Document:

exv10w36w1

 

Exhibit 10.36.1

AMERIGROUP CORPORATION

CHANGE IN CONTROL BENEFIT POLICY

     Section 1. Purpose of Policy.

          The name of this policy is the AMERIGROUP Corporation Change in Control Benefit Policy (the
“Policy”). The purposes of the Policy are as follows: (1) to reinforce and encourage the continued
attention and dedication of members of the Company’s management to their assigned duties without
the distraction arising from the possibility of a change in control of the Company; (2) to enable
and encourage the Company’s management to focus their attention on obtaining the best possible
transaction for the Company’s stockholders and to make an independent evaluation of all possible
transactions, without being diverted by their personal concerns regarding the possible impact of
various transactions on the security of their jobs and benefits; and (3) to provide severance
benefits to certain Participants (as defined below) who incur a termination of employment under the
circumstances described herein within a certain period following a Change in Control (as defined
below).

     Section 2. Definitions.

          For purposes of the Policy, the following terms shall be defined as set forth below:

          (a) “Affiliate” means any corporation or other entity 50% or more of the voting power
of the outstanding voting securities of which is owned by the Company or its Subsidiaries or by any
other Affiliate.

          (b) “Award” means all payments to a Participant under the Policy, including to the
extent applicable, the payment upon a Change in Control under Section 5(a), the Severance Payment
under Section 5(b) and the Gross-Up Payment under Section 5(d).

          (c) “Board” means the Board of Directors of the Company.

          (d) “Cause” means, unless a Participant is a party to a written employment agreement
with the Company, Subsidiary or Affiliate which contains a definition of “cause,” “termination for
cause,” or any other similar term or phrase, in which case “Cause” shall have the meaning set forth
in such agreement, conduct involving one or more of the following: (i) the substantial and
continuing failure of the Participant to render services to the Company or any Subsidiary or
Affiliate in accordance with the Participant’s obligations and position with the Company,
Subsidiary or Affiliate, after 30 day’s notice from the President of the Company or any Subsidiary
or Affiliate, such notice setting forth in reasonable detail the nature of such failure, and in the
event the Participant fails to cure such breach or failure within 30 days of notice from the
Company or any Subsidiary or Affiliate, if such breach or failure is capable of cure; (ii)
dishonesty, gross negligence, breach of fiduciary duty; (iii) the commission by the Participant of
an act of fraud or embezzlement, as found by a court of competent jurisdiction; (iv) the conviction
of the Participant of a felony; or a (v) material breach of the terms of an agreement with the
Company or any Subsidiary or Affiliate, provided that the Company or any Subsidiary or Affiliate
provides the

 

 

Participant with adequate notice of such breach and the Participant fails to cure such breach,
if the breach is reasonably curable, within thirty (30) days after receipt of such notice.

          (e) “Change in Control” means (1) in the case of any Award that is subject to Section
409A of the Code, any event that constitutes, within the meaning of Section 409A(a)(2)(A)(v) of the
Code, (i) a change in the ownership of the Company, (ii) a change in the effective control of the
Company, or (iii) a change in the ownership of a substantial portion of the Company’s assets, or
(2) in the case of any other Award, the first to occur of any one of the events set forth in the
following paragraphs:

          (i) any Person is or becomes the “Beneficial Owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities acquired directly from the
Company) representing 25% or more of the Company’s then outstanding securities, excluding
any Person who becomes such a Beneficial Owner in connection with a transaction described in
clause (A) of paragraph (iii);

          (ii) the following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the Effective Date of the Policy,
constitute the Board of Directors and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the election of directors
of the Company) whose appointment or election by the Board of Directors or nomination for
election by the Company’s stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors on the
Effective Date of the Policy or whose appointment, election or nomination for election was
previously so approved or recommended;

          (iii) there is consummated a merger or consolidation of the Company with any other
corporation other than (A) a merger or consolidation which results in the directors of the
Company immediately prior to such merger or consolidation continuing to constitute at least
a majority of the board of directors of the Company, the surviving entity or any parent
thereof, or (B) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the securities
Beneficially Owned by such Person any securities acquired directly from the Company)
representing 25% or more of the combined voting power of the Company’s then outstanding
securities; or

          (iv) the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or disposition
by the Company of all or substantially all of the Company’s assets, other than a sale or
disposition by the Company of all or substantially all of the Company’s assets to an entity
at least a majority of the board of directors of which comprises individuals who were
directors of the Company immediately prior to such sale or disposition.

          (f) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

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          (g) “Committee” means the Compensation Committee of the Board or, to the extent so
provided by the Board, any other person, committee or entity the Board may appoint to administer
the Policy.

          (h) “Company” means AMERIGROUP Corporation, a Delaware corporation, and, except in
determining under Section 2(e) hereof whether or not any Change in Control of the Company has
occurred, shall include any successor to its business and/or assets.

          (i) “Date of Termination” with respect to any purported termination of a Participant’s
employment (other than by reason of the Participant’s death or Disability), means the date
specified in the Notice of Termination (which shall be within thirty (30) days from the date such
Notice of Termination is given).

          (j) “Disability” means the condition of a Participant who is either (i) unable to
engage in any substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months; or (ii) by reason of any medically
determinable physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than three (3) months under an accident and health
plan covering employees of the Company.

          (k) “Eligible Recipient” means an employee, officer or director (including a
non-employee director) of the Company or of any Subsidiary or Affiliate.

          (l) “Enhancement Amount” means an additional LTI Award amount that a Participant may
have the opportunity to earn with respect to the first calendar year of a performance cycle under
the LTI Plan.

          (m) “Equity Plan” means the AMERIGROUP Corporation 2005 Equity Incentive Plan, or any
successor stock incentive plan, as amended from time to time.

          (n) “Excise Tax” means the excise tax imposed by Section 4999 of the Code, together
with any interest or penalties imposed with respect to that tax.

          (o) “Good Reason” means, without the consent of the Participant, (i) any changes in
the duties and responsibilities of the Participant which are materially inconsistent with the
duties and responsibilities of the Participant within the Company immediately prior to the Change
in Control, (ii) any 10% or greater reduction of the Participant’s target annual compensation in
effect immediately prior to the change of control, (iii) any required relocation of the
Participant’s office beyond a 50 mile radius from the location of the Participant’s office
immediately prior to the Change in Control, or (iv) any failure by the Company to obtain the
assumption of the Policy by a successor of the Company.

          (p) “LTI Award” means a long-term incentive compensation award granted pursuant to the
LTI Plan.

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          (q) “LTI Plan” means the Company’s Long Term Incentive Program, or any successor
long-term cash incentive plan, as amended from time to time, which is a component of the Company’s
2007 Cash Incentive Plan, as amended.

