) a Berkshire/Greenbriar Director, the party that designated such Berkshire/Greenbriar Director shall designate the replacement Berkshire/Greenbriar Director or (ii) a Goldman Director, the party that designated such Goldman Director shall designate the replacement Goldman Director. Except as set forth in paragraph (d) below, if consistent with Section 17, the replacement director is to be a Director other than an Investors' Director, the remaining Independent Directors shall designate the replacement director.

(c) Subject to paragraph (d) below, if at any time (i) the number of Berkshire/Greenbriar Nominees entitled to be nominated to the Board of Directors in accordance with these Bylaws in an election of directors presented to stockholders would decrease, within 10 days thereafter the Berkshire/Greenbriar Investors shall cause a sufficient number of Berkshire/Greenbriar Directors to resign from the Board of Directors so that the number of Berkshire/Greenbriar Directors on the Board of Directors after such resignation(s) equals the number of Berkshire/Greenbriar Nominees that the Berkshire/Greenbriar Investors would have been entitled to designate had an election of directors taken place at such time. The Berkshire/Greenbriar Investors shall also cause a sufficient number of Berkshire/Greenbriar Directors to resign from any relevant committees of the Board of Directors so that such committees are comprised in the manner contemplated by Section 19 after giving effect to such resignations, or (ii) the number of Goldman Nominees entitled to be nominated to the Board of Directors in accordance with these Bylaws in an election of directors presented to stockholders would decrease, within 10 days thereafter the Goldman Investors shall cause a sufficient number of Goldman Directors to resign from the Board of Directors so that the number of Goldman Directors on the Board of Directors after such resignation(s) equals the number of Goldman Nominees that the Goldman Investors would have been entitled to designate had an election of directors taken place at such time. The Goldman Investors shall also cause a sufficient number of Goldman Directors to resign from any relevant committees of the Board of Directors so that such committees are comprised in the manner contemplated by Section 19 after giving effect to such resignations. Any vacancies created by the resignations required by this Subsection (c) shall be filled by Independent Directors.

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(d) If at any time the percentage of the Total Voting Power of the Corporation Beneficially Owned by the Berkshire/Greenbriar Investors or the Goldman Investors decreases as a result of an issuance of Voting Securities by the Corporation (other than any of the issuances described in the last sentence of this Section 16(d)), such Investors may notify the Corporation that such Investors intend to acquire a sufficient amount of additional Voting Securities necessary to maintain their then current level of Board of Directors representation within 90 days. In such event, until the end of such period (and thereafter if such Investors in fact restore their percentage of the Total Voting Power of the Corporation during such period and provided that such Investors continue to maintain the requisite level of Beneficial Ownership of Voting Securities in accordance with Section 17) the Board of Directors shall continue to have the number of Berkshire/Greenbriar Directors or Goldman Directors, as applicable, that corresponds to the percentage of the Total Voting Power of the Corporation Beneficially Owned by such Investors prior to such issuance of Voting Securities by the Corporation. Notwithstanding any provision in the Governance Agreement or the Stockholders Agreement to the contrary, the provisions of this Section 16(d) shall not apply to any issuance of Voting Securities (x) upon conversion of any convertible securities which are either outstanding on, March 19 2003 (including, without limitation, issuances of securities upon any payment of dividends on, redemption of, or otherwise payable with respect to the Series A Convertible Preferred Stock or Series B Convertible Preferred Stock) or approved by the Board of Directors or a duly authorized committee of the Board of Directors after March 19, 2003 in accordance with
Section 2.06 of the Governance Agreement and with Section 2.06 of the Stockholders Agreement or (y) pursuant to employee or director stock option or incentive compensation or similar plans outstanding as of March 19, 2003 or, subsequent to March 19, 2003, approved by the Board of Directors or a duly authorized committee of the Board of Directors.

(e) Whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at any annual or special meeting of stockholders, the election, term of office, filling of vacancies, removal and other features of such directorships shall be governed by the terms of the Certificate of Incorporation applicable thereto, and by the terms of any certificate filed pursuant to Section 151(g) of the GCL designating such class or series and the rights, preferences, privileges and restrictions granted to and imposed on the holders of such designated Preferred Stock.

17. BOARD REPRESENTATION. (a) (i) For so long as the Berkshire/Greenbriar Investors Beneficially Own 15% or more of the Total Voting Power of the Corporation, subject to Sections 16(d) and 17(a)(iv), the Corporation shall exercise all authority under applicable law to cause any slate of directors presented to stockholders for election to the Board of Directors to consist of such nominees that, if elected, would result in the Board of Directors consisting of two Berkshire/Greenbriar Directors and eight Non-Berkshire/Greenbriar Directors (including at least five Independent Directors); PROVIDED, HOWEVER, that in the event the Total Voting Power of the Corporation Beneficially Owned by the Berkshire/Greenbriar Investors at any time is below 15% of the Total Voting Power of the Corporation, the Berkshire/Greenbriar Investors shall have

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no further right to nominate two Directors pursuant to this Section 17(a)(i); PROVIDED, FURTHER, that if the Berkshire/Greenbriar Investors, directly or indirectly, during the term of the Stockholders Agreement shall have sold, transferred or otherwise disposed of, on a cumulative basis, Beneficial Ownership of shares of Common Stock and/or Convertible Preferred Stock together representing 66 2/3% or more of the Total Voting Power of the Corporation represented by the Initial Berkshire/Greenbriar Shares as of March 19, 2003, to Persons who are not Berkshire/Greenbriar Investors, then the Corporation shall exercise all authority under applicable law to cause any slate of directors presented to stockholders for election to the Board of Directors to consist of such nominees that, if elected, would result in the Board of Directors consisting of one Berkshire/Greenbriar Director and nine Non-Berkshire/Greenbriar Directors (including at least six Independent Directors).

(ii) For so long as the Berkshire/Greenbriar Investors Beneficially Own less than 15% but at least 10% of the Total Voting Power of the Corporation, subject to Sections 16(d) and 17(a)(iv), the Corporation shall exercise all authority under applicable law to cause any slate of directors presented to stockholders for election to the Board of Directors to consist of such nominees that, if elected, would result in the Board of Directors consisting of one Berkshire/Greenbriar Director and nine Non-Berkshire/Greenbriar Directors (including at least six Independent Directors); PROVIDED, HOWEVER, that in the event the Total Voting Power of the Corporation Beneficially Owned by the Berkshire/Greenbriar Investors at any time is below 10% of the Total Voting Power of the Corporation, the Berkshire/Greenbriar Investors shall have no further right to nominate one Berkshire/Greenbriar Director pursuant to this Section 17(a)(ii).

(iii) Berkshire/Greenbriar Additional Shares shall not be included in any calculation of the Berkshire/Greenbriar Investors' Beneficial Ownership of the Total Voting Power of the Corporation under these Bylaws.

(iv) Notwithstanding anything in these By-Laws, the Corporation may increase the size of the Board of Directors through the appointment of one or more additional independent directors (as such term is used in the NYSE listing requirements) in order to comply with any applicable law, regulation or NYSE rule; PROVIDED, THAT, in the event of any such change, the Corporation will use its commercially reasonable best efforts to give the Berkshire/Greenbriar Investors the right to nominate, as nearly as possible, that proportion of the directors as permitted by the terms of Sections 17(a)(i) and 17(a)(ii). Any director appointed to the Board of Directors pursuant to the first clause of this Section 17(a)(iv) shall be selected by a majority of the Independent Directors and shall be an Independent Director. Each of the Berkshire/Greenbriar Investors shall perform any and all actions as reasonably requested by the Corporation in order for the Board of Directors to be changed pursuant to this Section 7(a)(iv).

(b)(i) For so long as the Goldman Investors Beneficially Own 20% or more of the Total Voting Power of the Corporation, subject to Sections 16(d) and

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17(b)(vi), the Corporation shall exercise all authority under applicable law to cause any slate of directors presented to stockholders for election to the Board of Directors to consist of such nominees that, if elected, would result in the Board of Directors consisting of three Goldman Directors and seven Non-Goldman Directors (including at least five Independent Directors); PROVIDED, HOWEVER, that if the Goldman Investors, directly or indirectly, during the term of the Governance Agreement shall have sold, transferred or otherwise disposed of, on a cumulative basis, Beneficial Ownership of shares of Common Stock and/or Convertible Preferred Stock together representing 33 1/3% or more of the Total Voting Power of the Corporation represented by the aggregate number of Original Goldman Shares and Initial Goldman Shares as of March 19, 2003 to Persons that are not Goldman Investors, then the Corporation shall exercise all authority under applicable law to cause any slate of directors presented to stockholders for election to the Board of Directors to consist of such nominees that, if elected, would result in the Board of Directors consisting of two Goldman Directors and eight Non-Goldman Directors
(including at least six Independent Directors)

(ii) For so long as the Goldman Investors Beneficially Own less than 20% but at least 15% of the Total Voting Power of the Corporation, subject to Sections 16(d) and 17(b)(vi), the Corporation shall exercise all authority under applicable law to cause any slate of directors presented to stockholders for election to the Board of Directors to consist of such nominees that, if elected, would result in the Board of Directors consisting of two Goldman Directors and eight Non-Goldman Directors (including at least six Independent Directors); PROVIDED, HOWEVER, that if the Goldman Investors, directly or indirectly, during the term of the Governance Agreement shall have sold, transferred or otherwise disposed of, on a cumulative basis, Beneficial Ownership of shares of Common Stock and/or Convertible Preferred Stock together representing 66 2/3% or more of the Total Voting Power of the Corporation represented by the aggregate number of Original Goldman Shares and Initial Goldman Shares as of the March 19, 2003 to Persons that are not Goldman Investors, then the Corporation shall exercise all authority under applicable law to cause any slate of directors presented to stockholders for election to the Board of Directors to consist of such nominees that, if elected, would result in the Board of Directors consisting of one Goldman Director and nine Non-Goldman Directors (including at least seven Independent Directors).

(iii) For so long as the Goldman Investors Beneficially Own less than 15% but at least 10% of the Total Voting Power of the Corporation, subject to Sections 16(d) and 17(b)(vi), the Corporation shall exercise all authority under applicable law to cause any slate of directors presented to stockholders for election to the Board of Directors to consist of such nominees that, if elected, would result in the Board of Directors consisting of one Goldman Director and nine Non-Goldman Directors (including at least seven Independent Directors).

(iv) In order to determine (x) the number of Goldman Nominees to be included in any slate of directors to be presented to stockholders for election to the Board of Directors and (y) the percentage of the Total Voting Power of the

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Corporation Beneficially Owned by the Goldman Investors for purposes of
Section 20, the Goldman Investors shall be deemed to Beneficially Own a percentage of the Total Voting Power of the Corporation that is no more than (1) 39.3% of the Total Voting Power of the Corporation less (2) the percentage of the Total Voting Power of the Corporation represented by any Voting Securities disposed of, directly or indirectly, by the Goldman Investors to Persons that are not Goldman Investors since March 19, 2003.

(v) The Goldman Additional Shares shall not be included in any calculation of the Goldman Investors' Beneficial Ownership of the Total Voting Power of the Corporation under these Bylaws.

(vi) Notwithstanding anything in these By-Laws, the Corporation may increase the size of the Board of Directors through the appointment of one or more additional independent directors (as such term is used in the NYSE listing requirements) in order to comply with any applicable law, regulation or NYSE rule; PROVIDED, THAT, in the event of any such change, the Corporation will use its commercially reasonable best efforts to give the Goldman Investors the right to nominate, as nearly as possible, that proportion of the directors as permitted by the terms of Sections 17(b)(i), 17(b)(ii) and 17(b)(iii). Any director appointed to the Board of Directors pursuant to the first clause of this Section 17(b)(vi) shall be selected by a majority of the Independent Directors and shall be an Independent Director. Each of the Goldman Investors shall perform any and all actions as reasonably requested by the Corporation in order for the Board of Directors to be changed pursuant to this Section 17(b)(vi).

18. DESIGNATION OF SLATE. Any Berkshire/Greenbriar Nominees or Goldman Nominees that are included in a slate of directors pursuant to Section 17 shall be designated by the Berkshire/Greenbriar Investors, in accordance with the Stockholders Agreement, on the one hand, or the Goldman Investors, in accordance with the Governance Agreement, on the other hand, respectively. Any Non-Berkshire/Greenbriar Director nominees and any Non-Goldman Director nominees who are to be included in any slate of directors pursuant to Section 17 shall be designated by majority vote of the then incumbent Directors who are not Investors' Directors (including the Chairman of the Board if he or she is an Independent Director). The Corporation's nominating committee, if any (or if there is no such nominating committee, the Board of Directors or any other duly authorized committee thereof) shall nominate each person so designated.

19. COMMITTEE MEMBERSHIP. (i) So long as the Berkshire/Greenbriar Investors shall be entitled to designate two Berkshire/Greenbriar Nominees for election to the Board of Directors, the finance, compensation, nominating, audit and any other committee of the Board of Directors shall consist of at least one Berkshire/Greenbriar Director; PROVIDED, HOWEVER, that if no Berkshire/Greenbriar Director is eligible for membership on an above-listed committee under then-applicable listing standards of the NYSE or any other applicable law, rule or regulation, then such committee of the Board of Directors shall include a Berkshire/Greenbriar Director only

15

when so permitted by the listing standards of the NYSE or any other applicable law, rule or regulation; PROVIDED, FURTHER, that the Corporation shall exercise all authority under applicable law, rule and regulation to permit the inclusion of any Berkshire/Greenbriar Director designated by the Berkshire/Greenbriar Investors on such committee, including, without limitation, causing an increase in the number of directors on such committee and (ii) so long as the Goldman Investors shall be entitled to designate two or more Goldman Nominees for election to the Board of Directors, the finance, compensation, nominating, audit and any other committee of the Board of Directors shall consist of at least one Goldman Director; PROVIDED, HOWEVER, that if no Goldman Director is eligible for membership on an above-listed committee under then-applicable listing standards of the NYSE or any other applicable law, rule or regulation, then such committee of the Board of Directors shall include a Goldman Director only when so permitted by the listing standards of the NYSE or any other applicable law, rule or regulation; PROVIDED, FURTHER, that the Corporation shall exercise all authority under applicable law, rule and regulation to permit the inclusion of any Goldman Director designated by the Goldman Investors on such committee, including, without limitation, causing an increase in the number of directors on such committee. To the extent that (i) Berkshire/Greenbriar Directors are not eligible for membership on the finance committee, compensation committee, nominating committee, audit committee and/or other committees of the Board of Directors, the Berkshire/Greenbriar Investors shall be entitled to designate a representative to attend and observe such committee meetings, provided that the observation is not prohibited by applicable listing standards, laws, rules or regulations, and (ii) Goldman Directors are not eligible for membership on the finance committee, compensation committee, nominating committee, audit committee and/or other committees of the Board of Directors, the Goldman Investors shall be entitled to designate a representative to attend and observe such committee meetings, provided that the observation is not prohibited by applicable listing standards, laws, rules or regulations.

20. APPROVALS. The Board of Directors shall not authorize, approve or ratify any of the following actions without the approval of (i) a majority of the Berkshire/Greenbriar Investors' Directors for so long as and at any time the Berkshire/Greenbriar Investors Beneficially Own 15% or more of the Total Voting Power of the Corporation, and, if the Berkshire/Greenbriar Investors' percentage Beneficial Ownership of the Total Voting Power of the Corporation is reduced below 15% by an issuance of Voting Securities by the Corporation, no such authorization, approval or ratification shall be given by the Board of Directors without the approval of a majority of the Berkshire/Greenbriar Directors (x) until 10 business days after the Corporation notifies the Berkshire/Greenbriar Investors in writing of such issuance, and (y) if the Berkshire/Greenbriar Investors shall have notified the Corporation within 10 business days after their receipt of a written notification of such issuance that the Berkshire/Greenbriar Investors, pursuant to the option granted to the Berkshire/Greenbriar Investors by Section 3.02 of the Stockholders Agreement, intend to acquire a sufficient amount of Voting Securities within such 90-day period referred to therein, so that the Berkshire/Greenbriar Investors will Beneficially Own at least 15% of the Total Voting Power of the Corporation by the end of such 90-day period subject to Section 16(d), during the 90-day period following an issuance of Voting Securities by the Corporation that causes the Berkshire/Greenbriar Investors to Beneficially Own less than

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15% of the Total Voting Power of the Corporation and (ii) a majority of the Goldman Directors for so long as and at any time (subject to the provisions of Sections 17(b)(vi)) the Goldman Investors Beneficially Own 15% or more of the Total Voting Power of the Corporation and, if the Goldman Investors' percentage Beneficial Ownership of the Total Voting Power of the Corporation is reduced below 15% by an issuance of Voting Securities by the Corporation, no such authorization, approval or ratification shall be given by the Board of Directors without the approval of a majority of the Goldman Directors (x) until 10 business days after the Corporation notifies the Goldman Investors in writing of such issuance, and (y) if the Goldman Investors shall have notified the Corporation within 10 business days after their receipt of a written notification of such issuance that the Goldman Investors, pursuant to the option granted to the Goldman Investors by Section 3.02 of the Governance Agreement, intend to acquire a sufficient amount of Voting Securities within such 90-day period referred to therein, so that the Goldman Investors will Beneficially Own at least 15% of the Total Voting Power of the Corporation by the end of such 90-day period subject to Section 16(d), during the 90-day period following an issuance of Voting Securities by the Corporation that causes the Goldman Investors to Beneficially Own less than 15% of the Total Voting Power of the Corporation:

(a) any merger, consolidation, acquisition or other business combination involving the Corporation or any Subsidiary of the Corporation (other than a Buyout Transaction) if the value of the consideration to be paid or received by the Corporation and/or its stockholders in any such individual transaction or in such transaction when added to the aggregate value of the consideration paid or received by the Corporation and/or its stockholders in all other such transactions approved by the Board of Directors during the immediately preceding 12 months exceeds the greater of (x) $75 million or (y) 11% of the Corporation's total consolidated assets;

(b) any sale, transfer, assignment, conveyance, lease or other disposition or any series of related dispositions of any assets, business or operations of the Corporation or any of its Subsidiaries (other than a Buyout Transaction) if the value of the assets, business or operations so disposed during the immediately preceding 12 months exceeds the greater of (x) $75 million or (y) 11% of the Corporation's total consolidated assets; or

(c) any issuance by the Corporation or any Significant Subsidiary of the Corporation of equity or equity-related securities (other than
(i) pursuant to customary employee or director stock option or incentive compensation or similar plans approved by the Board of Directors or a duly authorized committee of the Board of Directors, (ii) pursuant to transactions solely among the Corporation and its wholly owned Subsidiaries (including any Subsidiaries which would be wholly owned by the Corporation but for the issuance of directors' or shareholders' qualifying shares), (iii) upon conversion of convertible securities or upon exercise of warrants or options, which convertible securities, warrants or options are either outstanding on March 19, 2003 (including, without limitation, issuances of securities upon any payment of dividends on, redemption of, or otherwise payable with respect to the Series A Convertible Preferred Stock or the Series B Convertible Preferred Stock), or approved by the Board of

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Directors or a duly authorized committee of the Board of Directors after March 19, 2003, in accordance with Section 2.06 of the Governance Agreement and
Section 2.06 of the Stockholders Agreement, or (iv) in connection with any mergers, consolidations, acquisitions or other business combinations involving the Corporation or any Subsidiary of the Corporation which are approved by the Board of Directors or a duly authorized committee of the Board of Directors in accordance with Section 2.06 of the Governance Agreement and Section 2.06 of the Stockholders Agreement (if either is applicable)) for which the consideration received by the Corporation for such transactions during the immediately preceding 12 months exceeds $25 million.

21. NONEXCLUSIVITY. The Goldman Investors' and the Berkshire/Greenbriar Investors' rights under Sections 14, 15, 16, 17, 18, 19, and 20 shall not be deemed exclusive of any rights related to similar matters to which the Goldman Investors and the Berkshire/Greenbriar Investors may be entitled under these Bylaws, the Certificate of Incorporation, any agreement (including the Governance Agreement and the Stockholders Agreement) or otherwise.

22. QUORUM AND REQUIRED VOTE. Six (6) of the directors then in office, including at least two Independent Directors, shall constitute a quorum for the transaction of business. Except as otherwise provided by the Certificate of Incorporation or these Bylaws, every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the Board of Directors. Subject to Section 3.03 of the Governance Agreement and Section 3.03 of the Stockholders Agreement, as applicable, for so long as there are any Goldman Directors or Berkshire/Greenbriar Investors Directors serving on the Board of Directors, the Board of Directors shall not authorize, approve or ratify any action, at a meeting of the Board of Directors, by written consent or otherwise, without the approval of a minimum of six (6) members of the Board of Directors, of which at least two (2) of such six (6) members shall be Independent Directors, or in the event that the Board of Directors shall consist of less than six (6) members due to vacancies on the Board of Directors, the approval of all members of the Board of Directors, shall be required for authorization, approval or ratification of any action.

23. REMOVAL. Except as provided in the Certificate of Incorporation and in Section 16 hereof, a director may be removed from office at any time, with or without cause, by the affirmative vote of the holders of a majority of the outstanding shares entitled to vote at an election of directors. No reduction in the number of directors shall have the effect of removing any director prior to the expiration of his term.

24. RESIGNATION. Any director may resign by giving written notice to the Chairman of the Board, the Chief Executive Officer, the Secretary or the Board of Directors. Such resignation shall be effective when given unless the notice specifies a later time. The resignation shall be effective regardless of whether it is accepted by the Corporation.

25. COMPENSATION. If the Board of Directors so resolves, the directors, including the Chairman of the Board, shall receive compensation and expenses

18

of attendance at meetings of the Board of Directors and committees of the Board of Directors. Nothing herein shall preclude any director from serving the Corporation in another capacity and receiving compensation for such service.

26. COMMITTEES. Subject to Section 19, the Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the Board of Directors. In the absence or disqualification of any member of a committee of the Board of Directors, the other members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may, subject to Section 19, unanimously appoint another member of the Board of Directors to act in the place of such absent or disqualified member. The Board of Directors may, subject to
Section 19, designate one or more directors as alternate members of a committee who may replace any absent member at any meeting of the committee. To the extent permitted by resolution of the Board of Directors, a committee may exercise all of the authority of the Board of Directors to the extent permitted by Section 141(c) of the GCL.

27. TIME AND PLACE OF MEETINGS AND TELEPHONE MEETINGS. Immediately following each annual meeting of stockholders (or at such other time and place as may be determined by the Board of Directors), the Board of Directors shall hold a regular meeting for purposes of organizing the Board of Directors, electing officers, appointing committees and transacting other business. The Board of Directors may establish by resolution the times, if any, that other regular meetings of the Board of Directors shall be held. All meetings of directors shall be held at the principal executive office of the Corporation or at such other place, whether within or without the State of Delaware, as shall be designated in the notice for the meeting or in a resolution of the Board of Directors. Directors may participate in a meeting through use of conference telephone or similar communications equipment, so long as all directors participating in such meeting can hear each other.

28. CALL. Meetings of the Board of Directors, whether regular or special, may be called by the Chairman of the Board, the Chief Executive Officer, the Secretary or any two directors.

29. NOTICE. Regular meetings of the Board of Directors may be held without notice if the date and time of such meetings have been fixed by the Board of Directors. Special meetings shall be held upon four days' notice by mail, 24 hours notice delivered personally or by telephone, telegraph or confirmed fax or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate under the circumstances. Regular meetings shall be held upon similar notice if notice is required for such meetings. Neither a notice nor a waiver of notice need specify the purpose of any regular or special meeting. Notice sent by mail, telegram or fax shall be addressed to a director at his business or home address/fax number as shown upon the records of the Corporation, or at such other address/fax number as the director specifies in writing delivered to the Corporation, or if such an address/fax number is not so shown on such records and no written instructions have been received from the director, at the place at

19

which meetings of directors are regularly held. Such mailing, telegraphing, delivery or transmittal, as above provided, shall be due, legal and personal notice to such director. If a meeting is adjourned for more than 24 hours, notice of the adjourned meeting shall be given prior to the time of such meeting to the directors who were not present at the time of the adjournment.

