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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1997 Commission File Number l-1520
GENCORP INC.
(Exact name of registrant as specified in its charter)
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OHIO 34-0244000
(State of Incorporation) (I.R.S. Employer Identification No.)
175 GHENT ROAD, FAIRLAWN, OHIO 44333-3300
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (330) 869-4200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value 10c per share New York and Chicago
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 2, 1998, was $1,028,278,840.
As of January 31, 1998, there were 41,334,149 outstanding shares of the
Company's Common Stock, 10c par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1998 Proxy Statement of GenCorp Inc. are incorporated into
Part III of this Report.
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GENCORP INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997
TABLE OF CONTENTS
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ITEM
NUMBER PAGE
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PART I
1 Business.................................................................... 1
2 Properties.................................................................. 4
3 Legal Proceedings........................................................... 5
4 Submission of Matters to a Vote of Security Holders......................... 6
Executive Officers of the Registrant........................................ 6
PART II
5 Market for Registrant's Common Equity and Related Stockholder Matters....... 8
6 Selected Financial Data..................................................... 8
7 Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 8
8 Consolidated Financial Statements and Supplementary Data.................... 13
9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure................................................................ 13
PART III
10 Directors and Executive Officers of the Registrant.......................... 38
11 Executive Compensation...................................................... 38
12 Security Ownership of Certain Beneficial Owners and Management.............. 38
13 Certain Relationships and Related Transactions.............................. 38
PART IV
14 Exhibits, Financial Statement Schedules and Reports on Form 8-K............. 38
Signatures.................................................................. 39
Index to Financial Statements and Financial Statement Schedules............. GC-1
Exhibit Index............................................................... i
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PART I
ITEM 1. BUSINESS
GenCorp Inc. (hereinafter the "Company" or "GenCorp") was incorporated in
Ohio in 1915 as The General Tire & Rubber Company. The Company's operations are
grouped into three business segments: its automotive business, its polymer
products businesses and its aerospace and defense business, Aerojet-General
Corporation ("Aerojet"). The automotive segment produces highly engineered
extruded and molded rubber products and plastic extrusions. The polymer products
segment produces diverse products including vinyl-coated fabrics, vinyl
woodgrain and paper laminates, plastic films, decorative wallcoverings,
single-ply roofing systems, tennis balls and racquetballs and styrene/butadiene
based specialty latices. The aerospace and defense segment manufactures liquid
and solid rocket propulsion systems, defense electronics and custom chemicals.
As of November 30, 1997, the Company employed approximately 9,460 persons.
(Financial information relating to the Company's business segments appears on
pages 32 through 34 of this report.)
The Company and its businesses utilize the GenCorp Technology Center in
Akron, Ohio to support priorities of operational excellence and value-creating
growth by developing new products and improving existing products and processes.
The Center has a key role in the Company's technical activity and supports
research and development efforts across the Company. The Technology Center teams
with the business units to create new high impact technology that enables new
business opportunities through leveraging core competencies in cross-cutting
application disciplines such as: (i) adhesives, coatings and printing inks; (ii)
graphics and information technology; and (iii) materials selection, substitution
and fabrication. A number of design and development centers at the segments
focus on specific areas of the businesses and each plant has dedicated
engineering services. (Information relating to research and development expense
is set forth in Note E on page 21 of this report.)
The Company licenses technology and owns patents, which expire at various
times, relating to its businesses. The loss or expiration of any one or more of
them would not materially affect the business of the Company or any of its
segments. Important trademarks of the Company are registered in its major
marketing areas.
Although GenCorp's business is not seasonal in the traditional sense,
aerospace and defense revenues and earnings have tended to concentrate to some
degree in the fourth quarter of each year reflecting delivery schedules
associated with that segment's mix of contracts. Automotive revenues and
earnings have tended to concentrate to some degree in the second and fourth
quarters of the Company's fiscal year, generally as a consequence of seasonality
in the automotive industry's build schedules and in response to customers'
preparation for annual model changes.
Compliance with laws and regulations relating to the discharge of materials
into the environment or the protection of the environment continues to affect
many of the Company's operating facilities. A discussion of capital and
noncapital environmental expenditures incurred in 1997 and forecasted for 1998
and 1999 for environmental compliance is included under the heading
Environmental Matters on page 12 of this report. Environmental matters discussed
on page 12 and in Note R beginning on page 29 of this report are incorporated
herein by reference.
AUTOMOTIVE
Revenues from the Company's automotive Vehicle Sealing business are
principally derived from the development, manufacture and sale of highly
engineered extruded and molded rubber products for vehicle bodies and window
sealing for the original equipment automotive market.
The Vehicle Sealing business unit is a leading producer in North America of
sealing systems and components that prevent air, moisture and noise from
penetrating vehicle windows, doors and other openings. This unit supplies
products to the major domestic automotive companies for use in a wide variety of
vehicles including the General Motors full-size pickup truck, the Suburban,
Tahoe and Yukon, the small pickup truck, Blazer and Jimmy, the General Motors
Achieva, GrandAm and Skylark, the Ford Ranger small pickup, the Ford Explorer
and the Mercedes-Benz All-Activity Vehicle. The international presence for
Vehicle Sealing continues
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to expand through its German subsidiary, HENNIGES, which produces high quality
vehicle sealing systems, encapsulated glass and molded rubber parts for major
European customers including Volkswagen, Opel, BMW, Audi and Mercedes-Benz. The
Vehicle Sealing business unit also manages a thermoplastics extrusion business
which is a producer of gaskets, seals and trim for the appliance and automotive
industries.
Automotive products are sold directly to Original Equipment Manufacturer
(OEM) customers or their suppliers. Automotive customers include the major
domestic automobile manufacturers, the loss of one or more of which would have a
material adverse effect on this segment. Sales to General Motors in 1997 were at
least ten percent of the Company's net sales.
The emergence of foreign vehicle manufacturing facilities in North America
has significantly changed the automotive market in recent years. Competition
based upon price, quality, service, technology and reputation is intense. Raw
materials required by this segment are generally in good supply.
POLYMER PRODUCTS
Revenues of the Company's polymer products businesses are generated through
the design, manufacture and sale of specialty polymers and decorative and
building products for a variety of industrial, commercial and consumer markets.
The polymer products segment has a broad base of commercial and industrial
customers, the loss of any one of which would not have a material adverse effect
on the segment's business.
Within the polymer products segment, Decorative & Building Products' six
businesses include: (i) wallcovering (commercial and residential); (ii) coated
fabrics; (iii) decorative laminates; (iv) films; (v) heat transfer papers; and
(vi) building systems. In May 1997, the Company acquired Printworld from
Technographics, Inc. Printworld is a recognized leader in the paper laminate
industry and is also well known for its heat transfer printing process. The
Decorative & Building Products business unit is a major supplier of vinyl coated
fabrics for indoor and outdoor home furnishings and marine applications and for
a variety of other industrial and commercial industries. It is also a leading
supplier of coordinated vinyl and paper woodgrain laminates for furniture
cabinets and consumer electronics, transfer printing laminates used to decorate
apparel and home furnishings and double-polished clear vinyl films for the
office products and stationery markets. Decorative and engineered thermoplastic
films for use in furniture, ceiling tiles, and other industrial applications are
also produced and marketed. In addition, the production of single-ply membrane
systems for a wide range of commercial roofing applications is a growing part of
this business unit. Decorative & Building Products also offers a full line of
brand name commercial wallcoverings for new construction and refurbishment, as
well as residential wallcoverings for home applications.
Manufacturing for Decorative & Building Products is done in four locations:
Auburn, Pennsylvania; Columbus, Mississippi; Jeanette, Pennsylvania; and Monroe,
North Carolina. These highly efficient manufacturing operations include
compounding, calendering, lamination, decorative printing, embossing and
coating.
Specialty Polymers is another key business unit within the polymer products
segment, producing and marketing a comprehensive line of specialty latices used
as coatings for paper, as binding agents for carpets and nonwoven fabrics and as
tire cord adhesives. Specialty Polymers also produces in-mold coatings for
automotive, truck and marine industries. In 1997, production capacity expansion
at the Mogadore, Ohio facility was completed and in the fourth quarter of 1997
Specialty Polymers set records for product volume and installed a new high speed
advanced pilot coater.
Penn Racquet Sports is a leading manufacturer of tennis balls and
racquetballs. Tennis and racquetball accessories are purchased for resale under
Penn trademarks. The Company also licenses the Penn trademark for use in
production of a variety of sportswear and other products for sale worldwide.
Methods of distribution utilized by units within the polymer products
business segment vary widely depending on the nature of the products and the
industry or market served, with products being sold either directly or through
distributors. Penn products are marketed worldwide. The Company has agreements
with subsidiaries of Head Sport AG to distribute Penn(R) tennis balls in France,
Italy, Germany, Austria and Switzerland. In addition, the Company has an
exclusive agreement with Babolat S. A. France to distribute racquet strings,
professional stringing equipment and related accessories into the U.S. market.
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Competition based upon price, quality, service, technology and reputation
is intense with respect to virtually all products marketed by this segment and,
to a substantial degree, upon design and styling in the wallcovering and most
other coated fabrics and plastic film products. The Company believes that it
continues to be a major competitor in the markets served by this segment, and
that the raw materials required are generally available. To date, the Company
has been successful in mitigating the effects of higher raw material costs
through productivity improvements, operating cost reductions and product
pricing. Raw material costs are very sensitive to, and dependent on, worldwide
demand.
AEROSPACE AND DEFENSE
Aerojet plays a leading role in the development and production of
electronic sensor and surveillance systems, and smart munitions, as well as
solid and liquid rocket propulsion systems and related defense products and
services. The segment also operates a custom chemicals business, supplying
special intermediates and bulk pharmaceuticals to commercial and government
customers.
Aerojet concentrates on obtaining contracts that provide a balance between
technology development and long-term production.
Aerospace and defense programs include liquid and solid propulsion systems
for Titan, Minuteman, HAWK and Delta. Aerojet is also the prime contractor for
the Army's Sense and Destroy Armor (SADARM) program. In November 1996 Aerojet,
as part of the Lockheed Martin team, received a multi-year cost plus award fee
contract for the Space-Based Infrared System (SBIRS) the segment's largest
program. Aerojet's share of the work, with potential revenue of approximately
$780 million, runs through the year 2006. Aerojet also received the five year
follow-on contract worth approximately $265 million for consolidation of the
Defense Support Program (DSP) post-production activity. SBIRS is scheduled to
replace DSP around the year 2002 as the United States Air Force's next
generation early warning and tracking system. Propulsion contracts renewed in
1996 include extension of Titan services through the year 2003 and follow-on
Delta engines and services through the year 2005.
Aerojet believes that current activity as a key partner on SBIRS and
expertise in space surveillance and as the prime contractor for the Sense and
Destroy Armor (SADARM) smart munitions program will enable it to continue to
participate in future follow-on contracts and awards for related programs. Most
of the sales of this business are made directly or indirectly to agencies of the
United States government pursuant to contracts or subcontracts which are subject
to termination for convenience (with compensation) by the government in
accordance with Federal Acquisition Regulations.
Aerojet's direct and indirect sales to the United States government and its
agencies (principally the Department of Defense) were approximately $516 million
in 1997, $465 million in 1996 and $490 million in 1995. Competition based upon
price, technology, quality and service is intense for all products and services
in this business segment and has increased with the decline in the national
defense budget and the continuing consolidation of the industry. There are
several other major companies with the technology and capacity to produce most
of the products manufactured and sold by Aerojet, and in some areas, the
government has its own manufacturing capabilities. Aerojet believes it remains
competitive in its markets.
Backlog in the aerospace and defense businesses is commonplace and
significant. Aerojet's contract backlog was approximately $1.9 billion at
November 30, 1997, compared to $2.0 billion at November 30, 1996. Funded
backlog, which includes only the amount of those contracts for which money has
been authorized by Congress, totaled approximately $0.7 billion at November 30,
1997, compared with approximately $0.6 billion at November 30, 1996. Raw
materials required by this segment are generally in adequate supply.
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ITEM 2. PROPERTIES
Significant operating, manufacturing, research, design and/or marketing
facilities of the Company and its businesses are set forth below.
FACILITIES
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CORPORATE HEADQUARTERS
GenCorp Inc. *GenCorp Overseas Inc.
175 Ghent Road 52 Telok Blangah Road
Fairlawn, Ohio 44333-3300 #02-04 Telok Blangah House
330/869-4200 Singapore 0409
(65) 275-5001
GenCorp Technology Center
2990 Gilchrist Road
Akron, OH 44305-4489
330/794-6300
MANUFACTURING/RESEARCH/DESIGN/MARKETING LOCATIONS
AEROSPACE AND DEFENSE
Aerojet Design/Manufacturing Marketing/Sales Offices:
P.O. Box 13222 Facilities: *Colorado Springs, CO
Sacramento, CA 95813-6000 Azusa, CA *Huntsville, AL
916/355-1000 Jonesborough, TN *Los Angeles, CA
Sacramento, CA *Mt. Arlington, NJ
*Socorro, NM *Orlando, FL
*Washington, DC
* * * * * * * * * *
AUTOMOTIVE
Vehicle Sealing Manufacturing Facilities: Sales/Marketing/Design
7221 Engle Road, Suite 240 Batesville, AR and Engineering Facilities:
Fort Wayne, IN 46804-2233 *Berger, MO Farmington Hills, MI
219/434-9700 *Evansville, IN Wabash, IN
Fort Smith, AR
Marion, IN
Wabash, IN
Welland, Ontario, Canada
HENNIGES, Rehburg,
Germany and Ballina,
Ireland
* * * * * * * * * *
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POLYMER PRODUCTS
Decorative & Building Products Manufacturing Facilities: Sales/Marketing/Design/Distribution
175 Ghent Road Auburn, PA Facilities:
Fairlawn, OH 44333-3300 Columbus, MS *Charlotte, NC
330/869-4380 Jeannette, PA *Hackensack, NJ
Monroe, NC *Maumee, OH
*New York, NY
*Paris, France
*Pine Brook, NJ
Salem, NH
Penn Racquet Sports Sales/Manufacturing Facilities:
306 South 45th Avenue Phoenix, AZ
Phoenix, AZ 85043 Mullingar, Ireland
602/269-1492 *Nurnberg, Germany
Specialty Polymers Sales/Manufacturing/Distribution Facilities:
165 S. Cleveland Avenue *Dalton, GA
Mogadore, OH 44260-1593 Green Bay, WI
330/628/6550 Mogadore, OH
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* An asterisk next to a facility listed above indicates that it is a leased
property.
In addition, the Company and its businesses own and lease properties
(primarily machinery, warehouse and office facilities) in various regions of the
country for use in the ordinary course of its business. Data appearing in Note Q
on page 29 of this report with respect to leased properties is incorporated
herein by reference.
During 1997 the Company generally made effective use of its productive
capacity. The Company believes that the quality and productive capacity of its
properties are sufficient to maintain the Company's competitive position.
ITEM 3. LEGAL PROCEEDINGS
Information concerning legal proceedings, including proceedings relating to
environmental matters, which appears in Note R beginning on page 29 of this
report is incorporated herein by reference.
Santamaria v. Suburban Water Systems
On July 2, 1997, a "toxic tort" lawsuit was filed in the Los Angeles County
Superior Court, Santamaria v. Suburban Water Systems, Docket No. KC 025995,
naming as defendants 19 manufacturing companies, (including Aerojet), and 5
water companies. The complaint was subsequently amended to add additional
plaintiffs and two additional defendant public water companies and has been
served on the private water companies but not on the industrial PRPs. On January
15, 1998, the plaintiffs represented to the Court that Aerojet and the other
manufacturing defendants would be served within the next sixty days. The several
hundred plaintiffs, all of whom reside or resided in the San Gabriel Valley of
Los Angeles (SGV), alleged that the defendants placed hazardous chemicals in the
soil, groundwater and air in the SGV and provided contaminated well water to the
plaintiffs for many years. The causes of action alleged are negligence, wrongful
death, strict liability, trespass, nuisance, negligence per se, ultrahazardous
activity and fraudulent concealment, and the plaintiffs seek personal injury and
property damages in an unspecified amount and punitive damages. They also seek a
court order to stop the allegedly tortious activity, but no preliminary
injunctive relief is sought. Aerojet has notified its insurers and will
vigorously defend this action.
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Allen, et al. v Aerojet, MDC, Southern California Water Company, et al.
On December 8, 1997 a similar but unrelated "toxic tort" complaint was
filed in Sacramento Superior Court. The plaintiffs seek compensation for damages
for alleged personal injuries and property damages related to exposure to
groundwater contamination in eastern Sacramento County, California. Aerojet was
served on January 14, 1998 and will vigorously defend this matter. In addition
to Aerojet, McDonnell-Douglas Corporation and two Sacramento water purveyors are
defendants. Aerojet has also notified its insurers of this action.
In re: Proposition 65 Notices
Aerojet was served in November and December, 1997 with charges from two
private groups alleging that it has released chemicals into air and groundwater
near its Sacramento facility without filing sufficiently detailed public
notifications as required by California's Proposition 65. Following collection
and review of all of its Proposition 65 records, air release reports and
groundwater reports, Aerojet believes it is in compliance with Proposition 65
and has so advised the California Attorney General's office. While compliance
with Proposition 65 is a defense, private litigation may still be filed, and
Aerojet's insurance carriers have been notified of these claims.
While there can be no certainty regarding the outcome of any litigation, in
the opinion of management, after reviewing the information currently available
with respect to the matters discussed above and consulting with the Company's
counsel, any liability which may ultimately be incurred will not materially
affect the consolidated financial condition of the Company. The effect of
resolution of these matters on results of operations cannot be predicted because
any such effect depends on both future results of operations and the amount and
timing of the resolution of such matter.
The U.S. Government frequently conducts investigations into allegedly
illegal or unethical activity in the performance of defense contracts.
Investigations of this nature are common to the aerospace and defense industries
in which Aerojet participates and lawsuits may result; possible consequences may
include civil and criminal fines and penalties, in some cases, double or treble
damages, and suspension or debarment from future government contracting. Aerojet
currently is subject to several U.S. Government investigations regarding
business practices and cost classification from which additional legal or
administrative proceedings could result. While it is not possible to predict
with certainty the outcome of any such investigation, the Company does not
believe, based upon the information available at this time, that final
resolution of any such matter will have a material adverse effect on its
consolidated financial condition or result in its suspension or debarment as a
government contractor.
The Company and its subsidiaries are presently engaged in other litigation,
and additional litigation has been threatened. However, based upon information
presently available, none of such other litigation is believed to constitute a
"material pending legal proceeding" within the meaning of Item 103 of Regulation
S-K (17 CFR Reg. 229.103) and the Instructions thereto.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended November 30,
1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is given as of January 31, 1998, and except as
otherwise indicated, each individual has held the same office during the
preceding five-year period.
John B. Yasinsky, age 58: Chairman of the Board (since March 1995), Chief
Executive Officer and President (since July 1994); formerly President and Chief
Operating Officer (since November 1993); previously Group President of
Westinghouse Electric Corporation (since February 1993), President, Westinghouse
Power Systems (from 1990 to 1993), Executive Vice President, Westinghouse, World
Resources and Technology (from 1989 to 1990), and Executive Vice President,
Westinghouse International (from 1987 to 1989).
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Edward R. Dye, age 56: Secretary (since September 1988) and Assistant
General Counsel (since January 1987); formerly Assistant Secretary (from
November 1986 until September 1988), Associate General Counsel (from September
1985 until January 1987) and Counsel prior to September 1985.
Samuel W. Harmon, age 47: Senior Vice President, Human Resources (since
February 1996); previously Vice President, Human Resources (from October 1995
until February 1996); formerly Vice President, Human Resources, AlliedSignal,
Inc. for its European operations (since 1995) and for its Automotive Sector
(from 1993 to 1995), and Group Director for the Heavy Duty Brake Division (from
1990 to 1993).
Michael E. Hicks, age 39: Treasurer (since September 1994); formerly
Director, Treasury for the Company (since 1989) and Manager, Cash and Banking
(from 1988 to 1989).
James K. Lambert, age 47: Senior Vice President, Operations and Total
Quality (since March 1996); formerly Vice President, Worldwide Manufacturing,
AlliedSignal Automotive (since 1995), Vice President, Lean Manufacturing-Truck
Brake Systems, North American Operations (from 1991 to 1995) and Director of
European Operations, Bristol, England (from 1987 to 1991).
Nathaniel J. Mass, age 47: Senior Vice President, Strategic Growth (since
June 1996); formerly Partner and Director of the Business Dynamics Center,
McKinsey and Company (from 1994 to June 1996); Chief Executive Officer, Light
Sciences Inc. (from 1991 to 1993) and Director of Worldwide Strategic Planning,
Exxon Chemical Company (from 1988 to 1991).
Kevin M. McMullen, age 37: Vice President of the Company and President,
Decorative & Building Products Business Unit (since September 1996); previously
General Manager, General Electric Corporation's Lighting Division (since 1991)
and Senior Engagement Manager, McKinsey and Company (from 1985 to 1991).
William R. Phillips, age 55: Senior Vice President, Law; General Counsel
(since September 1996); previously Vice President, Law of Aerojet (since 1990)
and General Counsel, Group Counsel and Manager Legal Operations, General
Electric Aircraft Engines (from 1986 to 1989).