          (r) “Multiple” means a number for each Participant, selected by the Committee, ranging
from one (1) to three (3). Unless otherwise specified in writing by the Committee, the following
multiples shall be used: (i) three (3) for the Chairman or Chief Executive Officer; (ii) two (2)
for the President, Chief Operating Officer, Chief Financial Officer, any Executive Vice President
and any member of the Company’s Executive Committee; and (iii) one (1) for the Company’s Health
Plan Chief Executive Officers and any other Participant not specifically listed herein or assigned
a different Multiple by the Committee.

          (s) “Notice of Termination” means a notice which shall indicate the specific
termination provision in this Policy relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Participant’s employment under
the provision so indicated.

          (t) “Participant” means any Eligible Recipient selected by the Committee pursuant to
the Committee’s authority in Section 4(a) hereof. Notwithstanding the foregoing, for (i) Awards
payable under Sections 5(a), 5(b) and 5(d), the Participants shall include the Company’s Chairman,
Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, any member of
the Company’s Executive Committee and the Company’s Health Plan Subsidiary Chief Executive
Officers, and any other Participants designated by the Committee, and (ii) for Awards payable under
Sections 5(a) and 5(d), the Participants shall include those Company employees who are eligible for
an annual cash bonus and/or a long term incentive cash award, as applicable, as of the date of a
Change in Control

          (u) “Payment” means any payment or distribution in the nature of compensation (within
the meaning of Section 280G(b)(2)(A) of the Code) to or for the benefit of a Participant, whether
paid or payable pursuant to this Agreement or otherwise pursuant to any plan, agreement or
understanding between the Participant and the Company, which within the meaning of Section
280G(b)(2)(A)(i) of the Code, is contingent on a change in the ownership or effective control of
the Company, or in the ownership of a substantial portion of the assets of the Company.

          (v) “Protected Period” shall mean the period beginning on the date of a Change in
Control and ending on the date which is two (2) years after the date of such Change in Control.

          (w) “Separation from Service” means a Participant’s “separation from service” with the
Company within the meaning of Section 409A(a)(2)(A)(i) of the Code.

          (x) “Subsidiary” means any corporation or other entity (other than the Company) in an
unbroken chain of entities beginning with the Company, if each of the entities (other than the last
entity) in the unbroken chain owns stock possessing 50% or more of the total combined voting power
of all classes of securities in one of the other entities in the chain.

          (y) “Target Amount” means an amount determined under the LTI Plan that might be earned
by a Participant in three annual installments during a performance cycle of the LTI Plan.

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     Section 3. Effective Date.

          The effective date of the Policy shall be February 12, 2007 (the “Effective Date”). The Policy
shall remain in effect until the earlier of (i) such time as the Company has discharged all of its
obligations hereunder, or (ii) the date of the termination of the Policy pursuant to Section 10(e)
hereof.

     Section 4. Administration.

          (a) Prior to the date of a Change in Control, the Policy shall be interpreted, administered
and operated by the Committee; on and after the date of a Change in Control, the Policy shall be
interpreted, administered and operated by a committee appointed by the Committee as such Committee
is constituted immediately prior to the Change in Control. In each case, subject to the terms of
the Policy, the Committee shall have complete authority, in its sole discretion subject to the
express provisions of the Policy, to determine who shall be a Participant, to interpret the Policy,
to prescribe, amend and rescind rules and regulations relating to it, and to make all other
determinations necessary or advisable for the administration of the Policy. Notwithstanding the
foregoing, the Committee may delegate any of its duties hereunder to such person or persons from
time to time as it may designate.

          (b) All expenses and liabilities which members of the Committee incur in connection with the
administration of the Policy shall be borne by the Company. The Committee may employ attorneys,
consultants, accountants, appraisers, brokers, or other persons, and the Committee, the Company and
the Company’s officers and directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. No member of the Committee or the Board shall be personally liable
for any action, determination or interpretation made in good faith with respect to the Policy, and
all members of the Committee shall be fully protected by the Company in respect of any such action,
determination or interpretation.

     Section 5. Benefits Provided.

          (a) “Payments Upon a Change in Control” Subject to Section 5(d) hereof, the Company
shall pay to each Participant within ten (10) business days after a Change in Control, a lump sum
payment in an amount equal to the sum of (i) the Participant’s Target Amount for any LTI Award
(including any Enhancement Amount) that has been established for such Participant under the LTI
Plan, as amended, or any successor long-term incentive plan, for a performance year that has been
completed as of the date of the Change in Control and (ii) any unpaid but earned annual cash bonus
plus a pro-rated annual cash bonus for the fiscal year in which the Change in Control occurs. The
amount of any such pro-rated annual cash bonus shall be equal to the product of the Participant’s
target annual bonus for the applicable fiscal year, multiplied by a fraction, the numerator of
which is the number of months in the fiscal year completed prior to the date of the Change in
Control, and the denominator of which is twelve (12). Notwithstanding anything hereinabove to the
contrary, in the case of any Enhancement Amount for the 2006 performance year and any portion of
the Target Amount of an LTI Award that is attributable to the 2006 performance year, in no event
shall any payment be made hereunder prior to January, 2008.

          (b) “Termination After Change in Control” Subject to Section 5(d) hereof, if a
Participant’s employment with the Company is terminated during the Protected Period (i) by the

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Company other than for Cause, or by reason of the Participant’s Disability or death, or (ii) by the
Participant for Good Reason, the Company shall pay to each Participant within ten (10) business
days after the Participant’s Date of Termination a lump sum severance payment (the “Severance
Payment”) in an amount equal to the Participant’s Multiple times the sum of the Participant’s
annual base salary and the Participant’s target annual cash bonus, in each case, for the fiscal
year in which the Change in Control occurs. Notwithstanding anything hereinabove to the contrary,
in the case of any Severance Payment to be made after the Separation from Service of a Participant
that constitutes a distribution of deferred compensation to a “specified employee” within the
meaning of Section 409A(a)(2)(B)(i) of the Code, the Severance Payment shall be paid to the
Participant on the date that is six (6) months after the date of the Participant’s Separation from
Service.

          (c) “General Release” The Severance Payment shall be conditioned upon the execution
by the Participant of the Company’s standard form general release.