30. MEETING WITHOUT REGULAR CALL AND NOTICE. The transaction of business at any meeting of the Board of Directors, however called and noticed or wherever held, is as valid as though transacted at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes of the meeting. For such purposes, a director shall not be considered present at a meeting if, although in attendance at the meeting, the director protests the lack of notice prior to the meeting or at its commencement.

31. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all of the members of the Board of Directors individually or collectively consent in writing to such action. In addition, all directors (including those who are not members of a particular committee) shall receive notice of, and shall be entitled to attend, all meetings of any committee of the Board of Directors. Only those directors who are members of a particular committee shall be entitled to vote at meetings thereof.

32. COMMITTEE MEETINGS. The principles set forth in Sections 27 through 31 of these Bylaws shall also apply to committees of the Board of Directors and to actions taken by such committees.

33. HONORARY ADVISORS TO THE BOARD. The Board of Directors may appoint one or more Honorary Advisors, who shall hold such position for such period, shall have such authority and perform such duties as the Board of Directors may specify, subject to change at any time by the Board of Directors. An Honorary Advisor to the Board of Directors shall not be a director for any purpose or with respect to any provision of the Certificate of Incorporation, these Bylaws or of the GCL, and shall have no vote as a director. However, an Honorary Advisor to the Board of Directors may receive such compensation and expense reimbursement as the Board of Directors shall from time to time determine.

OFFICERS

34. TITLES AND RELATION TO BOARD OF DIRECTORS. The officers of the Corporation shall include a Chief Executive Officer, a President and a Secretary. The Board of Directors may also choose a Chairman of the Board, one or more Vice Chairmen of the Board, a Chief Operating Officer, a Chief Financial Officer, a General Counsel, a Treasurer, and one or more Vice Presidents (who may be designated Executive or Senior Vice Presidents), Assistant Secretaries, Assistant Treasurers or other officers. All officers shall perform their duties and exercise their powers subject to the direction of the Chief Executive Officer and the overriding direction of the Board of

20

Directors. If there shall occur a vacancy in any office, in the absence of the appointment of a replacement by the Board of Directors, the Chief Executive Officer shall have the right and power to appoint a Secretary, a Treasurer, a Chief Operating Officer, a Chief Financial Officer, a General Counsel, one or more additional Vice Presidents (who may be designated Executive or Senior Vice Presidents), one or more Assistant Secretaries and one or more Assistant Treasurers, all of whom shall serve at the pleasure of the Board of Directors, and shall perform their duties and exercise their powers subject to the direction of the Chief Executive Officer and the overriding direction of the Board of Directors. Any number of offices may be held simultaneously by the same person.

35. ELECTION, TERM OF OFFICE AND VACANCIES. At its regular annual meeting, the Board of Directors shall choose the officers of the Corporation. The officers shall hold office until their successors are chosen, except that the Board of Directors may remove any officer at any time. Subject to Section 34 of these Bylaws, if an office becomes vacant for any reason, the vacancy shall be filled by the Board of Directors.

36. RESIGNATION. Any officer may resign at any time upon written notice to the Corporation without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party. Such resignation shall be effective when given unless the notice specifies a later time. The resignation shall be effective regardless of whether it is accepted by the Corporation.

37. COMPENSATION. The Board of Directors shall fix the compensation of the Chairman of the Board, any Vice Chairman, the Chief Executive Officer and the President and may fix the salaries of other employees of the Corporation including the other officers. If the Board of Directors does not fix the salaries of the other officers, the Chief Executive Officer shall fix such salaries.

38. CHAIRMAN OF THE BOARD. The Chairman of the Board shall, if present, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these Bylaws.

39. CHIEF EXECUTIVE OFFICER. Unless otherwise determined by the Board of Directors, the Chief Executive Officer shall be deemed general manager of the Corporation. The Chief Executive Officer shall effectuate orders and resolutions of the Board of Directors and exercise such other powers and perform such other duties as the Board of Directors shall from time to time prescribe.

40. PRESIDENT AND VICE PRESIDENTS. Unless otherwise determined by the Board of Directors, in the absence or disability of the Chief Executive Officer, the President, and in the absence or disability of the President, the Vice President (who may be designated Executive or Senior Vice President), if any, or if more than one, the Vice Presidents (who may be designated Executive or Senior Vice Presidents) in order of their rank as fixed by the Board of Directors or, if not so ranked, the Vice President (who may be designated Executive or Senior Vice President) designated by the

21

Board of Directors, shall perform all the duties of the Chief Executive Officer, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Chief Executive Officer. The President and Vice Presidents (who may be designated Executive or Senior Vice Presidents) shall have such other powers and perform such other duties as from time to time may be prescribed for them by the Board of Directors or these Bylaws.

41. SECRETARY. The Secretary (or in his absence an Assistant Secretary or, if there be no Assistant Secretaries, another person designated by the Board of Directors) shall have the following powers and duties:

(a) RECORD OF CORPORATE PROCEEDINGS. The Secretary shall attend all meetings of the Board of Directors and its committees and shall record all votes and the minutes of such meetings in a book to be kept for that purpose at the principal executive office of the Corporation or at such other place as the Board of Directors may determine. The Secretary shall keep at the Corporation's principal executive office the original or a copy of these Bylaws, as amended from time to time.

(b) RECORD OF SHARES. Unless a transfer agent is appointed by the Board of Directors to keep a share register, the Secretary shall keep at the principal executive office of the Corporation a share register showing the names of the stockholders and their addresses, the number and class of shares held by each, the number and date of certificates issued, and the number and date of cancellation of each certificate surrendered for cancellation.

(c) NOTICES. The Secretary shall give such notices as may be required by law or these Bylaws.

(d) ADDITIONAL POWERS AND DUTIES. The Secretary shall exercise such other powers and perform such other duties as the Board of Directors or the Chief Executive Officer shall from time to time prescribe.

42. TREASURER. Unless otherwise determined by the Board of Directors, the Treasurer of the Corporation shall be its chief financial officer, and shall have custody of the corporate funds and securities and shall keep adequate and correct accounts of the Corporation's properties and business transactions. The Treasurer shall disburse such funds of the Corporation as may be ordered by the Board of Directors or by one or more persons authorized by the Board of Directors, taking proper vouchers for such disbursements, and when requested shall render to the Chief Executive Officer, the Board of Directors and, if applicable, the Chief Financial Officer, an account of all transactions and the financial condition of the Corporation and shall exercise such other powers and perform such other duties as the Board of Directors, the Chief Executive Officer or, if applicable, the Chief Financial Officer shall prescribe.

43. OTHER OFFICERS AND AGENTS. Such other officers and agents as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The

22

Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

SHARES

44. CERTIFICATES. Every stockholder shall be entitled to have a certificate or certificates certifying the number and class of shares of the capital stock of the Corporation owned by him. All such certificates shall be signed in the manner prescribed in the GCL. Any signature on such certificates may be a facsimile signature. The Board of Directors shall have the power to appoint one or more transfer agents and/or registrars for the transfer or registration of certificates of stock of any class, and may require stock certificates to be countersigned or registered by one or more of such transfer agents and/or registrars.

45. TRANSFERS OF SHARES OF CAPITAL STOCK. Transfers of shares shall be made only upon the transfer books of the Corporation, kept at the office of the Corporation or transfer agents and/or registrars designated by the Board of Directors. Before any new certificate is issued, the old certificate shall be surrendered for cancellation.

46. STOCKHOLDERS OF RECORD. Only stockholders of record shall be entitled to be treated by the Corporation as the holders in fact of the shares standing in their respective names and the Corporation shall not be bound to recognize any equitable or other claim to or interest in any share of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by law.

47. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may cause a new stock certificate to be issued in place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed. The Corporation may, at its discretion and as a condition precedent to such issuance, require the owner of such certificate to deliver an affidavit stating that such certificate was lost, stolen or destroyed, or to give the Corporation a bond or other security sufficient to indemnify it against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction or the issuance of a new certificate.

48. STOCKHOLDERS RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of and to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall be not more than sixty (60) days nor less than ten (10) days before the date of such meeting. A determination of stockholders of record entitled to notice of and to vote at a meeting of

23

stockholders shall apply to any adjournment of the meeting, PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the adjourned meeting, and shall fix a new record date for such adjourned meeting if the adjourned meeting is to take place more than thirty (30) days from the date set for the original meeting.

49. DIVIDENDS. Subject to the provisions of the Certificate of Incorporation and the GCL, the Board of Directors may, out of funds legally available therefor, declare dividends upon the stock of the Corporation. Before the declaration of any dividend, the Board of Directors may set apart, out of any funds of the Corporation available for dividends, such sum or sums as from time to time in its discretion may be deemed proper for working capital or as a reserve fund to meet contingencies or for such other purposes as shall be deemed conducive to the interests of the Corporation.

AMENDMENTS

50. ADOPTION OF AMENDMENTS. The Board of Directors is authorized and empowered from time to time in its discretion to make, alter, amend or repeal these Bylaws, except as such power may be restricted or limited by the GCL; PROVIDED, HOWEVER, that the provisions set forth in Sections 14, 16(a)-(d), 17, 18, 19, 20 or this Section 50 shall not be amended or repealed unless the Investors shall have consented thereto in writing. Notwithstanding the foregoing
(i) those provisions of Sections 14, 16(b)-(d), 17, 18, 19, 20 and the proviso in the preceding sentence of this Section 50 pertaining to the Berkshire/Greenbriar Investors shall be automatically repealed and cease to have any force or effect on the date upon which the Berkshire/Greenbriar Investors' rights under the Stockholders Agreement terminate pursuant to the terms of such agreement and (ii) those provisions of Sections 14, 16(b)-(d), 17, 18, 19, 20 and the proviso in the preceding sentence of this Section 50 pertaining to the Goldman Investors shall be automatically repealed and cease to have any force or effect on the date upon which the Goldman Investors' rights under the Governance Agreement terminate pursuant to the terms of such agreement

51. RECORD OF AMENDMENTS. Whenever an amendment or new bylaw is adopted, it shall be copied in the book to be kept for that purpose at the principal executive office of the Corporation or at such other place as the Board of Directors may determine. If any bylaw is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or written consent with respect thereto was filed shall be stated in said book.

CORPORATE SEAL

52. FORM OF SEAL. The corporate seal shall be circular in form, and shall have inscribed thereon the name of the Corporation, the date of its incorporation and the word "Delaware".

MISCELLANEOUS

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53. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for payment of money, notes, or other evidences of indebtedness, issued in the name of or payable by or to the Corporation, shall be signed or endorsed by the Chief Executive Officer, the President, the Chief Financial Officer, the Treasurer or such other person or persons as may from time to time be so authorized in accordance with a resolution of the Board of Directors.

54. CONTRACTS, ETC.; HOW EXECUTED. Except as otherwise provided in these Bylaws, the Chief Executive Officer, the President, any Vice President (who may be designated Executive or Senior Vice President) or Treasurer, or such other officer or officers as may from time to time be so authorized in accordance with a resolution of the Board of Directors, shall have the power and authority to sign and execute on behalf of the Corporation deeds, conveyances and contracts, and any and all other documents requiring execution by the Corporation. The Board of Directors may authorize any other officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.

55. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The Chief Executive Officer, the President or any Vice President (who may be designated Executive or Senior Vice President) or the Secretary or Assistant Secretary of the Corporation are authorized to vote, represent, and exercise on behalf of the Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the Corporation. The authority herein granted to said officers to vote or represent on behalf of the Corporation any and all shares held by the Corporation in any other corporation or corporations may be exercised either by such officers in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officers.

56. INSPECTION OF BYLAWS. The Corporation shall keep in its principal office for the transaction of business the original or a copy of these Bylaws as amended or otherwise altered to date, certified by the Secretary, which shall be open to inspection by the stockholders at all reasonable times during office hours.

57. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

58. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise requires, the general provisions, rules and construction, and definitions contained in the GCL shall govern the construction of these Bylaws. Without limiting the generality of the foregoing, the masculine gender includes the feminine and neuter, the singular number includes the plural and the plural number includes the singular, and the term "person" includes a corporation or other entity or organization as well as a natural person.

59. SEVERABILITY. If any provision of these Bylaws is determined to be invalid, void, illegal or unenforceable, the remaining provisions of these Bylaws

25

shall continue to be valid and enforceable and shall in no way be affected, impaired or invalidated thereby.

26

EXHIBIT 4.4


HEXCEL CORPORATION

and each of the Guarantors named herein

9.875% SENIOR SECURED NOTES DUE 2008


INDENTURE

Dated as of March 19, 2003



Wells Fargo Bank Minnesota, National Association

Trustee



CROSS-REFERENCE TABLE*

TRUST INDENTURE
ACT SECTION                                                                  INDENTURE SECTION
310(a)(1).................................................................             7.10
   (a)(2).................................................................             7.10
   (a)(3).................................................................             N.A.
   (a)(4).................................................................             N.A.
   (a)(5).................................................................             7.10
   (b)....................................................................             7.10
   (c)....................................................................             N.A.
311(a)....................................................................             7.11
   (b)....................................................................             7.11
   (c)....................................................................             N.A.
312(a)....................................................................             2.05
   (b)....................................................................            12.03
   (c)....................................................................            12.03
313(a)....................................................................             7.06
   (b)(1).................................................................             4.21
   (b)(2).................................................................          7.06; 7.07
   (c)....................................................................         7.06; 12.02
   (d)....................................................................             7.06
314(a)....................................................................      4.03;12.02; 12.05
   (b)....................................................................             4.21
   (c)(1).................................................................            12.04
   (c)(2).................................................................            12.04
   (c)(3).................................................................             N.A.
   (d)....................................................................             4.21
   (e)....................................................................            12.05
   (f)....................................................................             N.A.
315(a)....................................................................             7.01
   (b)....................................................................          7.05,12.02
   (c)....................................................................             7.01
   (d)....................................................................             7.01
   (e)....................................................................             6.11
316(a) (last sentence)....................................................             2.09
   (a)(1)(A)..............................................................             6.05
   (a)(1)(B)..............................................................             6.04
   (a)(2).................................................................             N.A.
   (b)....................................................................             6.07
   (c)....................................................................             2.12
317(a)(1).................................................................             6.08
   (a)(2).................................................................             6.09
   (b)....................................................................             2.04
318(a)....................................................................            12.01
   (b)....................................................................             N.A.
   (c)....................................................................            12.01

N.A. means not applicable.
* This Cross Reference Table is not part of the Indenture.


TABLE OF CONTENTS

                                                                                                        PAGE
                                ARTICLE 1.
                       DEFINITIONS AND INCORPORATION
                               BY REFERENCE

Section 1.01    Definitions.................................................................................1
Section 1.02    Other Definitions..........................................................................33
Section 1.03    Incorporation by Reference of Trust Indenture Act..........................................33
Section 1.04    Rules of Construction......................................................................34

                                ARTICLE 2.
                                THE NOTES

Section 2.01    Form and Dating............................................................................34
Section 2.02    Execution and Authentication...............................................................35
Section 2.03    Registrar and Paying Agent.................................................................35
Section 2.04    Paying Agent to Hold Money in Trust........................................................35
Section 2.05    Holder Lists...............................................................................36
Section 2.06    Transfer and Exchange......................................................................36
Section 2.07    Replacement Notes..........................................................................47
Section 2.08    Outstanding Notes..........................................................................47
Section 2.09    Treasury Notes.............................................................................48
Section 2.10    Temporary Notes............................................................................48
Section 2.11    Cancellation...............................................................................48
Section 2.12    Defaulted Interest.........................................................................48

                                ARTICLE 3.
                         REDEMPTION AND PREPAYMENT

Section 3.01    Notices to Trustee.........................................................................48
Section 3.02    Selection of Notes to Be Redeemed or Purchased.............................................49
Section 3.03    Notice of Redemption.......................................................................49
Section 3.04    Effect of Notice of Redemption.............................................................50
Section 3.05    Deposit of Redemption or Purchase Price....................................................50
Section 3.06    Notes Redeemed or Purchased in Part........................................................51
Section 3.07    Optional Redemption........................................................................51
Section 3.08    Mandatory Redemption.......................................................................51
Section 3.09    Offer to Purchase by Application of Excess Proceeds........................................51

                                ARTICLE 4.
                                 COVENANTS

Section 4.01    Payment of Notes...........................................................................53
Section 4.02    Maintenance of Office or Agency............................................................53
Section 4.03    Reports....................................................................................54
Section 4.04    Compliance Certificate.....................................................................55
Section 4.05    Taxes......................................................................................55
Section 4.06    Stay, Extension and Usury Laws.............................................................55
Section 4.07    Restricted Payments........................................................................55
Section 4.08    Dividend and Other Payment Restrictions Affecting Subsidiaries.............................59
Section 4.09    Incurrence of Indebtedness and Issuance of Preferred Stock.................................60
Section 4.10    Asset Sales................................................................................62

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Section 4.11    Transactions with Affiliates...............................................................64
Section 4.12    Liens......................................................................................65
Section 4.13    Line of Business...........................................................................65
Section 4.14    Offer to Repurchase Upon Change of Control.................................................65
Section 4.15    Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries..............67
Section 4.16    Advances to Restricted Subsidiaries........................................................67
Section 4.17    Payments for Consent.......................................................................67
Section 4.18    Additional Subsidiary Guarantees and Liens.................................................68
Section 4.19    Failure to Deliver Security Documents; Increased Interest Rate.............................69
Section 4.20    Further Assurances; Collateral Inspections and Reports; Costs
                and Indemnification........................................................................69

                                ARTICLE 5.
                                SUCCESSORS

Section 5.01    Merger, Consolidation, or Sale of Assets...................................................71
Section 5.02    Successor Corporation Substituted..........................................................71

                                ARTICLE 6.
                           DEFAULTS AND REMEDIES

Section 6.01    Events of Default..........................................................................72
Section 6.02    Acceleration...............................................................................74
Section 6.03    Other Remedies.............................................................................74
Section 6.04    Waiver of Past Defaults....................................................................75
Section 6.05    Control by Majority........................................................................75
Section 6.06    Limitation on Suits........................................................................75
Section 6.07    Rights of Holders of Notes to Receive Payment..............................................76
Section 6.08    Collection Suit by Trustee.................................................................76
Section 6.09    Trustee May File Proofs of Claim...........................................................76
Section 6.10    Priorities.................................................................................76
Section 6.11    Undertaking for Costs......................................................................77

                                ARTICLE 7.
                                  TRUSTEE

Section 7.01    Duties of Trustee..........................................................................77
Section 7.02    Rights of Trustee..........................................................................78
Section 7.03    Individual Rights of Trustee...............................................................78
Section 7.04    Trustee's Disclaimer.......................................................................79
Section 7.05    Notice of Defaults.........................................................................79
Section 7.06    Reports by Trustee to Holders of the Notes.................................................79
Section 7.07    Compensation and Indemnity.................................................................79
Section 7.08    Replacement of Trustee.....................................................................80
Section 7.09    Successor Trustee by Merger, etc...........................................................81
Section 7.10    Eligibility; Disqualification..............................................................81
Section 7.11    Preferential Collection of Claims Against Company..........................................81

                                ARTICLE 8.
                 LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01    Option to Effect Legal Defeasance or Covenant Defeasance...................................81
Section 8.02    Legal Defeasance and Discharge.............................................................81
Section 8.03    Covenant Defeasance........................................................................82
Section 8.04    Conditions to Legal or Covenant Defeasance.................................................82

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Section 8.05    Deposited Money and Government Securities to be Held in Trust; Other
                Miscellaneous Provisions...................................................................84
Section 8.06    Repayment to Company.......................................................................84
Section 8.07    Reinstatement..............................................................................84

                                ARTICLE 9.
                     AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01    Without Consent of Holders of Notes........................................................85
Section 9.02    With Consent of Holders of Notes...........................................................86
Section 9.03    Compliance with Trust Indenture Act........................................................87
Section 9.04    Revocation and Effect of Consents..........................................................87
Section 9.05    Notation on or Exchange of Notes...........................................................88
Section 9.06    Trustee to Sign Amendments, etc............................................................88

                                ARTICLE 10.
                              NOTE GUARANTEES

Section 10.01   Guarantee..................................................................................88
Section 10.02   Limitation on Guarantor Liability..........................................................89
Section 10.03   Execution and Delivery of Subsidiary Guarantee.............................................89
Section 10.04   Guarantors May Consolidate, etc., on Certain Terms.........................................90
Section 10.05   Releases Following Sale of Assets..........................................................91

                                ARTICLE 11.
                        SATISFACTION AND DISCHARGE

Section 11.01   Satisfaction and Discharge.................................................................91
Section 11.02   Application of Trust Money.................................................................92

                                ARTICLE 12.
                   COLLATERAL SHARING WITH PARITY LIENS

Section 12.01   Prerequisites to incurring Parity Lien Debt................................................92
Section 12.02   Equal and Ratable Lien Sharing by Holders of Notes and
                Holders of Parity Lien Debt................................................................94
Section 12.03   Enforcement................................................................................94
Section 12.04   Amendment..................................................................................94

                                ARTICLE 13.
                   INTERCREDITOR PROVISIONS RELATING TO
                      WORKING CAPITAL FACILITY LIENS

Section 13.01   Agreement between the Collateral Agent and Credit Facility Agent...........................95
Section 13.02   Equal and Ratable Sharing of Liens on Foreign Subsidiary Collateral........................96
Section 13.03   Disclaimer of Consensual Liens.............................................................96
Section 13.04   Notice of Intent to Foreclose..............................................................97
Section 13.05   Consent to License to Use Intellectual Property; Access to
                Information; Access to Real Property to Process and Sell Inventory.........................98
Section 13.06   Complete Agreement........................................................................100
Section 13.07   No Subrogation, Marshalling or Duty.......................................................100
Section 13.08   Limitation on Certain Relief, Defenses and Damage Claims..................................100
Section 13.09   Amendment; Waiver.........................................................................101
Section 13.10   Enforcement...............................................................................101
Section 13.11   Relative Rights...........................................................................102

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                                   ARTICLE 14.
                             COLLATERAL AND SECURITY

   Section 14.01   Security Documents........................................................................102
   Section 14.02   Collateral Agent..........................................................................103
   Section 14.03   Authorization of Actions to Be Taken......................................................104
   Section 14.04   Release of Note Liens.....................................................................104

                                   ARTICLE 15.
                                  MISCELLANEOUS

   Section 15.01   Trust Indenture Act Controls..............................................................106
   Section 15.02   Notices...................................................................................106
   Section 15.03   Communication by Holders of Notes with Other Holders of Notes.............................107
   Section 15.04   Certificate and Opinion as to Conditions Precedent........................................107
   Section 15.05   Statements Required in Certificate or Opinion.............................................108
   Section 15.06   Rules by Trustee and Agents...............................................................108
   Section 15.07   No Personal Liability of Directors, Officers, Employees and Stockholders..................108
   Section 15.08   Governing Law.............................................................................108
   Section 15.09   No Adverse Interpretation of Other Agreements.............................................108
   Section 15.10   Successors................................................................................109
   Section 15.11   Severability..............................................................................109
   Section 15.12   Counterpart Originals.....................................................................109
   Section 15.13   Table of Contents, Headings, etc..........................................................109

                                    EXHIBITS

Exhibit A    FORM OF NOTE
Exhibit B    FORM OF CERTIFICATE OF TRANSFER
Exhibit C    FORM OF CERTIFICATE OF EXCHANGE
Exhibit D    FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E    FORM OF NOTE GUARANTEE
Exhibit F    FORM OF SUPPLEMENTAL INDENTURE
Exhibit G    FORM OF INTERCOMPANY NOTE

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INDENTURE dated as of March 19, 2003 among Hexcel Corporation, a Delaware corporation (the "COMPANY"), the Guarantors (as defined) and Wells Fargo Bank Minnesota, National Association, as trustee (the "TRUSTEE").