Wayne A. Smith, age 50: Vice President of the Company (since August 1994),
also President of the Company's Vehicle Sealing Business Unit (since 1991);
formerly General Manager of the Company's Welland, Ontario vehicle sealing plant
(from 1986 to 1991) and Vice President-manufacturing (from 1985 to 1986).
D. Michael Steuert, age 49: Senior Vice President and Chief Financial
Officer (since August 1994); formerly Vice President and Chief Financial Officer
(since June 1990) and Treasurer (since May 1986), previously Vice
President -- Finance and Planning (from May 1987 to June 1990) and Treasurer.
Gregg R. Weida, age 50: Vice President of the Company (since August 1994),
also President of Penn Racquet Sports Business Unit (since 1991); formerly
President of the Company's Plastic Films Division (from 1987 to 1991) and
General Manager of the rigid plastics business (from 1986 to 1987).
Robert A. Wolfe, age 59: Vice President of the Company and President of
Aerojet (since September 1, 1997); formerly Executive Vice President of the
Pratt & Whitney Group, a division of United Technologies (during 1997);
President, Pratt & Whitney Aircraft's Large Commercial Engines business (from
1994 until 1997) and Senior Vice President, Pratt & Whitney's Commercial Engine
Management for Latin and North America (from 1992 to 1994).
Rosemary B.Younts, age 42: Senior Vice President, Communications (since
February 1996); previously Vice President, Communications (since January 1995),
Director of Communications (from 1993 to 1995) and various communications
positions with Aerojet (from 1984 to 1993).
Marvin W. Zima, age 60: Vice President of the Company (since August 1994),
also President of the Company's Specialty Polymers Business Unit (since 1991);
formerly President and Chief Executive Officer of Uniroyal Engineered Products
(from 1987 to 1991) and various other management positions with Uniroyal (from
1982 to 1987).
The Company's executive officers generally hold terms of office of one year
and/or until their successors are elected.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York and Chicago Stock
Exchanges. At December 31, 1997, there were approximately 13,100 holders of
record of the Company's common stock. During 1997, 1996 and 1995, the Company
paid quarterly cash dividends on common stock of $.15 per share. Information
regarding the high and low quarterly sales prices of common stock for the past
two years is contained in the Quarterly Financial Data (Unaudited) which appears
on page 35 of this report and is incorporated herein by reference.
Information concerning long-term debt, including restrictions and
provisions relating to distributions and cash dividends on the Company's common
stock, appears in Note L beginning on page 26 of this report and is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Financial data required under this section appears on page 36 of this
report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This annual report contains forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995. These statements present
(without limitation) the expectations, beliefs, plans and objectives of
management and future financial performance and/or assumptions underlying or
judgments concerning matters discussed in this document. These discussions and
any other discussions contained in this annual report, except to the extent that
they contain historical facts, are forward-looking and accordingly involve
estimates, assumptions, judgments and uncertainties. In addition to certain
contingency matters and their respective cautionary statements discussed
elsewhere in this annual report, the forward-looking information section on page
13 indicates some important factors that could cause actual results or outcomes
to differ materially from those addressed in the forward-looking statements.
Total sales for GenCorp in 1997 increased 3 percent to $1.57 billion from
$1.52 billion in 1996. Total segment operating profit increased to $152 million
in 1997 from $120 million in 1996, a 27 percent improvement. Net income,
including a 1997 and 1996 tax settlement of $67 million and $16 million,
respectively, increased to $137 million in 1997 compared to $42 million in 1996.
Fully diluted earnings per share were $3.36 in 1997 and $1.15 in 1996.
For continuing businesses, sales for 1997 increased 7 percent to $1.57
billion from $1.47 billion, while segment operating profit, excluding unusual
items, increased 9 percent to $152 million from $139 million. Continuing
businesses' net income before tax settlements and unusual items increased 26
percent to $68 million in 1997, compared to $54 million in 1996. On a similar
basis, fully diluted earnings per share improved to $1.70 in 1997 compared to
$1.44 in 1996.
Interest expense in 1997 decreased to $16 million compared to $27 million
in 1996. The decrease was due primarily to the conversion of $115 million in
debentures, a lower average level of debt outstanding throughout the year and
lower average interest rates.
The Company recorded net corporate other expense of $1 million in 1997 as
compared to $7 million in 1996. The $6 million improvement was primarily due to
the absence of costs associated with divested business units and environmental
matters.
FINANCIAL RESOURCES AND CAPITAL SPENDING
Cash flow provided from operating activities for fiscal 1997 was $169
million compared to $59 million in 1996 and $83 million in 1995. The increase in
cash flow from operating activities for 1997 primarily reflects the receipt of a
federal income tax settlement (see Note F -- Income Taxes) and reimbursement of
expenses related to an environmental settlement. The decrease in 1996 was
primarily due to tax payments for divested business
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units, an increase in government contract inventories, payment of a discontinued
business lawsuit settlement and expenditures related to environmental matters
and restructuring and early retirement programs. The decrease in 1996 was
partially offset by a federal income tax settlement.
For fiscal 1997, $79 million was used for investing activities, including
the acquisition of Printworld in the second quarter for $47 million and capital
expenditures of $58 million, offset by proceeds of $26 million from asset
dispositions. This is compared to cash flow provided from investing activities
of $65 million for fiscal 1996 resulting from asset dispositions of $125 million
mostly from the sales of the Vibration Control and Reinforced Plastics business
units, partially offset by capital expenditures of $47 million.
During the second quarter of 1997, the Company called its $115,000,000 8%
Convertible Subordinated Debentures Due August 1, 2002 (Debentures) for
redemption. In the third quarter of 1997, nearly 100 percent of the Debentures
were tendered for conversion into GenCorp common stock (see Note L -- Long-term
Debt and Credit Lines).
Financing activities in 1997, 1996 and 1995 primarily reflect a decrease in
debt and the payment of dividends. At November 30, 1997, the Company's total
debt was $109 million compared to $306 million at the end of 1996. The decrease
in debt resulted from the conversion of the Debentures, the collection of a tax
settlement and improved operating performance. The decrease in debt in 1996 was
primarily due to divestiture proceeds and a tax settlement.
Other income and expense as disclosed in the Company's Consolidated
Statement of Income was favorably impacted in fiscal 1997 by the collection of a
note receivable and interest from a 1996 divestiture and reimbursement of
expenses related to an environmental settlement.
Capital expenditures were made and are planned principally for capacity
expansion and asset replacement, cost reduction, safety and productivity
improvements and environmental protection. Capital expenditures totaled $58
million in 1997, $47 million in 1996 and $63 million in 1995. The Company's
total capital expenditures in 1998 are currently projected at about $90 million.
The increase in the capital expenditure program is for support of Aerojet's
Space-Based Infrared System (SBIRS) and Search and Destroy Armor (SADARM)
programs and the Custom Chemicals product line, program launches for automotive,
enhanced printer and coater capabilities within the Decorative & Building
Products business unit and for the pilot plant renovation of the Specialty
Polymers business unit.
Management believes that funds generated from operations and existing
borrowing capacity are adequate to finance planned capital expenditures,
company-sponsored research and development programs and dividend payments to
shareholders.
UNUSUAL ITEMS
During 1996, the Company recognized net unusual charges of $42 million.
These charges included a provision of $15 million for the Voluntary Early
Retirement Incentive Program for eligible employees at the Company's Fairlawn,
Ohio headquarters and GenCorp Technology Center, the net loss on the sale of
divested businesses of $10 million (see Note D -- Acquisitions and
Divestitures), a provision for environmental remediation costs associated with
the Company's Lawrence, Massachusetts facility of $8 million (see Note R --
Contingencies), a restructuring charge of $3 million for the Company's Vehicle
Sealing business unit, a charge of $2 million to reduce fixed assets to net
realizable value and a provision of $4 million for pension and other related
matters.
ACQUISITIONS AND DIVESTITURES
On May 7, 1997, the Company acquired certain net assets of Printworld from
Technographics, Inc. for $47 million in cash. Printworld is a recognized leader
in the transfer printing and paper laminate industry. The acquisition was
accounted for as a purchase and resulted in goodwill of $27 million which is
being amortized over 30 years.
9
<PAGE> 12
In November 1996, the Company completed the sale of its structural urethane
adhesives business to Ashland Inc. The Company purchased the Lytron(R)
polystyrene latex plastic pigment business from Morton International in August
1996. Lytron(R) plastic pigments are used primarily in paper and paperboard
coatings to improve gloss, brightness, opacity and printability performance. The
Company's Automotive Occupant Sensor (AOS) business was sold to the Robert Bosch
Corporation in June 1996. In March 1996, the Company sold its Reinforced
Plastics business unit to Cambridge Industries, Inc. and the Company sold its
Vibration Control business unit to BTR Antivibration Systems, Inc., a subsidiary
of BTR plc., in February 1996.
On January 14, 1998, the Company announced that an agreement in principle
had been reached with The Goodyear Tire & Rubber Company to acquire Goodyear's
Chemical Products Calhoun, Georgia latex manufacturing facility.
AEROSPACE AND DEFENSE
Sales in 1997 for Aerojet were $584 million, an increase of 18 percent from
1996 sales of $494 million. The increase was due to higher volume in the SBIRS,
Special Sensor Microwave Imager/Sounder (SSMIS), SADARM, Advanced Medium Range
Air to Air Missile (AMRAAM) and HAWK tactical missile programs and the Custom
Chemicals product line. The increase was partially offset by lower volume in the
Titan, Standard Missile and Satellite Readout Station Upgrade (SRSU) programs.
Aerojet's segment operating profit in 1997 was $55 million, an increase of
31 percent compared to $42 million in 1996. The increase primarily was due to
higher sales volume and improved contract performance. Aerojet's operating
margin improved to 9.4 percent in 1997 from 8.5 percent in 1996.
Contract backlog for Aerojet was $1.9 billion at the end of 1997, compared
to $2.0 billion at the end of 1996 and $0.9 billion in 1995. Funded backlog,
which includes only the amount of those contracts for which money has been
directly authorized by Congress, totaled $0.7 billion at the end of 1997
compared to $0.6 billion at the end of 1996 and $0.5 billion in 1995. The
Company anticipates that approximately $0.5 billion of the 1997 funded backlog
will be filled during 1998.
Outlook
Aerojet's contract base has remained stable as the overall business climate
has improved. Significant long-term contract awards received in 1997 and 1996
will favorably affect all major product areas in 1998 and beyond and will help
sustain sales growth. Contract backlog remains at a healthy level.
1996 Results
Sales in 1996 were $494 million, a decrease of 5 percent from 1995 sales of
$520 million. The decrease was due to lower volume in the Titan and Standard
Missile propulsion programs and the Tube-Fired Optically Tracked Wire (TOW 2B)
warhead program. Also included in 1995 sales was the final settlement of the
Small ICBM contract. The decline was partially offset by increased activity in
the Advanced Meteorological Sounding Unit (AMSU), SBIRS and Minuteman programs
and in the Custom Chemicals product line.
Segment operating profit in 1996 was $42 million, an increase of 40 percent
compared to $30 million in 1995. The increase was due to improved contract
performance and lower health care costs.
AUTOMOTIVE
Sales for the continuing automotive business segment, the Company's Vehicle
Sealing business unit, totaled $369 million in 1997 compared to $400 million in
1996. The sales decrease of 8 percent was due primarily to the reduction in
volume on several key automotive platforms and lower volume and competitive
pricing pressure in the refrigerator gasket business. During the year, the
Vehicle Sealing business unit had successful launches for products on the
Mercedes AAV, Ford F-Series truck and Honda Accord. Vehicle Sealing was also
awarded two new Saturn programs during the year. All Vehicle Sealing facilities
are now QS-9000 certified.
10
<PAGE> 13
Segment operating profit for the continuing automotive business in 1997 was
$29 million, an increase of 16 percent, compared to $25 million in 1996. The
improvement was due primarily to cost reduction initiatives and improved profit
margins on product lines for the Vehicle Sealing business unit. Automotive's
operating margin for continuing businesses improved to 7.9 percent in 1997 from
6.3 percent in 1996.
Outlook
In 1998, the automotive segment will launch 13 new programs, which should
increase sales volumes while segment operating profit should be favorably
affected by cost saving initiatives.
1996 Results
Sales for the continuing automotive business segment totaled $400 million
for 1996 compared to $410 million in 1995. Segment operating profit for the
continuing automotive business segment was $25 million in 1996 compared to $23
million in 1995. Sales and operating profit were adversely affected by the
General Motors strikes and lower volume and competitive pricing pressure for the
refrigerator gasket business.
POLYMER PRODUCTS
Sales increased 7 percent to $615 million in 1997 from $573 million in
1996. The improvement was primarily due to volume increases across paper coating
and Lytron(R) product lines at Specialty Polymers, as well as volume growth in
the commercial wallcovering and roofing product lines, and the Printworld
acquisition at Decorative & Building Products. This increase was partially
offset by sales declines in the residential wallcovering and plastic film lines
at Decorative & Building Products.
Segment operating profit in 1997 was $68 million compared to $72 million in
1996 excluding unusual items. Similarly, polymer products' operating margin
declined to 11.1 percent from 12.6 percent. The decrease was attributable to
lower average selling prices and increased raw material costs at Specialty
Polymers and increased raw material costs and start-up market costs relative to
new product offerings at Decorative & Building Products. The decrease was
partially offset by increased profits at Penn Racquet Sports due to aggressive
cost reduction programs.
Within the Decorative & Building Products business unit, the Printworld
acquisition provided expanded products and markets while a unit-wide
reorganization focused on product team integration and customer response.
Specialty Polymers completed its production expansion at its Mogadore, Ohio
facility and experienced strong volume growth, a 9 percent increase in 1997,
with 30 million pounds being shipped to new accounts. Specialty Polymers also
initiated several new product launches and started development of a new pilot
coater line. Though sales in 1997 were essentially flat for Penn Racquet Sports,
its European market share increased to 35 percent from 32 percent. Penn also
continued to aggressively pursue its cost reduction programs with the
introduction of various automation programs and the establishment of a worldwide
licensing agent for its trade name.
Outlook
The businesses within the polymer products segment should maintain or
strengthen their market positions. Sales growth in 1998 will be dependent on the
economic conditions of the various markets and future acquisitions. Segment
operating profit will be influenced by sales growth and changes in raw material
prices as well as completion of the unit-wide reorganization at Decorative &
Building Products.
1996 Results
Sales for the continuing polymer products business segment totaled $573
million for 1996 compared to $569 million in 1995. Sales growth in the roofing
and contract wallcovering product lines at Decorative & Building Products offset
a decrease at Specialty Polymers, while Penn Racquet Sports sales were
essentially flat. Segment operating profit for the continuing polymer products
business segment totaled $72 million in 1996
11
<PAGE> 14
compared to $56 million in 1995. The Specialty Polymers and Decorative &
Building Products businesses led the improvement.
ENVIRONMENTAL MATTERS
GenCorp's policy is to conduct its businesses with due regard for the
preservation and protection of the environment. The Company devotes a
significant amount of resources and management attention to environmental
matters and actively manages its ongoing processes to comply with extensive
environmental laws and regulations. The Company is involved in the remediation
of environmental conditions which resulted from generally accepted manufacturing
and disposal practices in the 1950s and 1960s which were followed at certain
GenCorp plants. In addition, the Company has been designated a potentially
responsible party, with other companies, at sites undergoing investigation and
remediation.
In 1997, capital expenditures for projects related to the environment were
approximately $6 million, compared to $11 million in 1996 and $5 million in
1995. The Company currently forecasts that capital expenditures for
environmental projects will approximate $7 million and $6 million in 1998 and
1999, respectively. During 1997, noncapital expenditures for environmental
compliance and protection totaled $43 million, of which $10 million was for
recurring costs associated with managing hazardous substances and pollution
abatement in ongoing operations and $33 million was for investigation and
remediation efforts at other sites. Similar noncapital expenditures were $29
million and $30 million in 1996 and 1995, respectively. It is presently expected
that noncapital environmental expenditures will increase slightly for the next
several years.
The nature of environmental investigation and cleanup activities often
makes it difficult to determine the timing and amount of any estimated future
costs that may be required for remedial measures. However, the Company reviews
these matters and accrues for costs associated with the remediation of
environmental pollution when it becomes probable that a liability has been
incurred and the amount of the liability (usually based upon proportionate
sharing) can be reasonably estimated. The Company's Consolidated Balance Sheet
at November 30, 1997 reflects accruals of $308 million and amounts recoverable
of $180 million from the U.S. Government and other third parties for such costs.
The effect of resolution of environmental matters on results of operations
cannot be predicted due to the uncertainty concerning both the amount and timing
of future expenditures and future results of operations. However, management
believes, on the basis of presently available information, that resolution of
these matters will not materially affect liquidity, capital resources or the
consolidated financial condition of the Company. The Company will continue its
efforts to mitigate past and future costs through pursuit of claims for
insurance coverage and continued investigation of new and more cost effective
remediation alternatives and associated technologies. For additional discussion
of environmental matters, refer to Note C -- Accounting Changes and Note
R -- Contingencies.
INFORMATION SYSTEMS AND THE YEAR 2000
As is the case with most other companies using computers in their
operations, the Company is in the process of addressing the Year 2000 problem.
The Company is currently engaged in a comprehensive project to upgrade its
information, technology, manufacturing and facilities computer software to
programs that will consistently and properly recognize the Year 2000. Many of
the Company's systems include new hardware and packaged software recently
purchased from large vendors who have represented that these systems are already
Year 2000 compliant. The Company is in the process of obtaining assurances from
vendors that timely updates will be made available to make all remaining
purchased software Year 2000 compliant.
The Company will utilize both internal and external resources to reprogram
or replace and test all of its software for Year 2000 compliance, and the
Company expects to complete the project in early 1999. The estimated cost for
this project could range as high as $15 million, excluding the cost of new
systems which will be capitalized. This cost is being funded through operating
cash flows. Failure by the Company and/or vendors and customers to complete Year
2000 compliance work in a timely manner could have a material adverse effect on
certain of the Company's operations.
12
<PAGE> 15
FORWARD-LOOKING STATEMENTS
This annual report contains information that is forward-looking including
material contingencies as described in the Notes to Consolidated Financial
Statements. The outcome of forward-looking statements and material contingencies
could differ materially from those discussed due to inherent economic risks and
changes in prevailing governmental policies and regulatory actions both domestic
and international.
Some important factors that could cause the Company's actual results or
outcomes to differ from those in such forward-looking statements include but are
not limited to the following:
- General economic trends affecting the Company's markets
- Governmental and regulatory policies including environmental regulations
- The Company's acquisition and restructuring activities
- Vehicle build rates for the North American automotive producers
- Defense Department or NASA budget levels
- Raw material prices for chemical feed stocks and natural/synthetic rubber
supplies
- The Company's ability to successfully modify and convert its systems to
be Year 2000 compliant
- Fluctuations in exchange rates of foreign currencies and other risks
associated with foreign operations
Additional risk factors may be described from time to time in the Company's
filings with the Securities and Exchange Commission. All such risk factors are
difficult to predict, contain material uncertainties that may affect actual
results and may be beyond the Company's control.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information called for by this item is set forth beginning on the next page
(page 14) of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in accountants or disagreements with the
Company's independent accountants regarding accounting and financial disclosure
matters during the Company's two most recent fiscal years or during any period
subsequent to the date of the Company's most recent financial statements.