          (d) “Section 280G”

               (i) Notwithstanding anything in this Policy to the contrary, in the event that it shall be
determined that any Payment would constitute an “excess parachute payment” within the meaning of
Section 280G(b) of the Code, the Participant shall be paid an additional amount (a “Gross-Up
Payment”) such that the net amount retained by the Participant after deduction of any Excise Tax,
and any federal, state and local income and employment taxes and excise tax, including any interest
and penalties with respect thereto, imposed upon the Gross-Up Payment, shall be equal to the
Payment; provided, however, that if the total Payment(s) are less than or equal to 120% of the
Capped Benefit (as defined below), the Payment(s) shall be reduced by an amount necessary to
prevent any portion of the Payment(s) from being a “parachute payment” as defined in Section
280G(b)(2) of the Code. If the Payment(s) are to be reduced pursuant to this Section, the Company
shall provide Participant with a reasonable opportunity to request which of the benefits payable to
the Participant shall be reduced. For purposes of determining the amount of the Gross-Up Payment,
the Participant shall be deemed to pay federal income tax and employment taxes at the highest
marginal rate of federal income and employment taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal rate of taxation in
the state and locality of the Participant’s residence on the date the Payment is made, net of the
reduction in federal income taxes that the Participant may obtain from the deduction of such state
and local income taxes. The “Capped Benefit” shall equal the total Payment(s), reduced by the
amount necessary to prevent any portion of the Payment(s) from being a “parachute payment” as
defined in Section 280G(b)(2) of the Code.

               (ii) All determinations to be made under this Section 5(d) shall be made by the Company’s
independent public accountant immediately prior to the Change in Control (the “Accounting Firm”);
provided, that if the Accounting Firm is serving as accountant or auditor to the individual, entity
or group effecting the Change of Control, the Committee shall appoint another independent
accounting firm to make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). The Accounting Firm shall provide its
determinations and any supporting calculations and work papers both to the Company and the
Participant within fifteen (15) business days after receipt of written notification from the
Company or the Participant that there has been a Payment or by such earlier time as is requested by
the Company. Any such determination by the Accounting Firm shall include explanations of whether
and when a Gross-Up Payment is required, the amount of any such Gross-Up Payment and the

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assumptions utilized in arriving at the determination. The Accounting Firm’s determination shall
be binding upon the Company and the Participant. Within five (5) days after receipt of the
Accounting Firm’s determination, the Company shall pay to the Participant any Gross-Up Payment determined
by the Accounting Firm.

               (iii) In the event that upon any audit by the Internal Revenue Service, or by a state or local
taxing authority, of a Payment or Gross-Up Payment, a change is finally determined to be required
in the amount of taxes paid by the Participant, appropriate adjustments shall be made under this
Section 5(d) in the manner determined by the Accounting Firm, such that the net amount which is
payable to the Participant after taking into account the provisions of Section 4999 of the Code and
any interest and penalties shall reflect the intent of the parties as expressed in paragraph (A) of
this Section 5(d). The Participant shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as soon as practicable but no later than ten (10)
business days after the Participant is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is requested to be paid. The
Participant shall not pay such claim prior to the expiration of the 30-day period following the
date on which the Participant gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the Company notifies the
Participant in writing prior to the expiration of such period that it desires to contest such
claim, the Participant shall: (A) give the Company any information reasonably requested by the
Company relating to such claim; (B) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney reasonably selected by the
Company; (C) cooperate with the Company in good faith in order effectively to contest such claim;
and (D) permit the Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall indemnify and hold the
Participant harmless, on an after-tax basis, for any excise tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this Section 5(d), the Company
shall control all proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may contest the claim in any permissible manner, and
the Participant agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company
shall determine. The Company’s control of the contest shall be limited to issues the resolution of
which could result in a Gross-Up Payment’s being payable hereunder, and the Participant shall be
entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

               (iv) All of the fees and expenses of the Accounting Firm in performing the determinations
referred to in paragraphs (ii) and (iii) of this Section 5(d) shall be borne solely by the Company.

          (e) Other Existing Arrangements This Policy will be subordinated to any written
severance benefit arrangement, change of control severance agreement or employment agreement that
provides for severance benefits in existence between the Participant and the Company,

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notwithstanding the terms of any such arrangement or agreement, and any benefits under any such
arrangement or agreement will be paid prior to any payments under this Policy, which shall be
delayed for payment until all benefits under any such arrangement or agreement have been
determined and paid, and payments under this Policy will be reduced by any amounts paid under any
such arrangement or agreement.

     Section 6. Termination Procedures.

               Any purported termination of a Participant’s employment following a Change in Control (other
than by reason of death) shall be communicated by written Notice of Termination from one party to
the other party in accordance with Section 9 hereof.

     Section 7. No Mitigation.

               The Company agrees that, in order for a Participant to be eligible to receive the Severance
Payment and other benefits described herein, the Participant is not required to seek other
employment or to attempt in any way to reduce any amounts payable to the Participant by the Company
pursuant to Section 5 hereof. Further, the amount of any payment or benefit provided for in this
Policy hereof shall not be reduced by any compensation or income earned by the Participant as the
result of employment by another employer or self-employment, by retirement benefits, by offset
against any amount claimed to be owed by the Participant to the Company, or otherwise.

     Section 8. Successors.

          (a) The Company shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume this Policy and all obligations of the Company hereunder in the same
manner and to the same extent that the Company would be so obligated if no such succession had
taken place.

          (b) This Policy shall inure to the benefit of and shall be binding upon the Company, its
successors and assigns, but without the prior written consent of the Participants this Policy may
not be assigned other than in connection with the merger or sale of substantially all of the
business and/or assets of the Company or similar transaction in which the successor or assignee
assumes (whether by operation of law or express assumption) all obligations of the Company
hereunder.

          (c) This Policy shall inure to the benefit of and be enforceable by the Participant’s personal
or legal representatives, executors, administrators, successors, heirs, distributees, devisees,
legatees or other beneficiaries. If a Participant shall die while any amount would still be payable
to such Participant hereunder (other than amounts which, by their terms, terminate upon the death
of the Participant) if such Participant had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Policy to the executors,
personal representatives or administrators of such Participant’s estate.

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     Section 9. Notices.

          For the purpose of this Policy, notices and all other communications provided for in the
Policy shall be in writing and shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid, addressed, if to a
Participant, to the address on file with the Company and, if to the Company, to the address set
forth below, or to such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective only upon actual
receipt:

To the Company:

AMERIGROUP Company

4425 Company Lane

Virginia Beach, VA 23462

Attention: Executive Vice President, Associate Services

     Section 10. Miscellaneous

          (a) No waiver by the Company or any Participant, as the case may be, at any time of any breach
by the other party of, or of any lack of compliance with, any condition or provision of this Policy
to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. All other plans, policies and
arrangements of the Company in which the Participant participates during the term of this Policy
shall be interpreted so as to avoid the duplication of benefits paid hereunder. It is expressly
acknowledged that the terms of this policy shall not affect the terms of any equity incentive
agreement between the Company and the Participant.

          (b) Employment with any present or future Affiliate or Subsidiary shall be considered
employment with the Company for all purposes of this Policy.

          (c) Nothing contained in this Policy or any documents relating to the Policy shall (i) confer
upon any Participant any right to continue in the employ of the Company or a subsidiary, (ii)
constitute any contract or agreement of employment, or (iii) interfere in any way with the right of
the Company to terminate the Participant’s employment at any time, with or without Cause.