The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined) of the 9.875% Senior Secured Notes due 2008 (the "NOTES"):

ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE

Section 1.01 DEFINITIONS.

"144A GLOBAL NOTE" means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

"ADDITIONAL NOTES" means an unlimited amount of Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the Initial Notes.

"AFFILIATE" means:

(1) any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person; or

(2) any other person who is a director or officer (A) of such specified person, (B) of any Subsidiary of such specified person or (C) of any person described in clause (1).

For the purposes of this definition, "control" when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Sections 4.10 and Section 4.11 only, "affiliate" shall also mean any beneficial owner of capital stock representing 10% or more of the total voting power of the voting stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such capital stock (whether or not currently exercisable) and any person who would be an affiliate of any such beneficial owner pursuant to the first sentence hereof.

"AGENT" means any Registrar, co-registrar, Paying Agent or additional paying agent.

"APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

"ASSET SALE" means any direct or indirect sale, lease, transfer, conveyance or other disposition (or series of related sales, leases, transfers, conveyances or dispositions) of shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares), property or other assets (each referred to for the purposes of this definition as a "disposition") by the Company or any Restricted Subsidiary (including

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any disposition by means of a merger, consolidation or similar transaction) involving an amount in excess of $3.0 million other than:

(1) a disposition by a Restricted Subsidiary to the Company, by the Company or a Restricted Subsidiary to a Restricted Subsidiary or between Restricted Subsidiaries;

(2) a disposition of property or assets at fair market value in the ordinary course of business and consistent with past practices of the Company or any of its Restricted Subsidiaries, as applicable (including sales of products to customers, disposition of excess inventory and dispositions of used or replaced equipment);

(3) the disposition or grant of licenses to third parties in respect of intellectual property;

(4) a sale or disposition of assets for the purpose of forming any Joint Venture, in exchange for an interest in such Joint Venture;

(5) the sale or other disposition of Equity Interests held by the Company on the date hereof in Asahi-Schwebel Co., Ltd.;

(6) the sale of Specified Properties;

(7) a disposition by the Company or any Subsidiary of assets within 24 months after such assets were directly or indirectly acquired as part of an acquisition of other properties or assets (including Capital Stock) (the "PRIMARY ACQUISITION"), if the assets being disposed of are "non-core" assets (as determined in good faith by a majority of the Board of Directors) or are required to be disposed of pursuant to any law, rule or regulation or any order of or settlement with any court or governmental authority, and the proceeds therefrom are used within 18 months after the date of sale to repay any Indebtedness Incurred in connection with the Primary Acquisition of such assets;

(8) for purposes of Section 4.10 only, a disposition that constitutes a Restricted Payment permitted by Section 4.07; or

(9) an Asset Sale that also constitutes a Change of Control; PROVIDED, HOWEVER, that the Company complies with Section 4.14.

"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.

"BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "Person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "Person" will be deemed to have beneficial ownership of all securities that such "Person" has the right to acquire by conversion or exercise of other securities, whether or not such right is exercisable immediately. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.

"BOARD OF DIRECTORS" means the board of directors of the Company or any committee thereof duly authorized to act on behalf thereof.

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"BORROWING BASE" means, as of any date, an amount equal to:

(1) 85% of the face amount of all accounts receivable owned by the Company and its Domestic Subsidiaries as of the end of the most recent fiscal quarter preceding such date that were not more than 180 days past due; PLUS

(2) 85% of the then most recently reported net book value of all inventory owned by the Company and its Domestic Subsidiaries as of the end of the most recent fiscal quarter preceding such date; PROVIDED that the amount of this clause (2) shall not exceed 55% of the Borrowing Base on any date of calculation.

"BROKER-DEALER" has the meaning set forth in the Exchange Registration Rights Agreement.

"BUSINESS DAY" means any day other than a Legal Holiday.

"CAPITAL LEASE OBLIGATION" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP. The amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP. The Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.

"CAPITAL STOCK" means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

"CASH EQUIVALENTS" means:

(1) United States dollars;

(2) investments in U.S. government obligations;

(3) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any State thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits aggregating in excess of $50.0 million (or the U.S. dollar equivalent thereof) and whose long-term debt is rated "A-" or higher (or such equivalent rating), at the time as of which any investment therein is made, by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act);

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(4) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (2) above entered into with a bank meeting the qualifications described in clause (3) above, at the time as of which any investment therein is made;

(5) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard & Poor's Ratings Group; and

(6) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any State, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at the time as of which any investment therein is made at least "A" by Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc.

"CLEARSTREAM" means Clearstream Banking, S.A.

"CHANGE OF CONTROL" events are:

(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Permitted Holder;

(2) the adoption of a plan relating to the liquidation or dissolution of the Company;

(3) any Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than one or more Permitted Holders, becomes the Beneficial Owner of more than 40% of the total voting power of Voting Stock of the Company; PROVIDED, HOWEVER, that the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) in the aggregate a lesser percentage of the total voting power of Voting Stock of the Company than the other Person and do not have the right or ability to elect or designate for election a majority of the Board of Directors;

(4) during any period of two consecutive years, individuals who at the beginning of that period constituted the Board of Directors, together with any new directors whose election by the Board of Directors or whose nomination for election by the stockholders of the Company was approved under the Governance Agreement, the Stockholders Agreement or by a vote of 66 2/3% of the directors of the Company then still in office who were either directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office; or

(5) the merger or consolidation of the Company with or into another Person other than a Permitted Holder, or the merger of another Person other than a Permitted Holder with the Company, and in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to the transaction and that represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to the transaction, the securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving Person that represent, immediately

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after the transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person or transferee.

"CLARK-SCHWEBEL LEASE" means the Lease Agreement dated as of September 15, 1998 between CSI Leasing Trust, William J. Wade and the Company CS Corporation.

"COLLATERAL" means property in which the Company or any other Obligor now or hereafter has rights (or the power to transfer a security interest) that is subject to a Note Lien.

"COLLATERAL AGENCY AGREEMENT" means the Collateral Agency Agreement dated March 19, 2003 among the Company, the Joint Collateral Agent, the Trustee and the representatives of Parity Lien Debt.

"COMPANY" means the issuer, and any and all successors thereto.

"CONSOLIDATED COVERAGE RATIO" as of any date of determination means the ratio of (x) the aggregate amount of EBITDA for the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination to (y) Consolidated Interest Expense for such four fiscal quarters; PROVIDED, HOWEVER, that:

(1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall calculated after giving effect on a pro forma basis to (a) such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and (b) the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period;

(2) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Cash Equivalents used to repay, repurchase, defease or otherwise discharge such Indebtedness;

(3) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Sale, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Sale for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Sale for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale);

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(4) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and

(5) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Sale, any Investment or acquisition of assets requiring an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Sale, Investment or acquisition of assets occurred on the first day of such period.

For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any interest rate protection agreement applicable to such Indebtedness if such interest rate protection agreement has a remaining term as at the date of determination in excess of 12 months).

"CONSOLIDATED INTEREST EXPENSE" means, for any period, the sum of, without duplication:

(1) total interest expense of the Company and its consolidated Restricted Subsidiaries for such period, including, to the extent not otherwise included in such interest expense, and to the extent Incurred by the Company or its Restricted Subsidiaries in such period, without duplication:

(a) interest expense attributable to Capital Lease Obligations;

(b) amortization of debt discount and debt issuance cost;

(c) amortization of capitalized interest;

(d) non-cash interest expense;

(e) accrued interest;

(f) amortization of commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing;

(g) interest actually paid by the Company or any such Restricted Subsidiary under any guarantee of Indebtedness of any other Person; and

(h) net payments, if any, made pursuant to interest rate protection agreements (including amortization of fees);

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(2) preferred stock dividends paid during such period in respect of all preferred stock of Restricted Subsidiaries of the Company held by Persons other than the Company; and

(3) cash contributions made during such period to any employee stock ownership plan or other trust for the benefit of employees to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust to purchase Capital Stock of the Company.

Notwithstanding the foregoing, in no event will:

(1) any non-cash dividends or distributions payable on the Company's Convertible Preferred Stock; or

(2) the accretion or amortization of original issue discount on the Company's Series B Convertible Preferred Stock,

be included in the calculation of Consolidated Interest Expense.

"CONSOLIDATED NET INCOME" means, for any period, the net income (loss) of the Company and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall not be included in such Consolidated Net Income:

(1) any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that:

(a) the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (3) below); and

(b) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income;

(2) any net income (loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that:

(a) the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend to another Restricted Subsidiary, to the limitation contained in this clause); and

(b) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income;

(3) any gain (but not loss) realized upon the sale or other disposition of any assets of the Company, its consolidated Subsidiaries or any other Person which is not sold or otherwise disposed

7

of in the ordinary course of business and any gain (but not loss) realized upon the sale or other disposition of any Capital Stock of any Person;

(4) any extraordinary gain or loss;

(5) cumulative effect of a change in accounting principles;

(6) compensation expense related to the issuance of stock incentives pursuant to the Plans;

(7) gains or losses from the early retirement or extinguishment of Indebtedness; and

(8) restructuring charges, write-downs and reserves (to the extent not included in clause (4) above) taken by the Company or its Restricted Subsidiaries prior to December 31, 2003 pursuant to the Restructuring Plan, PROVIDED that, the aggregate amount of any such charges, write-downs or reserves shall not in the aggregate exceed $7.5 million and any charges paid in excess of such amount or after December 31, 2003 shall be included in the calculation of Consolidated Net Income for the period when such charges are paid.

Notwithstanding the foregoing, for the purposes of Section 4.07 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under such covenant pursuant to clause (3)(d) of the first paragraph thereof.

"CONVERTIBLE PREFERRED STOCK" means the Company's Series A Convertible Preferred Stock and Series B Convertible Preferred Stock.

"CORPORATE TRUST OFFICE OF THE TRUSTEE" will be at the address of the Trustee specified in Section 15.02 hereof or such other address as to which the Trustee may give notice to the Company.

"CREDIT FACILITIES" means:

(1) one or more credit agreements, loan agreements, indentures or similar agreements providing for working capital advances, term loans, notes, letter of credit facilities or similar advances, loans, notes or facilities to the Company, any Restricted Subsidiary, domestic or foreign, or any or all of such persons, including, without limitation, the New Senior Credit Facility, as the same may be amended, modified, restated or supplemented from time to time, or any other indebtedness referred to in clauses (1) or (2) of the second paragraph of Section 4.09; and

(2) any one or more agreements governing advances, notes, loans or facilities provided to refund, refinance, replace or renew (including subsequent or successive refundings, financings, replacements and renewals) Indebtedness under the agreement or agreements referred to in the foregoing clause (1), as the same may be amended, modified, restated or supplemented from time to time.

"CREDIT FACILITY AGENT" means, at any time in respect of any Qualified Credit Facility, the administrative agent, collateral agent or collateral trustee for holders of Obligations under such Qualified Credit Facility which holds the Liens securing such Obligations.

"CREDIT FACILITY COLLATERAL" means, at any time in respect of any Qualified Credit Facility:

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(1) inventory (as defined in Article 9 of the New York Uniform Commercial Code), whether now owned or hereafter acquired, and the cash and non-cash proceeds thereof, and all rights under any existing or future policy of property loss or casualty insurance on such inventory, together with the cash proceeds thereof;

(2) accounts (as defined in Article 9 of the New York Uniform Commercial Code), whether now existing or hereafter arising, but only to the extent that such accounts are:

(a) rights to payment for goods sold or services rendered (whether or not such goods or services conform to the contract), or

(b) rights to payment for goods to be sold or services to be rendered, but only, at any time, to the extent inventory (whether consisting of raw materials, work-in-process or finished goods) is then on hand that may, upon completion of manufacture, be delivered for such sale,

in the case of each of paragraphs (1) and (2), together with all rights under the contract for such sale relating to or affecting the creation or collection of such account or the completion or sale of such inventory, together with all Liens, letters of credit, guarantees and other obligations securing or supporting such accounts, together with the cash and non-cash proceeds thereof;

(3) money, deposit accounts (as defined in Article 9 of the New York Uniform Commercial Code) and deposits therein and Cash Equivalents, except
(i) the Asset Sale Proceeds Account and deposits therein and (ii) money, deposit accounts, deposits and Cash Equivalents (whether held directly or in securities accounts) constituting identifiable proceeds of Collateral; and

(4) property of a Foreign Subsidiary owned by a Foreign Subsidiary, whenever held, acquired or arising, but only if and to the extent securing Indebtedness permitted by clause (2) of the second paragraph under
Section 4.09.

"CREDIT FACILITY INDEBTEDNESS" means any and all Indebtedness and other amounts payable under or in respect of the Credit Facilities including principal, premium (if any), interest (including interest accruing at the contract rate specified in the Credit Facilities (including any rate applicable upon default) on or after the filing of any petition in bankruptcy, or the commencement of any similar state, federal or foreign reorganization or liquidation proceeding, relating to the Company and interest that would accrue but for the commencement of such proceeding whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof.

"CREDIT FACILITY OBLIGATIONS" means Indebtedness under a Qualified Credit Facility permitted to be incurred under clauses (1), (2) or (11) of the second paragraph under Section 4.09 and other Obligations (not constituting Indebtedness) under such Credit Facility (which may, but need not, include Hedging Obligations and obligations under deposit account services agreements and cash management contracts with any lender that is or at any time was party to such Credit Facility or any of its Affiliates).

"CUSTODIAN" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto.

"DEFAULT" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

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"DEFINITIVE NOTE" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto.

"DEPOSITARY" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock or (3) is mandatorily redeemable or must be purchased, upon the occurrence of certain events or otherwise, in whole or in part, in each case on or prior to the first anniversary of the Stated Maturity of the Securities; PROVIDED, HOWEVER, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the first anniversary of the Stated Maturity of the Securities shall not constitute Disqualified Stock if (1) the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the Notes under Sections 3.09, 4.10 and 4.14 and (2) any such requirement only becomes operative after compliance with such terms applicable to the Notes, including the purchase of any Notes tendered pursuant thereto; and PROVIDED, FURTHER, HOWEVER, that Company's Convertible Preferred Stock shall note be deemed to be Disqualified Stock.

"DOMESTIC FOREIGN HOLDING COMPANY" means any Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia that owns, directly or indirectly, the stock of one or more Foreign Subsidiaries; PROVIDED that the fair market value of the gross assets of such Subsidiary (not including the portion of such fair market value which is attributable to (x) the stock of any Foreign Subsidiary owned, directly or indirectly, by such Subsidiary and (y) any asset held directly by such Subsidiary for less than 31 calendar days) does not exceed $1.0 million.

"DOMESTIC SUBSIDIARY" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company; PROVIDED, HOWEVER, that a Domestic Foreign Holding Company shall not constitute a Domestic Subsidiary.

"EBITDA" for any period for any Person means the sum of Consolidated Net Income PLUS, without duplication, the following to the extent deducted in calculating such Consolidated Net Income:

(1) all income tax expense of such Person and its consolidated Restricted Subsidiaries for such period;

(2) Consolidated Interest Expense for such period;

(3) depreciation expense and amortization expense of such Person and its consolidated Restricted Subsidiaries for such period (excluding amortization expense attributable to a prepaid cash item that was paid in a prior period); and

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(4) all other non-cash items of such Person and its consolidated Restricted Subsidiaries for such period (including any amounts recorded as compensation expense related to the issuance of stock incentives pursuant to the Plans but excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period) reducing Consolidated Net Income less all non-cash items increasing Consolidated Net Income for such period.

Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Restricted Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders.

"ENVIRONMENTAL LAWS" means any all applicable federal, regional, state, county and local laws, statutes, codes, ordinances, rules, regulations, directives, binding policies, permits, orders, decrees, directives and judgments (including common law) that govern or relate to the protection or clean-up of the environment, the use, treatment, storage, transportation, generation, manufacture, processing, distribution, handling or disposal of, or emission, discharge or other release or threatened release of, Hazardous Materials, the preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants or other natural resources, or the health and safety of persons or property, including protection of the health and safety of employees.

"EQUALLY AND RATABLY" means:

(1) in reference to sharing of Liens upon Foreign Subsidiary Collateral or proceeds thereof as between the holders of Credit Facility Obligations under a Qualified Credit Facility, on the one hand, and holders of Note Obligations and Parity Lien Obligations, on the other hand, that:

(a) such Liens and proceeds shall be allocated and distributed first to the Credit Facility Agent for account of the holders of Indebtedness constituting Credit Facility Obligations under the Qualified Credit Facility, on the one hand, and to the Joint Collateral Agent for account of the Holders of Notes and all Parity Lien Debt (if any), on the other hand, ratably in proportion to the Credit Facility Obligations included in the Credit Facilities Sharing Amount, outstanding on the Sharing Ratio Determination Date, on the one hand, and the principal of and interest and premium (if any) on the Notes and all other Parity Lien Debt, outstanding on the Sharing Ratio Determination Date, on the other hand;

(i) and if, giving effect to payments of any such principal, interest and premium from any other source:

(x) an amount sufficient to pay in full the Credit Facility Obligations included in the Credit Facility Sharing Amount has been so allocated and distributed to the Credit Facility Agent but any principal, interest or premium remains outstanding on the Notes or Parity Lien Debt, then thereafter such Liens and proceeds shall next be allocated and distributed exclusively to the Joint Collateral Agent for account of the Holders of Notes and Parity Lien Debt in an amount sufficient to pay in full all the remaining principal, interest and premium outstanding on the Notes and Parity Lien Debt; and

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(y) an amount sufficient to pay in full the principal, interest and premium of the Notes and Parity Lien Debt has been so allocated and distributed to the Joint Collateral Agent but any Credit Facility Obligations included in the Credit Facility Sharing Amount remain outstanding, then thereafter such Liens and proceeds shall next be allocated and distributed exclusively to the Credit Facility Agent for account of the holders of such Credit Facility Obligations included in the Credit Facility Sharing Amount in an amount sufficient to pay in full all remaining principal, interest and premium outstanding on such Credit Facility Obligations; and thereafter;

(b) such Liens and proceeds (if any remain after payment in full of all Credit Facility Obligations included in the Credit Facility Sharing Amount and all of the principal of and interest and premium on the Notes and all Parity Lien Debt) shall be allocated and distributed to the Credit Facility Agent for account of the holders of any remaining Credit Facility Obligations under the Qualified Credit Facility, on the one hand, and to the Joint Collateral Agent for account of the holders of any remaining Note Obligations and Parity Lien Obligations, on the other hand, ratably in proportion to the aggregate unpaid amount of such remaining Credit Facility Obligations under the Qualified Credit Facility due and demanded (with written notice to the Credit Facility Agent, the Trustee and the Joint Collateral Agent) prior to the date such distribution is made, on the one hand, and the aggregate unpaid amount of such remaining Note Obligations and Parity Lien Obligations due and demanded (with written notice to the Credit Facility Agent, the Trustee and the Joint Collateral Agent) prior to the date such distribution is made, on the other hand; and

(2) in reference to sharing of any Liens, guarantees, supporting obligations or loss sharing rights or proceeds thereof as between the holders of Note Obligations, on the one hand, and Parity Lien Obligations, on the other hand, that such Liens, guarantees, supporting obligations or loss sharing rights or proceeds:

(a) shall be allocated and distributed first to the Trustee for account of the Holders of Notes, on the one hand, and to an agent or representative appointed by and acting as paying agent for the holders of Parity Lien Debt, on the other hand, ratably in proportion to the principal of and interest and premium (if any) outstanding on the Notes when the allocation or distribution is made, on the one hand, and the principal of and interest and premium (if any) outstanding on the Parity Lien Debt when the allocation or distribution is made, on the other hand; and thereafter

(b) shall be allocated and distributed (if any remain after payment in full of all of the principal of and interest and premium on the Notes and the Parity Lien Debt) to the Trustee for account of the holders of any remaining Note Obligations, on the one hand, and to such paying agent for account of the holders of any remaining Parity Lien Obligations, on the other hand, ratably in proportion to the aggregate unpaid amount of such remaining Note Obligations due and demanded (with written notice to the Trustee and the Joint Collateral Agent) prior to the date such distribution is made, on the one hand, and the aggregate unpaid amount of such remaining Parity Lien Obligations due and demanded (with written notice to the Trustee and the Joint Collateral Agent) prior to the date such distribution is made, on the other hand.

For the purposes of clause (1) in this definition, (A) the "Credit Facility Sharing Amount" shall consist solely of reimbursement obligations in respect of letters of credit that are outstanding on the Sharing

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Rate Determination Date, the principal of and interest and premium (if any) of Indebtedness, including the amount of any unfunded revolver commitments that are funded within 30 calendar days of the Sharing Rate Determination Date, constituting Credit Facility Obligations under a Qualified Credit Facility and Hedging Obligations (included at the termination value thereof) and Obligations under deposit account services agreements and cash management contracts with any lender that is or at any time was party to such Qualified Credit Facility or any of its Affiliates; and (B) the "Sharing Ratio Determination Date" shall be the 30th day following the earliest date on which the Indebtedness under the Qualified Credit Facility has first become due and payable in full, the Notes have first become due and payable in full, or any Parity Lien Debt has first become due and payable in full, in each case at maturity, by acceleration or otherwise PROVIDED, HOWEVER, that in the event that any Hedging Obligation is terminated within five business days after the earliest such date, the Sharing Ratio Determination Date for such Hedging Obligation shall be such termination date otherwise it shall be the earliest such date.

"EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

"EQUITY OFFERING" means an offering of common stock of the Company pursuant to an effective registration statement under the Securities Act or in a valid private placement.

"EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear system.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"EXCHANGE NOTES" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f) hereof.

"EXCHANGE OFFER" has the meaning set forth in the Exchange Registration Rights Agreement.

"EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Exchange Registration Rights Agreement.

"EXCHANGE REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of March 19, 2003, among the Company, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements among the Company, the Guarantors and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act.