13
<PAGE> 16
GENCORP INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------
1997 1996 1995
------ ------ ------
(DOLLARS IN MILLIONS,
EXCEPT PER-SHARE DATA)
<S> <C> <C> <C>
NET SALES........................................................ $1,568 $1,515 $1,772
------ ------ ------
COSTS AND EXPENSES
Cost of products sold............................................ 1,243 1,200 1,430
Selling, general and administrative.............................. 147 143 174
Depreciation..................................................... 56 58 70
Interest expense................................................. 16 27 34
Other (income) expense, net...................................... (12) 3 (5)
Unusual items (Note B)........................................... -- 42 5
------ ------ ------
1,450 1,473 1,708
------ ------ ------
INCOME BEFORE INCOME TAXES....................................... 118 42 64
Income tax (benefit) provision (Note F).......................... (19) -- 26
------ ------ ------
Net Income..................................................... $ 137 $ 42 $ 38
====== ====== ======
EARNINGS PER SHARE OF COMMON STOCK
Primary.......................................................... $ 3.63 $ 1.24 $ 1.17
Fully diluted.................................................... $ 3.36 $ 1.15 $ 1.10
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
14
<PAGE> 17
GENCORP INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT NOVEMBER 30,
-------------------
1997 1996
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........................................ $ 18 $ 22
Accounts receivable (Note G)..................................... 252 207
Inventories (Note H)............................................. 157 158
Prepaid expenses and other....................................... 57 65
------ ------
Total Current Assets................................... 484 452
Investments and other assets (Note J)............................ 538 465
Property, plant and equipment, at cost
Land........................................................... 37 39
Buildings and building equipment............................... 279 288
Machinery and equipment........................................ 774 754
Construction in progress....................................... 31 21
------ ------
1,121 1,102
Accumulated depreciation....................................... (711) (689)
------ ------
Net property, plant and equipment........................... 410 413
------ ------
Total Assets........................................... $1,432 $1,330
====== ======
CURRENT LIABILITIES
Notes payable.................................................... $ 25 $ 43
Accounts payable -- trade........................................ 102 81
Income taxes (Note F)............................................ 21 27
Accrued expenses (Note K)........................................ 242 219
------ ------
Total Current Liabilities.............................. 390 370
Long-term debt (Note L).......................................... 84 263
Postretirement benefits other than pensions (Note I)............. 335 346
Other long-term liabilities (Note K)............................. 342 295
Contingencies (Note R)
SHAREHOLDERS' EQUITY
Preference stock -- $1.00 par value; 15 million shares
authorized; none outstanding................................... -- --
Common stock -- $.10 par value; 90 million shares authorized;
41.3 million shares outstanding (33.5 million in 1996)......... 4 3
Other capital.................................................... 146 22
Retained earnings................................................ 139 24
Cumulative currency translation adjustments...................... (8) 7
------ ------
Total Shareholders' Equity............................. 281 56
------ ------
Total Liabilities and Shareholders' Equity............. $1,432 $1,330
====== ======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
15
<PAGE> 18
GENCORP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------
1997 1996 1995
----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.......................................................... $ 137 $ 42 $ 38
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for unusual items.................................... -- 32 10
(Gain) loss on sale of businesses.............................. (3) 10 (5)
Savings plan stock contribution................................ -- -- 12
Depreciation, amortization and loss (gain) on disposal of fixed
assets........................................................ 60 65 76
Deferred income taxes.......................................... 13 (30) 15
Changes in operating assets and liabilities net of effects
of acquisitions and dispositions of businesses:
Accounts receivable.......................................... (45) 3 6
Inventories.................................................. 1 (18) (6)
Other current assets......................................... -- 2 1
Current liabilities.......................................... 36 (22) (11)
Other non-current assets..................................... (66) (3) (7)
Other long-term liabilities.................................. 36 (22) (46)
---- ---- ----
Net Cash Provided by Operating Activities................. 169 59 83
---- ---- ----
INVESTING ACTIVITIES
Capital expenditures................................................ (58) (47) (63)
Proceeds from business and asset dispositions....................... 26 125 27
Acquisitions........................................................ (47) (4) --
Investments and other, net.......................................... -- (9) --
---- ---- ----
Net Cash (Used in) Provided by Investing Activities....... (79) 65 (36)
---- ---- ----
FINANCING ACTIVITIES
Long-term debt incurred............................................. 180 370 255
Long-term debt paid................................................. (244) (490) (248)
Accounts receivable financing....................................... -- -- (60)
Net short-term debt (paid) incurred................................. (18) 22 14
Dividends........................................................... (22) (20) (20)
Other equity transactions........................................... 10 (1) 7
---- ---- ----
Net Cash Used in Financing Activities..................... (94) (119) (52)
---- ---- ----
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS................ (4) 5 (5)
Cash and cash equivalents at beginning of year...................... 22 17 22
---- ---- ----
Cash and Cash Equivalents at End of Year.................. $ 18 $ 22 $ 17
==== ==== ====
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
16
<PAGE> 19
GENCORP INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK RETAINED CUMULATIVE
------------------- OTHER EARNINGS TRANSLATION
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENTS
---------- ------ ------- -------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE AT NOVEMBER 30, 1994................... 32,075,182 $ 3 $ 5 $ (16) $ 1
Net income..................................... 38
Currency translation adjustments............... 7
Cash dividends -- $.60 per share............... (20)
Shares issued to employee saving plans......... 981,916 -- 12
Shares issued under stock incentive plans,
net.......................................... 345,351 -- 5
---------- ---- ----- ------ ---
BALANCE AT NOVEMBER 30, 1995................... 33,402,449 3 22 2 8
Net income..................................... 42
Currency translation adjustments............... (1)
Cash dividends -- $.60 per share............... (20)
Shares issued under stock option and incentive
plans, net................................... 77,198 -- --
---------- ---- ----- ------ ---
BALANCE AT NOVEMBER 30, 1996................... 33,479,647 3 22 24 7
Net income..................................... 137
Currency translation adjustments............... (15)
Cash dividends -- $.60 per share............... (22)
Conversion of subordinated debentures.......... 7,151,686 1 114
Shares issued under stock option and incentive
plans, net................................... 694,126 -- 10
---------- ---- ----- ------ ---
BALANCE AT NOVEMBER 30, 1997................... 41,325,459 $ 4 $ 146 $ 139 $ (8)
========== ==== ===== ====== ===
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
17
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- The Company is a multinational manufacturing company
operating primarily in the United States. Information on the Company's
operations by segment and geographic area is provided in Note S -- Business
Segment Information.
CONSOLIDATION -- The consolidated financial statements of the Company
include the accounts of the parent company and its majority-owned subsidiaries.
Intercompany accounts and transactions have been eliminated.
REVENUE RECOGNITION -- Generally, sales are recorded when products are
shipped or services are rendered. Sales and income under most government
fixed-price and fixed-price-incentive production type contracts are recorded as
deliveries are made. For contracts where relatively few deliverable units are
produced over a period of more than two years, revenue and income are recognized
at the completion of measurable tasks rather than upon delivery of the
individual units. Sales under cost reimbursement contracts are recorded as costs
are incurred and include estimated earned fees in the proportion that costs
incurred to date bear to total estimated costs. Certain government contracts
contain cost or performance incentive provisions which provide for increased or
decreased fees or profits based upon actual performance against established
targets or other criteria. Penalties and cost incentives are considered in
estimated sales and profit rates. Performance incentives are recorded when
measurable or when awards are made and provisions for estimated losses on
contracts are recorded when such losses become evident.
USE OF ESTIMATES -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
ENVIRONMENTAL COSTS -- The Company expenses, on a current basis, recurring
costs associated with managing hazardous substances and pollution in ongoing
operations. The Company also accrues for costs associated with the remediation
of environmental pollution when it becomes probable that a liability has been
incurred and its proportionate share of the amount can be reasonably estimated.
The Company recognizes amounts recoverable from insurance carriers, the U.S.
Government or other third parties, when the collection of such amounts becomes
probable. Pursuant to U.S. Government agreements or regulations, the Company
will recover a substantial portion of its environmental costs for its aerospace
and defense business segment through the establishment of prices of the
Company's products and services sold to the U.S. Government. With the exception
of applicable amounts representing current assets and liabilities, recoverable
amounts and accrued costs are included in other assets and other long-term
liabilities.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company's cash equivalents and
short and long-term bank debt bear interest at market rates and therefore their
carrying values approximate their fair values.
INVENTORIES -- Inventories are stated at the lower of cost or market. The
automotive and polymer products segments use the last-in, first-out method. The
aerospace and defense segment uses the average cost method. Foreign operations
use the first-in, first-out method.
Work-in-process on fixed-price contracts includes direct costs and overhead
less the estimated average cost of deliveries. Appropriate general and
administrative costs are allocated to government and certain other contracts.
LONG-LIVED ASSETS -- Property, plant and equipment are recorded at cost.
Refurbishment costs are capitalized in the property accounts whereas ordinary
maintenance and repair costs are expensed as incurred. Depreciation is computed
principally by accelerated methods for the aerospace and defense business
segment and by the straight-line method for the remainder of the Company.
Goodwill represents the excess of purchase price over the value of net
assets acquired and is amortized on a straight-line basis over a 35 year period
or less. Identifiable intangible assets, such as patents, trademarks, and
licenses, are recorded at cost, or when acquired as part of a business
combination, at estimated fair value.
18
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Intangible assets are amortized over their estimated useful life using the
straight-line method. Goodwill and intangible assets are included in other
assets.
Impairment of long-lived assets is recognized when events or changes in
circumstances indicate that the carrying amount of the asset, or related groups
of assets, may not be recoverable. Measurement of the amount of impairment may
be based on appraisal, market values of similar assets or estimated discounted
future cash flows resulting from the use and ultimate disposition of the asset.
INCOME TAXES -- Deferred income taxes are provided for temporary
differences between the carrying amount of assets and liabilities for financial
reporting and income tax purposes.
STATEMENTS OF CASH FLOWS -- For the purposes of the statements of cash
flows, all highly liquid debt instruments purchased with an original maturity of
three months or less are considered to be cash equivalents.
EARNINGS PER SHARE -- Currently, primary earnings per share of common stock
are calculated by dividing net income by the weighted average number of common
shares outstanding adjusted for the inclusion of stock options and shares to be
issued under other stock-based compensation programs. For fully diluted earnings
per share, net income and shares outstanding have also been adjusted as if the
Company's $115,000,000 8% Convertible Subordinated Debentures Due August 1, 2002
had been converted at the beginning of the period. (See Note L -- Long-term Debt
and Credit Lines for further information regarding the Debentures.)
RECLASSIFICATIONS -- Certain reclassifications have been made to conform
prior year's data to the current presentation.
NOTE B -- UNUSUAL ITEMS
During 1996, the Company recognized net unusual charges of $42 million.
These charges included a provision of $15 million for the Voluntary Early
Retirement Incentive Program for eligible employees at the Company's Fairlawn,
Ohio headquarters and GenCorp Technology Center, the net loss on the sale of
divested businesses of $10 million (see Note D -- Acquisitions and
Divestitures), a provision for environmental remediation costs associated with
the Company's Lawrence, Massachusetts facility of $8 million (see Note R --
Contingencies), a restructuring charge of $3 million for the Company's Vehicle
Sealing business unit, a charge of $2 million to reduce fixed assets to net
realizable value and a provision of $4 million related to pension and other
related matters.
During 1995, the Company recognized a net charge of $5 million for unusual
items. This charge included $10 million for the settlement of a lawsuit and
other matters related to discontinued businesses partially offset by gains of $5
million from the divestitures of the Company's Rigid Plastics business and a
resort property.
NOTE C -- ACCOUNTING CHANGES/NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted during the fourth quarter of 1997 the American
Institute of Certified Public Accountants' Statement of Position No. 96-1
"Environmental Remediation Liabilities" (SOP 96-1). The Statement provides
authoritative guidance on the recognition, measurement, display and disclosure
of environmental remediation liabilities. The Company conducted a review and
assessment of its environmental liabilities and as a result, it recognized
additional liabilities of approximately $63 million which were offset by
probable recoveries from third parties.
In 1997, the Company adopted the provisions of the Financial Accounting
Standards Board (FASB) Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). SFAS
121 requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. This Statement did not have a material
impact on the consolidated financial statements of the Company.
19
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
In February 1997, the FASB issued Statement No. 128, "Earnings per Share"
(SFAS 128), which is required to be adopted for interim and annual periods
ending after December 15, 1997. At that time, the Company will be required to
change the method presently used to compute earnings per share and to restate
all prior period amounts. SFAS 128 replaced primary and fully diluted earnings
per share with basic and diluted earnings per share. Under the new requirements
for calculating earnings per share, the dilutive effect of stock options will be
excluded from basic earnings per share but included in the computation of
diluted earnings per share. The new standard is expected to result in an
increase in basic earnings per share over primary earnings per share for the
years ended November 30, 1997 and 1996 of approximately $.08 and $.01 per share,
respectively, and have no impact on the primary earnings per share calculation
for the year ended November 30, 1995. The impact of SFAS 128 on the calculation
of fully diluted earnings per share for these periods is not expected to be
material.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" (SFAS 130) and Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). Both statements are required to
be adopted in fiscal year 1999. Currently, the Company's only element of
comprehensive income is cumulative translation adjustments. Once adopted, the
Company plans to provide the SFAS 130 required disclosures in its Consolidated
Statements of Shareholders' Equity and related footnotes. SFAS 131 requires that
annual and interim financial and descriptive information about reportable
operating segments be reported on the same basis used internally for evaluating
segment performance and the allocation of resources. While the Company has not
yet determined the impact of adopting SFAS 131 on its financial statement
disclosures, GenCorp does not expect any change to its primary financial
statements.
NOTE D -- ACQUISITIONS AND DIVESTITURES
On May 7, 1997, the Company acquired certain net assets of Printworld from
Technographics, Inc. for $47 million in cash. Printworld is a recognized leader
in the transfer printing and paper laminate industry. The acquisition was
accounted for as a purchase and resulted in goodwill of $27 million which is
being amortized over 30 years.
On August 23, 1996, the Company purchased the Lytron(R) polystyrene latex
plastic pigment business from Morton International for approximately $4 million.
Under the agreement, the Company acquired the Lytron(R) brand name, technology,
customer base and certain other assets. Lytron(R) plastic pigments are used
primarily in paper and paperboard coatings to improve gloss, brightness, opacity
and printability performance. The acquisition was accounted for as a purchase
and resulted in intangible assets of $3 million which is being amortized over 15
years.
On November 19, 1996, the Company completed the sale of substantially all
of the assets and certain liabilities of its structural urethane adhesives
business to Ashland Inc. for an aggregate consideration of approximately $4
million.
On June 21, 1996, the Company completed the sale of substantially all of
the assets and certain liabilities of its Automotive Occupant Sensor (AOS)
business to the Robert Bosch Corporation for an aggregate consideration of
approximately $3 million and the right to receive certain additional payments
based on the performance of the AOS business.
On March 1, 1996, the Company completed the sale of substantially all of
the assets and certain liabilities of its Reinforced Plastics business unit to
Cambridge Industries, Inc. of Madison Heights, Michigan for an aggregate
consideration of approximately $42 million. The sale was effective as of
February 29, 1996.
On February 15, 1996, the Company completed the sale of substantially all
of the assets and certain liabilities of its Vibration Control business unit to
BTR Antivibration Systems, Inc., a subsidiary of BTR plc., for an aggregate
consideration of approximately $84 million.
In 1995, the Company sold its Westward Look Resort and Rigid Plastics
business for an aggregate consideration of approximately $21 million.
20
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
On January 14, 1998, the Company announced that an agreement in principle
had been reached with The Goodyear Tire & Rubber Company to acquire Goodyear's
Chemical Products Calhoun, Georgia latex manufacturing facility.
NOTE E -- RESEARCH AND DEVELOPMENT EXPENSE
Company-sponsored research and development (R&D) expense was $28 million in
1997, $31 million in 1996 and $38 million in 1995. Company-sponsored R&D expense
includes the costs of technical activities that are useful in developing new
products, services, processes or techniques, as well as those expenses that may
significantly improve existing products or processes.
Customer-sponsored R&D expenditures which are funded under government
contracts totaled $175 million in 1997, $102 million in 1996 and $76 million in
1995.
NOTE F -- INCOME TAXES
INCOME TAX (BENEFIT) PROVISION
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------
1997 1996 1995
----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
CURRENT
U.S. federal................................................ $ (45) $ 18 $ 4
State and local............................................. 6 5 (2)
Foreign..................................................... 7 7 9
---- ---- ----
(32) 30 11
DEFERRED
U.S. federal................................................ 12 (26) 13
State and local............................................. 1 (4) 5
Foreign..................................................... -- -- (3)
---- ---- ----
13 (30) 15
---- ---- ----
Income Tax (Benefit) Provision.................... $ (19) $ -- $ 26
==== ==== ====
</TABLE>
EFFECTIVE INCOME TAX RATE
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate........................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal income tax
benefit................................................... 3.8 1.5 3.0
Tax settlements, including interest......................... (57.0) (39.0) --
Earnings of subsidiaries taxed at other than U.S. statutory
rate...................................................... .1 1.2 .3
Adjustment to estimated income tax accruals................. 1.1 -- .3
Other, net.................................................. .5 1.3 1.4
---- ---- ----
Effective Income Tax Rate......................... (16.5)% --% 40.0%
==== ==== ====
</TABLE>
The Company reduced its 1997 and 1996 income tax expense by $67 million and
$16 million, respectively, due to the receipt of federal income tax settlements
for tax credits, timing of deductions and related interest.
21
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DEFERRED TAXES
<TABLE>
<CAPTION>
AT NOVEMBER 30,
---------------------------------------------
1997 1996
-------------------- --------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Accrued estimated costs........................ $ 97 $ -- $101 $ --
Long-term contract method...................... 7 -- 9 --
Depreciation................................... -- 26 -- 28
Pension........................................ -- 42 -- 37
NOLs and tax credit carryforwards.............. 8 -- 7 --
Other postretirement/employee benefits......... 151 -- 156 --
---- ---- ---- -----
Deferred Taxes....................... $263 $ 68 $273 $ 65
==== ==== ==== =====
</TABLE>
The consolidated balance sheets reflect deferred income taxes of $44
million and $52 million in prepaid expenses and other at November 30, 1997 and
1996, respectively. Included in other long-term assets for 1997 and 1996 are
deferred income taxes of $151 million and $156 million, respectively. The
majority of net operating losses (NOLs) and tax credit carryforwards have an
indefinite carryforward period with the remaining portion expiring in years
through 2007. Pretax income of foreign subsidiaries was $21 million in 1997, $18
million in 1996 and $17 million in 1995. Cash paid during the year for income
taxes was $70 million in 1997, $29 million in 1996 and $28 million in 1995.
NOTE G -- ACCOUNTS RECEIVABLE
Unbilled receivables of $12 million and $22 million at November 30, 1997
and 1996, respectively, relating to long-term government contracts are included
in accounts receivable from the U.S. Government. Such amounts are billed either
upon delivery of completed units or settlements of contracts. The unbilled
receivables amount at November 30, 1997 includes $1 million expected to be
collected in fiscal year 1998, and $11 million expected to be collected in
subsequent years.
At year-end, the amount of commercial receivables was $158 million and $132
million for 1997 and 1996, respectively. Receivables for the automotive segment
of $63 million and $47 million in 1997 and 1996, respectively, are due primarily
from General Motors and Ford. The amount of U.S. Government receivables was $94
million and $75 million for 1997 and 1996, respectively. Included in the 1997
and 1996 U.S. Government receivable is $12 million and $5 million, respectively,
for environmental remediation recovery (see Note R -- Contingencies). The
Company's receivables are generally unsecured and are not backed by collateral
from its customers.
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE H -- INVENTORIES
<TABLE>
<CAPTION>
AT NOVEMBER 30,
-----------------
1997 1996
---- ----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Raw materials and supplies........................................ $ 43 $ 37
Work-in-process................................................... 9 9
Finished products................................................. 59 62
---- ----
Approximate replacement cost of inventories....................... 111 108
Reserves, primarily LIFO.......................................... (40) (40)
Long-term contracts at average cost............................... 199 172
Progress payments................................................. (113) (82)
---- ----
Inventories............................................. $157 $158
==== ====
</TABLE>
Aerojet's inventories applicable to government and other contracts include
general and administrative costs. The total of such costs incurred in 1997 and
1996 was $72 million and $66 million, respectively, and the amount in inventory
at the end of those years is estimated at $24 million. These estimates are based
on costs being removed from inventories on a basis proportional to the amounts
of each cost element projected through completion of the contract.
Inventories using the LIFO method represented 68 percent and 73 percent of
consolidated inventories at replacement cost at November 30, 1997 and 1996,
respectively.
NOTE I -- EMPLOYEE BENEFIT PLANS
PENSION PLANS -- The Company has a number of defined benefit pension plans
which cover substantially all salaried and hourly employees. Normal retirement
age generally is 65, but certain plan provisions allow for earlier retirement.
The Company's funding policy is consistent with the funding requirements of
federal law. The pension plans provide for pension benefits, the amounts of
which are calculated under formulas principally based on average earnings and
length of service for salaried employees and under negotiated non-wage based
formulas for hourly employees. The majority of the Company's plan assets are
invested in short-term investments, listed stocks and bonds.
NET PENSION (INCOME) COSTS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------
1997 1996 1995
----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Service cost.............................................. $ 16 $ 17 $ 18
Interest cost............................................. 132 125 117
Actual return on assets................................... (301) (314) (325)
Net amortization and deferral............................. 142 163 184
Curtailment effect........................................ -- 15 --
----- ----- -----
Net Pension (Income) Costs...................... $ (11) $ 6 $ (6)
===== ===== =====
</TABLE>
23
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
During 1996, a special retirement program was offered to encourage early
retirements among certain salaried employees. Also during 1996, the Company sold
its Reinforced Plastics and Vibration Control business units. These events
resulted in a curtailment charge of $15 million during the year.
ACTUARIAL ASSUMPTIONS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-----------------------------------
1997 1996 1995
--------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Discount rate.......................................... 7% 7 3/4% 7 1/2%
Salary progression(1).................................. 4 1/2% 4 1/2% 4%
Long-term rate of return(2)............................ 8 3/4% 8 3/4% 9%
Increase (decrease) in projected benefit obligation
from assumption changes.............................. $ 76 $(17) $ 44
</TABLE>
(1) No benefit escalation assumption beyond negotiated benefits is assumed
for the hourly plans.
(2) Excludes a variable annuity program with an interest assumption of 8
percent and assets of $890 million at November 30, 1997.
FUNDED STATUS
<TABLE>
<CAPTION>
AT NOVEMBER 30,
-----------------
1997 1996
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Plan assets at fair value.......................................... $2,256 $2,074
------ ------
Actuarial present value of plan benefits:
Vested........................................................... $1,810 $1,670
Non-vested....................................................... 44 42
------ ------
Accumulated benefit obligation..................................... 1,854 1,712
Effect of projected salary increases............................... 40 35
------ ------
Projected benefit obligation....................................... $1,894 $1,747
------ ------
Overfunded plans................................................... $ 362 $ 327
Unamortized balances:
Transition assets................................................ (24) (27)
Plan amendments.................................................. 30 30
Experience gains................................................. (247) (223)
Minimum funding liability........................................ (5) (4)
------ ------
Prepaid Pension Cost (Included in Investments and Other
Assets)................................................ $ 116 $ 103
====== ======
</TABLE>
The Company also sponsors a number of defined contribution pension plans.