          (d) A Participant shall be entitled to the benefits of any indemnity applicable to the
Participant that is provided by the Company’s articles of incorporation, bylaws or otherwise
immediately prior to a Change in Control, and any subsequent changes to the articles of
incorporation, bylaws or otherwise reducing the indemnity granted to the Company’s officers and
employees shall not affect the rights granted hereunder.

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          (e) Prior to a Change in Control, the Committee shall have the right to amend or terminate the
Policy and to add or remove Participants from time to time, in its sole and absolute discretion.
From and after (i) the occurrence of a Change in Control; (ii) the public announcement of a
proposal for a transaction that, if consummated, would constitute a Change in Control; or (iii)
the Board’s learning of a specific proposal containing the essential terms of a transaction
that, if consummated, would constitute a Change in Control, the Committee shall not have the right
to terminate the Policy or amend it any manner which adversely affects the rights of any
Participant unless the Company has obtained the prior written consent of each affected Participant.
Notwithstanding the preceding sentence, however, in the case of a proposal under clause (ii) or
clause (iii) immediately above, if the proposal is finally withdrawn or terminated, the Policy may
be terminated or amended after the withdrawal or termination. Notwithstanding the foregoing, the
Policy shall automatically terminate on the date following the termination of the Protected Period,
provided that all obligations accrued by Participants prior to such termination of the Policy must
be satisfied in full in accordance with the terms hereof.

          (f) Except as otherwise provided herein or by law, no right or interest of any Participant
under the Policy shall be assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution, levy, garnishment,
attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be
effective; and no right or interest of any Participant under the Policy shall be liable for, or
subject to, any obligation or liability of such Participant.

          (g) All amounts payable hereunder shall be subject to applicable federal, state and local tax
withholding.

          (h) This Policy shall be construed, interpreted and the rights of the parties determined in
accordance with the laws of the Commonwealth of Virginia (without regard to the conflicts of laws
principles thereof), to the extent not preempted by federal law, which shall otherwise control.

          (i) The invalidity or unenforceability of any provision of this Policy shall not affect the
validity or enforceability of any other provision of this Policy, which shall remain in full force
and effect. If this Policy shall for any reason be or become unenforceable by either party, this
Policy shall thereupon terminate and become unenforceable by the other party.

          (j) This Policy shall have no effect on any equity incentive award granted by the Company to a
Participant under the Equity Incentive Plan or any other equity incentive program or arrangement.
The terms of the equity incentive award shall govern those awards with respect to a change of
control.

          (k) If a Participant commences a legal action to enforce any of the obligations of the Company
under this Policy and it is ultimately determined that the Participant is entitled to any payments
or benefits under this Policy, the Company shall pay the Participant the amount necessary to
reimburse the Participant in full for all reasonable expenses (including reasonable attorneys’ fees
and legal expenses) incurred by the Participant with respect to such action. The Company shall pay
to a Participant interest on any unpaid portion of the Participant’s Award that is not paid when
due,

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calculated at the prime rate of The Chase Manhattan Bank as in effect from time to time from
the date that payment should have been made under this Policy, until the Award is fully paid.

11exv10w2

 

UNCLASSIFIED

EXHIBIT 10.2

CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED FOR THE REDACTED
PORTIONS. THE
CONFIDENTIAL REDACTED
PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
ASTERISKS DENOTE SUCH REDACTIONS.

MEMORANDUM OF UNDERSTANDING

USEC / ATK / HEXCEL

AMERICAN CENTRIFUGE PROGRAM

 

1. Parties

USEC Inc. (“USEC”), a Delaware corporation with a principal place of business at Bethesda MD, ATK
Space Systems Inc. (“ATK”), a Delaware corporation with a principal place of business at Salt Lake
City UT, and Hexcel Corporation (“Hexcel”), a Delaware corporation with a principal place of
business at Stamford CT, hereby enter into this Memorandum of Understanding (“Memorandum”) dated as
of August 16, 2007. This Memorandum will become effective on the “Effective Date” as defined in
Section 9.

2. Scope

USEC has received from the U.S. Nuclear Regulatory Commission (“USNRC”) a license to construct and
operate a uranium enrichment plant at Piketon Ohio and is in the process of demonstrating its
next-generation uranium enrichment technology for use at the plant.

ATK has contracted with USEC to assist USEC in the development, design and assembly of composite
rotors for demonstration of USEC’s enrichment technology. Once satisfactory performance and cost
data have been obtained from testing, it is USEC and ATK’s intention to enter into a contract
whereby ATK will manufacture and deliver, on a schedule that supports USEC’s requirements,
approximately 11,500 rotors, plus a sufficient number of spare rotors, that are estimated to be
required to construct a commercial centrifuge uranium enrichment plant with an initial capacity of
about 3.8 million SWUs (hereinafter referred to as the American Centrifuge Plant or “ACP” which
term includes any similar or substitute centrifuge program undertaken by USEC). It is estimated
that the assembly of composite rotors for the ACP will require approximately ***** of intermediate
modulus carbon fiber and approximately ***** of carbon fiber prepreg.

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In order to assure that a sufficient supply of intermediate modulus carbon fiber will be available
for the ACP, Hexcel is willing to increase its capacity for producing intermediate modulus carbon
fiber at its facility in Salt Lake City UT (the “SLC Facility”) and to supply intermediate modulus
carbon fiber required by the ACP, provided, however, that (i) USEC purchases, or causes ATK to
purchase, from Hexcel ***** of the intermediate modulus carbon fiber required for the ACP, and (ii)
USEC advances $***** to Hexcel against future purchases of the intermediate modulus carbon fiber
(the “Advance Payment”), all as subject to the terms and conditions set forth in this Memorandum.
Hexcel is also willing to supply the carbon fiber prepreg required by the ACP *****, provided,
however, that (i) USEC provides Hexcel a notice of its intent to purchase the carbon fiber prepreg
as provided in Section 6(B), and (ii) USEC purchases, or causes ATK to purchase, from Hexcel
certain amounts of carbon fiber prepreg for the ACP. Hexcel’s product designations for these
requirements of carbon-based products are ***** (“IM Fiber) and ***** (“Prepreg”).

*****.

Other than for this Memorandum, Hexcel is not a party to any agreement or other arrangement made or
to be made between USEC and ATK respecting any aspect of the ACP.

3. Product Use

USEC and ATK agree that IM Fiber and Prepreg purchased will be used solely for the ACP and will not
be used or resold for any other purpose, except as permitted under this Memorandum. In the event
that ATK or USEC has excess IM Fiber (not to exceed a cumulative total of *****) that it desires to
sell for purposes other than for the ACP, Hexcel will have a right of first refusal to purchase the
excess IM Fiber at a price offered by ATK or USEC. If Hexcel declines to purchase the IM Fiber
offered, ATK or USEC may sell such excess fiber to a third party but not at a price below that
offered to Hexcel without first offering the fiber to Hexcel at the lower price. Hexcel’s purchase
of excess IM Fiber will not reduce USEC or ATK’s commitments regarding the purchase IM Fiber under
this Memorandum.

