Exhibit 10.38

PERFORMANCE BASED AWARD AGREEMENT

under the

Hexcel Corporation 2003 Incentive Stock Plan

 

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

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

1.         Notice of Grant; Incorporation of Plan. A Notice of Grant is attached
hereto as Annex A and incorporated by reference herein. This PBA may result in
the Grantee being granted up to that number of Performance Based Restricted
Stock Units (“PBRSUs”) as indicated in the Notice of Grant.  Unless otherwise
provided herein, capitalized terms used in this Agreement and set forth in the
Notice of Grant shall have the meanings ascribed to them in the Notice of Grant
and capitalized terms used in this Agreement and set forth in the Plan shall
have the meanings ascribed to them in the Plan. The Plan is incorporated by
reference and made a part of this Agreement, and this Agreement shall be subject
to the terms of the Plan, as the Plan may be amended from time to time, provided
that any such amendment of the Plan must be made in accordance with Section IX
of the Plan. The PBA granted hereunder constitutes an Award within the meaning
of the Plan.

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

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

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

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

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3.         Vesting and Conversion of PBRSUs.  Subject to Sections 4 and 5,
PBRSUs shall vest and be converted into an equivalent number of shares of Common
Stock that will be distributed to the Grantee as soon as practicable after the
end of the Service Period.  Upon the distribution of the shares of Common Stock
in respect of PBRSUs, the Company shall issue to the Grantee or the Grantee’s
personal representative a stock certificate representing such shares of Common
Stock, free of any restrictions.

4.         Termination of Employment.

(a)       For purposes of the grant hereunder, any transfer of employment by the
Grantee among the Company and its Subsidiaries shall not be considered a
termination of employment.

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

S = N * (Days Employed/730)

 

Where

 

S

 

=

 

Shares to be received by the Grantee

 

 

 

 

 

N

 

=

 

The number of PBRSUs the Grantee would have received, based on the degree of
achievement of the Performance Measure for the Performance Period, had the
Grantee been employed by the Company for the entire Performance Period

 

 

 

 

 

Days

 

 

 

 

Employed

 

=

 

The number of days the Grantee was employed during the Performance Period prior
to the Grantee’s termination of employment

 

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

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

(d)       If, during either the Performance Period or the Service Period, the
Grantee voluntarily terminates his employment other than for Good Reason or is
terminated for Cause,

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the Grantee shall receive nothing and the PBA and any PBRSUs that have been
granted hereunder shall be null and void.

5.               Change in Control.

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

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

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

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

6.         Transferability of PBA and PBRSUs; No Incidents of Ownership;
Dividends

(a)       Except as provided in this Section 6(a), neither the PBA, the PBRSUs
nor any interest therein may be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or the laws of descent and
distribution. Any attempt to transfer the PBA or the PBRSUs in contravention of
this Section 6(a) is void ab initio. Neither the PBA nor the PBRSUs shall be
subject to execution, attachment or other process. Notwithstanding the
foregoing, the Grantee shall be permitted to transfer the PBA or PBRSUs to
members of his or her immediate family (i.e., children, grandchildren or
spouse), trusts for the benefit of such family members, and partnerships or
other entities whose only partners or equity owners are such family members;
provided, however, that no consideration can be paid for the transfer of the PBA
or PBRSUs and the transferee of the PBA or PBRSUs musts agree to be subject to
all conditions applicable to the PBA and PBRSUs (including all of the terms and
conditions of this Agreement) prior to transfer.

(b)       Except as set forth in Section 6(c), the Grantee shall not possess any
incidents of ownership (including, without limitation, dividend and voting
rights) in shares of the Common Stock in respect of the PBA or the PBRSUs unless
and until PBRSUs have been issued and vested and been converted into shares of
Common Stock distributed to the Grantee.

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

7.         Forfeiture of PBA or PBRSUs on Certain Conditions.

(a)       Notwithstanding anything to the contrary contained in this Agreement,
should the Grantee while an employee or after termination of employment fail to
comply with the “Protective Condition” (as defined in Section 7(b)), then the
PBA and any PBRSUs (to the extent not already converted into shares of Common
Stock distributed to the Grantee), shall immediately expire upon the Grantee’s
failure to meet such condition.