Participation in these plans is available to substantially all salaried
employees and to certain groups of hourly employees. Company contributions to
these plans are based on either a percentage of employee contributions or on a
specified amount per hour based on the provisions of each plan. The cost of
these plans was $10 million in 1997 and 1996 and $11 million in 1995. The
Company funds its contribution to the salaried plan with either GenCorp common
stock or cash.
HEALTH CARE PLANS -- In addition to providing pension benefits, the Company
currently provides certain health care and life insurance benefits to most
retired employees in the United States with varied coverage by employee groups.
The health care plans generally provide for cost sharing in the form of employee
contributions,
24
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
deductibles and coinsurance between the Company and its retirees. Retirees in
certain other countries are provided similar benefits by plans sponsored by
their governments.
NET PERIODIC COST
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
------------------------
1997 1996 1995
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Service cost................................................. $ 2 $ 3 $ 4
Interest cost................................................ 22 23 29
Net amortization and deferral................................ (6) (6) (1)
Net curtailment gain......................................... -- (15) (5)
---- ---- ----
Net Periodic Cost.................................. $ 18 $ 5 $ 27
==== ==== ====
</TABLE>
ACCRUED BENEFIT OBLIGATION
<TABLE>
<CAPTION>
AT NOVEMBER 30,
---------------
1997 1996
---- ----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Retirees........................................................... $252 $245
Fully eligible active plan participants............................ 32 30
Other active plan participants..................................... 30 26
---- ----
Accumulated Postretirement Benefit Obligation...................... 314 301
---- ----
Unamortized balances:
Plan amendments.................................................. 57 66
Experience (losses) gains........................................ (7) 9
---- ----
Accrued Benefit Obligation............................... $364 $376
==== ====
</TABLE>
The projected benefit obligation and related benefit cost are determined by
the application of relevant actuarial assumptions. The Company utilized a
discount rate of 7 percent in 1997, 7.75 percent in 1996 and 7.5 percent in
1995. The effect in 1997 of changing the discount rate was to increase the
projected benefit obligation by $18 million. The Company anticipates that its
health care cost trend rate will decline from 9 percent in 1997 to 6 percent in
2003, after which the trend rate is expected to stabilize. The effect of a one
percentage point increase in the assumed health care cost trend rate for each
future year would increase the benefit obligation at November 30, 1997 by $2
million and increase the aggregate of the service and interest cost components
of net periodic cost by $0.2 million. Plan design changes increased the
projected benefit obligation by $3 million in 1997 and decreased it by $9
million in 1996. Plan amendments are being amortized over the average remaining
service of the affected active employees. A curtailment gain of $15 million was
included in the gain on the sale of the Company's various business units during
1996.
25
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE J -- INVESTMENTS AND OTHER ASSETS
<TABLE>
<CAPTION>
AT NOVEMBER 30,
---------------
1997 1996
---- ----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Expected recoveries from U.S. Government and third parties for
environmental remediation (excluding $12 million and $5 million
classified as current)................................................... $168 $118
Deferred taxes............................................................. 151 156
Prepaid pension............................................................ 116 103
Goodwill and intangibles................................................... 51 25
Other...................................................................... 52 63
---- ----
Investments and Other Assets..................................... $538 $465
==== ====
</TABLE>
NOTE K -- ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES
ACCRUED EXPENSES
<TABLE>
<CAPTION>
AT NOVEMBER 30,
---------------
1997 1996
---- ----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Payable for goods, services and rights..................................... $146 $128
Accrued compensation and employee benefits................................. 42 39
Environmental reserves..................................................... 34 30
Other...................................................................... 20 22
---- ----
Accrued Expenses................................................. $242 $219
==== ====
</TABLE>
OTHER LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
AT NOVEMBER 30,
---------------
1997 1996
---- ----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Environmental reserves..................................................... $274 $230
Other...................................................................... 68 65
---- ----
Other Long-term Liabilities...................................... $342 $295
==== ====
</TABLE>
NOTE L -- LONG-TERM DEBT AND CREDIT LINES
LONG-TERM DEBT
<TABLE>
<CAPTION>
AT NOVEMBER 30,
---------------
1997 1996
---- ----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Revolving loans............................................................ $ 80 $140
8% Unsecured convertible subordinated debentures maturing 2002............. -- 115
Other...................................................................... 7 12
---- ----
Total debt................................................................. 87 267
Less amounts due within one year........................................... (3) (4)
---- ----
Long-term Debt................................................... $ 84 $263
==== ====
</TABLE>
On May 17, 1996, the Company entered into a new five-year unsecured $400
million revolving credit facility (Facility) which expires in May 2001. As of
November 30, 1997, unused and available revolving lines of credit totaled $307
million. The Company paid a variable commitment fee, which was 1/5 of one
percent, on the unused
26
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
balance. Interest rates were variable, primarily based on LIBOR, and were at an
average rate of 6.4 percent. The Facility contains various debt restrictions and
provisions relating to net worth, interest coverage and debt to earnings before
interest, taxes, depreciation and amortization (Debt/EBITDA) ratios. As of
November 30, 1997, the Company was required to maintain consolidated net worth
of at least $150 million.
During the second quarter of 1997, the Company called its $115,000,000 8%
Convertible Subordinated Debentures Due August 1, 2002 (Debentures) for
redemption. In the third quarter of 1997, substantially all of the Debentures
were tendered for conversion into GenCorp common stock at a conversion price of
$16.065 per share (equivalent to a conversion rate of approximately 62.247
shares of common stock per $1,000 principal amount of Debentures).
At November 30, 1997, the Company had unsecured, uncommitted lines of
credit with several banks for short-term borrowings aggregating $88 million, of
which $22 million was outstanding. Borrowings under such lines generally bear
interest at money market rates and are payable on demand. The Company also had
outstanding letters of credit totaling $23 million at November 30, 1997 of which
$13 million was issued under the Facility.
The maturities of other debt decline from $3 million in 1998 to zero by
2002. Cash paid during the year for interest was $17 million in 1997, $28
million in 1996 and $36 million in 1995.
NOTE M -- DISCONTINUED BUSINESSES
Discontinued businesses reserves are included in the consolidated balance
sheets as follows:
<TABLE>
<CAPTION>
AT NOVEMBER 30,
---------------
1997 1996
---- ----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Accrued expenses........................................................... $ 20 $ 26
Postretirement benefits other than pensions................................ 53 56
Other long-term liabilities................................................ 28 41
---- ----
Discontinued Businesses Reserves................................. $101 $123
==== ====
</TABLE>
NOTE N -- PREFERRED SHARE PURCHASE RIGHTS
In January 1997, the Board of Directors extended for ten additional years
GenCorp's Shareholder Rights Plan, as amended (Plan). When the Plan was
originally adopted in 1987, the Directors declared a dividend of one Preferred
Share Purchase Right (Right) on each outstanding share of common stock, payable
to shareholders of record on February 27, 1987. Rights outstanding at November
30, 1997 and 1996 were 41,325,459 and 33,479,647, respectively. The Plan
provides that under certain circumstances each Right will entitle shareholders
to buy one one-hundredth of a share of a new Series A Cumulative Preference
Stock at an exercise price of $100. The Rights will be exercisable only if a
person or group acquires 20 percent or more of GenCorp's common stock or
announces a tender or exchange offer that will result in such person or group
acquiring 30 percent or more of the common stock. GenCorp will be entitled to
redeem the Rights at two cents per Right at any time until ten days after a 20
percent position has been acquired (unless the Board elects to extend such time
period, which in no event may exceed thirty days). If the Company is involved in
certain transactions after the Rights become exercisable, a holder of Rights
(other than Rights beneficially owned by a shareholder who has acquired 20
percent or more of GenCorp's common stock, which Rights become void) is entitled
to buy a number of the acquiring company's common shares, or GenCorp's common
stock, as the case may be, having a market value of twice the exercise price of
each Right. A potential dilutive effect may exist upon the exercise of the
Rights. The Rights under the extended Plan will expire February 18, 2007. Until
a Right is exercised, the holder will have no rights as a stockholder of the
Company including, without limitation, the right to vote as a stockholder or to
receive dividends.
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
At November 30, 1997, 575,000 shares of $1 par value Series A Cumulative
Preference Stock were reserved for issuance upon exercise of Preferred Share
Purchase Rights.
NOTE O -- STOCK-BASED COMPENSATION PLANS
The Company has a 1997 Stock Option Plan and a 1993 Stock Option Plan. Each
plan provides for an aggregate of 2,500,000 shares of the Company's common stock
to be purchased pursuant to stock options or to be subject to stock appreciation
rights (SARs) which may be granted to selected officers and key employees at
prices equal to the market value of a share of common stock on the date of
grant. In general, the options are exercisable in 25 percent increments at six
months, one year, two years and three years from date of grant. No stock
appreciation rights have been granted.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
If compensation cost for the stock options granted in 1997 and 1996 had
been determined based on the fair value method of FASB Statement No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), the Company's net income
and earnings per share would have been reduced by $2 million ($.04 per share) in
1997 and $1 million ($.03 per share) in 1996. The pro forma effect on net income
for 1997 and 1996 is not representative of the pro forma effect on net income in
future years because it does not take into consideration pro forma compensation
expense related to grants made prior to 1996. The fair value was estimated at
the date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for both 1997 and 1996: risk-free interest rate of
6.0 percent, dividend yield of 3.1 percent, volatility factor of the expected
market price of the Company's common stock of 31 percent and an expected option
life of five years.
A summary of the Company's stock option activity, and related information
for the years ended November 30 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------- -------------------------- --------------------------
OPTIONS WEIGHTED AVERAGE OPTIONS WEIGHTED AVERAGE OPTIONS WEIGHTED AVERAGE
(000) EXERCISE PRICE (000) EXERCISE PRICE (000) EXERCISE PRICE
------- ---------------- ------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year......................... 2,440 $13.21 2,488 $12.75 1,581 $13.85
Granted........................ 1,068 $19.97 453 $14.88 1,077 $11.27
Exercised...................... (684) $13.00 (22) $11.70 -- $ --
Forfeited...................... (72) $12.86 (479) $12.45 (170) $13.64
----- ----- -----
Outstanding at end of year..... 2,752 $15.90 2,440 $13.21 2,488 $12.75
----- ----- -----
Exercisable at end of year..... 1,530 $14.20 1,465 $13.24 829 $14.16
----- ----- -----
Weighted-average fair value of
options granted during the
year......................... $5.38 $3.33 $2.48
</TABLE>
28
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table summarizes the range of exercise prices and
weighted-average exercise prices for options outstanding and exercisable at
November 30, 1997 under the Company's stock option plans:
<TABLE>
<CAPTION>
WEIGHED AVERAGE
FISCAL YEAR IN OPTIONS REMAINING OPTIONS
WHICH RANGE OF OUTSTANDING WEIGHTED AVERAGE CONTRACTUAL LIFE EXERCISABLE WEIGHTED AVERAGE
GRANTS WERE ISSUED EXERCISE PRICE (000) EXERCISE PRICE (YEARS) (000) EXERCISE PRICE
- ------------------- -------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
1993............... $ 16.00-$16.63 278 $16.40 5.9 278 $16.40
1994............... $ 12.63-$13.75 447 $12.90 6.7 447 $12.90
1995............... $ 10.75-$12.75 586 $11.22 7.8 412 $11.22
1996............... $ 12.38-$16.88 395 $15.02 8.8 178 $15.00
1997............... $ 17.50-$29.63 1,046 $19.99 9.4 215 $19.10
----- -----
Total.......... 2,752 1,530
===== =====
</TABLE>
The Stock Incentive Compensation Plan (SIC Plan) adopted in 1983 is based
on a formula which values incentive awards payable in cash or stock based upon
changes in the market value of the Company's common stock. The SIC Plan is
compensatory, and compensation expense/(income) attributable to the SIC Plan was
$0.2 million in 1997, $(0.2) million in 1996 and $(4) million in 1995. The
liability for accrued stock incentive compensation was $1 million and $2 million
at November 30, 1997 and 1996, respectively. During 1995, the Company converted
certain interests under the SIC Plan from phantom shares payable in cash or
stock into shares of common stock to be held in trust until payment pursuant to
elections made at the time of grant.
NOTE P -- COMMON STOCK
At November 30, 1997, 8,385,689 shares of $.10 par value common stock were
reserved for future issuance for payments of the Retirement Savings Plan
contributions, exercise of options and payments of awards under stock-based
compensation plans.
NOTE Q -- LEASE COMMITMENTS
The Company and its subsidiaries lease certain manufacturing plant
facilities, machinery and equipment and office buildings under long-term,
noncancelable leases. The leases generally provide for renewal options ranging
from five to ten years and require the Company to pay for utilities, insurance,
taxes and maintenance. Rent expense was $9 million in 1997 and 1996 and $11
million in 1995. Future minimum commitments at November 30, 1997 for existing
operating leases were $26 million with annual amounts declining from $7 million
in 1998 to $2 million in 2002. The Company's current obligation for leases after
2002 is $7 million.
NOTE R -- CONTINGENCIES
ENVIRONMENTAL MATTERS
Sacramento, California -- In June 1989, the United States District Court
approved a Partial Consent Decree (Decree) requiring Aerojet to conduct a
Remedial Investigation/Feasibility Study (RI/FS) of Aerojet's Sacramento,
California site and to prepare a RI/FS report on specific environmental
conditions present at the site and alternatives available to remedy such
conditions. Aerojet also is required to pay for certain governmental oversight
costs associated with compliance with the Decree. During the second quarter of
1997, the State of California expanded surveillance of perchlorate under the
RI/FS when this chemical was detected at previously undetectable levels using
new testing protocols in public water supply wells near Aerojet's property.
Aerojet has substantially completed its efforts under the Decree to
determine the nature and extent of contamination at the facility and to identify
the technologies that will likely be used to remediate the site. The remediation
costs are principally for design, construction, enhancement and operation of
groundwater and soil
29
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
treatment facilities, ongoing project management and regulatory oversight, and
are expected to be incurred over a period of approximately 15 years.
San Gabriel Valley Basin, California -- Aerojet, through its Azusa
facility, has been named by the U.S. Environmental Protection Agency (EPA) as a
potentially responsible party (PRP) in the portion of the San Gabriel Valley
Superfund Site known as the Baldwin Park Operable Unit (BPOU). Regulatory action
involves issuance of a Record of Decision (ROD) regarding regional groundwater
remediation, issuing Aerojet and 18 other PRPs Special Notice letters requiring
groundwater remediation and site specific investigation and possible cleanup.
Aerojet's investigation demonstrated that the principal groundwater
contamination, volatile organic compounds (VOC), is upgradient of Aerojet's
property and that only low concentrations of VOC contaminants are present in the
soils of Aerojet's presently and historically owned properties. The EPA contends
that Aerojet is one of the four largest sources of groundwater contamination at
the BPOU of the nineteen PRPs identified by the EPA. Aerojet contests the EPA's
position regarding the source of contamination and the number of responsible
PRPs. Aerojet has joined a Steering Committee comprised of eleven of the PRPs
identified by the EPA.
The ROD and Special Notice letters issued by the EPA require groundwater
remediation for the BPOU, estimated to cost $47 million in non-recurring costs
and $4 million to $5 million in annual operating expense. Aerojet, as part of
the Steering Committee, is participating in an effort to develop an alternative
"consensus" plan in which certain water supply entities would integrate the
remedial requirements into a water supply project. If implemented, the consensus
plan approach would allow the project to be eligible for federal funding for 25
percent of the non-recurring costs and additional funding from water supply
entities receiving benefit from the project, thus reducing the PRPs' costs.
Soon after the EPA issued the Special Notice letter, the State of
California also detected perchlorate in water wells in Southern California,
including the San Gabriel Valley, at previously undetectable levels using new
testing protocols. As a result of the recent finding of perchlorate, the EPA has
required investigation for and studies regarding treatability of perchlorate
contaminated water. Consequently, the EPA has allowed time extensions for
submittal by the PRPs of a good faith offer and negotiation of a consent decree
in response to the Special Notice letter. The perchlorate investigations and
studies are underway, primarily funded by Aerojet. The final perchlorate cleanup
standard (which has not yet been determined) could impact total cleanup cost and
implementation of the proposed consensus plan.
Muskegon, Michigan -- In a lawsuit filed by the U.S. Environmental
Protection Agency (EPA), the United States District Court ruled in 1992 that
Aerojet and its two inactive Cordova Chemical subsidiaries (Cordova) are liable
for remediation of Cordova's Muskegon, Michigan site, along with a former
owner/operator potentially responsible party (PRP) of an earlier chemical plant
at the site. That decision was appealed to the United States Court of Appeals.
In May 1997, the United States Court of Appeals for the Sixth Circuit
issued an en banc decision reversing Aerojet's and the other PRP's liability
under the CERCLA statute. Petitions for certiorari to the United States Supreme
Court for its review of the appellate decision have been filed on behalf of the
State of Michigan and the EPA. The Supreme Court granted the EPA's petition in
December 1997. Depending on the opinion of the Supreme Court, the case may be
remanded to the Federal District Court for further fact finding determinations
affecting the Cordova Chemical subsidiaries.
In a separate action, Aerojet and Cordova won indemnification for the
Muskegon site investigation and remediation costs from the State of Michigan in
the state court of claims. The Michigan Court of Appeals affirmed on appeal, and
the Michigan Supreme Court refused to hear the case. On December 23, 1996, the
Michigan Supreme Court denied the State's motion for reconsideration. As a
result, the Company believes that most of the $50 million to $100 million in
anticipated remediation costs will be paid by the State of Michigan and the
former owner/operator of the site. In addition, Aerojet believes it has
insurance coverage for the site.
30
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Aerojet's Reserve and Recovery Balances -- On October 30, 1997, Aerojet
executed an Agreement in Principle with the U.S. Government that, when
implemented after final U.S. Government approval, will establish the cost
sharing ratio and resolve certain other environmental and facility issues at the
Aerojet sites in Sacramento and Azusa, California.
At November 30, 1997, Aerojet had total reserves of $259 million for costs
to remediate the above sites and has recognized $180 million for probable future
recoveries. These estimates will be subject to change as work progresses,
additional experience is gained and environmental standards are revised. Legal
proceedings to obtain reimbursements of environmental costs from insurers are
continuing.
Lawrence, Massachusetts -- The Company has studied remediation alternatives
for its closed Lawrence, Massachusetts facility, which was contaminated with
PCBs, and has begun site remediation and off-site disposal of debris. The
Company has a reserve of $22 million for estimated decontamination and long-term
operating and maintenance costs of this site. The reserve represents the
Company's best estimate for the remaining remediation costs. Estimates of future
remediation costs could range as high as $43 million depending on the results of
future testing and the ultimate remediation alternatives undertaken at the site.
The time frame for remediation is currently estimated to range from 6 to 11
years.
Other Sites -- The Company is also currently involved, together with other
companies, in 28 other Superfund and non-superfund remediation sites. In many
instances, the Company's liability and proportionate share of costs have not
been determined largely due to uncertainties as to the nature and extent of site
conditions and the Company's involvement. While government agencies frequently
claim PRPs are jointly and severally liable at such sites, in the Company's
experience, interim and final allocations of liability costs are generally made
based on relative contributions of waste. Based on the Company's previous
experience, its allocated share has frequently been minimal, in many instances
less than 1 percent. The Company has reserves of approximately $27 million as of
November 30, 1997 which it believes are sufficient to cover its best estimate of
its share of the environmental remediation costs at these other sites. Also, the
Company is seeking recovery of its costs from its insurers.
ENVIRONMENTAL SUMMARY
In regard to the sites discussed above, management believes, on the basis
of presently available information, that resolution of these matters will not
materially affect liquidity, capital resources or the consolidated financial
condition of the Company. The effect of resolution of these matters on results
of operations cannot be predicted due to the uncertainty concerning both the
amount and timing of future expenditures and future results of operations.
OTHER LEGAL MATTERS
In August 1991, Olin Corporation (Olin) advised GenCorp that Olin believed
GenCorp to be jointly and severally liable for certain Superfund remediation
costs, estimated by Olin to be $70 million, associated with a former Olin
manufacturing facility and waste disposal sites in Ashtabula County, Ohio.
In 1993, GenCorp sought declaratory judgment in the United States District
Court for the Northern District of Ohio that the Company is not responsible for
environmental remediation costs associated with the former Olin facility and
Superfund sites. Olin counterclaimed seeking a judgment that GenCorp is jointly
and severally liable for a share of remediation costs.
In late 1995, the Court hearing on the issue of joint and several liability
was completed, and in August 1996 the Court held hearings relative to
allocation. The Court has not yet rendered a decision. If the Court finds
GenCorp is liable, subsequent trial phases will address damages.
The Company is vigorously litigating this matter and believes that it has
meritorious defenses to Olin's claims. While there can be no certainty regarding
the outcome of any litigation, in the opinion of management,
31
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
after reviewing the information currently available with respect to this matter
and consulting with the Company's counsel, any liability which may ultimately be
incurred will not materially affect the consolidated financial condition of the
Company.