4. Carbon Fiber Capacity Expansion

Hexcel has represented to USEC that the current and projected market demand for all types of carbon
fiber made by Hexcel is such that Hexcel will need to expand its carbon fiber capacity to meet USEC
and ATK’s requirements for IM Fiber for the ACP by adding a new carbon fiber line at the SLC
Facility (the “New Line”).

The New Line will be scheduled for completion no later than *****. This is a target completion date
and is subject to extension by delays caused by events consistent with “Force Majeure” as defined
in Section 11 (as extended, the “Completion Date”).

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USEC and ATK in good faith will cooperate with Hexcel to qualify, within three full calendar months
after the Completion Date, the New Line and any existing carbon fiber manufacturing lines providing
IM Fiber that may be used on the ACP so that such lines meet the specification attached as
Attachment A to Exhibit J (the “Carbon Fiber Specification”), *****. USEC and ATK will also, in
good faith, cooperate with Hexcel to confirm that the new and existing ***** lines supporting the
IM Fiber will manufacture precursor that enables such carbon fiber manufacturing lines to meet the
Carbon Fiber Specification, *****.

5. Advance Payment

USEC will advance $***** by wire transfer to Hexcel payable in three installments as follows:

	 	 	 	 	 
	The first installment within 10 days after the Effective Date
	 	$	*	****
	The second installment within 90 days after the Effective Date
	 	$	*	****
	The third installment within 180 days after the Effective Date
	 	$	*	****

Hexcel will not segregate these funds nor hold them in trust for USEC or ATK. Hexcel may draw on
the funds immediately upon receipt. If USEC fails to make any installment payment within thirty
days after it is due, all remaining installments will be due and payable immediately.

*****

6. Supply Arrangements with USEC and ATK for the ACP

     (A) Purchase and Supply of IM Fiber for the ACP

USEC agrees to purchase, or cause ATK to purchase, from Hexcel (i) ***** of its requirements of
intermediate modulus carbon fiber for the ACP; (ii) at least ***** of intermediate modulus carbon
fiber for the ACP and (iii) as described in Table 2 on Schedule A, the minimum amount of
intermediate modulus carbon fiber shown for that month, or per an agreed-to monthly delivery
schedule negotiated by ATK and Hexcel in the 3rd quarter of any year for the upcoming
year’s supply. Hexcel agrees to supply to ATK/USEC intermediate modulus carbon fiber which USEC is
obligated to purchase, or cause ATK to purchase, from Hexcel for the ACP. Hexcel will meet these
obligations to supply the intermediate modulus carbon fiber by supplying Hexcel’s IM Fiber. USEC’s
obligation to purchase or cause ATK to purchase intermediate modulus carbon fiber from Hexcel is
subject to Hexcel satisfying its obligations under Section 4(a) of the Hexcel/ATK Supply Agreement,
which includes the obligation of Hexcel to meet the Carbon Fiber Specification and delivery
requirements resulting from this Memorandum.

     (B) Purchase and Supply of Prepreg for the ACP

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On or before *****, USEC may, at its option, provide a notice to Hexcel (the “Prepreg Supply
Notice”) that USEC intends to purchase, or cause ATK to purchase, from Hexcel carbon fiber prepreg
for the ACP. The notice will include a proposed schedule for delivery of the amounts of carbon
fiber prepreg, by month. The parties will not be obligated to purchase or supply Prepreg unless
and until a purchase order is issued to and accepted by Hexcel; Hexcel will meet any obligations to
supply carbon fiber prepreg by supplying Hexcel’s Prepreg. The quantities, schedules and lead times
for the deliveries of carbon fiber prepreg will be agreed between ATK/USEC and Hexcel, taking into
account Hexcel’s internal and customer needs, availability of raw materials and fibers, capacity
and other manufacturing and shipping considerations. Any USEC obligation to purchase or cause ATK
to purchase carbon fiber prepreg from Hexcel is subject to Hexcel satisfying its obligations under
Section 4(a) of the Hexcel/ATK Supply Agreement, which includes the obligation of Hexcel to meet
specifications and delivery requirements resulting from this Memorandum. The specification for
carbon fiber prepreg will be negotiated in good faith between Hexcel and USEC and, upon agreement,
will be incorporated into this Memorandum.

     (C) Terms and Conditions of Purchase and Supply

Hexcel and ATK are parties to an existing supply agreement (i.e. that certain Memorandum of
Agreement between Hexcel and ATK as revised through December 8, 2005 (the “Hexcel/ATK Supply
Agreement”) which provides for the terms of sale by Hexcel to ATK of certain products other than IM
Fiber and Prepreg. To facilitate the purchase of USEC’s ACP requirements for carbon fiber and
carbon fiber prepreg through ATK, Hexcel and ATK agree that, as of the Effective Date:

     (i) The Hexcel/ATK Supply Agreement will be amended by adding “Exhibit J” thereto
substantially in the form as set forth in Schedule A to this Memorandum;

     (ii) Sections 3, 4(b) and (d), 8(b), 9 and 18 of the Hexcel/ATK Supply Agreement will be
disregarded;

     (iii) The “ATK Composites Procurement Terms and Conditions (Effective April 1, 2003 as
Modified for Hexcel Corporation),” which is incorporated into the Hexcel/ATK Supply Agreement, will
be modified as set forth in Schedule B to this Memorandum; and

     (iv) The terms of this Memorandum, including the Carbon Fiber Specification, will supersede
any inconsistent provisions of the Hexcel/ATK Supply Agreement, and the Hexcel/ATK Supply Agreement
will be interpreted to be consistent with this Memorandum and the Carbon Fiber Specification.

The Hexcel/ATK Supply Agreement will remain unaffected by any of the foregoing clauses (i) — (iv)
for products other than IM Fiber and Prepreg for the ACP.

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Hexcel and ATK will not modify the pricing (other than pursuant to any applicable escalation
formula), minimum quantities, delivery schedules, or specifications of IM Fiber and Prepreg without
the consent of USEC which shall not be unreasonably withheld.