"EXCLUDED ASSETS" means:

(1) Credit Facility Collateral;

(2) any lease of premises used only as office space or to warehouse inventory;

(3) an equity interest in a joint venture or any holding company holding such equity interest that is not a Subsidiary of the Company, if and for as long as the creation of a lien on such equity interest or the equity interests of such holding company is prohibited by the agreement or agreements governing the joint venture;

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(4) any fee interest in real estate that, in the good faith judgment of the Company, has a fair market value of less than $1.0 million;

(5) the portion of the voting stock of a Foreign Subsidiary that would, if subjected to the Note Liens, cause the aggregate voting stock of such Foreign Subsidiary subject to the Note Liens to exceed 65% of the aggregate outstanding voting stock of such Foreign Subsidiary, but only if, to the extent that and for as long as the amount exceeding 65% of such voting stock is not subject to any Lien securing any Indebtedness or Obligations other than the Notes and Note Obligations;

(6) personal property on which by law a perfected security interest cannot be created;

(7) personal property (such as copyrights, vessels, vehicles or aircraft) as to which a security interest can be created that must be perfected other than by the filing of a financing statement and which has, in the good faith judgment of the Company, an aggregate fair market value, for all such personal property, of less than $1.0 million;

(8) rights as licensee under any license of patents, trademarks or other intellectual property, if, to the extent that and for as long as the creation of a Note Lien on such rights is prohibited by the agreement granting such license;

(9) any lease, license, contract, property rights or agreement to which the Company or any Domestic Subsidiary is a party or any of its rights or interests thereunder if and for so long as the grant of such security interest shall constitute or result in (i) the abandonment, invalidation or unenforceability of any right, title or interest of the Company or any Domestic Subsidiary therein or (ii) in a breach or termination pursuant to the terms of, or a default under, any such lease, license, contract, property rights or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity); PROVIDED, HOWEVER, that such security interest shall attach immediately at such time as the condition causing such abandonment, invalidation or unenforceability shall be remedied and to the extent severable, shall attach immediately to any portion of such lease, license, contract, property rights or agreement that does not result in any of the consequences specified in (i) or (ii) above;

(10) any asset subject to a Lien permitted by clause (6), (7) or (9) of the definition of "Permitted Lien;"

(11) the lease of the Company's existing manufacturing facility located in Gilbert, Arizona until such time as such facility is used by the Company or any of its Subsidiaries in manufacturing operations;

(12) the Clark-Schwebel Lease and assets subject thereto until such time as all Obligations under the Clark-Schwebel Lease have been relieved and released;

(13) (i) the Company's unimproved parcel of land located in Livermore, California unless such parcel is not sold pursuant to the Agreement for Purchase and Sale of Real Property and Escrow Instructions dated April 10, 2002, between Hexcel Corporation and Northbrook Homes, LLC, and The DeSilva Group, LLC as amended or as amended and restated and (ii) the Company's manufacturing plant located in Kent, Washington unless such property is not sold prior to December 31, 2003;

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(14) the Company's manufacturing facilities located in Lancaster, Ohio and Clearwater, Florida, and the portion of the Company's manufacturing facility located in Casa Grande, Arizona that is leased by the Company;

(15) any leases of property (a) entered into in connection with or otherwise resulting from an acquisition by the Company or any Domestic Subsidiary of any Person or assets or (b) entered into in connection with an expansion or extension of the Company's or any Domestic Subsidiary's business and, in the case of clause (a) or (b), that require a landlord's consent to the security interest if despite the Company's commercially reasonable efforts the Company or such Domestic Subsidiary is unable to obtain such consent; PROVIDED, HOWEVER, that any lease resulting from the transfer of leasehold interests or other assets held by the Company or any Domestic Subsidiary that are not Excluded Assets shall not be Excluded Assets by reason of this clause (15);

(16) the patents and patent applications set forth on Schedule VIII(A) to the Pledge and Security Agreement dated as of March 19, 2003, among the Company, Clark-Schwebel Holding Co., Clark-Schwebel Corporation, Hexcel Pottsville Corporation and HSBC Bank USA;

(17) the patents and patent applications set forth on Schedule VII(B) to the Pledge and Security Agreement dated as of March 19, 2003, among the Company, Clark-Schwebel Holding Co., Clark-Schwebel Corporation, Hexcel Pottsville Corporation and HSBC Bank USA (the "Restricted Patents"), if and only for so long as the grant of a security interest in any Restricted Patent shall constitute or result in (i) the abandonment, invalidation or unenforceability of any right, title or interest of any grantor therein or
(ii) in a breach or termination pursuant to the terms of, or a default under, any agreement relating to such Restricted Patent (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code of any relevant jurisdiction or any other applicable law) then such Restricted Patent shall not constitute Collateral hereunder; provided, however that the security interest shall attach immediately (and such Restricted Patent shall constitute Collateral hereunder) at such time as the condition causing such abandonment, invalidation or unenforceability shall be remedied and, to the extent severable, shall attach immediately to any portion of such Restricted Patent that does not result in any of the consequences specified in (i) or (ii); and

(17) the outstanding voting stock of Clark-Schwebel Holding Corp., CS Tech-Fab Holding, Inc., Hexcel Technologies, Inc. and Clark-Schwebel Corporation.

"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the New Senior Credit Facility) in existence on the date hereof, until such amounts are repaid.

"EXISTING JOINT VENTURES" means:

(1) Clark-Schwebel Tech-Fab Company;

(2) BHA Aero Composite Parts, Co., Ltd.

(3) Asian Composites Manufacturing Sdn Bhd;

(4) Hexcel-DIC Partnership;

(5) CS Interglas AG; and

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(6) Asahi-Schwebel Co., Ltd.

"FINANCING TRANSACTIONS" means:

(1) the issuance and sale of 77,875 shares of the Company's Series A Convertible Preferred stock and 77,875 shares of the Company's Series B Convertible Preferred Stock to affiliates of Berkshire Partners LLC and Greenbriar Equity Group LLC for approximately $77.9 million in cash (before giving effect to fees and expenses);

(2) the issuance and sale of 47,125 shares of the Company's Series A Convertible Preferred stock and 47,125 shares of the Company's Series B Convertible Preferred Stock to affiliates of The Goldman Sachs Group, Inc. for approximately $47.1 million in cash (before giving effect to fees and expenses);

(3) the execution and delivery of the New Senior Credit Facility and satisfaction of all conditions of effectiveness and funding conditions therein set forth; and

(4) application of the net proceeds the Company receives from the sale of the Notes as set forth under the caption "Use of Proceeds" in the Offering Circular.

"FOREIGN SUBSIDIARY" means a Subsidiary of the Company that is incorporated in a jurisdiction other than, and the majority of the assets of which are located outside of, the United States, a State thereof and the District of Columbia.

"FOREIGN SUBSIDIARY COLLATERAL" means:

(1) equity interests in Foreign Subsidiaries and intercompany loans to and other claims against Foreign Subsidiaries, whenever owned, acquired or arising owned by the Company or any Domestic Subsidiary; and

(2) property of any Foreign Subsidiary, whenever owned, acquired or arising, except to the extent the same constitutes Credit Facility Collateral.

"GAAP" means generally accepted accounting principles in the United States as in effect from time to time.

"GLOBAL NOTES" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2) or 2.06(f) hereof.

"GLOBAL NOTE LEGEND" means the legend set forth in Section 2.06(g)(2), which is required to be placed on all Global Notes issued under this Indenture.

"GOVERNANCE AGREEMENT" means the Amended and Restated Governance Agreement dated as of March 19, 2003, among Hexcel, LXH, L.L.C., LXH II, L.L.C., GS Capital Partners 2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 Employee Fund, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG and Stone Street Fund 2000, L.P., as the same may be amended, modified, restated or supplemented from time to time.

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"GOVERNING DOCUMENTS" means, with respect to any Person, its certificate or articles of incorporation, its by-laws and all shareholder agreements, voting trusts and similar arrangements applicable to any of its Capital Stock, as applicable in each relevant jurisdiction.

"GOVERNMENT SECURITIES" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit.

"GUARANTEE" means any obligation, contingent or otherwise, of any person directly or indirectly guaranteeing any Indebtedness of any other person and any obligation, direct or indirect, contingent or otherwise, of such person:

(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or

(2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);

PROVIDED, HOWEVER, that the term "guarantee" shall not include:

(1) endorsements for collection or deposit in the ordinary course of business; or

(2) obligations, warranties and indemnities, not with respect to Indebtedness of any person, that have been or are undertaken or made in the ordinary course of business or in connection with any Asset Sale permitted by Section 4.10 and not for the benefit of or in favor of an affiliate of the Company or any of its Subsidiaries.

The term "guarantee" used as a verb has a corresponding meaning.

"GUARANTORS" means each of:

(1) Clark-Schwebel Holding Corp.;

(2) Clark-Schwebel Corporation;

(3) CS Tech-Fab Holding, Inc.;

(4) Hexcel Pottsville Corporation; and

(5) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture,

and their respective successors and assigns.

"HAZARDOUS MATERIAL" means all pollutants, contaminants, chemicals, wastes, and any other carcinogenic, mutagenic, ignitable, corrosive, reactive, toxic, explosive, flammable, infectious, radioactive or otherwise hazardous substances or materials (whether solids, liquids or gases) subject to regulation, control or remediation under Environmental Laws or is otherwise defined, listed or identified

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as a "hazardous waste" or "hazardous substance" (or other similar term) under Environmental Laws. By way of example only, the term Hazardous Substances includes petroleum, petroleum-derived substances and wastes, urea formaldehyde, polychlorinated biphenyls ("PCBs"), pesticides, herbicides, asbestos, sludge, slag, acids, metals, solvents and wastewaters.

"HEDGING OBLIGATIONS" of any Person means the obligations of such Person pursuant to any interest rate protection agreement or currency exchange protection agreement or other similar agreement or arrangement involving interest rates, currencies, commodities or otherwise.

"HOLDER" means a Person in whose name a Note is registered.

"IAI GLOBAL NOTE" means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors.

"INCUR" means issue, assume, guarantee, incur or otherwise become liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary; PROVIDED, FURTHER, that any amendment, modification or waiver of any provision of any document pursuant to which Indebtedness was previously Incurred shall not be deemed to be an Incurrence of Indebtedness as long as such amendment, modification or waiver does not:

(1) increase the principal or premium thereof or interest rate thereon;

(2) change to an earlier date the Stated Maturity thereof or the date of any scheduled or required principal payment thereon or the time or circumstances under which such Indebtedness may or shall be redeemed; or

(3) if such Indebtedness is contractually subordinated in right of payment to the Notes or the Subsidiary Guarantees, modify or affect, in any manner adverse to the Holders, such subordination.

The term "Incurrence" when used as a noun shall have a correlative meaning.

"INDEBTEDNESS" means, with respect to any Person on any date of determination (without duplication):

(1) the principal of and premium (if any such premium is then due and owing) in respect of (a) Indebtedness of such Person for money borrowed; and (b) Indebtedness evidenced by Notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable;

(2) all Capital Lease Obligations of such Person;

(3) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business);

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(4) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth business day following receipt by such Person of a demand for reimbursement following payment on the letter of credit);

(5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock of such Person, or with respect to any Subsidiary of such Person, the liquidation preference with respect to any preferred stock (but excluding, in each case, any accrued dividends);

(6) all obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any guarantee;

(7) all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; and

(8) to the extent not otherwise included in this definition, Hedging Obligations of such Person.

For purposes of this definition, the obligation of such Person with respect to the redemption, repayment or repurchase price of any Disqualified Stock that does not have a fixed redemption, repayment or repurchase price shall be calculated in accordance with the terms of such stock as if such stock were redeemed, repaid or repurchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture; PROVIDED, HOWEVER, that if such stock is not then permitted to be redeemed, repaid or repurchased, the redemption, repayment or repurchase price shall be the book value of such stock as reflected in the most recent financial statements of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the amount of liability required by GAAP to be accrued or reflected on the most recently published balance sheet of such Person; PROVIDED, HOWEVER, that:

(1) the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP; and

(2) Indebtedness shall not include any liability for federal, state, local or other taxes.

"INDENTURE" means this Indenture, as amended or supplemented from time to time.

"INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Note through a Participant.

"INITIAL NOTES" means the first $125.0 million aggregate principal amount of Notes issued under this Indenture on the date hereof.

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"INITIAL PURCHASERS" means Goldman, Sachs & Co. and Fleet Securities, Inc.

"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs.

"INTERCREDITOR AGREEMENT" means the Intercreditor and Agency Agreement dated the date hereof among the Joint Collateral Agent, the Trustee, Fleet Capital Corporation as the Administrative Agent for the lenders and Fleet Capital Corporation as Intercreditor Agent and Security Trustee (as such agreement may be amended, modified, supplemented or restated).

"INVESTMENT" by any Person in any other Person means any direct or indirect advance, loan (other than advances to customers or suppliers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such former Person) or other extension of credit (including by way of guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such latter Person that are or would be classified as investments on a balance sheet of such former Person prepared in accordance with GAAP. In determining the amount of any Investment in respect of any property or assets other than cash, such property or asset shall be valued at its fair market value at the time of such Investment (unless otherwise specified in this definition), as determined in good faith by the Board of Directors. For purposes of the definition of "Unrestricted Subsidiary," the definition of "Restricted Payment" and Section 4.07,

(1) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and

(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors.

"JOINDER AGREEMENT" means the Joinder Agreement substantially in the form of Exhibit A to the Collateral Agency Agreement.

"JOINT COLLATERAL AGENT" means a bank or trust company that:

(1) is authorized to exercise corporate trust powers;

(2) is reasonably satisfactory to the Trustee; and

(3) has been appointed by the Company and has agreed, pursuant to a Joint Collateral Agent Undertaking, to act as collateral agent for the equal and ratable benefit of all present and future Holders of Notes and Parity Lien Debt, whenever incurred, and also for the benefit of the present and future holders of all other Note Obligations and Parity Lien Obligations,

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in its capacity as such collateral agent, and any successor in such capacity. The Joint Collateral Agent shall initially be HSBC Bank USA.

"JOINT COLLATERAL AGENT UNDERTAKING" means a declaration of trust for a collateral trust, a collateral trust agreement or a collateral agency agreement executed and delivered by the Company and the Joint Collateral Agent on customary terms reasonably satisfactory to the Trustee, which shall include assumption by the Joint Collateral Agent of all of the obligations of the Joint Collateral Agent set forth in or arising under this Indenture.

"JOINT VENTURE" means the Existing Joint Ventures, and any other joint venture, partnership or other similar arrangement whether in corporate, partnership or other legal form which is formed by the Company or any Restricted Subsidiary and one or more Persons which own, operate or service a Permitted Business.

"JOINT VENTURE SUBSIDIARY" means a Restricted Subsidiary formed by the Company or any Restricted Subsidiary and one or more Persons which own, operate or service a Permitted Business.

"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period.

"LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer.

"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

"MAJORITY LENDERS" means, at any time in respect of any Qualified Credit Facility, lenders party thereto then holding or committed to provide at least a majority in principal amount of the aggregate loans, letters of credit and other extensions of credit outstanding or committed thereunder.

"MATERIAL DOMESTIC SUBSIDIARY" means as at any date of determination, any Domestic Subsidiary whose gross assets have a fair market value exceeding $100,000; PROVIDED, HOWEVER, that no value shall be attributed to any equity interest in Joint Ventures.

"NET AVAILABLE CASH" from an Asset Sale means the aggregate amount of cash received in respect of an Asset Sale (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form) therefrom, in each case net of:

(1) all legal, accounting, title and recording tax expenses, commissions and other fees and expenses Incurred, and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP as a consequence of such Asset Sale;

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(2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale;

(3) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries or Joint Ventures as a result of such Asset Sale;

(4) any amount of cash required to be placed in escrow by one or more parties to a transaction relating to contingent liabilities associated with an Asset Sale until such cash is released to the Company or a Restricted Subsidiary; and

(5) the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sales, all as determined in conformity with GAAP, retained by the Company or any Restricted Subsidiary after such Asset Sale.

"NET CASH PROCEEDS" with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, printing costs, underwriters' or placement agents' fees, discounts or commissions and brokerage, stock exchange listing fees, consultant and other fees actually Incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.

"NEW SENIOR CREDIT FACILITY" means that certain Credit Agreement, by and among the Company, Fleet Capital Corporation and Fleet Capital Corporation, as Administrative Agent and Fronting Bank, Fleet National Bank, London U.K. branch, as Fronting Bank and Issuing Bank, Fleet National Bank, as Issuing Bank and Fleet Securities, Inc., as Lead Arranger, providing for up to $115.0 million of revolving credit borrowings and letters of credit, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time.

"NON-MATERIAL DOMESTIC SUBSIDIARY" means a Domestic Subsidiary that is not a Material Domestic Subsidiary.

"NON-RECOURSE DEBT" means Indebtedness:

(1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender;

(2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity; and

(3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries.

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"NON-U.S. PERSON" means a Person who is not a U.S. Person.

"NOTE DOCUMENTS" means this Indenture, the Notes, the Subsidiary Guarantees, the Security Documents, Joint Collateral Undertaking and each Intercreditor Agreement.

"NOTE LIEN" means, to the extent securing Note Obligations, a Lien granted by a Security Document as security for Note Obligations and any Parity Lien Obligations.

"NOTE OBLIGATIONS" means the Notes (including all Additional Notes), the Subsidiary Guarantees and all other Obligations of any Obligor under the Note Documents.

"NOTES" has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes and any Additional Notes.

"OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

"OBLIGOR" means the Company, the Guarantors and each other Subsidiary which has granted the Joint Collateral Agent a Lien upon any of its property as security for any Note Obligations.

"OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person.

"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 15.05 hereof.

"OFFERING CIRCULAR" means the offering circular relating to the offering of the Notes, dated March 7, 2003.

"OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 15.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee.

"PARTICIPANT" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).

"PARITY LIEN" means, to the extent securing Parity Lien Obligations, a Lien that (a) is granted by a Security Document and held by the Joint Collateral Agent as security for Note Obligations and Parity Lien Obligations and (b) is not subordinated, by contract or pursuant to a judicial order requiring equitable subordination, to any other Lien.

"PARITY LIEN CREDIT DOCUMENT" means each indenture or other agreement or agreements governing any Parity Lien Debt.

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"PARITY LIEN DEBT" means the principal of and interest and premium (if any) on Indebtedness of the Company (other than Additional Notes) permitted to be incurred if: (x) the condition set forth in the first paragraph of Section 4.09 is satisfied; or (y) such Indebtedness is Permitted Debt permitted to be incurred pursuant to clause (11) of the second paragraph of Section 4.09 and such Indebtedness:

(1) is guaranteed by each Subsidiary which, on the date of incurrence of such Indebtedness, is obligated as a Guarantor under a Subsidiary Guarantee;

(2) is secured when incurred, Equally and Ratably with the Notes and all other Parity Lien Debt, by perfected Liens duly granted to the Joint Collateral Agent (or any agent thereof) by the Company and each Guarantor upon all of the Collateral;

(3) is not subordinated in right of payment to any other Indebtedness of the Company or any such Guarantor;

(4) matures no earlier than the maturity of the Notes and requires no prepayments, sinking fund payments or offer to purchase (except when, as and to the extent an offer to purchase the Notes is required by the provisions described under Sections 4.10 and 4.14);

(5) is incurred in a principal amount (net of any original issue discount) which, when added to the principal amount of Notes (including Additional Notes) then outstanding and the outstanding principal amount (or accreted value) of all other Parity Lien Debt then outstanding, does not exceed the greatest of:

(a) $135.0 million;

(b) 65% of the then most recently reported net book value of assets of the Company and its Domestic Subsidiaries that are accounted for on its consolidated balance sheet as "Property, plant and equipment," after giving pro forma effect to the use of proceeds from such Incurrence of Indebtedness; and

(c) 65% of the gross orderly liquidation value of the then most recently reported net book value of assets of the Company and its Domestic Subsidiaries that are accounted for on its consolidated balance sheet as "Property, plant and equipment," as most recently determined and reported to the Collateral Agent by an independent appraiser of recognized standing selected by the Company, after giving pro forma effect to the use of proceeds from such Incurrence of Indebtedness;

(6) is governed by an indenture or agreement which provides (for the enforceable benefit of the Trustee and Holders of Notes) that all Obligations in respect of the Notes and Parity Lien Debt shall be and are secured Equally and Ratably by all liens, guarantees, supporting obligations and loss sharing rights at any time granted by the Company or any Subsidiary or any other Person as security for such debt or any Obligations in respect of such Indebtedness, whether or not otherwise constituting Collateral, that all such liens, guarantees, supporting obligations and loss sharing rights are transferred to the Joint Collateral Agent and shall be enforceable by the Joint Collateral Agent, and that the holders of such Indebtedness and Obligations in respect of such Indebtedness consent to and direct the Joint Collateral Agent to perform its obligations under Sections 12.02 and Article 13; and

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(7) is designated by the Company, in an Officers' Certificate delivered to the Trustee on or before the date of incurrence of such Indebtedness, as Parity Lien Debt for the purposes of this Indenture.

"PARITY LIEN OBLIGATIONS" means Parity Lien Debt and all other Obligations of any Obligor under each indenture or agreement governing, securing or relating to any Parity Lien Debt.

"PARITY LIEN REPRESENTATIVE" means the representatives of the holders of Parity Lien Debt who become a party to the Collateral Agency Agreement.

"PERMITTED BUSINESS" means any business conducted by the Company and its Restricted Subsidiaries on the issue date and any business reasonably related, ancillary or complementary to the business of the Company and its Restricted Subsidiaries on the issue date.

"PERMITTED HOLDERS" means:

(1) The Goldman Sachs Group, Inc.;

(2) Greenbriar Equity Group, LLC;

(3) Berkshire Partners, LLC; and

(4) any Affiliate of any Person described in clauses (1)-(3) above.

"PERMITTED INVESTMENTS" means an Investment:

(1) in the Company or a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary; PROVIDED, HOWEVER, that the primary business of such Restricted Subsidiary is a Permitted Business;

(2) in another Person, if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's primary business is a Permitted Business;

(3) in Cash Equivalents;

(4) in receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; PROVIDED, HOWEVER, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;

(5) in loans or advances to officers, directors or employees of the Company or any of its Subsidiaries for travel, transportation, entertainment, and moving and other relocation expenses and other business expenses that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;

(6) in loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Subsidiary, as the case may be;

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(7) in stock, obligations or securities received:

(a) in settlement of debts created in the ordinary course of business and owing to the Company or any Subsidiary;

(b) in satisfaction of judgments; or

(c) as consideration in connection with an Asset Sale permitted pursuant to Section 4.10; and

(8) deemed to have been made as a result of the acquisition of a Person that at the time of such acquisition held instruments constituting Investments that were not acquired in contemplation of the acquisition of such Person.

"PERMITTED LIENS" means:

(1) Note Liens;

(2) Parity Liens securing Parity Lien Debt;

(3) Liens on Credit Facility Collateral securing Credit Facility Obligations;

(4) Liens on any Foreign Subsidiary Collateral securing Credit Facility Obligations, but only if the Joint Collateral Agent has been granted valid, enforceable and perfected Liens upon such Foreign Subsidiary Collateral Equally and Ratably securing the Note Obligations and any Parity Lien Obligations;

(5) Liens in favor of the Company or its Restricted Subsidiaries;

(6) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Subsidiary of the Company; PROVIDED that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Subsidiary;

(7) Liens on property existing at the time of acquisition of the property by the Company or any Subsidiary of the Company; PROVIDED that such Liens were in existence prior to the contemplation of such acquisition;

(8) Liens to secure the performance of statutory obligations, leases, surety or appeal bonds, performance bonds or other obligations of a like nature Incurred in the ordinary course of business;

(9) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (8) of the second paragraph of Section 4.09 covering only the assets acquired with such Indebtedness;

(10) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; PROVIDED that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;

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(11) Liens granted to the Trustee as security for Note Obligations;

(12) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries;

(13) Liens Incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding; and

(14) Liens on property of a Foreign Subsidiary owned by a Foreign Subsidiary, whenever held, acquired or arising, but only if and to the extent securing Indebtedness permitted by clause (2) of the second paragraph under Section 4.09.

"PERMITTED PRIOR LIENS" means (a) Liens described in clauses (6), (7) or
(9) of the definition of "Permitted Liens" and (b) Liens that arise by operation of law and are not voluntarily granted, to the extent entitled by law to priority over the security interests created by the Security Documents.

"PERMITTED REFINANCING INDEBTEDNESS" means Indebtedness that refunds, refinances, replaces, renews, repays or extends (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances," and "refinanced" shall have a correlative meaning) any Indebtedness Incurred in compliance with this Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of another Restricted Subsidiary) including Indebtedness that refinances Permitted Refinancing Indebtedness; PROVIDED, HOWEVER, that:

(1) the Permitted Refinancing Indebtedness has Stated Maturity no earlier than any Stated Maturity of the Indebtedness being refinanced;

(2) the Permitted Refinancing Indebtedness has an Weighted Average Life to Maturity at the time such Permitted Refinancing Indebtedness is Incurred that is equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being refinanced; and

(3) such Permitted Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the sum of (x) either the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) of the Indebtedness being refinanced (including, with respect to both the Permitted Refinancing Indebtedness and the Indebtedness being refinanced, amounts then outstanding and amounts available thereunder) or, if the Indebtedness being refinanced is the Capital Lease Obligation entered into on or about September 15, 1998, the aggregate purchase price of the property subject thereto, PLUS (y) unpaid interest, prepayment penalties, redemption premiums, defeasance costs, fees, expenses and other amounts owing with respect thereto, PLUS reasonable financing fees and other reasonable out-of-pocket expenses Incurred in connection therewith;

PROVIDED, FURTHER, HOWEVER, that Permitted Refinancing Indebtedness shall not include Indebtedness of a Subsidiary that refinances Indebtedness of the Company.

"PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

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"PLANS" means any employee benefit plan, retirement plan, deferred compensation plan, restricted stock plan, health, life, disability or other insurance plan or program, employee stock purchase plan, employee stock ownership plan, pension plan, stock option plan or similar plan or arrangement of the Company or any Subsidiary, or any successor thereof and "Plan" shall have a correlative meaning.

"PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.06(g)(1) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture.

"QIB" means a "qualified institutional buyer" as defined in Rule 144A.

"QUALIFIED CREDIT FACILITY" means a Credit Facility:

(1) which is governed by an agreement that provides for the enforceable benefit of the Holders of Notes, Trustee, Joint Collateral Agent and holders of Parity Lien Debt, as third party beneficiaries thereof, that:

(a) all Liens on property described in clause (1) of the definition of Foreign Subsidiary Collateral and proceeds thereof at any time securing any Obligations under such Credit Facility shall secure Equally and Ratably the Obligations under such Credit Facility and all Note Obligations and Parity Lien Obligations;

(b) all Liens on property described in clause (2) of the definition of Foreign Subsidiary Collateral and the proceeds thereof at any time securing any domestic U.S. commitments and borrowings under such Credit Facility shall secure Equally and Ratably the Obligations under such Credit Facility and all Note Obligations and Parity Lien Obligations;

(c) the agent or representative holding the Liens securing Obligations under such Credit Facility shall be bound by and shall perform each of the obligations of the Credit Facility Agent as set forth Article 13; and

(2) in respect of which the agent or representative holding the Liens securing Obligations under such Credit Facility has delivered to the Trustee and the Joint Collateral Agent:

(a) written notice (that has not been withdrawn by such agent or representative) certifying that such Credit Facility is a Qualified Credit Facility and that such agent or representative is bound by and will perform the obligations of the Credit Facility Agent; and

(b) if any other Credit Facility Agent previously delivered such notice and certification in respect of any predecessor Credit Facility, an instrument reasonably satisfactory to the Trustee and the Joint Collateral Agent signed by such previous Credit Facility Agent withdrawing the previous notice and certification and forever renouncing and discharging all rights and benefits under this Indenture that otherwise would have been enforceable by such previous Credit Facility Agent or the holders of Obligations under such previous Credit Facility.

The New Senior Credit Facility shall constitute a Qualified Credit Facility upon due authorization, execution and delivery by the Administrative Agent thereunder of the Intercreditor Agreement. So long as the New Senior Credit Facility remains outstanding, no other Credit Facility shall become a Qualified Credit Facility unless such Credit Facility is permitted under the terms of the New Senior Credit Facility and this Indenture.

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"REGISTRATION RIGHTS AGREEMENTS" means (1) the Registration Rights Agreement dated March 19, 2003 among the Company, Berkshire Fund V, Limited Partnership, Berkshire Fund VI, Limited Partnership, Berkshire Investors LLC, Greenbriar Co-Investment Partners, L.P. and Greenbriar Equity Fund, L.P. and (2) the Amended and Restated Registration Rights Agreement dated March 19, 2003 among the Company, LXH, L.L.C., LXH II, L.L.C., GS Capital Partners 2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 Employee Fund, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG and Stone Street Fund 2000, L.P.

"REGULATION S" means Regulation S promulgated under the Securities Act.

"REGULATION S GLOBAL NOTE" means a Global Note bearing the Private Placement Legend and deposited with or on behalf of the Depositary and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S.

"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.

"RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Private Placement Legend.

"RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private Placement Legend.

"RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment.

"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

"RESTRUCTURING PLAN" means the business consolidation and restructuring actions with respect to: (i) the EuroCore rationalization involving the Duxford, England, Welkenraedt, Belgium and Casa Grande, Arizona facilities; (ii) the consolidation and reorganization of carbon weaving and decorative fabric production involving the Decines and Les Avenieres, France facilities; (iii) the consolidation and reorganization of fabric production between the Anderson, South Carolina, Washington, Georgia and Statesville, North Carolina facilities and (iv) equipment relocation to the Salt Lake City, Utah facility.

"RULE 144" means Rule 144 promulgated under the Securities Act.

"RULE 144A" means Rule 144A promulgated under the Securities Act.

"RULE 903" means Rule 903 promulgated under the Securities Act.

"RULE 904" means Rule 904 promulgated the Securities Act.

"SEC" means the Securities and Exchange Commission.

"SECURED INDEBTEDNESS" means any Indebtedness of the Company secured by a Lien.

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"SECURED OBLIGATIONS" means Note Obligations, any Parity Lien Obligations and all obligations hereunder or under any other Security Document (including, without limitation, any guarantees of any of the foregoing).

"SECURED PARTIES" means the Joint Collateral Agent, the Trustee, the Holders from time to time of the Notes, each Parity Lien Representative and each holder from time to time of Parity Lien Debt.

"SECURITIES ACT" means the Securities Act of 1933, as amended.

"SECURITY DOCUMENTS" means the Joint Collateral Undertaking and one or more security agreements, pledge agreements, collateral assignments, mortgages, deed of trust or other grants or transfers for security executed and delivered by the Company or any other Obligor creating (or purporting to create) a Lien upon property (other than Excluded Assets) owned or to be acquired by the Company or such other Obligor in favor of the Joint Collateral Agent or the Trustee for the benefit of the Holders of the Notes (or in favor of an agent of the Joint Collateral Agent or the Trustee), the Subsidiary Guarantees and any other Obligations in respect of the Note Obligations.

"SENIOR INDEBTEDNESS" means:

(1) all Credit Facility Indebtedness;

(2) Indebtedness represented by the Clark-Schwebel Lease; and

(3) all other Indebtedness of the Company, including interest (including interest accruing at the contract rate specified in the Credit Facilities or the documentation governing such other Indebtedness, as applicable (including any rate applicable upon default) on or after the filing of any petition in bankruptcy, or the commencement of any similar state, federal or foreign reorganization or liquidation proceeding, relating to the Company, whether or not allowed as a claim against the Company in any such proceeding) and fees thereon, whether outstanding on the issue date or thereafter issued or Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior in right of payment to the Notes;

PROVIDED, HOWEVER, that Senior Indebtedness shall not include:

(1) any liability for federal, state, local or other taxes owed or owing by the Company;

(2) any accounts payable or other liabilities to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities);

(3) any Indebtedness, guarantee or obligation of the Company which is subordinate or junior in right of payment in any respect to any other Indebtedness, guarantee or obligation of the Company, including any Subordinated Obligations;

(4) any obligations with respect to any capital stock; and

(5) any intercompany Indebtedness of the Company or any Guarantor to the Company or any of its Affiliates.

"SENIOR SUBORDINATED INDEBTEDNESS" means the Company's 9 3/4% Senior Subordinated Notes due 2009 and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank

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PARI PASSU with the 9 3/4% Senior Subordinated Notes due 2009 in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness.

"SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as defined in the Exchange Registration Rights Agreement.

"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof.

"SPECIAL INTEREST" means all liquidated damages then owing pursuant to the Exchange Registration Rights Agreement.

"SPECIFIED PROPERTIES" shall mean the Company's manufacturing plants located in Lancaster, Ohio; Livermore, California; Welkenraedt, Belgium; and Lodi, New Jersey and the property referred to as "Plant Three" in Kent, Washington.

"STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement, dated as of March 19, 2003, among Berkshire Fund V, Limited Partnership, Berkshire Fund VI, Limited Partnership, Berkshire Fund V Investment Corp., Berkshire Fund VI Investment Corp., Berkshire Investors LLC, Greenbriar Co-Investment Partners, L.P., Greenbriar Equity Fund, L.P. and the Company.

"SUBORDINATED NOTES" means the Company's:

(1) 9 3/4% Senior Subordinated Notes due 2009; and

(2) 7% Convertible Subordinated Debentures due 2011.

"SUBORDINATED OBLIGATION" means any Indebtedness of the Company (whether outstanding on the issue date or thereafter Incurred) that is contractually subordinated or junior in right of payment to the Notes pursuant to a written agreement, including the Subordinated Notes.

"SUBSIDIARY" means, with respect to any specified Person:

(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

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"SUBSIDIARY GUARANTEE" means the Guarantee by each Guarantor of the Company's payment obligations under this Indenture and on the Notes, executed pursuant to the provisions of this Indenture.

"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA.

"TRUSTEE" means the party named as such in the preamble to this Indenture until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

"UNRESTRICTED GLOBAL NOTE" means a permanent global Note substantially in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend.

"UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend.

"UNRESTRICTED SUBSIDIARY" means:

(1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and

(2) any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any capital stock or Indebtedness of, or holds any lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; PROVIDED, HOWEVER, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.07.

The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under the first paragraph of Section 4.09 and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions.

"U.S. PERSON" means a U.S. Person as defined in Rule 902(o) under the Securities Act.

"VOTING STOCK" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors or other similar governing entity of such Person.

"WEIGHTED AVERAGE LIFE TO MATURITY" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (x) the sum of the products of the numbers of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or scheduled redemption multiplied by the amount of such payment by (y) the sum of all such payments.

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"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any specified Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) will at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

Section 1.02 OTHER DEFINITIONS.

                                                                                     Defined in
Term                                                                                   Section
----                                                                                   -------
"AFFILIATE TRANSACTION".............................................................    4.11
"ASSET SALE OFFER"..................................................................    3.09
"AUTHENTICATION ORDER"..............................................................    2.02
"CHANGE OF CONTROL OFFER"...........................................................    4.14
"CHANGE OF CONTROL PAYMENT".........................................................    4.14
"CHANGE OF CONTROL PAYMENT DATE"....................................................    4.14
"COVENANT DEFEASANCE"...............................................................    8.03
"EVENT OF DEFAULT"..................................................................    6.01
"EXCESS PROCEEDS"...................................................................    4.10
"INCUR".............................................................................    4.09
"LEGAL DEFEASANCE"..................................................................    8.02
"OFFER AMOUNT"......................................................................    3.09
"OFFER PERIOD"......................................................................    3.09
"PAYING AGENT"......................................................................    2.03
"PERMITTED DEBT"....................................................................    4.09
"PURCHASE DATE".....................................................................    3.09
"REGISTRAR".........................................................................    2.03
"RESTRICTED PAYMENTS"...............................................................    4.07

Section 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.

Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.

The following TIA terms used in this Indenture have the following meanings:

"INDENTURE SECURITIES" means the Notes;

"INDENTURE SECURITY HOLDER" means a Holder of a Note;

"INDENTURE TO BE QUALIFIED" means this Indenture;

"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and

"OBLIGOR" on the Notes and the Subsidiary Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Subsidiary Guarantees, respectively.

All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them.

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Section 1.04 RULES OF CONSTRUCTION.

Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3) "or" is not exclusive;

(4) words in the singular include the plural, and in the plural include the singular;

(5) "will" shall be interpreted to express a command;

(6) provisions apply to successive events and transactions; and

(7) references to sections of or rules under the Securities Act will be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time.

ARTICLE 2.
THE NOTES

Section 2.01 FORM AND DATING.

(a) GENERAL. The Notes and the Trustee's certificate of authentication will be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof.

The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

(b) GLOBAL NOTES. Notes issued in global form will be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.

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(1) EUROCLEAR AND CLEARSTREAM PROCEDURES APPLICABLE. The provisions of
the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearsteam.

Section 2.02 EXECUTION AND AUTHENTICATION.

One Officer must sign the Notes for the Company by manual or facsimile signature.

If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid.

A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee will, upon receipt of a written order of the Company signed by two Officers (an "AUTHENTICATION ORDER"), authenticate Notes for original issue up to the aggregate principal amount stated in the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof.

The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company.

Section 2.03 REGISTRAR AND PAYING AGENT.

The Company will maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar will keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company will notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar.

The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes.

The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes.

Section 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.

The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Special Interest, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The

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Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) will have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee will serve as Paying Agent for the Notes.

Section 2.05 HOLDER LISTS.

The Trustee will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a).

Section 2.06 TRANSFER AND EXCHANGE.

(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if:

(1) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary; or

(2) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee.

Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this
Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.

(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES. The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

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(1) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL NOTE. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; PROVIDED, HOWEVER, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1).

(2) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN GLOBAL NOTES. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either:

(A) both:

(i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and

(ii) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or

(B) both:

(i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and

(ii) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(2) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.

(3) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED GLOBAL NOTE. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following:

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(A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

(C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable.

(4) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE. A beneficial interest in any Restricted Global Note may be exchanged by any Holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and:

(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Exchange Registration Rights Agreement and the Holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company;

(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Exchange Registration Rights Agreement;

(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Exchange Registration Rights Agreement; or

(D) the Registrar receives the following:

(i) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or

(ii) if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the

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Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above.

Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.

(c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE NOTES.

(1) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO RESTRICTED DEFINITIVE NOTES. If any Holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

(A) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

(B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable;

(F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

(G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

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the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(2) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. A Holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if:

(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Exchange Registration Rights Agreement and the Holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company;

(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Exchange Registration Rights Agreement;

(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Exchange Registration Rights Agreement; or

(D) the Registrar receives the following:

(i) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or

(ii) if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

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(3) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. If any Holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company will execute and the Trustee will authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will not bear the Private Placement Legend.

(d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS.

(1) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

(A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

(B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable;

(F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or

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(G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause
(C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note.

(2) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if:

(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Exchange Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or
(iii) a Person who is an affiliate (as defined in Rule 144) of the Company;

(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Exchange Registration Rights Agreement;

(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Exchange Registration Rights Agreement; or

(D) the Registrar receives the following:

(i) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or

(ii) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

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(3) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (2)(B), (2)(D) or
(3) above at a time when an Unrestricted Global Note has not yet been issued, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

(e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).

(1) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE NOTES. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

(A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

(C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable.

(2) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if:

(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Exchange Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a broker-dealer, (ii) a Person participating in the

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distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company;

(B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Exchange Registration Rights Agreement;

(C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Exchange Registration Rights Agreement; or

(D) the Registrar receives the following:

(i) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or

(ii) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(3) UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

(f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in accordance with the Exchange Registration Rights Agreement, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate:

(1) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered into the Exchange Offer by Persons that certify in the applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company; and

(2) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer.

Concurrently with the issuance of such Notes, the Trustee will cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company will execute and the Trustee will authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount.

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(g) LEGENDS. The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

(1) Private Placement Legend.

(A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR
(5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

(B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(4), (c)(2), (c)(3), (d)(2),
(d)(3), (e)(2), (e)(3) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) will not bear the Private Placement Legend.

(2) GLOBAL NOTE LEGEND. Each Global Note will bear a legend in substantially the following form:

"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED

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BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."

(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.

(i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.

(1) To permit registrations of transfers and exchanges, the Company will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 or at the Registrar's request.

(2) No service charge will be made to a Holder of a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof).

(3) The Registrar will not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.

(4) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes will be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

(5) The Company will not be required:

(A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection;

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(B) to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or

(C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date.

(6) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.

(7) The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof.

(8) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.

Section 2.07 REPLACEMENT NOTES.

If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note.

Every replacement Note is an additional obligation of the Company and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

Section 2.08 OUTSTANDING NOTES.

The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note.

If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser.

If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest.

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Section 2.09 TREASURY NOTES.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded.

Section 2.10 TEMPORARY NOTES.

Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without unreasonable delay, the Company will prepare and the Trustee will authenticate definitive Notes in exchange for temporary Notes.

Holders of temporary Notes will be entitled to all of the benefits of this Indenture.

Section 2.11 CANCELLATION.

The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes will be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

Section 2.12 DEFAULTED INTEREST.

If the Company defaults in a payment of interest on the Notes, it will pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company will fix or cause to be fixed each such special record date and payment date, PROVIDED that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) will mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.

ARTICLE 3.
REDEMPTION AND PREPAYMENT

Section 3.01 NOTICES TO TRUSTEE.

If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it must furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth:

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(1) the clause of this Indenture pursuant to which the redemption shall occur;

(2) the redemption date;

(3) the principal amount of Notes to be redeemed; and

(4) the redemption price.

Section 3.02 SELECTION OF NOTES TO BE REDEEMED OR PURCHASED.

If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee will select Notes for redemption or purchase as follows:

(1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or

(2) if the Notes are not listed on any national securities exchange, on a PRO RATA basis, by lot or by such method as the Trustee shall deem fair and appropriate.

In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Trustee from the outstanding Notes not previously called for redemption or purchase.

The Trustee will promptly notify the Company in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected will be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.

Section 3.03 NOTICE OF REDEMPTION.

Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 11 of this Indenture.

The notice will identify the Notes to be redeemed and will state:

(1) the redemption date;

(2) the redemption price;

(3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note

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or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note;

(4) the name and address of the Paying Agent;

(5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(6) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;

(7) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and

(8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes.

At the Company's request, the Trustee will give the notice of redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the Company has delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

Section 3.04 EFFECT OF NOTICE OF REDEMPTION.

Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

Section 3.05 DEPOSIT OF REDEMPTION OR PURCHASE PRICE.

One Business Day prior to the redemption or purchase price date, the Company will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest and Special Interest, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest and Special Interest, if any, on, all Notes to be redeemed or purchased.

If the Company complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

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Section 3.06 NOTES REDEEMED OR PURCHASED IN PART.

Upon surrender of a Note that is redeemed or purchased in part, the Company will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered.

Section 3.07 OPTIONAL REDEMPTION.

(a) At any time prior to April 1, 2006, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture (including the original principal amount of any Additional Securities) at a redemption price of 109.875% of the principal amount, plus accrued and unpaid interest and Special Interest, if any, to the redemption date, with the Net Cash Proceeds of one or more Equity Offerings; PROVIDED that:

(1) at least 65% of the aggregate principal amount of Notes issued under this Indenture (including the original principal amount of any Additional Notes) remains outstanding immediately after the occurrence of any such redemption (excluding Notes held by the Company and its Subsidiaries); and

(2) the redemption occurs within 120 days after the date of the related Equity Offering.

(b) Except pursuant to the preceding paragraph, the Notes will not be redeemable at the Company's option prior to April 1, 2006.

(c) After April 1, 2006, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Special Interest, if any, on the Notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on April 1, 2006 of the years indicated below:

YEAR                                         PERCENTAGE
----                                         ----------
2006........................................    104.938%
2007........................................    102.469%
2008 and thereafter.........................    100.000%

(d) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof.

Section 3.08 MANDATORY REDEMPTION.

The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes except as provided under Sections 3.09, 4.10 and 4.14.

Section 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.

In the event that, pursuant to Section 4.10 hereof, the Company is required to commence an offer to all Holders to purchase Notes (an "ASSET SALE OFFER"), it will follow the procedures specified below.

The Asset Sale Offer shall be made to all Holders and all Holders of other Indebtedness that is PARI PASSU with the Notes containing provisions similar to those set forth in this Indenture with respect to

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offers to purchase or redeem with the proceeds of sales and assets. The Asset Sale Offer will remain open for a period of at least 20 Business Days following its commencement and not more than 30 Business Days, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than three Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company will apply all Excess Proceeds (the "OFFER AMOUNT") to the purchase of Notes and such other PARI PASSU Indebtedness (on a pro rata basis, if applicable) or, if less than the Offer Amount has been tendered, all Notes and other Indebtedness tendered in response to the Asset Sale Offer. Payment for any Notes so purchased will be made in the same manner as interest payments are made.

If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, and Special Interest, if any, will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale Offer.

Upon the commencement of an Asset Sale Offer, the Company will send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice will contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The notice, which will govern the terms of the Asset Sale Offer, will state:

(1) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer will remain open;

(2) the Offer Amount, the purchase price and the Purchase Date;

(3) that any Note not tendered or accepted for payment will continue to accrue interest;

(4) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer will cease to accrue interest after the Purchase Date;

(5) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 only;

(6) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date;

(7) that Holders will be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

(8) that, if the aggregate principal amount of Notes and other PARI PASSU Indebtedness surrendered by Holders exceeds the Offer Amount, the Company will select the Notes and other PARI PASSU Indebtedness to be purchased on a PRO RATA basis based on the principal amount of Notes and such other PARI PASSU Indebtedness surrendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, will be purchased); and

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(9) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer).

On or before the Purchase Date, the Company will, to the extent lawful, accept for payment, on a PRO RATA basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and will deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, will promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company will promptly issue a new Note, and the Trustee, upon written request from the Company will authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Asset Sale Offer on the Purchase Date.

Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

ARTICLE 4.
COVENANTS

Section 4.01 PAYMENT OF NOTES.

The Company will pay or cause to be paid the principal of, premium, if any, and interest and Special Interest, if any, on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Special Interest, if any will be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company will pay all Special Interest, if any, in the same manner on the dates and in the amounts set forth in the Exchange Registration Rights Agreement

The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Special Interest (without regard to any applicable grace period) at the same rate to the extent lawful.

Section 4.02 MAINTENANCE OF OFFICE OR AGENCY.

The Company will maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

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The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof.

Section 4.03 REPORTS.

(a) Whether or not required by the Commission's rules and regulations, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes, within the time periods specified in the Commission's rules and regulations:

(1) all quarterly and annual reports that would be required to be filed with the Commission on Forms 10-Q and 10-K if the Company were required to file such reports; and

(2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports.

(b) If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company.

(c) All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. Each annual report on Form 10-K will include a report on the Company's consolidated financial statements by the Company's certified independent accountants. In addition, following the consummation of the Exchange Offer contemplated by the Exchange Registration Rights Agreement, the Company will file a copy of each of the reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the rules and regulations applicable to such reports (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request.

(d) If, at any time after consummation of the Exchange Offer contemplated by the Exchange Registration Rights Agreement, the Company is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, the Company will nevertheless continue filing the reports specified in the preceding paragraph with the Commission within the time periods specified above unless the Commission will not accept such a filing. the Company agrees that it will not take any action for the purpose of causing the Commission not to accept any such filings. If, notwithstanding the foregoing, the Commission will not accept the Company's filings for any reason, the Company will post the reports referred to in the preceding paragraph on its website within the time periods that would apply if the Company were required to file those reports with the Commission.

(e) In addition, the Company and the Guarantors agree that, for so long as any Notes remain outstanding, at any time they are not required to file the reports required by the preceding paragraphs with

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the Commission, they will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

Section 4.04 COMPLIANCE CERTIFICATE.

(a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture and the Security Documents, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and the Security Documents and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture or the Security Documents (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto.

(b) So long as any of the Notes are outstanding, the Company will deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.

Section 4.05 TAXES.

The Company will pay, and will cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes.

Section 4.06 STAY, EXTENSION AND USURY LAWS.

The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.07 RESTRICTED PAYMENTS.