The Company and its subsidiaries are subject to various other legal
actions, governmental investigations, and proceedings relating to a wide range
of matters in addition to those discussed above. In the opinion of management,
after reviewing the information which is currently available with respect to
such matters and consulting with the Company's counsel, any liability which may
ultimately be incurred with respect to these additional matters will not
materially affect the consolidated financial condition of the Company. The
effect of resolution of these matters on results of operations cannot be
predicted because any such effect depends on both future results of operations
and the amount and timing of the resolution of such matters.
NOTE S -- BUSINESS SEGMENT INFORMATION
The aerospace and defense business segment designs, develops and
manufactures propulsion systems and electronic sensor systems for the Department
of Defense and National Aeronautics and Space Administration. Its primary
businesses are Propulsion and Electronic Systems.
The automotive business segment designs and produces extruded rubber for
vehicle body and window sealing systems for the domestic, transplant and foreign
automotive manufacturers.
The polymer products business segment designs and manufactures specialty
polymers and decorative and building products for consumers and industry. The
segment is a leading producer of polymer-based products and operates three
businesses: Decorative & Building Products, Penn Racquet Sports and Specialty
Polymers. The principal markets include the paper industry, residential and
commercial construction and the sporting goods industry, as well as varied
consumer and industrial markets that demand a broad range of thermoplastic
products.
Sales in 1997, 1996 and 1995 to the U.S. Government and its agencies
(principally the Department of Defense) totaled $516 million, $466 million and
$490 million, respectively, and were generated almost entirely by the aerospace
and defense business segment. Sales to General Motors, primarily by the
automotive business segment, were $174 million in 1997, $170 million in 1996 and
$286 million in 1995. Intersegment sales were not material.
Segment operating profit represents net sales less applicable costs,
expenses and provisions for restructuring and unusual items relating to
operations. Segment operating profit excludes corporate income and expenses,
provisions for unusual items, interest expense and income taxes.
In 1996, the Company recognized an unusual loss of $42 million of which $13
million related to the Company's reportable segments. The unusual loss from
reportable segments consisted of $14 million from the divestiture of the
Vibration Control and Reinforced Plastics businesses and a provision of $3
million for the restructuring of the Vehicle Sealing business unit offset by a
gain of $4 million from the sale of the structural urethane business. The
Vibration Control and Reinforced Plastics businesses were part of the automotive
business segment. The structural urethane business was part of the polymer
products business segment.
In 1995, the Company recognized a net unusual gain of $4 million from the
divestiture of its Rigid Plastics business. The Rigid Plastics business was part
of the polymer products business segment.
Identifiable assets are those assets that are used by the business segments
and exclude corporate assets consisting principally of cash and marketable
securities, certain investments and headquarters' assets.
32
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
GEOGRAPHIC SEGMENTS
GenCorp's operations are located primarily in Canada, Europe and the United
States. Inter-area sales are not significant to the total sales of any
geographic area. Unusual items included in operating profit pertained to United
States operations.
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------
1997 1996 1995
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
NET SALES
Canada................................................... $ 95 $ 91 $ 95
Europe................................................... 104 131 123
United States............................................ 1,305 1,240 1,446
United States export sales............................... 64 53 108
------ ------ ------
$1,568 $1,515 $1,772
====== ====== ======
OPERATING PROFIT
Canada................................................... $ 19 $ 16 $ 17
Europe................................................... (1) -- (3)
United States............................................ 134 117 99
Unusual items............................................ -- (13) 4
------ ------ ------
$ 152 $ 120 $ 117
====== ====== ======
IDENTIFIABLE ASSETS
Canada................................................... $ 40 $ 36 $ 36
Europe................................................... 91 107 115
United States............................................ 1,008 902 1,025
------ ------ ------
1,139 1,045 1,176
Corporate assets......................................... 293 285 282
------ ------ ------
Total Assets................................... $1,432 $1,330 $1,458
====== ====== ======
</TABLE>
33
<PAGE> 36
GENCORP INC.
BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-----------------------------
1997 1996 1995
------ ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
NET SALES
Aerospace and defense........................................... $ 584 $ 494 $ 520
Automotive...................................................... 369 448 662
Polymer products................................................ 615 573 590
------ ------ -------
$1,568 $1,515 $ 1,772
====== ====== =======
INCOME
Aerospace and defense........................................... $ 55 $ 42 $ 30
Automotive...................................................... 29 19 25
Polymer products................................................ 68 72 58
Unusual items................................................... -- (13) 4
------ ------ -------
Segment Operating Profit................................... 152 120 117
Interest expense................................................ (16) (27) (34)
Corporate other income (expense), net........................... (1) (7) 6
Corporate expenses.............................................. (17) (15) (16)
Unusual items................................................... -- (29) (9)
------ ------ -------
Income Before Income Taxes................................. $ 118 $ 42 $ 64
====== ====== =======
ASSETS
Aerospace and defense........................................... $ 669 $ 615 $ 594
Automotive...................................................... 206 199 357
Polymer products................................................ 264 231 225
------ ------ -------
Identifiable Assets........................................ 1,139 1,045 1,176
Corporate assets................................................ 293 285 282
------ ------ -------
Total Assets............................................... $1,432 $1,330 $ 1,458
====== ====== =======
CAPITAL EXPENDITURES
Aerospace and defense........................................... $ 23 $ 15 $ 15
Automotive...................................................... 19 15 33
Polymer products................................................ 13 16 13
Corporate....................................................... 3 1 2
------ ------ -------
$ 58 $ 47 $ 63
====== ====== =======
DEPRECIATION
Aerospace and defense........................................... $ 23 $ 23 $ 25
Automotive...................................................... 15 17 27
Polymer products................................................ 16 15 15
Corporate....................................................... 2 3 3
------ ------ -------
$ 56 $ 58 $ 70
====== ====== =======
EMPLOYEES
Aerospace and defense........................................... 3,390 3,010 3,070
Automotive...................................................... 3,480 3,490 6,020
Polymer products................................................ 2,410 2,270 2,340
Corporate....................................................... 180 180 270
------ ------ -------
9,460 8,950 11,700
====== ====== =======
</TABLE>
34
<PAGE> 37
GENCORP INC.
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
FEBRUARY 28 MAY 31 AUGUST 31 NOVEMBER 30
----------- ------ --------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1997
Net sales............................................. $ 328 $ 403 $ 394 $ 443
---- ---- ---- ----
Gross profit.......................................... $ 62 $ 77 $ 74 $ 84
---- ---- ---- ----
Income before income taxes............................ $ 15 $ 32 $ 35 $ 36
---- ---- ---- ----
Net Income............................................ $ 11 $ 84(1) $ 20 $ 22
----- ----- ----- -----
- ---------------------------------------------------------------------------------------------------------------
Earnings per share of common stock
Primary............................................. $ .32 $2.45 $ .50 $ .52
Fully diluted....................................... $ .30 $2.06 $ .49 $ .52
The sum of the quarterly E.P.S. amounts may not equal the annual amount due to changes in the number of
shares outstanding during the year.
Common stock price range -- high...................... 19 3/4 21 1/4 31 29 5/8
-- low....................... 17 1/2 18 1/8 20 7/8 21 3/4
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
FEBRUARY 29 MAY 31 AUGUST 31 NOVEMBER 30
----------- ------ --------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1996
Net sales............................................. $ 368 $378 $ 361 $ 408
---- ---- ---- ----
Gross profit.......................................... $ 56 $ 71 $ 71 $ 83
---- ---- ---- ----
Unusual items......................................... $ 25 $ -- $ -- $ 17
---- ---- ---- ----
Income (loss) before income taxes..................... $ (20) $ 24 $ 26 $ 12
---- ---- ---- ----
Net Income (Loss)..................................... $ (12) $ 14 $ 16 $ 24(1)
---- ---- ---- ----
- ---------------------------------------------------------------------------------------------------------------
Earnings (loss) per share of common stock
Primary............................................. $(.35) $.42 $ .47 $ .69
Fully diluted....................................... $(.35) $.38 $ .42 $ .60
The sum of the quarterly E.P.S. amounts may not equal the annual amount due to changes in the number of
shares outstanding during the year.
Common stock price range -- high...................... 13 3/8 15 7/8 15 1/2 18 5/8
-- low....................... 11 1/8 11 1/2 12 1/2 13 5/8
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes tax settlements of $67 million in 1997 and $16 million in 1996.
CAPITAL STOCK
The Company's common stock is listed on the New York and Chicago Stock
Exchanges. At November 30, 1997 and December 31, 1997, there were approximately
13,100 holders of record of the Company's common stock. During 1997, 1996 and
1995, the Company paid quarterly cash dividends on common stock of $.15 per
share.
35
<PAGE> 38
GENCORP INC.
SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE AND RATIO
DATA)
<S> <C> <C> <C> <C> <C>
NET SALES
Aerospace and defense......................... $ 584 $ 494 $ 520 $ 594 $ 872
Automotive.................................... 369 448 662 605 539
Polymer products.............................. 615 573 590 541 494
------ ------ ------ ------ ------
$1,568 $1,515 $1,772 $1,740 $1,905
====== ====== ====== ====== ======
SEGMENT OPERATING PROFIT
Aerospace and defense......................... $ 55 $ 42 $ 30 $ 25 $ 53
Automotive.................................... 29 19 25 37 25
Polymer products.............................. 68 72 58 50 47
Unusual items................................. -- (13) 4 (80) --
------ ------ ------ ------ ------
$ 152 $ 120 $ 117 $ 32 $ 125
====== ====== ====== ====== ======
OPERATIONS
Income (loss) from operations................. $ 137 $ 42 $ 38 $ (13) $ 43
Cumulative effect of accounting changes....... -- -- -- (213) --
------ ------ ------ ------ ------
Net Income (Loss)...................... $ 137 $ 42 $ 38 $ (226) $ 43
====== ====== ====== ====== ======
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Income (loss) from operations................. $ 3.63 $ 1.24 $ 1.17 $ (.41) $ 1.35
Cumulative effect of accounting changes....... -- -- -- (6.69) --
------ ------ ------ ------ ------
Net income (loss) primary..................... $ 3.63 $ 1.24 $ 1.17 $(7.10) $ 1.35
Net income (loss) fully diluted............... $ 3.36 $ 1.15 $ 1.10 $(7.10) $ 1.24
Cash dividends paid........................... $ .60 $ .60 $ .60 $ .60 $ .60
OPERATING RATIOS
Return on average assets employed(1).......... 10.0% 5.1% 6.4% 1.2% 9.3%
Assets employed turnover...................... 2.0x 1.8x 1.9x 2.3x 2.6x
Income (loss) from operations to net
sales(1).................................... 4.5% 1.7% 2.1% (.7)% 2.3%
GENERAL
Capital expenditures.......................... $ 58 $ 47 $ 63 $ 63 $ 67
Depreciation.................................. 56 58 70 73 74
Total assets.................................. 1,432 1,330 1,458 1,455 1,213
Long-term debt................................ 84 263 383 378 416
</TABLE>
(1) Adjusted for tax settlements of $67 million in 1997 and $16 million in 1996.
36
<PAGE> 39
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of GenCorp Inc.:
We have audited the accompanying consolidated balance sheets of GenCorp
Inc. as of November 30, 1997 and 1996, and the related consolidated statements
of income, shareholders' equity and cash flows for each of the three years in
the period ended November 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of GenCorp Inc. at
November 30, 1997 and 1996, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended November 30,
1997, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Akron, Ohio
January 15, 1998
37
<PAGE> 40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to nominees who will stand for election as a
director of the Company at the March 25, 1998 Annual Meeting of Shareholders is
set forth on pages 2 and 3 of the Company's 1998 Proxy Statement and is
incorporated herein by reference. Information with respect to directors of the
Company whose terms extend beyond the March 25, 1998 Annual Meeting of
Shareholders is set forth on pages 3 and 4 of the Company's 1998 Proxy Statement
and is incorporated herein by reference.
Also, see Executive Officers of the Registrant on pages 6 and 7 of this
report.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is set forth on pages 9
through 21 of the Company's 1998 Proxy Statement and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding the security ownership of certain beneficial owners
and management is set forth on pages 5 and 6 of the Company's 1998 Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain transactions and employment arrangements with
management is set forth on pages 15 and 16 of the Company's 1998 Proxy Statement
and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
A list of financial statements and financial statement schedules is set
forth in a separate section of this report beginning on page GC-1.
(a)(3) LISTING OF EXHIBITS
An index of exhibits begins on page -i- of this report.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended November 30,
1997.
(c) EXHIBITS
The response to this portion of Item 14 is set forth in a separate section
of this report immediately following the Exhibit Index.
(d) FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted because they are
inapplicable, not required by the instructions or the information is included in
the consolidated financial statements or notes thereto.
38
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GENCORP INC.
February 18, 1998
By /s/ W. R. PHILLIPS
------------------------------------
W. R. Phillips
Senior Vice President, Law;
General Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- --------------------------------- -------------------
<S> <C> <C>
/s/ J. B. YASINSKY Chairman, Chief Executive Officer February 18, 1998
- ---------------------------------------- and President
J. B. Yasinsky
/s/ D. M. STEUERT Senior Vice President and Chief February 18, 1998
- ---------------------------------------- Financial Officer
D. M. Steuert
/s/ P. J. PARR Director-Audit, Accounting & Tax February 18, 1998
- ---------------------------------------- (principal accounting officer)
P. J. Parr
* Director February 18, 1998
- ----------------------------------------
C. A. Corry
* Director February 18, 1998
- ----------------------------------------
W. K. Hall
* Director February 18, 1998
- ----------------------------------------
R. K. Jaedicke
* Director February 18, 1998
- ----------------------------------------
P. X. Kelley
* Director February 18, 1998
- ----------------------------------------
R. D. Kunisch
* Director February 18, 1998
- ----------------------------------------
D. E. McGarry
* Director February 18, 1998
- ----------------------------------------
J. M. Osterhoff
* Director February 18, 1998
- ----------------------------------------
S. W. Percy
* Director February 18, 1998
- ----------------------------------------
P. J. Phoenix
* Director February 18, 1998
- ----------------------------------------
R. B. Pipes
*Signed by the undersigned as
attorney-in-fact and agent for the
Directors indicated.
/s/ E. R. DYE February 18, 1998
- ----------------------------------------
E. R. Dye
</TABLE>
39
<PAGE> 42
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1)(2) AND (3), (c) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT INDEX
CERTAIN EXHIBITS
FISCAL YEAR ENDED NOVEMBER 30, 1997
GENCORP INC.
FAIRLAWN, OHIO 44333-3300
<PAGE> 43
GENCORP INC.
ITEM 14(a)(1) AND (2)
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
(1) FINANCIAL STATEMENTS:
The following consolidated financial statements of GenCorp Inc. are included in Item
8:
Consolidated Statements of Income for the years ended November 30, 1997, 1996 and
1995........................................................................... 14
Consolidated Balance Sheets at November 30, 1997 and 1996......................... 15
Consolidated Statements of Cash Flows for the years ended November 30, 1997, 1996
and 1995....................................................................... 16
Consolidated Statements of Shareholders' Equity for the years ended November 30,
1997, 1996 and 1995............................................................ 17
Notes to Consolidated Financial Statements.......................................... 18
</TABLE>
(2) FINANCIAL STATEMENT SCHEDULES:
All consolidated financial statement schedules are omitted because they are
inapplicable, not required by the instructions or the information is included in
the consolidated financial statements or notes thereto.
GC-1
<PAGE> 44
CONSENT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
GenCorp Inc.
We consent to the incorporation by reference in the Prospectuses
constituting part of GenCorp Inc.'s Registration Statements No. 333-35621,
33-61928, 33-28056 and 2-98730 on Form S-8, Post Effective Amendment No. 1 to
Registration Statements No. 2-80440 and 2-83133 on Form S-8, and Post Effective
Amendment No. 4 to Registration Statement No. 2-66840 on Form S-8 of our report
dated January 15, 1998, with respect to the consolidated financial statements of
GenCorp Inc. included in this Annual Report (Form 10-K) for the year ended
November 30, 1997.
Ernst & Young LLP
Akron, Ohio
February 18, 1998
GC-2
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
TABLE EXHIBIT EXHIBIT
ITEM NO. DESCRIPTION LETTER
- -------- ----------------------------------------------------------------------------- -------
<C> <S> <C>
3. ARTICLES OF INCORPORATION AND BY-LAWS
The Amended Articles of Incorporation of GenCorp Inc., as amended as of
December 7, 1987, were filed as Exhibit A to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1988 (File No. 1-1520), and
are incorporated herein by reference. (17 pages)
The Code of Regulations of GenCorp Inc., as amended November 25, 1987, were
filed as Exhibit B to the Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 1988 (File No. 1-1520), and are incorporated herein
by reference. (16 pages)
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
Amended and Restated Rights Agreement (with exhibits) dated as of December 7,
1987 between GenCorp Inc. and Morgan Shareholder Services Trust Company as
Rights Agent was filed as Exhibit D to the Company's Annual Report on Form
10-K for the fiscal year ended November 30, 1987 (File No. 1-1520), and is
incorporated herein by reference. (86 pages)
Amendment to Rights Agreement among GenCorp Inc., The First Chicago Trust
Company of New York, as resigning Rights Agent and The Bank of New York, as
successor Rights Agent, dated August 21, 1995 was filed as Exhibit A to the
Company's Annual Report on Form 10-K for the fiscal year ended November 30,
1995 (File No. 1-1520), and is incorporated herein by reference. (3 pages)
Amendment to Rights Agreement between GenCorp Inc. and The Bank of New York
as successor Rights Agent, dated as of January 20, 1997 was filed as Exhibit
4.1 to the Company's Current Report on Form 8-K Date of Report January 20,
1997 (File No. 1-1520), and is incorporated herein by reference. (3 pages)
Information relating to the Company's long-term debt is set forth in Note L
of this report, which information is incorporated herein by reference.
Instruments defining the rights of holders of other long-term debt are not
filed herewith since no such single debt item exceeds 10 percent of
consolidated assets. The Company agrees, however, to furnish a copy of any
such agreement or instrument to the Commission upon request.
10. MATERIAL CONTRACTS
10.(iii)(A) MANAGEMENT CONTRACTS, COMPENSATORY PLANS OR ARRANGEMENTS
An Employment Agreement dated October 15, 1993 between the Company and J. B.
Yasinsky, President and Chief Operating Officer of the Company was filed as
Exhibit A to the Company's Annual Report on Form 10-K for the fiscal year
ended November 30, 1993 (File No. 1-1520), and is incorporated herein by
reference. (4 pages)
Employment Agreement dated May 10, 1996 between the Company and Nathaniel J.
Mass was filed as Exhibit A to the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1996 (File No. 1-1520), and is
incorporated herein by reference. (5 pages)
Employment Agreement dated July 28, 1997 between the Company and Robert A.
Wolfe. (4 pages) A
Severance Agreement dated as of November 12, 1997 between the Company and
John B. Yasinsky. (22 pages) B
Severance Agreement dated as of November 12, 1997 between the Company and
Nathaniel J. Mass. (22 pages) C
</TABLE>
i
<PAGE> 46
<TABLE>
<CAPTION>
TABLE EXHIBIT EXHIBIT
ITEM NO. DESCRIPTION LETTER
- -------- ----------------------------------------------------------------------------- -------
<C> <S> <C>
Severance Agreement dated as of November 12, 1997 between the Company and
Robert A. Wolfe. (22 pages) D
Form of Severance Agreement granted as of November 12, 1997 to certain
executive officers of the Company (other than the three officers identified E
above). (22 pages)
GenCorp Inc. Deferred Compensation Plan for Nonemployee Directors effective
January 1, 1992 and as last amended January 30, 1998. (20 pages) F
Retirement Plan for Nonemployee Directors of GenCorp Inc. as amended January
30, 1998. (6 pages) G
GenCorp Inc. Long-Term Incentive Program effective January 27, 1993 and as
last amended November 12, 1997. (23 pages) H
GenCorp Inc. Executive Incentive Compensation Program as amended January 30,
1998. (24 pages) I
GenCorp 1996 Supplemental Retirement Plan for Management Employees effective
March 1, 1996 was filed as Exhibit B to the Company's Annual Report on Form
10-K for the fiscal year ended November 30, 1996 (File No. 1-1520), and is
incorporated herein by reference. (15 pages)
Benefits Restoration Plan for Salaried Employees of GenCorp Inc. and Certain
Subsidiary Companies as amended and restated effective December 1, 1986, was
filed as Exhibit G to the Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 1987 (File No. 1-1520), and is incorporated herein by
reference. (6 pages)
The Stock Incentive Compensation Plan of GenCorp Inc. (as amended effective
October 1, 1985) was filed as Exhibit B to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1985 (File No. 1-1520), and
is incorporated herein by reference. (21 pages)
Amendment to the GenCorp Inc. and Participating Subsidiaries Stock Incentive
Compensation Plan, effective as of April 5, 1987, was filed as Exhibit H to
the Company's Annual Report on Form 10-K for the fiscal year ended November
30, 1987 (File No. 1-1520), and is incorporated herein by reference. (6
pages)
Amendment to the GenCorp Inc. and Participating Subsidiaries Stock Incentive
Compensation Plan, effective July 13, 1995, was filed as Exhibit C to the
Company's Annual Report on Form 10-K for the fiscal year ended November 30,
1996 (File No. 1-1520), and is incorporated herein by reference. (13 pages)
Information relating to the Deferred Bonus Plan of GenCorp Inc. is contained
in Post-Effective Amendment No. 1 to Form S-8 Registration Statement No.