     (D)  Direct Purchases by USEC

Without affecting the rights and obligations of USEC and ATK to one another as provided in any
agreement between ATK and USEC (which agreement takes precedence as between USEC and ATK), USEC may
purchase IM Fiber and Prepreg directly from Hexcel on the terms and conditions applicable under the
Hexcel/ATK Supply Agreement as amended by the foregoing clauses (i) — (iv) (the “USEC Purchase
Terms”). Except to the extent of any direct purchases by USEC pursuant to this Memorandum, ATK will
purchase IM Fiber and Prepreg under the Hexcel/ATK Supply Agreement. A USEC offer to purchase IM
Fiber or Prepreg directly from Hexcel will only be effective if it: (i) is made in accordance with
the USEC Purchase Terms; (ii) is for not less than a minimum monthly quantity; (iii) is notified in
writing to Hexcel by USEC and ATK jointly at least sixty days in advance of the scheduled delivery
date; and (iv) would not have the effect of imposing any additional or greater obligations on
Hexcel than if such direct purchase had not been made. No failure of either USEC or ATK to purchase
IM Fiber or Prepreg will relieve the other of the obligation to purchase IM Fiber and Prepreg in
accordance with this Memorandum or the Hexcel/ATK Supply Agreement.

     (E) Pricing

The prices for IM Fiber and Prepreg, including provision for the escalation of prices, are set
forth in Exhibit J and Section 7. However, in recognition of the Advance Payment made by USEC,
Hexcel will reduce the IM Fiber price by $*****, of IM Fiber purchased by USEC and ATK for the ACP,
up to a maximum aggregate price reduction equal to *****. For avoidance of doubt, price
escalations will be determined before application of any price reduction.

7. Additional Obligations

     (A) Abandonment of the ACP.

USEC acknowledges that it is necessary for Hexcel to expand the SLC Facility to supply IM Fiber for
the ACP, and that in so doing Hexcel will undertake considerable expense and effort to design and
construct the New Line to meet USEC and ATK’s requirements for supply. Among other things, Hexcel
will employ its personnel for design and planning, commit to ordering long lead-time equipment,
retain third party engineering and other services, procure appropriate approvals and employ its
capital resources. USEC further acknowledges that if the ACP is abandoned Hexcel would suffer

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substantial damages and that such damages cannot be determined with reasonable certainty at this
time.

Accordingly, in the event that USEC, for any reason whatsoever, abandons the ACP (as evidenced by a
notice signed by the chief executive officer of USEC which references this Memorandum and which is
delivered to Hexcel no later than seven days following the final corporate action by USEC necessary
to abandon) before the start of the first month in which the minimum quantity of IM Fiber is
required to be purchased as set forth in Exhibit J (such event being a “Section 7(A) Event”), USEC
will pay Hexcel damages equal to the sum of (i) Hexcel’s actual expenditures for the New Line, (ii)
Hexcel’s obligations incurred to suppliers, contractors and other third parties for deliveries and
work performed for the New Line, and (iii) Hexcel’s reasonable costs incurred in connection with
suspension or termination of work on the New Line (should Hexcel, at its option, decide to suspend
or terminate construction of the New Line), including settled and unsettled claims asserted against
Hexcel, all as of the delivery date of the notice to Hexcel of the Section 7(A) Event (the
aggregate amount payable by USEC being the “Damage Amount”). The maximum Damage Amount under this
Section 7(A) will be $*****. The Damage Amount will be paid by USEC within ten days after Hexcel
submits reasonable evidence of the determination of the Damage Amount, provided, however, (i) that
USEC’s payment will be reduced by any Advance Payment previously made, and (ii) that Hexcel will
return to USEC the amount, if any, by which any Advance Payment previously made exceeds the Damage
Amount. In addition, should Hexcel complete the New Line, it will pay USEC at the rate of $*****
produced on the New Line and sold or used by Hexcel prior to December 31, 2011, up to a maximum
aggregate payment equal to the Damage Amount paid by USEC. Hexcel will have no obligation to
maximize this payment by selling or using fiber from the New Line if it can otherwise obtain fiber
from its other production lines. Hexcel will make these payments, if any, to USEC within sixty
days after the end of the month in which the payment amount is earned.

The Damage Amount payable by USEC will be the exclusive liability of USEC to Hexcel, and the
exclusive remedy of Hexcel against USEC, arising from a Section 7(A) Event. Neither USEC nor ATK
will be liable to Hexcel for any other actual, consequential, special, indirect, or incidental
damages including loss of use or loss of profits, under any theory of law or equity, arising from a
Section 7(A) Event. In addition, upon the occurrence of a Section 7(A) Event, the obligations of
USEC to purchase IM Fiber and Prepreg, and the obligation of Hexcel to supply IM Fiber and Prepreg
under this Memorandum and the Hexcel/ATK Supply Agreement automatically will terminate, in each
case without liability of a Party to any other Party except for liabilities accrued prior to
termination and the obligations of USEC and Hexcel to make payments under this Section 7(A).

     (B) Failure to Purchase IM Fiber Monthly Minimum for the ACP

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If a Section 7(A) Event has not occurred, and neither USEC nor ATK purchases, in any month
commencing *****, the minimum quantity of IM Fiber set forth in Exhibit J (for any reason other
than a failure to deliver, in accordance with this Memorandum, IM Fiber by Hexcel), USEC will
forfeit to Hexcel out of the Advance Payment an amount (the “Forfeited Amount”) equal to the
aggregate price reduction that would have been applied on the quantity of IM Fiber by which the
amount purchased is less than the minimum quantity. Hexcel will have no obligation to credit the
Forfeited Amount against other purchases of IM Fiber or Prepreg or to supply in any other month the
quantity of IM Fiber not purchased.

Except as provided in the last paragraph of this Section 7(B), the remedy in the prior paragraph is
the exclusive remedy for the failure to purchase the monthly minimum in any month, but does not
adversely affect Hexcel’s rights against USEC and ATK with respect to the purchase of IM Fiber in
accordance with Sections 6(A)(i) and 6(A)(ii) of this Memorandum and the Hexcel/ATK Supply
Agreement, but the Forfeited Amount will be applied by Hexcel as a credit against any other damages
that Hexcel may suffer.

In addition, if the Advance Payment has been reduced to zero by any combination of the fiber price
reductions described in Section 6(E), the amounts forfeited by USEC under Section 7(B) and the
payments made to USEC under Section 7(C), then Hexcel may, in accordance with Section 10, terminate
the obligations of USEC to purchase IM Fiber and Prepreg, and the obligation of Hexcel to supply IM
Fiber and Prepreg under this Memorandum, the USEC Purchase Terms and the Hexcel/ATK Supply
Agreement, in each case without any liability to any other Party except for liabilities accrued
prior to termination.

     (C) Pricing Of IM Fiber based on Purchases of Prepreg for the ACP

If a Section 7(A) Event has not occurred, the price of IM Fiber to be purchased by USEC/ATK is
based on the volume of Prepreg that is purchased, as described on Schedule A.