The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly make a Restricted Payment. "Restricted Payment," with respect to any Person means:

(1) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving

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such Person) or similar payment to the direct or indirect Holders of its Capital Stock (other than dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Company or a Restricted Subsidiary, and other than pro rata dividends or other distributions made by a Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation));

(2) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock);

(3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations (other than the purchase, repurchase, or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition); or

(4) the making of any Investment (other than a Permitted Investment) in any Person,

unless, at the time of and after giving effect to such Restricted Payment:

(1) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;

(2) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Coverage Ratio test set forth in the first paragraph of
Section 4.09; and

(3) the aggregate amount of the Restricted Payment and all other Restricted Payments made since the issue date would exceed the sum of, without duplication:

(a) 50% of the Consolidated Net Income accrued during the period, which will be treated as one accounting period, from the beginning of the fiscal quarter in which the issue date occurs to the end of the most recent fiscal quarter ending at least 45 days before the date of the Restricted Payment, or, in case the Consolidated Net Income is a deficit, less 100% of that deficit; PLUS

(b) 100% of the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock, other than Disqualified Stock and other than Capital Stock issued in connection with the Financing Transactions, subsequent to the issue date and on or before the date of the Restricted Payment, other than an issuance or sale to a Subsidiary of the Company or an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees; PLUS

(c) the amount by which the Indebtedness of the Company is reduced on the Company's balance sheet upon the conversion or exchange, other than by a Subsidiary of the Company, subsequent to the issue date and on or before the date of the Restricted Payment, of any

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Indebtedness of the Company convertible or exchangeable for Capital Stock, other than Disqualified Stock, of the Company, less the amount of any cash, or the fair value of any other property, distributed by the Company upon the conversion or exchange; PLUS

(d) an amount equal to the sum of (x) the net reduction in Investments since the date hereof in Unrestricted Subsidiaries resulting from dividends, repayments of loans or advances or other transfers of assets, in each case to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, and (y) the portion, proportionate to the Company's equity interest in the Subsidiary, of the fair market value of the net assets of an Unrestricted Subsidiary at the time the Unrestricted Subsidiary is designated a Restricted Subsidiary; PROVIDED, HOWEVER, that this sum shall not exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made and treated as a Restricted Payment by the Company or any Restricted Subsidiary in the Unrestricted Subsidiary.

The preceding provisions will not prohibit:

(1) any acquisition of any Capital Stock of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company, other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company, or options, warrants or other rights to purchase the Capital Stock; PROVIDED, HOWEVER, that:

(a) the purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments; and

(b) the Net Cash Proceeds from the sale shall be excluded from clause (3)(b) of the first paragraph of this Section 4.07;

(2) any purchase, repurchase, redemption, defeasance or acquisition or retirement for value of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company, other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company, or options, warrants or other rights to purchase the Capital Stock; PROVIDED, HOWEVER, that:

(a) the purchase, repurchase, redemption, defeasance or acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments; and

(b) the Net Cash Proceeds from the sale shall be excluded from clause
(3)(b) of the first paragraph of this Section 4.07;

(3) any purchase, repurchase, redemption, defeasance or acquisition or retirement for value of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred under Section 4.09; PROVIDED, HOWEVER, that the Indebtedness:

(a) shall have a Stated Maturity later than the Stated Maturity of the Notes; and

(b) shall have a Weighted Average Life to Maturity greater than the remaining Weighted Average Life to Maturity of the Notes;

PROVIDED, FURTHER, HOWEVER, that the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments;

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(4) any purchase or redemption of Subordinated Obligations from Net Available Cash after application of such Net Available Cash pursuant to the provisions of Section 4.10; PROVIDED, HOWEVER, that the purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments;

(5) so long as no Default shall have occurred and be continuing, or result therefrom, the repurchase at any time by the Company of up to $23.0 million in aggregate principal amount of, and interest on, Subordinated Obligations with the net cash proceeds of the sale by the Company of its Equity Interests in Asahi- Schwebel Co., Ltd. (or the net proceeds from the sale of any securities received by the Company in connection with the sales of Equity Interests in Asahi-Schwebel Co., Ltd.); PROVIDED, HOWEVER, that such repurchases shall be excluded in the calculation of Restricted Payments;

(6) so long as no Default shall have occurred and be continuing, or result therefrom, the repurchase by the Company of its 9 3/4% Senior Subordinated Notes due 2009; PROVIDED that, at the time of and after giving effect to any such repurchases, (a) the Company's EBITDA for the prior four-quarter period for which internal financial statements are available shall be no less than $125.0 million and (b) the Consolidated Coverage Ratio shall exceed 2.25 to 1.0, PROVIDED, FURTHER, HOWEVER, that any such repurchases shall be included in the calculation of Restricted Payments;

(7) dividends paid within 60 days after the date of declaration thereof if at the date of declaration the dividend would have complied with this Section 4.07; PROVIDED, HOWEVER, that at the time of payment of the dividend, no other Default shall have occurred and be continuing or result therefrom; PROVIDED, FURTHER, HOWEVER, that the declaration, but not the payment, of such dividend shall be included in the calculation of the amount of Restricted Payments;

(8) so long as no Default shall have occurred and be continuing, or result therefrom, Investments in Joint Ventures or other Persons engaged in a Permitted Business in an aggregate amount which, when added together with the amount of all other Investments made according to this clause (8) which at the time have not been repaid through dividends, repayments of loans or advances or other transfers of assets, does not exceed $60.0 million; PROVIDED, HOWEVER, that the amount of the Investments shall be excluded in the calculation of Restricted Payments;

(9) so long as no Default shall have occurred and be continuing, or result therefrom, payments with respect to employee or director stock options, stock incentive plans or restricted stock plans of the Company, including any redemption, repurchase, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Company, restricted stock, options on any of these shares or similar securities held by directors, officers or employees or former directors, officers or employees or by any Plans upon death, disability, retirement or termination of employment of any of these Persons under the terms of the Plans or agreement under which the shares or related rights were issued or acquired; PROVIDED, HOWEVER, that the amount of any of these payments shall be included in the calculation of Restricted Payments;

(10) so long as no Default shall have occurred and be continuing, or result therefrom, any purchase or defeasance of Subordinated Obligations or Capital Stock upon a Change of Control to the extent required by this Indenture or other agreement or instrument under which the Subordinated Obligations or Capital Stock were issued, but only if the Company has first complied with all its obligations under Section 4.14; PROVIDED, HOWEVER, that the amount of the purchase or defeasance shall be excluded in the calculation of Restricted Payments; or

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(11) so long as no Default shall have occurred and be continuing, or result therefrom, Restricted Payments in an aggregate amount which, when added together with the amount of all other Restricted Payments made under, this clause (11) which at that time have not been repaid through dividends, repayments of loans or advances or other transfers of assets, does not exceed $40.0 million; PROVIDED, HOWEVER, that the amount of the Restricted Payments shall be included in the calculation of Restricted Payments.

The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.07 will be determined in good faith by the Board of Directors whose resolution with respect thereto will be delivered to the Trustee. Not later than the date of making any Restricted Payment, the Company will deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed.

Section 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES.

The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries;

(2) make loans or advances to the Company or any of its Restricted Subsidiaries; or

(3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries.

However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:

(1) agreements governing Existing Indebtedness and Credit Facilities as in effect on the date hereof and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date hereof;

(2) this Indenture, the Notes and the Subsidiary Guarantees;

(3) applicable law;

(4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was Incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; PROVIDED that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be Incurred;

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(5) customary non-assignment provisions in leases, licenses and other agreements entered into in the ordinary course of business and consistent with past practices;

(6) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (3) of the preceding paragraph;

(7) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition;

(8) Permitted Refinancing Indebtedness; PROVIDED that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

(9) Liens securing Indebtedness otherwise permitted to be Incurred under the provisions of Section 4.12 that limit the right of the debtor to dispose of the assets subject to such Liens;

(10) any encumbrance or restriction contained in the governing documents of any Joint Venture Subsidiary;

(11) provisions with respect to the disposition or distribution of assets or property in Joint Venture agreements, assets sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business; and

(12) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business.

Section 4.09 INCURRENCE OF INDEBTEDNESS.

The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary may Incur Indebtedness if, on the date of the Incurrence and after giving effect to the Incurrence on a pro forma basis (including a pro forma application of the net proceeds therefrom), the Consolidated Coverage Ratio exceeds 2.0 to 1.0.

The first paragraph of this Section 4.09 will not prohibit the Incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"):

(1) the incurrence by the Company or any Domestic Subsidiary of additional Indebtedness and letters of credit under Credit Facilities in an aggregate principal amount at any one time outstanding and incurred under this clause
(1)(with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries in respect thereof) not to exceed the greater of:

(a) $200.0 million; or

(b) the amount of the Borrowing Base as of the date of such incurrence;

(2) Indebtedness Incurred by Foreign Subsidiaries that are Restricted Subsidiaries to finance the working capital requirements of such Subsidiaries; PROVIDED, HOWEVER, that the aggregate principal amount of such Indebtedness, when added together with the amount of Indebtedness Incurred by all

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Foreign Subsidiaries that are Restricted Subsidiaries under this clause (2) and then outstanding, does not exceed the sum of:

(a) 85% of the then most recently reported net book value of all inventory owned by Foreign Subsidiaries that are Restricted Subsidiaries as of the end of the most recent fiscal quarter preceding such date; PROVIDED that the amount of this clause (a) shall not exceed 55% of the total of clauses (a) and (b) of this clause (2) on any date of calculation; PLUS

(b) 85% of the face amount of all accounts receivable owned by Foreign Subsidiaries as of the end of the most recent fiscal quarter preceding such date that were not more than 180 days past due;

(3) Indebtedness owed to and held by the Company or any Wholly Owned Restricted Subsidiary; PROVIDED, HOWEVER, that (a) any subsequent issuance or transfer of any Capital Stock which results in the Wholly Owned Restricted Subsidiary ceasing to be a Wholly Owned Restricted Subsidiary or any subsequent transfer of the Indebtedness, other than to the Company or a Wholly Owned Restricted Subsidiary, shall be deemed, in each case, to constitute the Incurrence of such Indebtedness and (b) if the Company or any Guarantor is the obligor on such Indebtedness, the payment of such Indebtedness is expressly subordinate to the prior payment in full in cash of all obligations with respect to the Notes, in the case of the Company, or the Subsidiary Guarantee in the case of a Guarantor;

(4) the Incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Subsidiary Guarantees issued on the date hereof and the Exchange Notes and the related Subsidiary Guarantees to be issued pursuant to the Exchange Registration Rights Agreement;

(5) the Incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness, other than Indebtedness described in clauses (1),
(2), (3) or (4) above;

(6) the Incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be Incurred under the first paragraph of this Section 4.09 or clause (4) or
(5) above or this clause (6);

(7) Hedging Obligations directly related to Indebtedness permitted to be Incurred by the Company and Restricted Subsidiaries under this Indenture or, in the case of a currency exchange protection agreement, reasonably related to the ordinary course of business of the Company and its Restricted Subsidiaries;

(8) Indebtedness, including Capital Lease Obligations and purchase money Indebtedness, Incurred by the Company or its Restricted Subsidiaries to finance the acquisition of tangible assets or other capital expenditures, and Indebtedness Incurred by the Company or its Restricted Subsidiaries to refinance such Capital Lease Obligations and purchase money Indebtedness, in an aggregate outstanding principal amount which, when added together with the amount of Indebtedness Incurred under this clause (8) and then outstanding, does not exceed $20.0 million;

(9) Indebtedness in respect of performance, surety or appeal bonds provided in the ordinary course of the Company and its Restricted Subsidiaries;

(10) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the

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payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09; PROVIDED, in each such case, that the amount thereof is included in Consolidated Interest Expense of the Company as accrued; and

(11) Indebtedness in an aggregate principal amount which, together with all other Indebtedness of the Company and Restricted Subsidiaries outstanding on the date of the Incurrence, other than Indebtedness permitted by clauses
(1) through (10) above or the first paragraph of this Section 4.09, does not exceed $40.0 million.

The Company will not Incur:

(1) any Indebtedness if that Indebtedness is contractually subordinate in right of payment to any Senior Indebtedness, unless the Indebtedness is Senior Subordinated Indebtedness or is contractually subordinated in right of payment to the Notes; PROVIDED, HOWEVER, that no Indebtedness of the Company will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being unsecured, or

(2) any Secured Indebtedness that is not Senior Indebtedness.

For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (11) above, or is entitled to be Incurred pursuant to the first paragraph of this Section 4.09, the Company will be permitted to classify such item of Indebtedness on the date of its Incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.09. Indebtedness under Credit Facilities outstanding on the date on which Notes are first issued and authenticated under this Indenture will be deemed to have been Incurred on such date in reliance on the exception provided by clauses (1) or (2) of the definition of Permitted Debt, as applicable.

In determining amounts of Indebtedness outstanding under this Section 4.09 and to avoid duplication, Indebtedness of a Person resulting from the grant by that Person of security interests with respect to, or from the issuance by that Person of guarantees of, or from the assumption of obligations with respect to letters of credit supporting, Indebtedness Incurred by that Person under this Indenture, or Indebtedness which that Person is otherwise permitted to Incur under this Indenture, shall not be deemed to be a separate Incurrence of Indebtedness by that Person.

Section 4.10 ASSET SALES.

The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:

(1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; and

(2) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash. For purposes of this provision, each of the following will be deemed to be cash:

(a) the assumption of Indebtedness of the Company or any Restricted Subsidiary and the release of the Company or the Restricted Subsidiary from all liability with respect to the

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Indebtedness in connection with the Asset Sale; PROVIDED, HOWEVER, that the amount of the Indebtedness shall not be deemed to be cash for the purpose of the term "Net Available Cash;" and

(b) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or the Restricted Subsidiary into cash.

Within 360 days after the receipt of the Net Available Cash from the Asset Sale, an amount equal to 100% of the Net Available Cash from the Asset Sale, subject to the following two paragraphs, shall be applied by the Company or the Restricted Subsidiary, as the case may be:

(1) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business which, in the case of an Asset Sale of Equity Interests or assets of a Domestic Subsidiary, must be owned by the Company or a Domestic Subsidiary;

(2) to make a capital expenditure which, in the case of an Asset Sale of Equity Interests or assets of a Domestic Subsidiary, will be a capital expenditure of the Company or a Domestic Subsidiary; or

(3) to acquire other long-term assets that are used or useful in a Permitted Business which, in the case of an Asset Sale of Equity Interests or assets of a Domestic Subsidiary, must be owned by the Company or a Domestic Subsidiary.

Notwithstanding the above, the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash according to the foregoing paragraph except to the extent that the aggregate Net Available Cash from all Asset Sales which are not applied according to the foregoing paragraph exceeds $15.0 million. Pending application of Net Available Cash under this Section 4.10, the Net Available Cash will be invested in Cash Equivalents which, in the case of an Asset Sale of Equity Interests or assets of a Domestic Subsidiary, must be held by the Joint Collateral Agent as part of the Collateral in a segregated account that includes only proceeds of Asset Sales and interest earned thereon (an "ASSET SALE PROCEEDS ACCOUNT").

Any Net Available Cash from Asset Sales, as set forth in the preceding paragraph, that is not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, within five days thereof, the Company will make an Asset Sale Offer to all Holders of Notes and all holders of Parity Lien Debt that contains provisions similar to those set forth herein with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other Parity Lien Debt that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and Special Interest, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and Parity Lien Debt tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Notes and the Parity Lien Debt will be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

The Company will comply with the requirements of the securities laws in connection with the purchase of the Notes under this Section 4.10. To the extent that the provisions of any securities laws conflict with provisions of this
Section 4.10, the Company will comply with the applicable securities laws and shall not be deemed to have breached its obligations under this Section 4.10.

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Section 4.11 TRANSACTIONS WITH AFFILIATES.

The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "AFFILIATE TRANSACTION"), unless:

(1) the Affiliate Transaction is made in good faith and on terms which are fair and reasonable to the Company or the Restricted Subsidiary, as the case may be; and

(2) the Company delivers to the Trustee:

(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this Section 4.11 and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and

(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Company of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.

The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:

(1) the Financing Transactions;

(2) any Permitted Investment and any Restricted Payment permitted to be paid under Section 4.07;

(3) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise under, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors;

(4) the payment of reasonable fees to directors of the Company and its Restricted Subsidiaries;

(5) transactions between the Company or a Restricted Subsidiary and one or more Restricted Subsidiaries; PROVIDED, HOWEVER, that no Affiliate of the Company, other than another Restricted Subsidiary, owns, directly or indirectly, any Capital Stock in any of the Restricted Subsidiaries;

(6) transactions in the ordinary course of business, including loans, expense advances and reimbursements, between the Company or any of its Restricted Subsidiaries, on the one hand, and any employee of the Company or any of its Restricted Subsidiaries, on the other hand;

(7) transactions with affiliates entered into in the ordinary course of business of the Company or its Restricted Subsidiaries, on terms which are, in the opinion of the Company's management or the Board of Directors, fair and reasonable to the Company or its Restricted Subsidiaries;

(8) the granting and performance of registration rights for shares of Capital Stock of the Company under a written registration rights agreement approved by a majority of directors of the Company that are disinterested with respect to the transactions;

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(9) transactions with Affiliates solely in their capacity as holders of Indebtedness or Capital Stock of the Company or any of its Subsidiaries, so long as Indebtedness or Capital Stock of the same class is also held by Persons that are not Affiliates of the Company and these Affiliates are treated no more favorably than holders of the Indebtedness or the Capital Stock generally;

(10) transactions pursuant to the Governance Agreement, the Stockholders Agreement, or either of the Registration Rights Agreements and any amendments to, or waivers of any provision of, any such agreements that are not adverse to the interests of the Holders of the Notes and which are approved by a majority of the directors of the Company disinterested with respect to the amendment or waiver, as applicable; and

(11) any transaction between the Company or any Restricted Subsidiaries and any of the Existing Joint Ventures under agreements in effect on the issue date.

Section 4.12 LIENS.

The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, Incur, assume or suffer to exist any Lien of any kind on any asset now owned or hereafter acquired, except Permitted Liens. The Company will not and will not permit any of its Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any pledge of or other Lien on the outstanding Equity Interests of Clark-Schwebel Holding Corp. or Clark-Schwebel Corporation.

Additionally, the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any Lien of any kind:

(1) upon any property as security for any Parity Lien Obligation, unless the Company or such Subsidiary causes such Lien (a) to be granted to the Joint Collateral Agent and (b) to extend to and secure the Note Obligations upon substantially the same terms but subject to the provisions of this Indenture and causes such Lien to be duly perfected; or

(2) securing any Parity Lien Debt, unless this Indenture or agreement governing such Parity Lien Debt (a) provides (for the enforceable benefit of the Trustee and Holders of Notes) that (x) the holder of such Parity Lien Debt is bound by the terms of the Joint Collateral Agent Undertakings and (y) all obligations in respect of the Notes are Equally and Ratably secured by all Liens, guarantees, supporting obligations and loss sharing rights at any time granted by the Company or any of its Subsidiaries or any other Person as security for such Parity Lien Debt, whether or not otherwise constituting Collateral, and (b) authorizes the Joint Collateral Agent to perform its obligations set forth herein and the Joint Collateral Agent Undertakings.

Section 4.13 BUSINESS ACTIVITIES.

The Company will not, and will not permit any Restricted Subsidiary to, engage in any business other than a Permitted Business.

Section 4.14 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.

(a) Upon the occurrence of a Change of Control, the Company will make an offer (a "CHANGE OF CONTROL OFFER") to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Special Interest on the Notes repurchased, if any, to

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the date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and stating:

(1) that the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Notes tendered will be accepted for payment;

(2) the circumstances and relevant facts regarding the Change of Control, including a statement of pro forma historical income, cash flow and capitalization after giving effect to the Change of Control;

(3) the purchase price and the purchase date, which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE");

(4) the instructions determined by the Company, consistent with this Section, that a Holder must follow in order to have its purchased.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of Sections 3.09 or 4.14 of this Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under Section 3.09 or this Section 4.14 by virtue of such conflict.

(b) On the Change of Control Payment Date, the Company will, to the extent lawful:

(1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;

(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and

(3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

The Paying Agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED that each new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

(c) Notwithstanding anything to the contrary in this Section 4.14, the Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this
Section 4.14 and Section 3.09 hereof and purchases all Notes validly tendered and not withdrawn under the Change of Control Offer.

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Section 4.15 LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES.

The Company will not sell any shares of Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted Subsidiary to issue or sell shares of its Capital Stock, in each case, other than preferred stock within the meaning of "Qualified Preferred Stock," as defined herein, except:

(1) to the Company or a Wholly Owned Restricted Subsidiary;

(2) directors' qualifying shares;

(3) if, immediately after giving effect to the issuance or sale, neither the Company nor any of its Subsidiaries own any Capital Stock of the Restricted Subsidiary; or

(4) if, immediately after giving effect to the issuance or sale, the Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in the Person remaining after giving effect to the issuance or sale would have been permitted to be made under Section 4.07 if made on the date of the issuance or sale.

The issuance or sale of shares of Capital Stock of any Restricted Subsidiary of the Company will not violate the provisions above if the shares are issued or sold in connection with:

(1) the formation or capitalization of a Restricted Subsidiary which, at the time of the issuance or sale or immediately after the issuance or sale, is a Joint Venture Subsidiary; or

(2) a single transaction or a series of substantially contemporaneous transactions by which the Restricted Subsidiary becomes a Restricted Subsidiary of the Company by reason of the acquisition of securities or assets from another Person.

Section 4.16 ADVANCES TO RESTRICTED SUBSIDIARIES.

All advances to Restricted Subsidiaries made by the Company or any Guarantor after the date hereof will be evidenced by intercompany notes in favor of the Company or such Guarantor, as applicable. These intercompany notes will be pledged pursuant to the Security Documents to secure the Note Obligations and any Parity Lien Obligations. Each intercompany note will be payable upon demand and will bear interest at the same rate as the Notes. The intercompany notes will each be in the form attached as Exhibit G hereto.

The Company and any Guarantor will not permit any Restricted Subsidiary in respect of which the Company or such Guarantor, as applicable is a creditor by virtue of an intercompany note to Incur any Indebtedness that is subordinate or junior in right of payment to any Indebtedness of such Restricted Subsidiary unless the Indebtedness so incurred is also subordinated in right of payment to all intercompany notes of such Restricted Subsidiary.

Section 4.17 PAYMENTS FOR CONSENT.

The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

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Section 4.18 ADDITIONAL SUBSIDIARY GUARANTEES AND LIENS.

If:

(1) any Domestic Subsidiary has EBITDA for the last four-quarter period for which internal financial statements are available in excess of $2.5 million;

(2) any group of Domestic Subsidiaries, taken together, have EBITDA in excess of $2.5 million for the last four-quarter period for which internal financial statements are available; or

(3) any Subsidiary guarantees or otherwise provides direct credit support for any Indebtedness of the Company,

(each such event set forth in clauses (1) through (3) above, a "Triggering Event"), then such Subsidiary or group of Subsidiaries will become a Guarantor or Guarantors and execute a supplemental indenture within 10 Business Days of the date on which such Triggering Event occurred; PROVIDED, HOWEVER, this
Section 4.18 will not apply to Subsidiaries that have properly been designated as Unrestricted Subsidiaries in accordance with this Indenture for so long as they continue to constitute Unrestricted Subsidiaries; and PROVIDED, FURTHER, HOWEVER, that clause (2) above will not apply to any Domestic Subsidiary with an EBITDA for the last four-quarter period for which internal financial statements are available of less than $250,000. The form of such Subsidiary Guarantee is attached as Exhibit E hereto.

If the Company or any other Obligor at any time owns or acquires property (except property that is at such time an Excluded Asset) that is not subject to a valid, enforceable and perfected Note Lien held by the Joint Collateral Agent as security for the Note Obligations and any Parity Lien Obligations, or if the Company or any of its Subsidiaries at any time grants or permits to exist any consensual lien upon any property constituting an Excluded Asset, except Credit Facility Collateral, as security for any Parity Lien Obligation or Credit Facility Obligation, then the Company will, or will cause such Subsidiary to, concurrently:

(1) execute and deliver to the Joint Collateral Agent a Security Document upon substantially the same terms as the Security Documents delivered in connection with the issuance of the Notes, granting a Lien upon such property to the Joint Collateral Agent for the benefit of the Holders of Note Obligations and Parity Lien Obligations;

(2) cause the Lien granted in such Security Document to be duly perfected in any manner permitted by law; and

(3) deliver to the Joint Collateral Agent an opinion of counsel reasonably satisfactory to the Joint Collateral Agent, confirming as to such Security Document the matters set forth as to the Security Documents and Liens thereunder in the opinions of counsel delivered on behalf of the Company to the Initial Purchasers of the Notes in connection with the issuance of the Notes and, if the property subject to such Security Document is an interest in real estate, such local counsel opinions, title and flood insurance policies, surveys and other supporting documents as the Joint Collateral Agent may reasonably request, PROVIDED, HOWEVER, that no such opinion will be required if in the reasonable judgment of the Company the fair market value of all such collateral is less than $1.0 million.