2-83133 dated April 18, 1986 and is incorporated herein by reference. (16
pages)
Amendment to the Deferred Bonus Plan of GenCorp Inc. effective as of April 5,
1987, was filed as Exhibit I to the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1987 (File No. 1-1520), and is
incorporated herein by reference. (3 pages)
GenCorp Inc. 1993 Stock Option Plan effective March 31, 1993 was filed as
Exhibit 4.1 to Form S-8 Registration Statement No. 33-61928 dated April 30,
1993 and is incorporated herein by reference. (11 pages)
GenCorp Inc. 1997 Stock Option Plan effective March 26, 1997 was filed as
Exhibit 4.1 to Form S-8 Registration Statement No. 333-35621 dated September
15, 1997 and is incorporated herein by reference. (10 pages)
</TABLE>
ii
<PAGE> 47
<TABLE>
<CAPTION>
TABLE EXHIBIT EXHIBIT
ITEM NO. DESCRIPTION LETTER
- -------- ----------------------------------------------------------------------------- -------
<C> <S> <C>
Form of Restricted Stock Agreement between the Company and Nonemployee
Directors providing for payment of part of Directors' compensation for
service on the Board of Directors in Company stock was filed as Exhibit E to
the Company's Annual Report on Form 10-K for the fiscal year ended November
30, 1994 (File No. 1-1520), and is incorporated herein by reference. (4
pages)
11. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS J
(1 page)
21. SUBSIDIARIES OF THE REGISTRANT K
Listing of Subsidiaries (1 page)
23. CONSENTS OF EXPERTS
Consent of Ernst & Young LLP is contained on page GC-2 of this Form 10-K and
is incorporated herein by reference.
24. POWER OF ATTORNEY L
Powers of Attorney executed by C. A. Corry, W. K. Hall, R. K. Jaedicke, P. X.
Kelley, R. D. Kunisch, D. E. McGarry, J.M. Osterhoff, S. W. Percy, P. J.
Phoenix, and R. B. Pipes, Directors of the Company. (10 pages)
27. FINANCIAL DATA SCHEDULE
(Filed for EDGAR only)
The Company will supply copies of any of the foregoing exhibits to any
shareholder upon receipt of a written request addressed to GenCorp Inc., 175
Ghent Road, Fairlawn, Ohio 44333-3300--Attention: Secretary, and payment of
$1 per page to help defray the costs of handling, copying and return postage.
</TABLE>
iii
<PAGE> 1
EXHIBIT A
[LOGO - GENCORP] 175 Ghent Road
Fairlawn, Ohio 44333-3300
Tel: 216-869-4200
July 28, 1997
Robert A. Wolfe
10 Windsor Court
Farmington, Connecticut 06032
Dear Bob:
On behalf of GenCorp and the senior leadership team members you met during your
interviews, I want to express our excitement over the prospect of you joining
our leadership team. I am pleased to extend to you an offer of employment on and
subject to the terms and conditions set forth herein.
1. You will be employed as the President of Aerojet General Corporation
("Aerojet") located in Sacramento, California, commencing September 1,
1997. In this capacity, you will devote your full time and efforts to the
performance of those duties customarily performed in this capacity
subject to the direction of the Chairman & Chief Executive Officer and in
compliance with GenCorp's published policies and directives. At the next
meeting of the GenCorp Board, you will be nominated for election as a
Vice President of GenCorp.
2. Your initial semi-monthly base salary will be $13,542 (annualized salary
of $325,000). Annual base salary is payable in twenty-four semi-monthly
installments in accordance with GenCorp's regular pay practices. Your
base salary will be subject to review at the end of each fiscal year, and
subsequent base salary adjustments will be dependent upon your
performance against established objectives and GenCorp's compensation
policies and practices then in effect.
3. Your annual compensation includes participation in GenCorp's Executive
Incentive Compensation Program, beginning with GenCorp's 1997 fiscal
year. Under this program, you have the opportunity to earn up to 100% of
your base salary (payable in cash and GenCorp stock), subject to actual
performance versus specific financial and special objectives.
Notwithstanding the normal terms of the program, you will be guaranteed a
cash bonus for the 1997 fiscal year equal to 50% of the bonus amount to
which you would be entitled if you had been employed by Aerojet during
the entire 1997 fiscal year, which ends November 30. Bonuses are payable
in January or February in accordance with GenCorp's regular pay practices
and discretion of the CEO.
<PAGE> 2
Robert A. Wolfe July 28, 1997
Page 2
4. On the date your employment commences ("employment date"), you will be
granted an option to purchase 75,000 shares of GenCorp common stock
pursuant to GenCorp's 1997 Stock Option Plan. The option price will be
the closing price on the New York Stock Exchange of GenCorp common stock
on your employment date. Also on your employment date, you will be
granted an additional 12,300 restricted shares of GenCorp Common Stock.
Transfer of the shares will be restricted for a three-year period
commencing upon your employment date. Subject to your signature of
GenCorp's standard form of Restricted Stock Agreement, you will have full
voting rights and receive dividends during the restriction period. You
will acquire unrestricted ownership of the stock three years from your
employment date if you are still an employee of GenCorp on such date.
However, if your employment at GenCorp or Aerojet terminates within three
years from your employment date for any reason other than death,
disability, or change in control of Aerojet, you will forfeit 100% of the
restricted stock.
5. As President of Aerojet you will also be eligible to participate in
GenCorp's Stock Option Plan. The next grant under this plan is
anticipated in March, 1998.
6. You will be eligible to participate in GenCorp's Long-Term Incentive
Program commencing with the 1997-1999 performance period, and you will be
deemed to be a participant therein during the entire 1997-1999
performance period. If Aerojet and GenCorp achieve specified performance
goals, you will be entitled to receive an incentive award of GenCorp's
stock having a value which equals between 10% and 40% of your average
annual compensation (base plus bonus) during the performance period.
7. You will be eligible to participate in the GenCorp Retirement Savings
Plan. GenCorp currently matches up to 6% (first 3% at 100%, next 3% at
50%) of the participant's contributions from base salary and year-end
bonus. The Retirement Savings Plan also allows participants to make
supplemental contributions from eligible compensation on a pre-tax and
after-tax basis. Your contribution rate may be limited by certain
restrictions imposed by the Internal Revenue Code. GenCorp's matching
contributions vest immediately.
8. You will automatically participate in the Aerojet-General Corporation
Consolidated Pension Plan. Under the terms of that plan, you will be
vested in your pension benefit after completing five years of service.
9. You will be eligible to participate in GenCorp's Benefit Restoration
Plan. The Benefit Restoration Plan's purpose is to restore retirement
savings plan and pension plan benefits that you would otherwise lose
because of certain Internal Revenue Code limitations on participation in
such plans. One of those restrictions is a cap on the amount of an
individual employee's compensation upon which contributions to the
savings plan, and calculation of pension benefits, may be
<PAGE> 3
Robert A. Wolfe July 28, 1997
Page 3
based. The IRS compensation cap for the current plan year (which began
November 1, 1996) is $150,000
10. If your employment with Aerojet and GenCorp terminates due to a change in
control of Aerojet or GenCorp within five (5) years of your employment
date, GenCorp will pay to you the accrued pension benefits in which you
failed to vest pursuant to the terms of the Aerojet-General Corporation
Consolidated Pension Plan and the GenCorp Benefits Restoration Plan.
Furthermore, if your employment with Aerojet and GenCorp terminates for
any reason after (3) years from your employment date, GenCorp will
guarantee you a minimum annual retirement income in the amount of
$57,239.
11. Aerojet will pay or reimburse you for reasonable expenses that you incur
in connection with your transfer and relocation of your home pursuant to
Aerojet's Relocation Policy & Guidelines, including assistance in the
sale of your current residence, transportation of household goods, and
purchase of a residence in the Sacramento area. A copy of this program is
enclosed.
12. You will be entitled to four (4) weeks of paid vacation during each year
of your employment. Please note that GenCorp's vacation policy does not
include any provision for carrying forward to a subsequent year any
unused vacation nor payment in lieu of any unused vacation.
13. GenCorp has entered into an agreement with AYCO to provide individual
financial counseling for its corporate officers. This arrangement will be
available to you on a cost-sharing basis. If you elect to participate,
your cost will be 10% of the annual fees charged by AYCO. You will incur
an income tax liability on imputed income resulting from GenCorp's
payment of its share of AYCO's fees. You may be able to offset such taxes
if you are able to itemize deductions for financial counseling services.
Consult your personal tax advisor for information regarding
deductibility.
14. In addition to the above-mentioned employee benefit plans, you will be
eligible to participate in other employee benefit plans for salaried
employees (subject to and in accordance with the provisions of the
applicable plan), including the following:
- Comprehensive Health Care
- Dental Care
- Life Insurance
- Supplemental Group Universal Life Insurance
- Long-Term Disability Insurance
Nothing herein will be deemed to preclude GenCorp from changing or
terminating any employee benefit plan or practice applicable to you and
other employees or require GenCorp to employ you for any specific period
of time. Participation in some of these plans is voluntary and requires
employee contributions.
<PAGE> 4
Robert A. Wolfe July 28, 1997
Page 4
15. GenCorp will enter into a severance agreement with you which contains the
standard terms and conditions utilized for GenCorp's executive officers
and will provide certain severance payments in the event your employment
is terminated due to "change in control" of GenCorp or of Aerojet (as
defined in such severance agreement).
16. The term of your employment will be indefinite in duration and,
therefore, subject to termination at will by notice from you or GenCorp.
Your offer of employment is contingent upon successfully passing a
pre-employment alcohol and drug screen test.
I am very excited by the opportunity to have you join our executive leadership
team and work together to help GenCorp achieve its vision and long-term
objectives. If the foregoing offer of employment is satisfactory to you, please
indicate your agreement by signing and remitting one copy of this letter.
Sincerely,
GENCORP INC.
/s/ John B. Yasinsky
John B. Yasinsky
Agreed and accepted this 1st day of August 1997
---------- -----------------
/s/ Robert A. Wolfe
- --------------------------------------
Robert A.Wolfe
<PAGE> 1
EXHIBIT B
SEVERANCE AGREEMENT
-------------------
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this
"Agreement"), dated as of November 12, 1997, is made and entered by and between
GenCorp Inc., an Ohio corporation (the "Company"), and John B. Yasinsky (the
"Executive").
WITNESSETH:
----------
WHEREAS, the Executive is a senior executive or a key employee
of the Company or one or more of its Subsidiaries and has made and is expected
to continue to make major contributions to the short- and long-term
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most
publicly held companies, the possibility of a Change in Control (as defined
below) exists;
WHEREAS, the Company desires to assure itself of both present
and future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executives and key employees,
including the Executive, applicable in the event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior
executives and key employees are not practically disabled from discharging their
duties in respect of a proposed or actual transaction involving a Change in
Control; and
WHEREAS, the Company desires to provide additional inducement
for the Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as
follows:
1. CERTAIN DEFINED TERMS. In addition to terms defined
elsewhere herein, the following terms have the following meanings when used in
this Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a
rate not less than the Executive's annual fixed or base compensation as
in effect for Executive immediately prior to the occurrence of a Change
in Control or such higher rate as may be determined from time to time
by the Board or a committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to
Section 3(b) or Section 3(c), the Executive shall have committed:
<PAGE> 2
(i) a criminal violation involving fraud,
embezzlement or theft in connection with his duties or in the
course of his employment with the Company or any Subsidiary;
(ii) intentional wrongful damage to property of the
Company or any Subsidiary;
(iii) intentional wrongful disclosure of secret
processes or confidential information of the Company or any
Subsidiary; or
(iv) intentional wrongful engagement in any
Competitive Activity;
and any such act shall have been demonstrably and materially harmful to
the Company. For purposes of this Agreement, no act or failure to act
on the part of the Executive shall be deemed "intentional" if it was
due primarily to an error in judgment or negligence, but shall be
deemed "intentional" only if done or omitted to be done by the
Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for "Cause" hereunder unless and until there shall
have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the
Board then in office at a meeting of the Board called and held for such
purpose, after reasonable notice to the Executive and an opportunity
for the Executive, together with his counsel (if the Executive chooses
to have counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, the Executive had
committed an act constituting "Cause" as herein defined and specifying
the particulars thereof in detail. Nothing herein will limit the right
of the Executive or his beneficiaries to contest the validity or
propriety of any such determination.
(d) "Change in Control" means the occurrence during the Term
of any of the following events, subject to the provisions of Section
1(d)(v) hereof:
(i) All or substantially all of the assets of the
Company are sold or transferred to another corporation or
entity, or the Company is merged, consolidated or reorganized
into or with another corporation or entity, with the result
that upon conclusion of the transaction less than 51% of the
outstanding securities entitled to vote generally in the
election of directors or other capital interests of the
acquiring corporation or entity are owned directly or
indirectly, by the shareholders of the Company generally prior
to the transaction; or
(ii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the
-2-
<PAGE> 3
Exchange Act, disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act (a "Person")) has become the beneficial owner (as
the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act (a "Beneficial Owner")) of securities representing 20% or
more of the combined voting power of the then-outstanding
voting securities of the Company; or
(iii) The individuals who, at the beginning of any
period of two consecutive calendar years, constituted the
Directors of the Company cease for any reason to constitute at
least a majority thereof unless the nomination for election by
the Company's stockholders of each new Director of the Company
was approved by a vote of at least two-thirds of the Directors
of the Company still in office who were Directors of the
Company at the beginning of any such period; or
(iv) The Board determines that (A) any particular
actual or proposed merger, consolidation, reorganization, sale
or transfer of assets, accumulation of shares or tender offer
for shares of the Company or other transaction or event or
series of transactions or events will, or is likely to, if
carried out, result in a Change in Control falling within
Section 1(d)(i), (ii) or (iii) and (B) it is in the best
interests of the Company and its shareholders, and will serve
the intended purposes of this Agreement, if this Agreement
shall thereupon become immediately operative.
(v) Notwithstanding the foregoing provisions of this
Section 1(d):
(A) If any such merger, consolidation,
reorganization, sale or transfer of assets, or tender
offer or other transaction or event or series of
transactions or events mentioned in Section 1(d)(iv)
shall be abandoned, or any such accumulations of
shares shall be dispersed or otherwise resolved, the
Board may, by notice to the Executive, nullify the
effect thereof and reinstate this Agreement as
previously in effect, but without prejudice to any
action that may have been taken prior to such
nullification.
(B) Unless otherwise determined in a
specific case by the Board, a "Change in Control"
shall not be deemed to have occurred for purposes of
Section (1)(d)(ii) solely because (X) the Company,
(Y) a Subsidiary, or (Z) any Company-sponsored
employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either
files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule
-3-
<PAGE> 4
14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing
Beneficial Ownership by it of shares of the
then-outstanding voting securities of the Company,
whether in excess of 20% or otherwise, or because the
Company reports that a change in control of the
Company has occurred or will occur in the future by
reason of such beneficial ownership.
(e) "Competitive Activity" means the Executive's
participation, without the written consent of an officer of the
Company, in the management of any business enterprise if such
enterprise engages in substantial and direct competition with the
Company and such enterprise's sales of any product or service
competitive with any product or service of the Company amounted to 25%
of such enterprise's net sales for its most recently completely fiscal
year and if the Company's net sales of said product or service amounted
to 25% of the Company's net sales for its most recently completed
fiscal year. "Competitive Activity" will not include (i) the mere
ownership of securities in any such enterprise and the exercise of
rights appurtenant thereto or (ii) participation in the management of
any such enterprise other than in connection with the competitive
operations of such enterprise.
(f) "Employee Benefits" means the perquisites, benefits and
service credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which Executive is entitled to participate, including
without limitation any stock option, performance share, performance
unit, stock purchase, stock appreciation, savings, pension,
supplemental executive retirement, or other retirement income or
welfare benefit, deferred compensation, incentive compensation, group
or other life, health, medical/hospital or other insurance (whether
funded by actual insurance or self-insured by the Company), disability,
salary continuation, expense reimbursement and other employee benefit
policies, plans, programs or arrangements that may now exist or any
equivalent successor policies, plans, programs or arrangements that may
be adopted hereafter by the Company or a Subsidiary.
(g) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(h) "Incentive Pay" means an annual amount equal to not less
than the average of the annual bonus made or to be made in regard to
services rendered in any fiscal year during the three fiscal years
immediately preceding, or, if greater, 75% of the maximum bonus
opportunity for, the fiscal year in which the Change in Control occurs
pursuant to the Executive Incentive Compensation Program or similar
annual bonus plan, program or arrangement (whether or not funded) of
the Company, or any successor thereto.
-4-
<PAGE> 5
(i) "Severance Period" means the period of time commencing on
the date of the first occurrence of a Change in Control and continuing
until the earliest of (i) the third anniversary of the occurrence of
the Change in Control, (ii) the Executive's death, or (iii) the
Executive's attainment of age 65.
(j) "Subsidiary" means a corporation, company or other entity
(i) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors or other
managing authority) are, or (ii) which does not have outstanding shares
or securities (as may be the case in a partnership, joint venture or
unincorporated association), but more than 50% of whose ownership
interest representing the right generally to make decisions for such
other entity is, now or hereafter, owned or controlled, directly or
indirectly, by the Company except that for purposes of determining
whether any person may be a Participant for purposes of any grant of
incentive stock options, "Subsidiary" means any corporation in which at
the time the Company owns or controls, directly or indirectly, more
than 50% of the total combined voting power represented by all classes
of stock issued by such corporation.
(k) "Term" means the period commencing as of the date hereof
and expiring as of the later of (i) the close of business on December
31, 2000, or (ii) the expiration of the Severance Period; PROVIDED,
HOWEVER, that (A) commencing on January 1, 1999 and each January 1
thereafter, the term of this Agreement will automatically be extended
for an additional year unless, not later than September 30 of the
immediately preceding year, the Company or the Executive shall have
given notice that it or the Executive, as the case may be, does not
wish to have the Term extended and (B) subject to the last sentence of
Section 9, if, prior to a Change in Control, the Executive ceases for
any reason to be an employee of the Company and any Subsidiary,
thereupon without further action the Term shall be deemed to have
expired and this Agreement will immediately terminate and be of no
further effect. For purposes of this Section 1(k), the Executive shall
not be deemed to have ceased to be an employee of the Company and any
Subsidiary by reason of the transfer of Executive's employment between
the Company and any Subsidiary, or among any Subsidiaries.
(l) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date
of termination, or such other date that may be specified by the
Executive if the termination is pursuant to Section 3(b) or Section
3(c)).
2. OPERATION OF AGREEMENT. This Agreement will be effective
and binding immediately upon its execution, but, anything in this Agreement to
the contrary notwithstanding, this Agreement will not be operative unless and
until a Change in Control occurs. Upon the occurrence of a Change in Control at
any time during the Term, without further action, this Agreement shall become
immediately operative.
-5-
<PAGE> 6
3. TERMINATION FOLLOWING A CHANGE IN CONTROL.
(a) If the Executive's employment is terminated by the Company
or any Subsidiary during the Severance Period, the Executive shall be
entitled to the benefits provided by Section 4 unless such termination
is the result of the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled
within the meaning of, and begins actually to receive disability
benefits pursuant to, the long-term disability plan in effect for, or
applicable to, Executive immediately prior to the Change in Control; or
(iii) Cause.
(b) If the Executive terminates his employment with the
Company and its Subsidiaries during the Severance Period, the Executive
shall be entitled to the benefits provided by Section 4 if such
termination follows the occurrence of one or more of the following
events (regardless of whether any other reason, other than Cause as
hereinabove provided, for such termination exists or has occurred,
including without limitation other employment):
(i) Failure to elect or reelect or otherwise to
maintain the Executive in the office or the position, or a
substantially equivalent office or position, of or with the
Company and/or a Subsidiary, as the case may be, which the
Executive held immediately prior to a Change in Control, or
the failure to reelect or the removal of the Executive as a
Director of the Company (or any successor thereto) if the
Executive shall have been a Director of the Company
immediately prior to the Change in Control;
(ii) (A) A significant adverse change in the nature
or scope of the authorities, powers, functions,
responsibilities or duties attached to the position with the
Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, (B) a reduction in
the Executive's Base Pay, (C) a reduction in the Executive's
opportunities for Incentive Pay (including but not limited to
a reduction in target bonus percentage or target award
opportunity (whether measured by dollar amount or management
objectives)) provided by the Company, or (D) the termination
or denial of the Executive's rights to Employee Benefits or a
reduction in the scope or aggregate value thereof, any of
which is not remedied by the Company within ten calendar days
after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the
case may be;
-6-
<PAGE> 7
(iii) A determination by the Executive (which
determination will be conclusive and binding upon the parties
hereto provided it has been made in good faith and in all
events will be presumed to have been made in good faith unless
otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred
following a Change in Control, including, without limitation,
a change in the scope of the business or other activities for
which the Executive was responsible immediately prior to the
Change in Control, which has rendered the Executive
substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer
a substantial reduction in, any of the authorities, powers,
functions, responsibilities or duties attached to the position
held by the Executive immediately prior to the Change in
Control, which situation is not remedied within ten calendar
days after written notice to the Company from the Executive of
such determination;
(iv) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or transfer of
all or substantially all of its business and/or assets, unless
the successor or successors (by liquidation, merger,
consolidation, reorganization, transfer or otherwise) to which
all or substantially all of its business and/or assets have
been transferred (directly or by operation of law) assumed all
duties and obligations of the Company under this Agreement
pursuant to Section 12(a);
(v) The Company relocates its principal executive
offices, or requires the Executive to have his principal
location of work changed, to any location that is in excess of
thirty miles from the location thereof immediately prior to
the Change in Control, or requires the Executive to travel
away from his office in the course of discharging his
responsibilities or duties of his employment more than
fourteen consecutive calendar days or an aggregate of more
than ninety calendar days in any consecutive 365 calendar-day
period, without, in either case, his prior written consent; or
(vi) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the
Company or any successor thereto which is not remedied by the
Company within ten calendar days after receipt by the Company
of written notice from the Executive of such breach.