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

8.         Equitable Adjustment.

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

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

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Withholding Taxes with respect to the conversion of some or all PBRSUs by check
or wire transfer, the Company’s obligation to deliver shares of Common Stock
shall be subject to the payment in available funds by the Grantee of all
Withholding Taxes with respect to PBRSUs which are the subject of such
conversion.  The Company or a Subsidiary shall, to the extent permitted by law,
have the right to deduct from any payment of any kind otherwise due to the
Grantee any federal, state, local or other taxes required to be withheld with
respect to such payment.

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

11.       Section 409A.

(a)       It is intended that this Agreement comply in all respects with the
requirements of Sections 409A(a)(2) through (4) of the Internal Revenue Code of
1986, as amended, and applicable Treasury Regulations and other generally
applicable guidance issued thereunder (collectively, the “Applicable
Regulations”), and this Agreement shall be interpreted for all purposes in
accordance with this intent.

(b)       Notwithstanding any term or provision of this Agreement (including any
term or provision of the Plan incorporated herein by reference), the parties
hereto agree that, from time to time, the Company may, without prior notice to
or consent of the Grantee, amend this Agreement to the extent determined by the
Company, in the exercise of its discretion in good faith, to be necessary or
advisable to prevent the inclusion in the Grantee’s gross income pursuant to the
Applicable Regulations of any compensation intended to be deferred hereunder.
The Company shall notify the Grantee as soon as reasonably practicable of any
such amendment affecting the Grantee.

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

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

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

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

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

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17.       Definitions.  For purposes of this Agreement:

(a)       “Affiliate” of any Person shall mean any other Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such first Person.  The term “Control” shall have
the meaning specified in Rule 12b-2 under the Exchange Act;

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

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

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

(i)      any Person is or becomes the Beneficial Owner, directly or indirectly,
of 40% or more of either (A) the then outstanding Common Stock of the Company
(the “Outstanding Common Stock”) or (B) the combined voting power of the then
outstanding securities entitled to vote generally in the election of directors
of the Company (the “Total Voting Power”); excluding, however, the following:
(I) any acquisition by the Company or any of its Controlled Affiliates, (II) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its Controlled Affiliates and (III) any
Person who becomes such a Beneficial Owner in connection with a transaction
described in the exclusion within paragraph (iii) below; or

(ii)     a change in the composition of the Board such that the individuals who,
as of the effective date of this Agreement, constitute the Board (such
individuals shall be hereinafter referred to as the “Incumbent Directors”) cease
for any reason to constitute at least a majority of the Board; provided,
however, for purposes of this definition, that any individual who becomes a
director subsequent to such effective date, whose election, or nomination for
election by the Company’s stockholders, was made or approved by a vote of at
least a majority of the Incumbent Directors (or directors whose election or
nomination for election was previously so approved) shall be considered a member
of the Incumbent Board; but, provided, further, that any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person or legal entity
other than the Board shall not be considered a member of the Incumbent Board; or

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(iii)    there is consummated a merger or consolidation of the Company or any
direct or indirect Subsidiary of the Company or a sale or other disposition of
all or substantially all of the assets of the Company (“Corporate Transaction”);
excluding, however, such a Corporate Transaction (A) pursuant to which all or
substantially all of the individuals and entities who are the Beneficial Owners,
respectively, of the Outstanding Common Stock and Total Voting Power immediately
prior to such Corporate Transaction will Beneficially Own, directly or
indirectly, more than 50%, respectively, of the outstanding common stock and the
combined voting power of the  then outstanding common stock and the combined
voting power of the then outstanding securities entitled to vote generally in
the election of directors of the company resulting from such Corporate
Transaction (including, without limitation, a company which as a result of such
transaction owns the Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Corporate Transaction
of the Outstanding Common Stock and Total Voting Power, as the case may be, and
(B) immediately following which the individuals who comprise the Board
immediately prior thereto constitute at least a majority of the board of
directors of the company resulting from such Corporate Transaction (including,
without limitation, a company which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries); or

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

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

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

(1)       a significant adverse alteration in the nature or status of the
Grantee’s responsibilities, position or authority;

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

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

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

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

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

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

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

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

(h)   “Performance Period” shall mean the period beginning on January 1, 2007
and ending on December 31, 2008;

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

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

(i)   upon such Change of Control, but subject to the fulfillment of the other
terms and conditions of the PBRSUs, the holders of PBRSUs shall be entitled to

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receive such other security or consideration to the same extent the holders
would have been entitled to receive such security or consideration had the
PBRSUs converted into Common Stock immediately prior to the Change of Control;

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

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

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

(l)    “Service Period” shall mean the period beginning on January 1, 2009 and
ending on December 31, 2009;

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

(n)       “Threshold Level” is defined on Annex B.