If the Company or any Subsidiary creates or permits to exist any Lien on any Foreign Subsidiary Collateral as security for any Obligations under any Qualified Credit Facility, then the Company will, or will cause such Subsidiary to, concurrently grant the Joint Collateral Agent valid, enforceable and perfected Liens upon such Foreign Subsidiary Collateral as security for Note Obligations and Parity Lien Obligations.

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Section 4.19 FAILURE TO DELIVER SECURITY DOCUMENTS; INCREASED INTEREST RATE.

As of the date of this Indenture, the Company may not have delivered to the Joint Collateral Agent each Security Document granting the first-priority security interests in the Collateral. If this occurs, the Company will use its best efforts to deliver all of the Security Documents to the Joint Collateral Agent after the date hereof. If the Company is unable to deliver to the Joint Collateral Agent, within the time periods set forth below, all of the Security Documents, the following shall occur:

(1) if all the Security Documents have not been delivered within 60 days after the date hereof, the annual interest rate on the Notes will increase by 0.25%;

(2) if all the Security Documents have not been delivered within 150 days after the date hereof, the annual interest rate on the Notes will increase by an additional 0.25%;

(3) if all Security Documents have not been delivered within 240 days after the date hereof, the annual interest rate on the Notes will increase by an additional 0.25%; and

(4) if all the Security Documents have not been delivered within 330 days after the date hereof, the annual interest rate on the Notes will increase by an additional 0.25%;

PROVIDED, that the increase in the annual interest rate on the Notes described above will not exceed 1% in the aggregate and, PROVIDED, FURTHER, that (i) when all the Security Documents are delivered at any time after the date hereof or
(ii) if the failure by the Company to deliver all Security Documents results solely from the refusal by any third-party or governmental authority to take any action required for Hexcel to make such delivery of all Security Documents, the annual interest rate on the Notes will return to 9.875%.

Section 4.20 FURTHER ASSURANCES; COLLATERAL INSPECTIONS AND REPORTS; COSTS AND INDEMNIFICATION.

(a) The Company will, and will cause each of its Subsidiaries to, do or cause to be done all acts and things which may be required, or which the Joint Collateral Agent from time to time may reasonably request, to assure and confirm that the Joint Collateral Agent holds, for the benefit of the holders of Note Obligations and Parity Lien Obligations, duly created, enforceable and perfected Liens upon the Collateral as contemplated by this Indenture and the Security Documents, so as to render the same available for the security and benefit of this Indenture and of the Notes, Subsidiary Guarantees and all other Note Obligations and Parity Lien Obligations, according to the intent and purposes herein expressed.

(b) Upon request of the Joint Collateral Agent at any time and from time to time, the Company will, and will cause each of its Subsidiaries to, promptly execute, acknowledge and deliver such Security Documents, instruments, certificates, notices and other documents and take such other actions as the Joint Collateral Agent may reasonably request to create, perfect, protect, assure or enforce the Liens and benefits intended to be conferred as contemplated by this Indenture for the benefit of the holders of Note Obligations and the holders of Parity Lien Obligations. If the Company or such Subsidiary fails to do so, the Collateral Agent is hereby irrevocably authorized and empowered, with full power of substitution, to execute, acknowledge and deliver such Security Documents, instruments, certificates, notices and other documents and, subject to Article 12, take such other actions in the name, place and stead of the Company or such Subsidiary, but the Joint Collateral Agent will have no obligation to do so and no liability for any action taken or omitted by it in good faith in connection therewith.

(c) Upon request of the Collateral Agent at any time and from time to time, the Company will, and will cause its Subsidiaries to, (i) permit the Joint Collateral Agent or any advisor, auditor,

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consultant, attorney or representative acting for the Joint Collateral Agent, upon reasonable notice to the Company and during normal business hours unless an Event of Default is continuing, to visit and inspect any of the property of the Company and its Subsidiaries, to review, make extracts from and copy the books and records of the Company and its Subsidiaries relating to any such property, and to discuss any matter pertaining to any such property with the officers and employees of the Company and its Subsidiaries, and (ii) deliver to the Joint Collateral Agent such reports, including valuations, relating to any such property or any Lien thereon as the Collateral Agent may request.

(d) The Company will bear and pay all legal expenses, collateral audit and valuation costs, filing fees, insurance premiums and other costs associated with the performance of the obligations of the Company and its Subsidiaries set forth in this Section 4.20 and also will pay, or promptly reimburse the Trustee and Joint Collateral Agent for, all costs and expenses incurred by the Trustee or Collateral Agent in connection therewith, including all reasonable fees and charges of any advisors, auditors, consultants, attorneys or representatives acting for the Trustee or for the Joint Collateral Agent.

(e) The Company will pay, reimburse the Trustee, the Joint Collateral Agent and the Holders of Notes for, and, to the fullest extent lawful, defend and indemnify each of them against, all claims, liabilities, taxes, costs and expenses of every type and nature (including, without limitation, the reasonable fees and charges of attorneys, advisors, auditors and consultants acting for any of them) incurred by any of them as a result of or in connection with the creation, perfection, protection or enforcement of the Note Liens or the exercise or enforcement of any right or remedy under the Security Documents or to prove, preserve, protect or enforce any Note Lien or any claim based upon the Note Liens in any legal proceeding, including any Insolvency or Liquidation Proceeding. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee, as Holder of Notes, or the Joint Collateral Agent through the Trustee's, such Holder of Notes, or the Joint Collateral Agent's, as applicable, own willful misconduct, gross negligence or bad faith.

(f) The Company will pay, reimburse the Trustee, the Joint Collateral Agent and the Holders of Notes for, and, to the fullest extent lawful, defend and indemnify each of them against, all claims, liabilities, taxes, costs and expenses of every type and nature (including, without limitation, the reasonable fees and charges of attorneys, advisors, auditors and consultants acting for any of them) incurred by any of them as a result of or in connection with: (A) the presence, Release, or threatened Release of or exposure to any Hazardous Material at, from, in, to, on, or under any Property currently or formerly owned, leased or otherwise used or occupied by the Company; (B) the transportation, treatment, storage, handling, recycling or disposal or arrangement for transportation, treatment, storage, handling, recycling or disposal of any Hazardous Material at or to any location by or on behalf of the Company; or (C) any violation of Environmental Law by the Company.

(g) The Company will comply with the provisions of TIA Section 314(b). To the extent applicable, the Company will cause TIA Section 313(b), relating to reports, and TIA Section 314(d), relating to the release of property or securities or relating to the substitution therefore of any property or securities to be subjected to the Lien of the Security Documents, to be complied with. Any certificate or opinion required by TIA Section 314(d) may be made by an officer of the Company except in cases where TIA Section 314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected or reasonably satisfactory to the Trustee.

To the extent applicable, the Company will furnish to the Trustee, prior to each proposed release of Collateral pursuant to the Security Documents:

(1) all documents required by TIA Section 314(d); and

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(2) an opinion of counsel to the effect that such accompanying documents constitute all documents required by TIA Section 314(d).

If any Collateral is released in accordance with this Indenture or any Security Document at a time when the Trustee is not itself also the Joint Collateral Agent and if the Company has delivered the certificates and documents required by the Security Documents and this Section 4.20, the Trustee will determine whether it has received all documentation required by TIA Section 314(d) in connection with such release and, based on such determination and the opinion of counsel delivered pursuant to this Indenture, will deliver a certificate to the Joint Collateral Agent setting forth such determination.

ARTICLE 5.
SUCCESSORS

Section 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS.

The Company may not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless:

(1) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation organized or existing under the laws of the United States, any state of the United States or the District of Columbia;

(2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Company under the Notes, this Indenture, the Exchange Registration Rights Agreement and the Security Documents pursuant to agreements reasonably satisfactory to the Trustee;

(3) immediately after such transaction, no Default or Event of Default exists; and

(4) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition has been made will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Coverage Ratio test set forth in the first paragraph of Section 4.09.

In addition, the Company may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This Section 5.01 will not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any Domestic Restricted Subsidiary of the Company or a merger of a Domestic Restricted Subsidiary into the Company.

Section 5.02 SUCCESSOR CORPORATION SUBSTITUTED.

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in a transaction that is subject to, and

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that complies with the provisions of, Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; PROVIDED, HOWEVER, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof.

ARTICLE 6.
DEFAULTS AND REMEDIES

Section 6.01 EVENTS OF DEFAULT.

Each of the following is an "Event of Default":

(1) the Company defaults for 30 days in the payment when due of interest on, or Special Interest with respect to, the Notes;

(2) the Company defaults in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the Notes;

(3) the Company or any of its Subsidiaries fails to comply with the provisions of Section 4.16 or 5.01 hereof;

(4) the Company fails to comply with any of its obligations in Section 4.14, other than a failure to purchase Notes, or Section 4.10, other than a failure to purchase Notes, Section 4.03, Section 4.07, Section 4.09,
Section 4.08, Section 4.11, Section 4.15, Section 4.13 or Section 4.18 for 30 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of Notes then outstanding voting as a single class;

(5) the Company fails to observe or perform any other covenant, representation, warranty or other agreement in this Indenture, the Notes or the Security Documents for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; PROVIDED, HOWEVER, that in no event shall a failure by the Company to observe or perform any representation or warranty be an Event of Default unless such failure would have a material adverse effect on the management, the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries, taken as a whole;

(6) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary (or the payment of which is guaranteed by the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary), whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, if that default:

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(A) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or

(B) results in the acceleration of such Indebtedness prior to its express maturity,

and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness or the maturity of which has been so accelerated, aggregates $10.0 million or more;

(7) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, which judgment or judgments remains outstanding for 60 days following such judgment or judgments and are not discharged, waived or stayed within 10 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; provided that the aggregate of all such undischarged judgments exceeds $10.0 million;

(8) any Security Document or any Lien purported to be granted thereby and having a fair market value in excess of $10.0 million is held in any judicial proceeding to be unenforceable or invalid, in whole or in part, or ceases for any reason (other than pursuant to a release that is delivered or becomes effective as set forth herein) to be fully enforceable and perfected;

(9) the Company or any Guarantor, or any Person acting on behalf of any of them, denies or disaffirms, in writing, any obligation of the Company or any Guarantor set forth in or arising under any Security Document;

(10) except as permitted by this Indenture, any Subsidiary Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee;

(11) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law:

(A) commences a voluntary case,

(B) consents to the entry of an order for relief against it in an involuntary case,

(C) consents to the appointment of a custodian of it or for all or substantially all of its property,

(D) makes a general assignment for the benefit of its creditors, or

(E) generally is not paying its debts as they become due; or

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(12) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(A) is for relief against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case;

(B) appoints a custodian of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or

(C) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary;

and the order or decree remains unstayed and in effect for 60 consecutive days.

The Company is required to deliver to the Trustee, within 30 days after its occurrence, written notice of any event which would constitute a Default, its status and what action the Company is taking or proposes to take in respect to the event.

Section 6.02 ACCELERATION.

In the case of an Event of Default specified in clause (11) or (12) of
Section 6.01 hereof, with respect to the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately.

Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (11) or (12) of Section 6.01 hereof occurs with respect to the Company, any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived.

Section 6.03 OTHER REMEDIES.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Special Interest, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or

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constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

Section 6.04 WAIVER OF PAST DEFAULTS.

Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except an Event of Default in the payment of the principal of, premium and Special Interest, if any, or interest on, the Notes (including in connection with an offer to purchase); PROVIDED, HOWEVER, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

Section 6.05 CONTROL BY MAJORITY.

Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability.

Section 6.06 LIMITATION ON SUITS.

Except to enforce the right to receive payment of principal, premium, Special Interest, if any, or interest when due no Holder of a Note may pursue a remedy with respect to this Indenture or the Notes unless:

(1) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default;

(2) the Holders of at least 25% in principal amount of the then outstanding Notes have requested the Trustee to pursue the remedy;

(3) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense;

(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and

(5) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request.

A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note.

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Section 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.

Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Special Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

Section 6.08 COLLECTION SUIT BY TRUSTEE.

If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as Trustee of an express trust against the Company for the whole amount of principal of, premium and Special Interest, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.

The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10 PRIORITIES.

If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:

FIRST: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection;

SECOND: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Special Interest, if any, and interest, ratably, without preference or priority of any

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kind, according to the amounts due and payable on the Notes for principal, premium and Special Interest, if any and interest, respectively; and

THIRD: to the Company or to such party as a court of competent jurisdiction shall direct.

The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10.

Section 6.11 UNDERTAKING FOR COSTS.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes.

ARTICLE 7.
TRUSTEE

Section 7.01 DUTIES OF TRUSTEE.

(a) If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.

(b) Except during the continuance of an Event of Default:

(1) the duties of the Trustee will be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01;

(2) the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

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(3) the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section 7.01.

(e) No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability. The Trustee will be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

(f) The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section 7.02 RIGHTS OF TRUSTEE.

(a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(c) The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care.

(d) The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute willful misconduct or gross negligence.

(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company will be sufficient if signed by an Officer of the Company.

(f) The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction.

Section 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as Trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.

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Section 7.04 TRUSTEE'S DISCLAIMER.

The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.

Section 7.05 NOTICE OF DEFAULTS.

If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee will mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium or Special Interest, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes.

Section 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.

(a) Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee will mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also will comply with TIA Section 313(b)(2). The Trustee will also transmit by mail all reports as required by TIA Section 313(c).

(b) A copy of each report at the time of its mailing to the Holders of Notes will be mailed by the Trustee to the Company and filed by the Trustee with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company will promptly notify the Trustee when the Notes are listed on any stock exchange.

Section 7.07 COMPENSATION AND INDEMNITY.

(a) The Company will pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation will not be limited by any law on compensation of a Trustee of an express trust. The Company will reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses will include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.

(b) The Company and the Guarantor will indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company , the Guarantors or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its gross negligence, willful misconduct or bad faith. The Trustee will notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company will not relieve the Company or any of the Guarantors of

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their obligations hereunder. The Company or such Guarantor will defend the claim and the Trustee will cooperate in the defense. The Trustee may have separate counsel and the Company will pay the reasonable fees and expenses of such counsel. Neither the Company nor any Guarantor need pay for any settlement made without its consent, which consent will not be unreasonably withheld.

(c) The obligations of the Company and the Guarantors under this
Section 7.07 will survive the satisfaction and discharge of this Indenture.

(d) To secure the Company's payment obligations in this Section 7.07, the Trustee will have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien will survive the satisfaction and discharge of this Indenture.

(e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(11) or (12) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

(f) The Trustee will comply with the provisions of TIA
Section 313(b)(2) to the extent applicable.

Section 7.08 REPLACEMENT OF TRUSTEE.

(a) A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08.

(b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:

(1) the Trustee fails to comply with Section 7.10 hereof;

(2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

(3) a custodian or public officer takes charge of the Trustee or its property; or

(4) the Trustee becomes incapable of acting.

(c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

(d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

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(e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(f) A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will mail a notice of its succession to Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee, PROVIDED all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof will continue for the benefit of the retiring Trustee.

Section 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be the successor Trustee.

Section 7.10 ELIGIBILITY; DISQUALIFICATION.

There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition.

This Indenture will always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b).

Section 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.

ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.

The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.

Section 8.02 LEGAL DEFEASANCE AND DISCHARGE.

Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes (including the Subsidiary Guarantees) on the date the conditions set forth below are

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satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Company and the Guarantors will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including the Subsidiary Guarantees), which will thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes, the Subsidiary Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which will survive until otherwise terminated or discharged hereunder:

(1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Special Interest, if any, on such Notes when such payments are due from the trust referred to in Section 8.04 hereof;

(2) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof;

(3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith; and

(4) this Article 8.

Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

Section 8.03 COVENANT DEFEASANCE.

Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19 and 4.20 hereof and clause (4) of Section 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes will thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes will not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes and Subsidiary Guarantees, the Company and the Guarantors may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event of Default under
Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes and Subsidiary Guarantees will be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(3) through 6.01(6) hereof will not constitute Events of Default.

Section 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.

In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof:

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(1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium and Special Interest, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date;

(2) in the case of an election under Section 8.02 hereof, the Company has delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that:

(A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or

(B) since the date of this Indenture, there has been a change in the applicable federal income tax law,

in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3) in the case of an election under Section 8.03 hereof, the Company must deliver to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit);

(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

(6) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; and

(7) the Company must deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Additionally, the Collateral will be released in whole as provided in
Section 14.04 upon either a Legal Defeasance or Covenant Defeasance under either
Section 8.02 or 8.03 hereof.

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Section 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.

Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Special Interest, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.06 REPAYMENT TO COMPANY.

Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or Special Interest, if any, or interest on any Note and remaining unclaimed for two years after such principal, premium or Special Interest, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) will be discharged from such trust; and the Holder of such Note will thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as Trustee thereof, will thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.

Section 8.07 REINSTATEMENT.

If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantor's obligations under this Indenture and the Notes and the Subsidiary Guarantees will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company makes any payment of principal of, premium or Special Interest, if any, or interest on any Note following the reinstatement of its obligations, the Company will be

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subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES.

Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Subsidiary Guarantees, the Notes or any Security Documents without the consent of any Holder of a Note:

(1) to cure any ambiguity, defect or inconsistency;

(2) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder;

(3) to provide for the assumption of the Company's or a Guarantor's obligations to the Holders of the Notes by a successor to the Company pursuant to Article 5 or Article 10 hereof;

(4) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note;

(5) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA;

(6) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof;

(7) to allow any Guarantor to execute a supplemental indenture and/or a Subsidiary Guarantee with respect to the Notes;

(8) to make, complete or confirm any grant of Collateral permitted or required by this Indenture or Security Documents or any release of Collateral that becomes effective as set forth in this Indenture or Security Documents;

(9) to conform the text of this Indenture, the Subsidiary Guarantees, the Security Documents or the Notes to any provision of the Description of Notes contained in the Offering Circular to the extent that such provision in that Description of Notes was intended to be a verbatim recitation of a provision of this Indenture, the Subsidiary Guarantees, the Security Documents or the Notes;

(10) reflect any waiver or termination of any right arising under Article 12 that otherwise would be enforceable by any holder of a Parity Lien Obligation or Parity Lien, if such waiver or termination is set forth or provided herein or agreement governing or giving rise to such Parity Lien Obligation or Parity Lien; PROVIDED, that no such waiver or amendment pursuant to this clause (10) shall adversely affect the rights of Holders of Notes; or

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(11) to make any amendment or supplement approved in accordance with
Section 13.09.

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee will not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise.

Section 9.02 WITH CONSENT OF HOLDERS OF NOTES.

Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including, without limitation, Section 3.09, 4.10 and 4.14 hereof), the Subsidiary Guarantees, the Notes or any Security Documents with the consent of the Holders of at least a majority in principal amount of the Notes (including, without limitation, Additional Notes, if any) then outstanding voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium or Special Interest, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Subsidiary Guarantees, the Notes or any Security Documents may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02.

An amendment or supplement to, or wavier of, Article 13 will become effective only as set forth under Section 13.09.

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but will not be obligated to, enter into such amended or supplemental Indenture.

It is not be necessary for the consent of the Holders of Notes under this
Section 9.02 to approve the particular form of any proposed amendment or waiver, but it is sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company will mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each

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Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):

(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.14 hereof;

(3) reduce the rate of or change the time for payment of interest, including default interest, on any Note;

(4) waive a Default or Event of Default in the payment of principal of or interest or premium, or Special Interest, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration);

(5) make any Note payable in money other than that stated in the Notes;

(6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Special Interest, if any, on the Notes;

(7) make any change in the amendment and waiver provisions set forth in this fifth paragraph of Section 9.02;

(8) release any Guarantor from any of its obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms of this Indenture; or

(9) release any Collateral from the obligations created by the Security Documents except as provided in the Security Documents.

In addition, no amendment or supplement to the provisions of Articles 12, 13 or 14 will impose any obligation on the Trustee or adversely affect the rights of the Trustee in its individual capacity without the consent of the Trustee.

Section 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.

Every amendment or supplement to this Indenture or the Notes will be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect.

Section 9.04 REVOCATION AND EFFECT OF CONSENTS.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

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Section 9.05 NOTATION ON OR EXCHANGE OF NOTES.

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver.

Section 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.

The Trustee will sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee will be entitled to receive and (subject to Section 7.01 hereof) will be fully protected in relying upon, in addition to the documents required by Section 15.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental Indenture is authorized or permitted by this Indenture.

ARTICLE 10.
SUBSIDIARY GUARANTEES

Section 10.01 GUARANTEE.

(a) Subject to this Article 10, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to the Secured Parties and their successors and assigns, irrespective of the validity and enforceability of the Secured Obligations, this Indenture or the obligations of the Company hereunder or thereunder, that:

(1) the principal of, premium and Special Interest, if any, and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Secured Parties hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and

(2) in case of any extension of time of payment or renewal of any Secured Obligations or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.

Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.

(b) The Guarantors hereby agree that their obligations hereunder are unconditional, irrespective of the validity, regularity or enforceability of the Secured Obligations or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Secured Party with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable

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discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Subsidiary Guarantee will not be discharged except by complete performance of the obligations contained in the Secured Obligations and this Indenture.

(c) If any Secured Party is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by such Secured Party, this Subsidiary Guarantee, to the extent theretofore discharged, will be reinstated in full force and effect.

(d) Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Secured Parties in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Secured Parties, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Subsidiary Guarantee. The Guarantors will have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Secured Parties under the Subsidiary Guarantee.

Section 10.02 LIMITATION ON GUARANTOR LIABILITY.

Each Guarantor, and each Secured Party, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary Guarantee. To effectuate the foregoing intention, the Secured Parties and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will be limited to the maximum amount that will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 10, result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance.

Section 10.03 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.

To evidence its Subsidiary Guarantee set forth in Section 10.01, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form attached as Exhibit E hereto will be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture will be executed on behalf of such Guarantor by one of its Officers.

Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 10.01 will remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee.

If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee will be valid nevertheless.

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The delivery of any Note by the Trustee, after the authentication thereof hereunder, will constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors.

In the event that the Company creates or acquires any Domestic Subsidiary after the date of this Indenture, if required by Section 4.18 hereof, the Company will cause such Domestic Subsidiary to comply with the provisions of
Section 4.18 hereof and this Article 10, to the extent applicable.

Section 10.04 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.

Except as otherwise provided in Section 10.05, no Guarantor may sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Company or another Guarantor, unless:

(1) immediately after giving effect to such transaction, no Default or Event of Default exists; and

(2) either:

(a) subject to Section 10.05 hereof, the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger assumes all the obligations of that Guarantor pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Joint Collateral Agent, under (i) the Secured Obligations, this Indenture and the Subsidiary Guarantee (ii) the Exchange Registration Rights Agreement and (iii) the Security Documents delivered by that Guarantor on the terms set forth herein or therein; and

(b) the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation, Section 4.10 hereof.

In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Secured Obligations and this Indenture to be performed by the Guarantor, such successor Person will succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued will in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Secured Obligations and this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof.

Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses
(a) and (b) above, nothing contained in the Secured Obligations or this Indenture or in any of the Notes will prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or will prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor.

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Section 10.05 RELEASES FOLLOWING SALE OF ASSETS.