(c) Notwithstanding anything contained in this Agreement to
the contrary, in the event of a Change in Control), the Executive may
terminate employment with the Company and any Subsidiary for any
reason, or without reason, during the thirty-day period immediately
following the date six months after the first occurrence of a Change in
Control with the right to severance compensation as provided in Section
4.
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<PAGE> 8
(d) A termination by the Company pursuant to Section 3(a)
(other than as described in Section 3(a)(i), (ii) or (iii)) or by the
Executive pursuant to Section 3(b) or Section 3(c) will not affect any
rights that the Executive may have pursuant to any agreement, policy,
plan, program or arrangement of the Company providing Employee
Benefits, which rights shall be governed by the terms thereof.
4. SEVERANCE COMPENSATION.
(a) Severance benefits to which the Executive is entitled
pursuant to Section 3 are described on Annex A. The Company will pay to
the Executive the amounts described in Paragraphs (1), (2) and (3) of
Annex A within five business days after the Termination Date or, if
later, upon the expiration of the revocation period provided for in
Annex C. The benefits and perquisites described in Paragraphs (4), (5),
(6) and (7) of Annex A will be provided to the Executive as described
therein.
(b) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit
required to be made or provided hereunder on a timely basis, the
Company will pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime
rate" as quoted from time to time during the relevant period in the
Midwest Edition of THE WALL STREET JOURNAL. Such interest will be
payable as it accrues on demand. Any change in such prime rate will be
effective on and as of the date of such change.
(c) Notwithstanding any provision of this Agreement to the
contrary, the parties' respective rights and obligations under this
Section 4 and under Sections 5 and 7 will survive any termination or
expiration of this Agreement or the termination of the Executive's
employment following a Change in Control for any reason whatsoever.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that this Agreement shall become
operative and it shall be determined (as hereafter provided) that any
payment or distribution by the Company or any of its affiliates to or
for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any stock
option, performance share, performance unit, stock appreciation right
or similar right, or the lapse or termination of any restriction on, or
the vesting or exercisability of, any of the foregoing (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any
successor provision thereto) by reason of being considered "contingent
on a change in ownership or control" of the Company, within the meaning
of Section 280G of the Code (or any successor provision thereto) or to
any similar tax imposed by state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with
any such interest and penalties, being hereafter collectively referred
to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment or payments (collectively, a "Gross-Up
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<PAGE> 9
Payment"); PROVIDED, HOWEVER, that no Gross-up Payment shall be made
with respect to the Excise Tax, if any, attributable to (i) any
incentive stock option, as defined by Section 422 of the Code ("ISO")
granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in
tandem with any ISO described in clause (i). The Gross-Up Payment shall
be in an amount such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such
taxes), including any Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all
determinations required to be made under this Section 5, including
whether an Excise Tax is payable by the Executive and the amount of
such Excise Tax and whether a Gross-Up Payment is required to be paid
by the Company to the Executive and the amount of such Gross-Up
Payment, if any, shall be made by a nationally recognized accounting
firm (the "Accounting Firm") selected by the Executive in his sole
discretion. The Executive shall direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the
Company and the Executive within 30 calendar days after the Termination
Date, if applicable, and any such other time or times as may be
requested by the Company or the Executive. If the Accounting Firm
determines that any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-Up Payment to the Executive within five
business days after receipt of such determination and calculations with
respect to any Payment to the Executive. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall, at
the same time as it makes such determination, furnish the Company and
the Executive an opinion that the Executive has substantial authority
not to report any Excise Tax on his federal, state or local income or
other tax return. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local
tax law at the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts or fails to pursue its remedies
pursuant to Section 5(f) and the Executive thereafter is required to
make a payment of any Excise Tax, the Executive shall direct the
Accounting Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting
calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment shall be promptly paid by the Company
to, or for the benefit of, the Executive within five business days
after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or the Executive, as the
case may be, reasonably requested by the Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with the preparation
and issuance of the determinations and calculations contemplated by
Section
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<PAGE> 10
5(b). Any determination by the Accounting Firm as to the amount of the
Gross-Up Payment shall be binding upon the Company and the Executive.
(d) The federal, state and local income or other tax returns
filed by the Executive shall be prepared and filed on a consistent
basis with the determination of the Accounting Firm with respect to the
Excise Tax payable by the Executive. The Executive shall make proper
payment of the amount of any Excise Payment, and at the request of the
Company, provide to the Company true and correct copies (with any
amendments) of his federal income tax return as filed with the Internal
Revenue Service and corresponding state and local tax returns, if
relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment.
If prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting
Firm determines that the amount of the Gross-Up Payment should be
reduced, the Executive shall within five business days pay to the
Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by Section 5(b) shall be borne by the Company. If such
fees and expenses are initially paid by the Executive, the Company
shall reimburse the Executive the full amount of such fees and expenses
within five business days after receipt from the Executive of a
statement therefor and reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service or any other taxing authority
that, if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as promptly as
practicable but no later than ten business days after the Executive
actually receives notice of such claim and the Executive shall further
apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid (in each case, to the extent known
by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the thirty calendar-day period
following the date on which he gives such notice to the Company and
(ii) the date that any payment of amount with respect to such claim is
due. If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the
Executive shall:
(i) provide the Company with any written records or
documents in his possession relating to such claim reasonably
requested by the Company;
(ii) 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
competent in respect of the subject matter and reasonably
selected by the Company;
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<PAGE> 11
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) 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 interest and penalties) incurred in
connection with such contest and shall indemnify and hold harmless the
Executive, on an after-tax basis, for and against 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 limiting the foregoing provisions of this Section
5(f), the Company shall control all proceedings taken in connection
with the contest of any claim contemplated by this Section 5(f) and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim (provided, however, that the
Executive may participate therein at his own cost and expense) and may,
at its option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and
the Executive 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;
PROVIDED, HOWEVER, that if the Company directs the Executive to pay the
tax claimed and sue for a refund, the Company shall advance the amount
of such payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income or other tax, including interest or penalties
with respect thereto, imposed with respect to such advance; and
PROVIDED FURTHER, HOWEVER, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the
Company's control of any such contested claim shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive 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.
(g) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), the Executive
receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section
5(f)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after any taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 5(f), a determination is made that
the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its
intent to contest such denial or refund prior to the expiration of
thirty calendar days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of
any such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid by the Company to the Executive
pursuant to this Section 5.
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<PAGE> 12
6. NO MITIGATION OBLIGATION. The Company hereby acknowledges
that it will be difficult and may be impossible for the Executive to find
reasonably comparable employment following the Termination Date and that the
non-competition covenant contained in Section 8 will further limit the
employment opportunities for the Executive. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not provide for mitigation, offset or reduction of any severance
payment received thereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable, and the
Executive will not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor will any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in the last
sentences of Paragraphs (2) and (4) of Annex A.
7. FUNDING; PROFESSIONAL FEES AND EXPENSES.
(a) It is the intent of the Company that the Executive not be
required to incur fees and related expenses for the retention of
attorneys, accountants, actuaries, consultants, and/or other
professionals ("professionals") in connection with the interpretation,
enforcement or defense of Executive's rights under this Agreement by
litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the
Executive hereunder. Accordingly, if it should appear to the Executive
that the Company has failed to comply with any of its obligations under
this Agreement or in the event that the Company or any other person
takes or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, the Executive the
benefits provided or intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive from time
to time to retain one or more professionals of the Executive's choice,
at the expense of the Company as hereafter provided, to advise and
represent the Executive in connection with any such interpretation,
enforcement or defense, including without limitation the initiation or
defense of any litigation or other legal action, whether by or against
the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any
existing or prior relationship between the Company and such
professional, the Company irrevocably consents to the Executive's
entering into a relationship with any such professional, and in that
connection the Company and the Executive agree that a confidential
relationship shall exist between the Executive and any such
professional. Without respect to whether the Executive prevails, in
whole or in part, in connection with any of the foregoing, the Company
will pay and be solely financially responsible for any and all
reasonable fees and related expenses incurred by the Executive in
connection with any of the foregoing.
(b) Without limiting the obligations of the Company pursuant
to this Agreement, in the event a Change in Control occurs, the
performance of the Company's obligations under this Agreement shall be
secured by amounts deposited or to be deposited in trust pursuant to
certain trust agreements to which the Company shall be a
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<PAGE> 13
party, providing, among other things for the payment of severance
compensation to the Executive pursuant to Section 4, and the Gross-Up
Payment to the Executive pursuant to Section 5, and providing that the
reasonable fees and related expenses of one or more professionals
selected from time to time by the Executive pursuant to Section 7(a)
shall be paid, or reimbursed to the Executive if paid by the Executive,
either in accordance with the terms of such trust agreements, or, if
not so provided, on a regular, periodic basis upon presentation by the
Executive to the trustee of a statement or statements prepared by such
professional in accordance with its customary practices. Any failure by
the Company to satisfy any of its obligations under this Section 7(b)
shall not limit the rights of the Executive hereunder. Upon the earlier
to occur of (i) a Change of a Control or (ii) a declaration by the
Board that a Change in Control is imminent, the Company shall promptly
to the extent it has not previously done so, and in any event within
five business days:
(A) transfer to trustees of such trust agreements to
be added to the principal of the trusts a sum equal to (I) the
present value on the date of the Change in Control (or on such
fifth business day if the Board has declared a Change in
Control to be imminent) of the payments to be made to the
Executive under the provisions of Sections 4 and 5 hereof,
such present value to be computed using the assumptions set
forth on Annex B, less (II) the balance in the Executive's
accounts provided for in such trust agreements as of the most
recent completed valuation thereof, as certified by the
trustee under each trust agreement; provided, however, that if
the trustee under any trust agreement, respectively, does not
so certify by the end of the fourth business day after the
earlier of such Change in Control or declaration, then the
balance of such respective account shall be deemed to be zero.
Any payments of severance compensation or other benefits
hereunder by the trustee pursuant to any trust agreement
shall, to the extent thereof, discharge the Company's
obligation to pay severance compensation and other benefits
hereunder, it being the intent of the Company that assets in
such trusts be held as security for the Company's obligation
to pay severance compensation and other benefits under this
Agreement; and
(B) transfer to the trustees to be added to the
principal of the trusts under the trust agreements the sum of
FIVE HUNDRED THOUSAND DOLLARS ($500,000) less any principal in
such trusts on such fifth business day dedicated to the
payment of the Company's obligations under Section 7(a)
hereto. Any payments of the Executive's reasonable
professional fees and related expenses by the trustees
pursuant to the trust agreements shall, to the extent thereof,
discharge the Company's obligation hereunder, it being the
intent of the Company that assets in such trust be held as
security for the Company's obligation under Section 7(a)
hereof. The Executive understands and acknowledges that the
corpus of the trust, or separate portion thereof, dedicated to
the payment of the Company's obligations under Section 7(a)
hereto will be $500,000 and that such amount will be available
to discharge not only the obligations of the Company to the
Executive under Section 7(a) hereof, but also similar
obligations of the
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<PAGE> 14
Company to other executives and employees under similar
provisions of other agreements.
(c) Subject to the foregoing, the Executive shall have the
status of a general unsecured creditor of the Company and shall have no
right to, or security interest in, any assets of the Company or any
Subsidiary.
8. COMPETITIVE ACTIVITY. During a period ending three (3)
years following the Termination Date, if the Executive shall have received or
shall be receiving benefits under Section 4, the Executive shall not, without
the prior written consent of the Company, which consent shall not be
unreasonably withheld, engage in any Competitive Activity.
9. EMPLOYMENT RIGHTS. Nothing expressed or implied in this
Agreement will create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control. Any termination of
employment of the Executive or the removal of the Executive from the office or
position in the Company or any Subsidiary following the commencement of any
action by or discussion with a third person that ultimately results in a Change
in Control shall be deemed to be a termination or removal of the Executive after
a Change in Control for purposes of this Agreement entitling the Executive to
severance benefits provided by Section 4.
10. RELEASE. Payment of the severance compensation set forth
in Section 4 hereto is conditioned upon the Executive executing and delivering a
release (the "Release") substantially in the form provided in Annex C.
11. WITHHOLDING OF TAXES. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
the Company is required to withhold pursuant to any law or government regulation
or ruling.
12. SUCCESSORS AND BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business or assets of the
Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required to
perform if no such succession had taken place. This Agreement will be
binding upon and inure to the benefit of the Company and any successor
to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or
assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor shall thereafter be
deemed the "Company" for the purposes of this Agreement), but will not
otherwise be assignable, transferable or delegable by the Company.
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<PAGE> 15
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and
legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 12(a) and 12(b).
Without limiting the generality or effect of the foregoing, the
Executive's right to receive payments hereunder will not be assignable,
transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive's will or
by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 12(c), the
Company shall have no liability to pay any amount so attempted to be
assigned, transferred or delegated.
13. NOTICES. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
five business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or three business
days after having been sent by a nationally recognized overnight courier service
such as Federal Express, UPS, or Purolator, addressed to the Company (to the
attention of the Secretary of the Company) at its principal executive office and
to the Executive at his principal residence, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of changes of address shall be effective only upon receipt.
14. GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement will be governed by and construed in
accordance with the substantive laws of the State of Ohio, without giving effect
to the principles of conflict of laws of such State.
15. VALIDITY. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
16. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by
such other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by
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<PAGE> 16
either party which are not set forth expressly in this Agreement. References to
Sections are to references to Sections of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same agreement.
18. PRIOR AGREEMENT. This Agreement amends and restates the
Severance Agreement, dated as of November 8, 1995 (the "Prior Agreement"),
between the Company and the Executive, which Prior Agreement shall, without
further action, be superseded as of the date first above written.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
/s/ John B. Yasinsky
-----------------------------------------
John B. Yasinsky
GENCORP INC.
By: /s/ Samuel W. Harmon
------------------------------------
Samuel W. Harmon
Senior Vice President, Human Resources
By: /s/ Edward R. Dye
------------------------------------
Edward R. Dye
Secretary
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<PAGE> 17
Annex A
-------
SEVERANCE COMPENSATION
1. BASE PAY AND ANNUAL BONUS. A lump sum payment in an amount
equal to (a) any unpaid Base Pay through the date of the Executive's termination
of employment and (b) any annual bonus payable in the year in which the
Executive's termination of employment occurs, determined in accordance with the
provisions of the Executive Incentive Compensation Program.
2. SEVERANCE PAY. A lump sum payment in an amount equal to
three (3) times the sum of (A) Base Pay (at the highest rate in effect for any
period prior to the Termination Date), plus (B) Incentive Pay (determined in
accordance with the standards set forth in Section 1(h)), but not less than 375%
of Base Pay (at the highest rate in effect for any period prior to the
Termination Date). If the Executive is entitled to a severance payment under
this Agreement and termination pay under his Employment Agreement dated October
15, 1993, due to the termination of his employment after a Change in Control,
then the severance payment described in the preceding sentence will be reduced
by the total amount of the termination pay which is paid or payable to the
Executive under the Employment Agreement as a result of such termination.
3. PERFORMANCE AWARDS: Upon an Executive's termination of
employment pursuant to Section 3(b) or 3(c), all performance awards under the
GenCorp Inc. Long-Term Incentive Program, if any, will be paid in accordance
with the provisions of such Program.
4. HEALTH AND LIFE BENEFITS. For a period of 36 months
following the Termination Date (the "Continuation Period"), the Company will
arrange to provide the Executive with Employee Benefits that provide health and
life benefits (but not disability, stock option, performance share, performance
unit, stock purchase, stock appreciation or similar compensatory benefits)
substantially similar to those that the Executive was receiving or entitled to
receive immediately prior to the Termination Date (or, if greater, immediately
prior to the reduction, termination, or denial described in Section 3(b)(ii)),
except that the level of any such Employee Benefits to be provided to the
Executive may be reduced in the event of a corresponding reduction generally
applicable to all recipients of or participants in such Employee Benefits. If
and to the extent that any benefit described in this Paragraph 4 is not or
cannot be paid or provided under any policy, plan, program or arrangement of the
Company or any Subsidiary, as the case may be, then the Company will itself pay
or provide for the payment to the Executive, his dependents and beneficiaries,
of such Employee Benefits. Employee Benefits otherwise receivable by the
Executive pursuant to this Paragraph 4 will be reduced to the extent comparable
welfare benefits are actually received by the Executive from another employer
during the Continuation Period following the Executive's Termination Date, and
any such benefits actually received by the Executive shall be reported by the
Executive to the Company.
<PAGE> 18
5. RETIREMENT BENEFITS. Retirement benefits under the
applicable qualified pension plan sponsored by the Company or Subsidiary and the
Benefits Restoration Plan for Salaried Employees of GenCorp Inc. and Certain
Subsidiary Companies ("Benefits Restoration Plan") that are accrued but not
vested at the time of the Executive's termination of employment will be vested
in accordance with the provisions of the Benefits Restoration Plan.
6. OUTPLACEMENT SERVICES. Outplacement services for a period
of up to twelve months by a firm selected by the Executive, at the expense of
the Company in an amount up to 20% of the Executive's Base Pay.
7. FINANCIAL COUNSELING. Financial counseling for the
Continuation Period as defined in Paragraph (4) of this Annex A in a manner
similar to that provided to executive officers prior to a Change in Control.
A-2
<PAGE> 19
Annex B
-------
Funding Assumptions
-------------------
In calculating the present value of payments to be made to the Executive under
Sections 4 and 5 of the Agreement, as required by Section 7(b)(B) of the
Agreement, the Company shall
(1) Assume that all payments to be made to the Executive shall be
paid on a date which is six (6) months following the date of
the Change in Control; and
(2) Apply a discount factor which is equal to the yield to
maturity, as reported in the Midwest Edition of THE WALL
STREET JOURNAL, of the 26-week Treasury Bill most recently
issued as of the date of the Change in Control.
<PAGE> 20
Annex C
-------
Form of Release
------]---------
WHEREAS, the Executive's employment has been terminated in
accordance with Section 3(a) (other than as described in Section 3(a)(i), (ii)
or (iii)), (b) or (c) of the Severance Agreement dated as of _____________,
1997, by and between ___________________(the "Executive") and GenCorp Inc. (the
"Agreement").
WHEREAS, the Executive is required to sign this Release in
order to receive the Severance Compensation as described in Annex A of the
Agreement and the other benefits described in the Agreement.
NOW THEREFORE, in consideration of the promises and agreements
contained herein and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, and intending to be legally bound, the
Executive agrees as follows:
1. This Release is effective on the date hereof and will continue in
effect as provided herein.
2. In consideration of the payments to be made and the benefits to be
received by the Executive pursuant to the Agreement, which the Executive
acknowledges are in addition to payments and benefits which the Executive would
be entitled to receive absent the Agreement, the Executive, for himself and his
dependents, successors, assigns, heirs, executors and administrators (and his
and their legal representatives of every kind), hereby releases, dismisses,
remises and forever discharges GenCorp Inc., its predecessors, parents,
subsidiaries, divisions, related or affiliated companies, officers, directors,
stockholders, members, employees, heirs, successors, assigns, representatives,
agents and counsel (the "Company") from any and all arbitrations, claims,
including claims for attorney's fees, demands, damages, suits, proceedings,
actions and/or causes of action of any kind and every description, whether known
or unknown, which Executive now has or may have had for, upon, or by reason of
any cause whatsoever ("claims"), against the Company, including but not limited
to:
(a) any and all claims arising out of or relating to
Executive's employment by or service with the Company and his
termination from the Company;
(b) any and all claims of discrimination, including but not
limited to claims of discrimination on the basis of sex, race, age,
national origin, marital status, religion or handicap, including,
specifically, but without limiting the generality of the foregoing, any
claims under the Age Discrimination in Employment Act, as amended,
Title VII of the Civil Rights Act of 1964, as amended, the Americans
with Disabilities Act, Ohio Revised Code Section 4101.17 and Ohio
Revised Code Chapter 4112, including Sections 4112.02 and 4112.99
thereof; and
(c) any and all claims of wrongful or unjust discharge or
breach of any contract or promise, express or implied.
<PAGE> 21
3. Executive understands and acknowledges that the Company does not
admit any violation of law, liability or invasion of any of his rights and that
any such violation, liability or invasion is expressly denied. The consideration
provided for this Release is made for the purpose of settling and extinguishing
all claims and rights (and every other similar or dissimilar matter) that
Executive ever had or now may have against the Company to the extent provided in
this Release. Executive further agrees and acknowledges that no representations,
promises or inducements have been made by the Company other than as appear in
the Agreement.