     (D) Late Delivery of IM Fiber for the ACP

Hexcel’s obligations to supply IM Fiber for the ACP will be governed solely by this Memorandum, the
USEC Purchase Terms and the Hexcel/ATK Supply Agreement. In the event Hexcel is late in delivery
of either IM Fiber, Hexcel will pay ATK a penalty, commencing on the 16th day of delay, equal to
***** of the then current price of the delayed IM Fiber, per day of delay, until the date of
delivery of the delayed IM Fiber to ATK. The penalty is limited to a cap of *****. Notwithstanding
anything to the contrary contained herein, in no event will Hexcel be liable to USEC or ATK for any
consequential, special, indirect, or incidental damages, including loss of use or loss of profits,
under any theory of law or equity, for any matter arising out of under this Memorandum, the USEC
Purchase Terms or the Hexcel/ATK Supply Agreement.

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The payment of such amount will not adversely affect the rights of USEC and ATK against Hexcel
with respect to the purchase of IM Fiber in accordance with other Sections of this Memorandum and
the Hexcel/ATK Supply Agreement.

     (E) Failure to Qualify the New Line

If through no fault of USEC and ATK the New Line is not qualified by *****, Hexcel will return to
USEC, within ten days after such date, the Advance Payment less any previously Forfeited Amount
under Section 7(B). The return of the Advance Payment will be the exclusive liability of Hexcel to
USEC and ATK, and the exclusive remedy of USEC and ATK against Hexcel, arising from the failure to
qualify the New Line. Hexcel will not be liable to USEC or ATK for any actual, consequential,
special, indirect, or incidental damages, including loss of use or loss of profits, under any
theory of law, arising from such failure. For the avoidance of doubt, the failure to qualify the
New Line is not a default by Hexcel as long as Hexcel is not otherwise in default in supplying IM
Fiber under the terms of this Memorandum and the Hexcel/ATK Supply Agreement.

     (F) Exchange of Information

USEC will keep Hexcel apprised of the progress of the ACP in reasonable detail and will promptly
inform Hexcel of any facts and circumstances that could result in any actual or anticipated
abandonment or delay of the ACP.

Hexcel will keep USEC and ATK apprised of the progress of the New Line in reasonable detail and
will promptly inform USEC and ATK of any facts and circumstances that could result in any actual or
anticipated delay in qualifying the New Line beyond *****.

8. Nature of Memorandum

Nothing in the arrangements contemplated by this Memorandum is intended to constitute a
partnership, joint venture or other common enterprise, and Hexcel retains, free and clear and
without any restriction or encumbrance arising out of this Memorandum, all rights to its
facilities, assets and intellectual property.

9. Confidentiality; Effective Date; Binding Commitments

Hexcel and USEC agree, and USEC shall cause ATK to agree, that this Memorandum and any information
exchanged in the performance hereof shall be kept confidential and protected in accordance with the
terms of the confidentiality agreement between Hexcel and USEC effective April 5, 2005
(“Hexcel/USEC Confidentiality Agreement”).

This Memorandum will become effective on the date (the “Effective Date”) on which the letter of
credit is issued pursuant to Section 5. *****

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On becoming effective, this Memorandum is intended to be a legally binding commitment that
supercedes any prior representations, agreements and understandings relating to the subject matter
hereof, except for the Hexcel/USEC Confidentiality Agreement. Each Party has obtained its
respective corporate or other approvals necessary for it to enter into and perform under this
Memorandum. The terms of this Memorandum may not be waived or modified except by a writing signed
by the Party against which the waiver or modification is sought to be enforced.

10. Termination; Continuing Default

     (A) This Memorandum and/or the Hexcel/ATK Supply Agreement may be terminated by a Party
pursuant to a termination right expressly provided in another Section of this Memorandum.

     (B) This Memorandum and the Hexcel/ATK Supply Agreement, together and not separately, may be
terminated by USEC and ATK, acting jointly, if there is a Continuing Default by Hexcel under the
Memorandum or the Hexcel/ATK Supply Agreement.

     (C) This Memorandum and/or the Hexcel/ATK supply Agreement may be terminated by Hexcel against
either or both USEC and ATK if there is a Continuing Default by either of them under this
Memorandum or the Hexcel/ATK Supply Agreement.

Unless otherwise expressly provided in another Section of this Memorandum, a termination will be
effective upon notice and all liabilities accrued prior to termination will survive the
termination.

The term “Continuing Default” means a material default by a Party which continues for more than
sixty days after receipt of notice from the Party asserting such default that describes, in
particular detail, the facts supporting the default.

Any termination of the Hexcel/ATK Supply Agreement that may arise under this Memorandum will affect
the Hexcel/ATK Supply Agreement only to the extent it applies to this Memorandum and Schedule A and
will have no effect on the Hexcel/ATK Supply Agreement as applied to any other program or contract
or any other exhibit to the Hexcel/ATK Supply Agreement.

11. Force Majeure

A Party will be excused from performance under this Memorandum (except for the obligations to
purchase the minimum amounts contained in Section 6(A)(ii) and (iii) and 6(B)) if the failure to
perform arises from causes beyond the reasonable control of the Party.  Examples of such causes
include acts of God or of the public enemy, acts of the Federal Government in either its sovereign
or contractual capacity, fires, floods, epidemics, quarantine restrictions, strikes, freight
embargoes, lack of raw material *****,

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and unusually severe weather *****. The Party asserting Force Majeure will give notice to the
other Parties promptly of the effect of such Force Majeure on performance under this Memorandum and
the likely duration thereof, if reasonably known, and will keep the other Parties informed of any
changes in such circumstances, including when such Force Majeure ceases. The Party claiming Force
Majeure shall use commercially reasonable efforts to continue to perform under this Memorandum, to
remedy the circumstances constituting the Force Majeure and to mitigate the adverse effects of such
Force Majeure on performance under this Memorandum. For the avoidance of doubt, (1) this Section 11
is not applicable in determining whether USEC is obligated to pay any Damage Amount pursuant to
Section 7(A) and (2) to the extent that Hexcel does not supply IM Fiber because it is excused due
to a Force Majeure, USEC and ATK shall be excused from their obligations to purchase such excused
amount of IM Fiber, so that (a) USEC and ATK may purchase the excused amount of intermediate
modulus carbon fiber from a different source without breaching Section 6(A)(i); (b) the minimum
amount of intermediate modulus carbon fiber to be purchased pursuant to Section 6(A)(ii) shall be
reduced by such excused amount; and (c) the minimum monthly amount of intermediate modulus carbon
fiber to be purchased pursuant to Section 6(A)(iii) shall be reduced by such excused amount.

12. Notices 

Notices and communications required to be given by a Party under this Memorandum will be in writing
and deemed delivered when delivered personally or by courier, or when received if posted as
registered or certified mail, to the following addresses

USEC

USEC Inc.