 

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ANNEX A

NOTICE OF GRANT

PERFORMANCE BASED AWARD

HEXCEL CORPORATION 2003 INCENTIVE STOCK PLAN

 

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

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

Grantee

 

 

 

 

 

Address of Grantee

 

 

 

 

 

Foreign Sub Plan, if applicable

 

 

 

 

 

Grant Date

 

 

 

 

 

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

 

 

 

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

 

HEXCEL CORPORATION

 

Grantee

 

 

 

 

 

 

By:

 

 

 

 

 

Ira J. Krakower

 

 

 

 

Senior Vice President

 

 

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ANNEX B

The “Performance Measure” shall be Return on Net Capital Employed, or “RONCE,”
as  defined on Exhibit I attached hereto.

 

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

 

The “Threshold Level” of the Performance Measure shall be     %.

 

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

 

PBRSU Award Schedule

Degree of Attainment of Performance Measure

 

Percentage of Target Amount of PBRSUs to be Awarded

 

 

 

% or more

 

150%

 

 

 

%

 

100%

 

 

 

%

 

50%

 

 

 

less than    %

 

0

 

 

 

 

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

 

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Exhibit I

HEXCEL CORPORATION

Definition and Computation of RONCE

For Purposes Of

Performance Share Awards for 2007-2008 Performance Cycle

 

 

Computation:

“RONCE” shall be computed by dividing the Average return by the Average Capital
employed and expressed as a percentage:

Average Return

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Average Capital Employed

Definitions:

“Average Capital Employed” shall mean the sum of Net Capital Employed as of
December 31, 2006, December 31, 2007 and December 31, 2008, divided by three.

“Average Return” shall mean the sum of the Return for the calendar years of 2007
and 2008, divided by two.

“Cash” as of a particular date shall mean cash and cash equivalents of the
Company and its Subsidiaries as of such date, as reported in its financial
statements.

“Consolidated Operating Income” shall mean the net income of the Company and its
Subsidiaries as reported in its financial statements together with the sum of
expenses (income) related to preferred dividends and accretion, equity in
(earnings) losses of affiliated companies and partnerships, income taxes,
interest expense (net of interest income) and Non-Operating Gains and Losses of
the Company.

“Equity in Earnings from Affiliated Companies” shall mean the equity in earnings
from affiliated companies of the Company and its Subsidiaries as reported in its
financial statements.

“Net Capital Employed” as of a particular date shall mean the sum of
Shareholder’s Equity and Total Debt as of such date, minus Cash as of such date.

“Non-Operating Gains and Losses” of the Company shall be any expense or income
arising from transactions outside the ordinary course of business including but
not limited to any of the sale or purchase of debt or equity securities of the
Company, debt refinancing or prepayment of debt, judgment or settlement of
claims or litigation, acquisitions or divestitures, the sale or purchase of
tangible or intangible assets and the impairment of tangible and intangible
assets.

“Return” for a particular period shall mean the sum of Consolidated Operating
Income, Equity

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in Earnings from Affiliated Companies and Non-Operating Gains and Losses for
such period.

“RONCE” is an acronym for Return on Net Capital Employed.

“Shareholder’s Equity” as of a particular date shall mean total stockholder’s
equity of the Company as reported in its financial statements as of such date.

“Total Debt” as of a particular date shall mean the sum of “notes payable and
current maturities of capital lease obligations” and “long-term notes payable
and capital lease obligations” of the Company and its Subsidiaries as of such
date, as reported in its financial statements.

The Compensation Committee shall retain its powers to make appropriate
adjustments to the RONCE performance goal to reflect the impact of unusual,
non-recurring or extraordinary income or expense not reflected in such goal as
defined, as authorized under the Company’s 2003 Incentive Stock Plan.

 

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