In the event of any sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) a Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee and all security interests granted by that Guarantor to the Joint Collateral Agent; PROVIDED that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10 hereof, the Trustee will execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee.

Additionally, the Subsidiary Guarantee of a Guarantor and all security interests granted by that Guarantor to the Joint Collateral Agent will be released if the Company designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary.

Any Guarantor not released from its obligations under its Subsidiary Guarantee will remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Secured Obligations and this Indenture as provided in this Article 10.

ARTICLE 11.
SATISFACTION AND DISCHARGE

Section 11.01 SATISFACTION AND DISCHARGE.

This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when:

(1) either:

(a) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or

(b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Special Interest, if any, and accrued interest to the date of maturity or redemption;

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(2) no Default or Event of Default has occurred and is continuing on the date of such deposit or will occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound;

(3) the Company or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and

(4) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.

In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section, the provisions of Section 11.02 and Section 8.06 will survive. In addition, nothing in this Section 11.01 will be deemed to discharge those provisions of Section 7.07 hereof, that, by their terms, survive the satisfaction and discharge of this Indenture.

Section 11.02 APPLICATION OF TRUST MONEY.

Subject to the provisions of Section 8.06, all money deposited with the Trustee pursuant to Section 11.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 11.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and any Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.01; PROVIDED that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.

ARTICLE 12.
COLLATERAL SHARING WITH PARITY LIENS

Section 12.01 PREREQUISITES TO INCURRING PARITY LIEN DEBT.

(1) Prior to incurring any Parity Lien Debt, the Company will deliver to the Trustee and the Joint Collateral Agent an Officer's Certificate stating that:

(a) the Company intends to incur, on a date stated therein, Indebtedness that will constitute Parity Lien Debt;

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(b) no Default or Event of Default exists on the date of such Officer's Certificate or will exist after giving effect to the incurrence of such Indebtedness;

(c) the Company has appointed the Joint Collateral Agent to hold the security interest on behalf of such Parity Lien Debt in accordance with the Joint Collateral Agent Undertaking and has taken all steps necessary to make such Joint Collateral Agent Undertaking applicable to the Parity Lien Debt;

(d) the Company will, on the date of such incurrence, execute and deliver such additional Security Documents and take all such action as may be necessary to grant or confirm the grant of Collateral to the Joint Collateral Agent as security for all present and future Note Obligations and Parity Lien Obligations, and shall take such action to perfect such security interest such that after giving effect thereto the Joint Collateral Agent will hold as security for all present and future Note Obligations and Parity Lien Obligations, a valid and perfected security interest upon all or substantially all of the Collateral that, immediately prior to giving effect thereto, was subject to the Note Liens;

(e) the Liens securing such proposed Parity Lien Debt will not be subject or subordinate to any Lien securing Indebtedness other than Liens permitted by clause (9) of the definition of "Permitted Liens;" and

(f) the Company and its Subsidiaries will, on such date, enter into all amendments, if any, to the Security Documents then in effect that are necessary to add Parity Lien Obligations to the obligations secured thereby, pursuant to amendments delivered to the Joint Collateral Agent therewith, to be executed on such date by the Joint Collateral Agent and the Company or the Subsidiary party to such Security Documents;

(2) the holders of any Parity Lien Obligations, or a representative on their behalf, shall execute and deliver a contractual undertaking in substantially the form of the Joinder Agreement attached as an exhibit to the Collateral Agency Agreement or the Joint Collateral Agent Undertaking whereby such persons agree to be bound by the lien sharing provisions of this Indenture;

(3) the Company will deliver to the Trustee and Joint Collateral Agent, as the case may be, opinions of counsel confirming on customary terms:

(a) the validity and enforceability of the Joint Collateral Agent Undertaking and all additional and amended Security Documents delivered to the Joint Collateral Agent;

(b) the validity, enforceability and perfection of the Liens granted by such Security Documents;

(c) that the Note Obligations and Parity Lien Obligations (i) are secured by equal and ratable security interests in the Collateral and
(ii) that the holders of any such Parity Lien Obligations or their representative have duly executed and delivered a contractual undertaking in substantially the form of the Joinder Agreement attached as an exhibit to the Collateral Agency Agreement whereby such persons agree to be bound by the lien sharing provisions of this Indenture and the Joint Collateral Agent Undertaking and that such contractual undertaking is legally binding and enforceable on such holders of Parity Lien Debt; and

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(d) the continued perfection of the Note Liens, without loss of priority as against any Lien other than Parity Liens, upon giving effect to the inclusion of such Parity Lien Obligation in the Joint Collateral Undertaking and any such amendment of the Security Documents,

then, subject to the terms of the Joint Collateral Agent Undertaking, the Trustee will direct the Joint Collateral Agent to execute and deliver such amendment to the Security Documents, if any, as may be necessary to accomplish the foregoing and the Joint Collateral Agent will countersign the Joinder Agreement thereby confirming that it will hold the Note Liens and all such Security Documents and the Liens granted thereby for the benefit of the holders of the Note Obligations and Parity Lien Obligations on the terms of such Joint Collateral Agent Undertaking.

Section 12.02 EQUAL AND RATABLE LIEN SHARING BY HOLDERS OF NOTES AND HOLDERS OF PARITY LIEN DEBT.

Notwithstanding (i) anything to the contrary contained in the Note Documents or any indenture, agreement or instrument governing, evidencing or relating to any Parity Lien Obligations, (ii) the time, order or method of attachment of the Note Liens or the Parity Liens, (iii) the time or order of filing or recording of financing statements or other documents filed or recorded to perfect any Lien upon any Collateral, (iv) the time of taking possession or control over any Collateral or (v) the rules for determining priority under the Uniform Commercial Code or any other law governing relative priorities of secured creditors:

(1) the Note Liens will rank Equally and Ratably with all valid, enforceable and perfected Parity Liens, whenever granted upon any present or future Collateral, but only to the extent such Parity Liens secure Parity Lien Obligations, and

(2) all proceeds of the Note Liens and Parity Liens shall be allocated and distributed Equally and Ratably on account of the Note Obligations and Parity Lien Obligations.

Section 12.03 ENFORCEMENT.

The provisions of Section 12.01(2) are intended for the benefit solely of the Company and shall be enforceable by the Company against the Trustee, the Joint Collateral Agent and the Holders of Notes. The provisions of Section 12.02 are binding upon and intended for the benefit of the Joint Collateral Agent and each present and future holder of Note Obligations and Parity Lien Obligations, each of whom shall be entitled to enforce such provisions as a third party beneficiary hereof.

Section 12.04 AMENDMENT.

(a) No amendment or supplement to the provisions of this Article 12 will:

(1) be effective unless set forth in a writing signed by the Trustee with the consent of the Holders of at least a majority in principal amount of the Notes (including, without limitation, Additional Notes) then outstanding voting as a single class, except that any such amendment which increases the obligations or adversely affects the rights of the Holders of Notes will be effective only with the consent of the Holders of at least 66?% in principal amount of the Notes (including, without limitation, Additional Notes) then outstanding, voting as a single class; or

(2) be effective without the written consent of the Company and, if any Parity Lien Debt is then outstanding, the Holders of at least a majority in principal amount of all Parity Lien Debt then outstanding voting as a single class, except that any such amendment which increases

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the obligations or adversely affects the rights of the holders of Parity Lien Debt will be effective only with the consent of the Holders of at least 66 2/3% in principal amount of all Parity Lien Debt then outstanding, voting as a single class.

Any such amendment or supplement that imposes any obligation upon the Joint Collateral Agent or adversely affects the rights of the Joint Collateral Agent in its individual capacity at any time when the Trustee is not the Joint Collateral Agent will become effective only with the consent of the Joint Collateral Agent.

(b) No waiver of any of the provisions of this Article 12 will in any event be effective unless set forth in a writing signed and consented to, as required for an amendment under this Section 12.04, by the party to be bound thereby.

ARTICLE 13.
INTERCREDITOR PROVISIONS
RELATING TO
WORKING CAPITAL FACILITY LIENS

Section 13.01 AGREEMENT BETWEEN THE COLLATERAL AGENT AND CREDIT FACILITY AGENT.

(a) If and whenever any Credit Facility becomes a Qualified Credit Facility, the Joint Collateral Agent and the Credit Facility Agent under such Qualified Credit Facility shall become obligated to perform, each for the benefit of the other, the obligations set forth in this Article 13.

(b) No agent or representative under any Credit Facility that is not a Qualified Credit Facility shall ever have the right to rely on or enforce any obligation of the Joint Collateral Agent set forth in this Article 13.

(c) The obligations of the Joint Collateral Agent set forth in this Article 13 shall be enforceable by the Credit Facility Agent under each Qualified Credit Facility to which such Credit Facility Agent is a party as a third party beneficiary hereof, without need for any additional agreement or undertaking between the Joint Collateral Agent and such Credit Facility Agent.

(d) The Joint Collateral Agent may require the Credit Facility Agent to execute and deliver an instrument reasonably satisfactory to the Joint Collateral Agent, by which the Credit Facility Agent confirms to the Joint Collateral Agent its agreement to be bound by and perform the obligations of the Credit Facility Agent set forth in this Article 13.

(e) At the request of the Company from time to time, the Joint Collateral Agent will enter into an agreement with the Credit Facility Agent by which each of them confirms to the other its agreement to be bound by and perform its obligations set forth in this Article 13, and the Joint Collateral Agent is authorized, at the request of the Company, to enter into such additional agreements with the Credit Facility Agent as may be necessary or appropriate, in the opinion of the Joint Collateral Agent, to confirm, elaborate upon, perform, implement or give further assurance for any obligations of the Joint Collateral Agent or such Credit Facility Agent in any respect that is not materially inconsistent with the provisions, intents and purposes of this Article 13 and does not impose any additional material obligation or material liability on the Joint Collateral Agent or any holder of Note Obligations or Parity Lien Obligations.

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Section 13.02 EQUAL AND RATABLE SHARING OF LIENS ON FOREIGN SUBSIDIARY COLLATERAL.

(a) Notwithstanding (i) anything to the contrary contained in the Note Documents, any indenture, agreement or instrument governing, evidencing or relating to any Parity Lien Obligations or any Obligations in respect of any Qualified Credit Facility, (ii) the time, order or method of attachment of Liens securing any Obligations under any Qualified Credit Facility or any Note Liens or Parity Liens, (iii) the time or order of filing or recording of financing statements or other documents filed or recorded to perfect any Lien upon any Foreign Subsidiary Collateral or proceeds thereof, (iv) the time of taking possession or control over any Foreign Subsidiary Collateral or proceeds thereof or (v) the rules for determining priority under the Uniform Commercial Code or any other law governing relative priorities of secured creditors, and regardless of whether Liens upon Foreign Subsidiary Collateral or proceeds thereof are enforced by the Credit Facility Agent or the Joint Collateral Agent or any agent on their behalf:

(1) to the extent (and only to the extent) attaching to Foreign Subsidiary Collateral and proceeds thereof, all valid, enforceable and perfected Note Liens, all valid, enforceable and perfected Parity Liens and all valid, enforceable and perfected Liens securing Obligations under a Qualified Credit Facility, in each case whenever granted, will rank Equally and Ratably, and

(2) to the extent (and only extent attributable to Foreign Subsidiary Collateral or the proceeds thereof), the proceeds of all such valid, enforceable and perfected Note Liens, Parity Liens and Liens securing Obligations under a Qualified Credit Facility upon (and only upon) Foreign Subsidiary Collateral and proceeds thereof shall be allocated and distributed Equally and Ratably on account of the Note Obligations, Parity Lien Obligations and Obligations under a Qualified Credit Facility.

(b) The provisions of this clause (b)(1) of Section 13.02 shall not apply to:

(1) any Lien upon any property other than Foreign Subsidiary Collateral and proceeds thereof;

(2) any payment or distribution to which any Person may become entitled as a creditor of the owner of any Foreign Subsidiary Collateral other than as a result of the enforcement of a Lien upon, or the allowance of a secured claim to the extent predicated solely on a Lien upon, such Foreign Subsidiary Collateral.

Section 13.03 DISCLAIMER OF CONSENSUAL LIENS.

(1) The Joint Collateral Agent will not claim or enforce any consensual lien upon any Credit Facility Collateral.

(2) The Credit Facility Agent will not claim or enforce any consensual lien upon any Collateral or Excluded Asset other than (a) Credit Facility Collateral and (b) Foreign Subsidiary Collateral and proceeds thereof.

(3) The holders of Note Obligations and Parity Lien Obligations shall be entitled to receive and retain, free from any Lien securing Credit Facility Obligations, all payments made in cash by the Company or any other Obligor and all amounts received with respect to Note Obligations and Parity Lien Obligations through the exercise of a set-off or other similar right, even if such cash constitutes proceeds of property subject to a Lien securing Credit Facility Obligations.

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(4) The holders of Credit Facility Obligations shall be entitled to receive and retain, free from any Note Lien or Parity Lien thereon, all payments made in cash by the Company or any other Obligor and all amounts received with respect to Credit Facility Obligations through the exercise of a set-off or other similar right, even if such cash constitutes proceeds of property subject to a Note Lien or Parity Lien.

(5) If any cash proceeds of Credit Facility Collateral or Foreign Subsidiary Collateral are converted into, or invested in property subject to Note Liens or Parity Liens at any time when the Joint Collateral Agent has not received written notice from the Credit Facility Agent or any holder of Indebtedness outstanding under a Qualified Credit Facility stating that such Indebtedness has become due and payable in full (whether at maturity, upon acceleration or otherwise), then all Liens upon such cash proceeds securing Credit Facility Obligations shall be released and discharged concurrently with such conversion, or investment.

(6) If any cash proceeds of Collateral are converted into, or invested in property subject to Liens securing Credit Facility Obligations at any time when the Credit Facility Agent has not received written notice from the Joint Collateral Agent or any Holder of Notes or Parity Lien Debt stating that the Notes or Parity Lien Debt has become due and payable in full (whether at maturity, upon acceleration or otherwise), then all Note Liens and Parity Liens upon such cash proceeds shall be released and discharged concurrently with such conversion, or investment.

(7) The provisions of this Section 13.03 do not apply to, restrict or affect any judicial lien, including any attachment or judgment lien.

Section 13.04 NOTICE OF INTENT TO FORECLOSE.

(a) The Credit Facility Agent will give the Joint Collateral Agent notice of its intent to enforce any consensual Lien upon any Credit Facility Collateral or Foreign Subsidiary Collateral.

(b) The Joint Collateral Agent will give the Credit Facility Agent notice of its intent to enforce any consensual Lien upon any Collateral.

(c) The notice required by Sections 13.04(a) and 13.04(b):

(1) shall be required to be given by a party only if it intends to:

(A) deliver to the Company or a Subsidiary written notice of its intent to foreclose a consensual Lien or a written proposal to retain property subject to a consensual Lien in full or partial satisfaction of any obligation secured thereby;

(B) commence legal action against the Company or a Subsidiary for foreclosure or replevin or other enforcement of a consensual Lien; or

(C) take possession of goods or real property of the Company or a Subsidiary upon which it holds a consensual Lien;

(2) shall not be required in any other instance or as to any other action or event (including, for purposes of illustration and not by way of limitation, any incurrence, payment or acceleration of any Indebtedness or Obligation or any amendment or waiver of the terms thereof, any exercise of a right of setoff, any notification to account debtors to make payment directly to the secured party or any other exercise of collection rights or the institution of any other legal

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proceedings, including suit to collect any debt or claim or the commencement of any bankruptcy case, receivership or insolvency proceeding);

(3) need only state that it is given pursuant to the provisions of Section 13.04 of this Indenture and that lien enforcement action may be taken by the party giving the notice, and need not disclose or describe the action to be taken;

(4) need only be given once by or to any particular Credit Facility Agent;

(5) may be given by electronic mail, telefax, postal mail or courier or personal delivery or in any other manner permitted by law for service of legal process;

(6) shall be given to a party at the address (including an e-mail address, telecopy address or office address within the State of New York) specified by such party by notice to the other party and shall not be required if no address is so specified; and

(7) shall be given at least five Business Days prior to the date on which any enforcement action described in Section 13.04(c)(1) is taken, except that a party may give such notice promptly after taking such enforcement action if it in good faith believes that immediate enforcement action is or may be required to protect its interest in the property subject to its Liens.

(d) The party giving any notice required by this Section 13.04 shall endeavor, promptly after delivery such notice, to deliver a copy thereof to the Company, but neither the Company nor any Subsidiary shall be entitled to demand or receive any such notice or copy thereof.

(e) No liability or defense shall ever arise, no Lien shall ever be lost, invalidated or impaired, and no action taken in enforcement of a Lien shall ever be annulled, set aside, affected or impaired, if any notice required by this Section 13.04 is not given or is defectively given.

(f) The provisions of this Section 13.04 do not apply to, restrict or affect any judicial lien, including any attachment or judgment lien.

Section 13.05 CONSENT TO LICENSE TO USE INTELLECTUAL PROPERTY; ACCESS TO INFORMATION; ACCESS TO REAL PROPERTY TO PROCESS AND SELL INVENTORY.

(a) If so requested at any time by the Credit Facility Agent, the Joint Collateral Agent shall deliver its written consent (given without any representation, warranty or obligation whatsoever) to any grant by any Obligor to the Credit Facility Agent of a non-exclusive royalty-free license to use any patent, trademark or proprietary information of such Obligor that is subject to a consensual Lien held by the Joint Collateral Agent, in connection with the enforcement of any consensual Lien held by the Credit Facility Agent upon any inventory of the Company or any Subsidiary and to the extent the use of such patent, trademark or proprietary information is necessary or appropriate, in the good faith opinion of the Credit Facility Agent, to manufacture, produce, complete, remove or sell any such inventory in any lawful manner. Any consent so delivered by the Joint Collateral Agent shall be binding on its successors and assigns, including a purchaser of the patent, trademark or proprietary information subject to such license at a foreclosure sale conducted in foreclosure of any Note Lien or Parity Lien thereon.

(b) If the Joint Collateral Agent or a purchaser at a foreclosure sale conducted in foreclosure of any Note Lien or Parity Lien takes actual possession of any documentation of the Company or a Subsidiary (whether such documentation is in the form of a writing or is stored in any data equipment or data record in the physical possession of the Joint Collateral Agent or the foreclosure purchaser), then

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upon request of the Credit Facility Agent and reasonable advance notice, the Joint Collateral Agent or such foreclosure purchaser will permit the Credit Facility Agent or its representative to inspect and copy such documentation if and to the extent the Credit Facility Agent certifies to the Joint Collateral Agent that:

(1) such documentation contains or may contain information necessary or appropriate, in the good faith opinion of the Credit Facility Agent, to the enforcement of the Credit Facility Agent's liens upon any Credit Facility Collateral or Foreign Subsidiary Collateral; and

(2) the Credit Facility Agent and the lenders under the Credit Facility are entitled to receive and use such information as against the Company and the Subsidiaries and their suppliers, customers and contractors and under applicable law and, in doing so, will comply with all obligations imposed by law or contract in respect of the disclosure or use of such information.

(c) If, upon enforcement of any Note Lien or Parity Lien held by the Joint Collateral Agent, the Joint Collateral Agent or a purchaser at a foreclosure sale conducted in foreclosure of any Note Lien or Parity Lien takes actual possession of any real property, equipment or fixture of any Obligor, then, if so requested by the Credit Facility Agent and upon reasonable advance notice, the Joint Collateral Agent or such foreclosure purchaser will allow the Credit Facility Agent and its officers, employees and agents (but not any of its transferees) reasonable and non-exclusive access to and use of such real property, equipment and fixtures, for a period not exceeding 180 consecutive calendar days (the "Processing and Sale Period"), as necessary or reasonably appropriate to manufacture, produce, complete, remove or sell, in any lawful manner, any inventory upon which the Credit Facility Agent holds a Lien, subject to the following conditions and limitations:

(1) The Processing and Sale Period shall commence on the date the Joint Collateral Agent or, if the Joint Collateral Agent has not taken possession, the foreclosure purchaser takes possession of such real property and shall terminate on the earlier of (i) the day which is 180 days thereafter and (ii) the day on which all inventory (other than inventory abandoned by the Credit Facility Agent) has been removed from such real property.

(2) Each of the Joint Collateral Agent and foreclosure purchaser shall be entitled, as a condition of permitting such access and use, to demand and receive assurances reasonably satisfactory to it that the access or use requested and all activities incidental thereto:

(A) will be permitted, lawful and enforceable as against the Company and the Subsidiaries and their suppliers, customers and contractors and under applicable law and will be conducted in accordance with prudent manufacturing practices; and

(B) will be adequately insured for damage to property and liability to persons, including property and liability insurance for the benefit of the Joint Collateral Agent and the holders of Note Obligations and Parity Lien Obligations, at no cost to the Joint Collateral Agent or such holders.

The Joint Collateral Agent and such purchaser (i) shall provide reasonable cooperation, reasonable support and reasonable assistance to the Credit Facility Agent in connection with the manufacture, production, completion, removal and sale of any Credit Facility Collateral by the Credit Facility Agent as provided above and (ii) shall be entitled to receive, from the Credit Facility Agent, fair compensation and reimbursement for their reasonable costs and expenses incurred in connection with such cooperation, support and

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assistance to the Credit Facility Agent. The Joint Collateral Agent and such purchaser (or its transferee or successor) shall not otherwise be required to manufacture, produce, complete, remove, insure, protect, store, safeguard, sell or deliver any inventory subject to any Lien held by the Credit Facility Agent or to provide any support, assistance or cooperation to the Credit Facility Agent in respect thereof.

(d) The Company and other Obligors consent to the performance by the Joint Collateral Agent and foreclosure purchaser of the obligations set forth in this
Section 13.05 and acknowledge and agree that, in the absence of gross negligence or willful misconduct by the Joint Collateral Agent, neither the Joint Collateral Agent (nor any holder of Note Obligations or Parity Lien Obligations) nor any foreclosure purchaser shall ever be accountable or liable for any action taken or omitted by the Credit Facility Agent or its officers, employees and agents in connection therewith or incidental thereto or in consequence thereof, including any improper use or disclosure of any proprietary information by the Credit Facility Agent or its officers, employees, agents, successors or assigns or any other damage to or misuse or loss of any property of the Company and the Subsidiaries as a result of any action taken or omitted by the Credit Facility Agent or its officers, employees, agents, successors or assigns.

Section 13.06 COMPLETE AGREEMENT.

(a) This Article 13 and the Intercreditor Agreement sets forth exhaustively the complete agreement and sole contractual obligations and rights as between the Joint Collateral Agent and the Credit Facility Agent.

(b) Neither the Joint Collateral Agent and nor the Credit Facility Agent will be restricted in any respect not expressly set forth herein as to any matter relating to the creation, perfection, protection or enforcement of their respective Liens and their rights and obligations in respect of such matters shall be based solely on the legal rights and duties, if any, that they would have if they had not entered into any agreement whatsoever with each other relating to their Liens.

Section 13.07 NO SUBROGATION, MARSHALLING OR DUTY.

Neither the assumption nor the performance of any obligation set forth in or arising under this Article 13 shall ever create or give rise to any right of subrogation, right of marshalling, duty of care, duty of loyalty, duty of disclosure or other fiduciary duty whatsoever enforceable by the Joint Collateral Agent, the Credit Facility Agent or any holder of Note Obligations, Parity Lien Obligations or Credit Facility Obligations.

Section 13.08 LIMITATION ON CERTAIN RELIEF, DEFENSES AND DAMAGE CLAIMS.

(a) None of the Note Obligations, Note Liens, Parity Lien Obligations, Parity Liens, Credit Facility Obligations and Credit Facility Liens will ever be forfeited, invalidated, discharged, reduced, subordinated or restricted or otherwise affected or impaired by any breach of any obligation set forth in or arising under this Article 13.

(b) No claim shall ever be made agains