6903 Rockledge Dr.

Bethesda, MD 20817

*****

ATK

ATK Space Systems, Inc

Freeport Center Building A15

Clearfield, UT 84016

*****

Hexcel

Hexcel Corporation

11711 Dublin Blvd

Dublin, CA 94568

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*****

The foregoing contact information will be applicable for all notices and communications hereunder
until such time as a Party by like means has notified the other Parties of any change.

13. Governing Law

This Memorandum will be governed by Delaware Law without applying conflicts of law principles. The
Parties agree to submit any disputes under this Memorandum to the courts of Delaware for
determination. If a court should determine that any provision of this Memorandum is unenforceable,
the Parties intend that such provision be modified by the court so as to be enforceable to the
fullest extent permitted under the law.

14. Assignment

This Memorandum is not assignable in whole or in part by any party without the prior written
consent of the other parties, except to a wholly owned subsidiary of the assignor (but in no
event will the assignor be released from its obligations hereunder). This Memorandum shall inure to
the benefit of and be binding on the parties hereto and their respective successors and permitted
assigns. A party may assign the right to receive payments from another party hereunder to a
financial institution that generally collects payments from customers of the assignor but such
assignment is subject to the rights of the payor with respect to such payments.

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IN WITNESS WHEREOF, the Parties have caused this Memorandum to be executed by their duly authorized
representatives as of the day and year first above written.

	 	 	 
	USEC Inc.

	 	ATK Space Systems Inc
	 
	 	 
	By /s/ Charles W. Kerner

	 	By /s/ Mark J. Messick
	Name: Charles W. Kerner

	 	Name: Mark J. Messick
	Title: Director of Procurement and Contracts

	 	Title: Vice President and
General Manager, 
	 

	 	        ATK Aerostructures Division
	 
	 	 
	Hexcel Corporation
	 	 
	 
	 	 
	By /s/ Charles D. Dunbar
	 	 
	Name: Charles D. Dunbar
	 	 
	Title: Director of Sales
	 	 

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Schedule A

Exhibit J to Memorandum of Agreement

Between

Hexcel and ATK

*****

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Schedule B

Modified Form

of

ATK Composites Procurement Terms and Conditions (Effective April 1, 2003 as Modified for Hexcel
Corporation)

The following modifications to the ATK Composites Procurement Terms and Conditions (Effective April
1, 2003 as Modified for Hexcel Corporation) (the “Terms and Conditions”) which is incorporated into
the ATK Supply Agreement shall apply to purchases pursuant to this Memorandum:

	1)	 	The following Sections of the Terms and Conditions shall be deleted: 1.3, second paragraph of
1.6(b), 1.6(c), 1.10 (b), 1.10(c), 1.10(d), second paragraph of 1.13, 1.14, 1.15, 1.16, 1.42,
1.43, 1.44(d), 1.44(e), 1.44(h), 1.44(k), 1.45, 1.47, 1.48 and Section 2 (Special Provisions).

	2)	 	The last sentence of Section 1.6(a) shall be amended to read: “Unless performance is
excused, deliveries will be made even in the event of a strike at either the Buyer’s or
Seller’s location, unless prior written consent is obtained from the other party, which shall
not be unreasonably withheld.”

	3)	 	The last sentence of Section 1.6(b) shall be amended to read: “Unless performance is
excused, if ATK requests, Contractor shall, at Contractor’s expense, ship via air or other
expedited routing to avoid the delay or minimize it as much as possible.”

	4)	 	The second sentence of Section 1.7 shall be amended to read: “Either party may litigate any
dispute arising under or relating to this Contract before a court located in the state of
Delaware.”

5) The first paragraph of Section 1.9 shall be amended to read:

	 	 	“Failure of either party to enforce at any time any of the provisions of this Contract,
or any rights in respect thereto, or to exercise any election therein provided, shall in
no way be considered to be a waiver or relinquishment of the right to thereafter enforce
such provisions or rights or exercise any subsequent elections. Except as specifically
provided, any and all of the rights and remedies under this Contract shall be cumulative
and in addition to, and not in lieu of, the rights and remedies granted by law. If any
provision of this Contract becomes void or unenforceable by law, the remaining shall be
valid and enforceable.”

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	6)	 	Section 1.12 shall be amended to read:
	 
	 	 	“Except to the extent claims arise from the other party’s negligent or intentional acts
or omissions, each party agrees to indemnify and hold the other party, its officer’s,
employees, agents and representatives, harmless from any and all claims, fines,
penalties, offsets, liabilities, judgments, losses, damages, costs and profit
disallowed, or expenses (including reasonable attorney’s fees) for:

	 	(a)	 	Property damage or personal injury including death, of whatever kind or
nature arising out of, as a result of, or in connection with the party’s, its
employees’, agents’, Subcontractors’, and lower-tier Subcontractors to comply
with any law, regulation, or clause whose terms are part of this Contract,
and/or
	 
	 	(b)	 	Any liability which arises as the result of failure of the party’s or
its lower-tier Subcontractors to comply with any law, regulation, or clause
whose terms are part of this Contract, and/or
	 
	 	(c)	 	Liability from any actual or alleged patent, copyright, trademark, or
trade secret infringement by reason of any manufacture, use, or sale of any
articles delivered by Contractor under this Contract, provided that
Contractor’s indemnification shall not apply:

	 	i.	 	To the extent such infringement results
directly from compliance with Buyer’s particularlized designs,
specifications or instructions, or from changes made by Buyer
to Contractor’s product after delivery without Contractor’s
knowledge or authorization; or
	 
	 	ii.	 	To the extent such infringement results
from the use or sale of the product in combination with other
items (unless such combination was known and authorized by
Contractor) and would not have occurred from the product
itself.

	 	(d)	 	The indemnifying party must be promptly notified of any claim for
indemnity. In the event of an obligation to indemnify, the indemnifying party,
at the indemnifying party’s election, have sole charge and direction thereof,
in which event, the other party, shall provide the indemnifying party
reasonable assistance in the defense thereof as the indemnifying party may
require. The other party shall have the right to be represented in such suit
by advisory counsel at the other party’s expense.”

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	7)	 	The first paragraph of Section 1.13 shall be amended to read: “ATK and/or its customers
shall at all times have title to all drawings and specifications furnished by ATK to
Contractor. Contractor agrees to use all drawings and specifications provided by ATK solely
in connection with the Contract and shall not disclose such drawings and specifications to any
person, firm or corporation other than those employees of ATK and/or its customers, the
Contractor, or approved Subcontractors that have a need to know.”

	8)	 	The second paragraph of Section 1.35 shall be amended to read: “Notwithstanding the
foregoing, any amounts due or to become due hereunder may be assigned by the Contractor
provided that such assignment shall not be binding upon ATK unless and until ATK is notified
thereof.”

	9)	 	Section 1.39 shall be amended to read: “Irrespective of the place of performance, this Contract
shall be governed by and construed according to the laws of the State of Delaware.

16

UNCLASSIFIED

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