4. Executive further agrees and acknowledges that:
(a) The release provided for herein releases claims to and
including the date of this Release;
(b) He has been advised by the Company to consult with legal
counsel prior to executing this Release, has had an opportunity to
consult with and to be advised by legal counsel of his choice, fully
understands the terms of this Release, and enters into this Release
freely, voluntarily and intending to be bound;
(c) He has been given a period of 21 days to review and
consider the terms of this Release, prior to its execution and that he
may use as much of the 21 day period as he desires; and
(d) He may, within 7 days after execution, revoke this
Release. Revocation shall be made by delivering a written notice of
revocation to the Vice President of Human Resources at the Company. For
such revocation to be effective, written notice must be actually
received by the Vice President of Human Resources at the Company no
later than the close of business on the 7th day after Executive
executes this Release. If Executive does exercise his right to revoke
this Release, all of the terms and conditions of the Release shall be
of no force and effect and the Company shall not have any obligation to
make payments or provide benefits to Executive as set forth in Sections
4, 5 and 7 of the Agreement.
5. Executive agrees that he will never file a lawsuit or other
complaint asserting any claim that is released in this Release.
C-2
<PAGE> 22
6. Executive waives and releases any claim that he has or may have to
reemployment after __________________.
IN WITNESS WHEREOF, the Executive has executed and delivered
this Release on the date set forth below.
Dated:_____________________ ___________________________________
Executive
C-3
<PAGE> 1
EXHIBIT C
SEVERANCE AGREEMENT
-------------------
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this
"Agreement"), dated as of November 12, 1997, is made and entered by and between
GenCorp Inc., an Ohio corporation (the "Company"), and Nathaniel J. Mass (the
"Executive").
WITNESSETH:
----------
WHEREAS, the Executive is a senior executive or a key employee
of the Company or one or more of its Subsidiaries and has made and is expected
to continue to make major contributions to the short- and long-term
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most
publicly held companies, the possibility of a Change in Control (as defined
below) exists;
WHEREAS, the Company desires to assure itself of both present
and future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executives and key employees,
including the Executive, applicable in the event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior
executives and key employees are not practically disabled from discharging their
duties in respect of a proposed or actual transaction involving a Change in
Control; and
WHEREAS, the Company desires to provide additional inducement
for the Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as
follows:
1. CERTAIN DEFINED TERMS. In addition to terms defined
elsewhere herein, the following terms have the following meanings when used in
this Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a
rate not less than the Executive's annual fixed or base compensation as
in effect for Executive immediately prior to the occurrence of a Change
in Control or such higher rate as may be determined from time to time
by the Board or a committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to
Section 3(b), the Executive shall have committed:
<PAGE> 2
(i) a criminal violation involving fraud,
embezzlement or theft in connection with his duties or in the
course of his employment with the Company or any Subsidiary;
(ii) intentional wrongful damage to property of the
Company or any Subsidiary;
(iii) intentional wrongful disclosure of secret
processes or confidential information of the Company or any
Subsidiary; or
(iv) intentional wrongful engagement in any
Competitive Activity;
and any such act shall have been demonstrably and materially harmful to
the Company. For purposes of this Agreement, no act or failure to act
on the part of the Executive shall be deemed "intentional" if it was
due primarily to an error in judgment or negligence, but shall be
deemed "intentional" only if done or omitted to be done by the
Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for "Cause" hereunder unless and until there shall
have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the
Board then in office at a meeting of the Board called and held for such
purpose, after reasonable notice to the Executive and an opportunity
for the Executive, together with his counsel (if the Executive chooses
to have counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, the Executive had
committed an act constituting "Cause" as herein defined and specifying
the particulars thereof in detail. Nothing herein will limit the right
of the Executive or his beneficiaries to contest the validity or
propriety of any such determination.
(d) "Change in Control" means the occurrence during the Term
of any of the following events, subject to the provisions of Section
1(d)(v) hereof:
(i) All or substantially all of the assets of the
Company are sold or transferred to another corporation or
entity, or the Company is merged, consolidated or reorganized
into or with another corporation or entity, with the result
that upon conclusion of the transaction less than 51% of the
outstanding securities entitled to vote generally in the
election of directors or other capital interests of the
acquiring corporation or entity are owned directly or
indirectly, by the shareholders of the Company generally prior
to the transaction; or
(ii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the
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<PAGE> 3
Exchange Act, disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act (a "Person")) has become the beneficial owner (as
the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act (a "Beneficial Owner")) of securities representing 20% or
more of the combined voting power of the then-outstanding
voting securities of the Company; or
(iii) The individuals who, at the beginning of any
period of two consecutive calendar years, constituted the
Directors of the Company cease for any reason to constitute at
least a majority thereof unless the nomination for election by
the Company's stockholders of each new Director of the Company
was approved by a vote of at least two-thirds of the Directors
of the Company still in office who were Directors of the
Company at the beginning of any such period; or
(iv) The Board determines that (A) any particular
actual or proposed merger, consolidation, reorganization, sale
or transfer of assets, accumulation of shares or tender offer
for shares of the Company or other transaction or event or
series of transactions or events will, or is likely to, if
carried out, result in a Change in Control falling within
Section 1(d)(i), (ii) or (iii) and (B) it is in the best
interests of the Company and its shareholders, and will serve
the intended purposes of this Agreement, if this Agreement
shall thereupon become immediately operative.
(v) Notwithstanding the foregoing provisions of this
Section 1(d):
(A) If any such merger, consolidation,
reorganization, sale or transfer of assets, or tender
offer or other transaction or event or series of
transactions or events mentioned in Section 1(d)(iv)
shall be abandoned, or any such accumulations of
shares shall be dispersed or otherwise resolved, the
Board may, by notice to the Executive, nullify the
effect thereof and reinstate this Agreement as
previously in effect, but without prejudice to any
action that may have been taken prior to such
nullification.
(B) Unless otherwise determined in a
specific case by the Board, a "Change in Control"
shall not be deemed to have occurred for purposes of
Section (1)(d)(ii) solely because (X) the Company,
(Y) a Subsidiary, or (Z) any Company-sponsored
employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either
files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule
-3-
<PAGE> 4
14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing
Beneficial Ownership by it of shares of the
then-outstanding voting securities of the Company,
whether in excess of 20% or otherwise, or because the
Company reports that a change in control of the
Company has occurred or will occur in the future by
reason of such beneficial ownership.
(e) "Competitive Activity" means the Executive's
participation, without the written consent of an officer of the
Company, in the management of any business enterprise if such
enterprise engages in substantial and direct competition with the
Company and such enterprise's sales of any product or service
competitive with any product or service of the Company amounted to 25%
of such enterprise's net sales for its most recently completely fiscal
year and if the Company's net sales of said product or service amounted
to 25% of the Company's net sales for its most recently completed
fiscal year. "Competitive Activity" will not include (i) the mere
ownership of securities in any such enterprise and the exercise of
rights appurtenant thereto or (ii) participation in the management of
any such enterprise other than in connection with the competitive
operations of such enterprise.
(f) "Employee Benefits" means the perquisites, benefits and
service credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which Executive is entitled to participate, including
without limitation any stock option, performance share, performance
unit, stock purchase, stock appreciation, savings, pension,
supplemental executive retirement, or other retirement income or
welfare benefit, deferred compensation, incentive compensation, group
or other life, health, medical/hospital or other insurance (whether
funded by actual insurance or self-insured by the Company), disability,
salary continuation, expense reimbursement and other employee benefit
policies, plans, programs or arrangements that may now exist or any
equivalent successor policies, plans, programs or arrangements that may
be adopted hereafter by the Company or a Subsidiary.
(g) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(h) "Incentive Pay" means an annual amount equal to not less
than the average of the annual bonus made or to be made in regard to
services rendered in any fiscal year during the three fiscal years
immediately preceding, or, if greater, 75% of the maximum bonus
opportunity for, the fiscal year in which the Change in Control occurs
pursuant to the Executive Incentive Compensation Program or similar
annual bonus plan, program or arrangement (whether or not funded) of
the Company, or any successor thereto.
-4-
<PAGE> 5
(i) "Severance Period" means the period of time commencing on
the date of the first occurrence of a Change in Control and continuing
until the earliest of (i) the third anniversary of the occurrence of
the Change in Control, (ii) the Executive's death, or (iii) the
Executive's attainment of age 65.
(j) "Subsidiary" means a corporation, company or other entity
(i) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors or other
managing authority) are, or (ii) which does not have outstanding shares
or securities (as may be the case in a partnership, joint venture or
unincorporated association), but more than 50% of whose ownership
interest representing the right generally to make decisions for such
other entity is, now or hereafter, owned or controlled, directly or
indirectly, by the Company except that for purposes of determining
whether any person may be a Participant for purposes of any grant of
incentive stock options, "Subsidiary" means any corporation in which at
the time the Company owns or controls, directly or indirectly, more
than 50% of the total combined voting power represented by all classes
of stock issued by such corporation.
(k) "Term" means the period commencing as of the date hereof
and expiring as of the later of (i) the close of business on December
31, 2000, or (ii) the expiration of the Severance Period; PROVIDED,
HOWEVER, that (A) commencing on January 1, 1999 and each January 1
thereafter, the term of this Agreement will automatically be extended
for an additional year unless, not later than September 30 of the
immediately preceding year, the Company or the Executive shall have
given notice that it or the Executive, as the case may be, does not
wish to have the Term extended and (B) subject to the last sentence of
Section 9, if, prior to a Change in Control, the Executive ceases for
any reason to be an employee of the Company and any Subsidiary,
thereupon without further action the Term shall be deemed to have
expired and this Agreement will immediately terminate and be of no
further effect. For purposes of this Section 1(k), the Executive shall
not be deemed to have ceased to be an employee of the Company and any
Subsidiary by reason of the transfer of Executive's employment between
the Company and any Subsidiary, or among any Subsidiaries.
(l) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date
of termination, or such other date that may be specified by the
Executive if the termination is pursuant to Section 3(b)).
2. OPERATION OF AGREEMENT. This Agreement will be effective
and binding immediately upon its execution, but, anything in this Agreement to
the contrary notwithstanding, this Agreement will not be operative unless and
until a Change in Control occurs. Upon the occurrence of a Change in Control at
any time during the Term, without further action, this Agreement shall become
immediately operative.
-5-
<PAGE> 6
3. TERMINATION FOLLOWING A CHANGE IN CONTROL.
(a) If the Executive's employment is terminated by the Company
or any Subsidiary during the Severance Period, the Executive shall be
entitled to the benefits provided by Section 4 unless such termination
is the result of the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled
within the meaning of, and begins actually to receive disability
benefits pursuant to, the long-term disability plan in effect for, or
applicable to, Executive immediately prior to the Change in Control; or
(iii) Cause.
(b) If the Executive terminates his employment with the
Company and its Subsidiaries during the Severance Period, the Executive
shall be entitled to the benefits provided by Section 4 if such
termination follows the occurrence of one or more of the following
events (regardless of whether any other reason, other than Cause as
hereinabove provided, for such termination exists or has occurred,
including without limitation other employment):
(i) Failure to elect or reelect or otherwise to
maintain the Executive in the office or the position, or a
substantially equivalent office or position, of or with the
Company and/or a Subsidiary, as the case may be, which the
Executive held immediately prior to a Change in Control, or
the failure to reelect or the removal of the Executive as a
Director of the Company (or any successor thereto) if the
Executive shall have been a Director of the Company
immediately prior to the Change in Control;
(ii) (A) A significant adverse change in the nature
or scope of the authorities, powers, functions,
responsibilities or duties attached to the position with the
Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, (B) a reduction in
the Executive's Base Pay, (C) a reduction in the Executive's
opportunities for Incentive Pay (including but not limited to
a reduction in target bonus percentage or target award
opportunity (whether measured by dollar amount or management
objectives)) provided by the Company, or (D) the termination
or denial of the Executive's rights to Employee Benefits or a
reduction in the scope or aggregate value thereof, any of
which is not remedied by the Company within ten calendar days
after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the
case may be;
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<PAGE> 7
(iii) A determination by the Executive (which
determination will be conclusive and binding upon the parties
hereto provided it has been made in good faith and in all
events will be presumed to have been made in good faith unless
otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred
following a Change in Control, including, without limitation,
a change in the scope of the business or other activities for
which the Executive was responsible immediately prior to the
Change in Control, which has rendered the Executive
substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer
a substantial reduction in, any of the authorities, powers,
functions, responsibilities or duties attached to the position
held by the Executive immediately prior to the Change in
Control, which situation is not remedied within ten calendar
days after written notice to the Company from the Executive of
such determination;
(iv) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or transfer of
all or substantially all of its business and/or assets, unless
the successor or successors (by liquidation, merger,
consolidation, reorganization, transfer or otherwise) to which
all or substantially all of its business and/or assets have
been transferred (directly or by operation of law) assumed all
duties and obligations of the Company under this Agreement
pursuant to Section 12(a);
(v) The Company relocates its principal executive
offices, or requires the Executive to have his principal
location of work changed, to any location that is in excess of
thirty miles from the location thereof immediately prior to
the Change in Control, or requires the Executive to travel
away from his office in the course of discharging his
responsibilities or duties of his employment more than
fourteen consecutive calendar days or an aggregate of more
than ninety calendar days in any consecutive 365 calendar-day
period, without, in either case, his prior written consent; or
(vi) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the
Company or any successor thereto which is not remedied by the
Company within ten calendar days after receipt by the Company
of written notice from the Executive of such breach.
(c) A termination by the Company pursuant to Section 3(a)
(other than as described in Section 3(a)(i), (ii) or (iii)) or by the
Executive pursuant to Section 3(b) will not affect any rights that the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights
shall be governed by the terms thereof.
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<PAGE> 8
4. SEVERANCE COMPENSATION.
(a) Severance benefits to which the Executive is entitled
pursuant to Section 3 are described on Annex A. The Company will pay to
the Executive the amounts described in Paragraphs (1), (2) and (3) of
Annex A within five business days after the Termination Date or, if
later, upon the expiration of the revocation period provided for in
Annex C. The benefits and perquisites described in Paragraphs (4), (5),
(6) and (7) of Annex A will be provided to the Executive as described
therein.
(b) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit
required to be made or provided hereunder on a timely basis, the
Company will pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime
rate" as quoted from time to time during the relevant period in the
Midwest Edition of THE WALL STREET JOURNAL. Such interest will be
payable as it accrues on demand. Any change in such prime rate will be
effective on and as of the date of such change.
(c) Notwithstanding any provision of this Agreement to the
contrary, the parties' respective rights and obligations under this
Section 4 and under Sections 5 and 7 will survive any termination or
expiration of this Agreement or the termination of the Executive's
employment following a Change in Control for any reason whatsoever.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that this Agreement shall become
operative and it shall be determined (as hereafter provided) that any
payment or distribution by the Company or any of its affiliates to or
for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any stock
option, performance share, performance unit, stock appreciation right
or similar right, or the lapse or termination of any restriction on, or
the vesting or exercisability of, any of the foregoing (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any
successor provision thereto) by reason of being considered "contingent
on a change in ownership or control" of the Company, within the meaning
of Section 280G of the Code (or any successor provision thereto) or to
any similar tax imposed by state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with
any such interest and penalties, being hereafter collectively referred
to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment or payments (collectively, a "Gross-Up
Payment"); PROVIDED, HOWEVER, that no Gross-up Payment shall be made
with respect to the Excise Tax, if any, attributable to (i) any
incentive stock option, as defined by Section 422 of the Code ("ISO")
granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in
tandem with any ISO described in clause (i). The Gross-Up Payment shall
be in an amount such that,
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<PAGE> 9
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all
determinations required to be made under this Section 5, including
whether an Excise Tax is payable by the Executive and the amount of
such Excise Tax and whether a Gross-Up Payment is required to be paid
by the Company to the Executive and the amount of such Gross-Up
Payment, if any, shall be made by a nationally recognized accounting
firm (the "Accounting Firm") selected by the Executive in his sole
discretion. The Executive shall direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the
Company and the Executive within 30 calendar days after the Termination
Date, if applicable, and any such other time or times as may be
requested by the Company or the Executive. If the Accounting Firm
determines that any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-Up Payment to the Executive within five
business days after receipt of such determination and calculations with
respect to any Payment to the Executive. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall, at
the same time as it makes such determination, furnish the Company and
the Executive an opinion that the Executive has substantial authority
not to report any Excise Tax on his federal, state or local income or
other tax return. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local
tax law at the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts or fails to pursue its remedies
pursuant to Section 5(f) and the Executive thereafter is required to
make a payment of any Excise Tax, the Executive shall direct the
Accounting Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting
calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment shall be promptly paid by the Company
to, or for the benefit of, the Executive within five business days
after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or the Executive, as the
case may be, reasonably requested by the Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with the preparation
and issuance of the determinations and calculations contemplated by
Section 5(b). Any determination by the Accounting Firm as to the amount
of the Gross-Up Payment shall be binding upon the Company and the
Executive.
(d) The federal, state and local income or other tax returns
filed by the Executive shall be prepared and filed on a consistent
basis with the determination of the Accounting Firm with respect to the
Excise Tax payable by the Executive. The Executive
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<PAGE> 10
shall make proper payment of the amount of any Excise Payment, and at
the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority,
and such other documents reasonably requested by the Company,
evidencing such payment. If prior to the filing of the Executive's
federal income tax return, or corresponding state or local tax return,
if relevant, the Accounting Firm determines that the amount of the
Gross-Up Payment should be reduced, the Executive shall within five
business days pay to the Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by Section 5(b) shall be borne by the Company. If such
fees and expenses are initially paid by the Executive, the Company
shall reimburse the Executive the full amount of such fees and expenses
within five business days after receipt from the Executive of a
statement therefor and reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service or any other taxing authority
that, if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as promptly as
practicable but no later than ten business days after the Executive
actually receives notice of such claim and the Executive shall further
apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid (in each case, to the extent known
by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the thirty calendar-day period
following the date on which he gives such notice to the Company and
(ii) the date that any payment of amount with respect to such claim is
due. If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the
Executive shall:
(i) provide the Company with any written records or
documents in his possession relating to such claim reasonably
requested by the Company;
(ii) 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
competent in respect of the subject matter and reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
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<PAGE> 11
PROVIDED, HOWEVER, that the Company shall bear and pay directly all
costs and expenses (including interest and penalties) incurred in
connection with such contest and shall indemnify and hold harmless the
Executive, on an after-tax basis, for and against 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 limiting the foregoing provisions of this Section
5(f), the Company shall control all proceedings taken in connection
with the contest of any claim contemplated by this Section 5(f) and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim (provided, however, that the
Executive may participate therein at his own cost and expense) and may,
at its option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and
the Executive 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;
PROVIDED, HOWEVER, that if the Company directs the Executive to pay the
tax claimed and sue for a refund, the Company shall advance the amount
of such payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income or other tax, including interest or penalties
with respect thereto, imposed with respect to such advance; and
PROVIDED FURTHER, HOWEVER, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the
Company's control of any such contested claim shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive 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.
(g) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), the Executive
receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section
5(f)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after any taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 5(f), a determination is made that
the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its
intent to contest such denial or refund prior to the expiration of
thirty calendar days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of
any such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid by the Company to the Executive
pursuant to this Section 5.
6. NO MITIGATION OBLIGATION. The Company hereby acknowledges
that it will be difficult and may be impossible for the Executive to find
reasonably comparable employment following the Termination Date and that the
non-competition covenant contained in Section 8 will further limit the
employment opportunities for the Executive. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not
-11-
<PAGE> 12
provide for mitigation, offset or reduction of any severance payment received
thereunder. Accordingly, the payment of the severance compensation by the
Company to the Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable, and the Executive will not
be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise, nor will any profits, income, earnings
or other benefits from any source whatsoever create any mitigation, offset,
reduction or any other obligation on the part of the Executive hereunder or
otherwise, except as expressly provided in the last sentences of Paragraphs (2)
and (4) of Annex A.
7. FUNDING; PROFESSIONAL FEES AND EXPENSES.
(a) It is the intent of the Company that the Executive not be
required to incur fees and related expenses for the retention of
attorneys, accountants, actuaries, consultants, and/or other
professionals ("professionals") in connection with the interpretation,
enforcement or defense of Executive's rights under this Agreement by
litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the
Executive hereunder. Accordingly, if it should appear to the Executive
that the Company has failed to comply with any of its obligations under
this Agreement or in the event that the Company or any other person
takes or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, the Executive the
benefits provided or intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive from time
to time to retain one or more professionals of the Executive's choice,
at the expense of the Company as hereafter provided, to advise and
represent the Executive in connection with any such interpretation,
enforcement or defense, including without limitation the initiation or
defense of any litigation or other legal action, whether by or against
the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any
existing or prior relationship between the Company and such
professional, the Company irrevocably consents to the Executive's
entering into a relationship with any such professional, and in that
connection the Company and the Executive agree that a confidential
relationship shall exist between the Executive and any such
professional. Without respect to whether the Executive prevails, in
whole or in part, in connection with any of the foregoing, the Company
will pay and be solely financially responsible for any and all
reasonable fees and related expenses incurred by the Executive in
connection with any of the foregoing.
(b) Without limiting the obligations of the Company pursuant
to this Agreement, in the event a Change in Control occurs, the
performance of the Company's obligations under this Agreement shall be
secured by amounts deposited or to be deposited in trust pursuant to
certain trust agreements to which the Company shall be a party,
providing, among other things for the payment of severance compensation
to the Executive pursuant to Section 4, and the Gross-Up Payment to the
Executive pursuant to Section 5, and providing that the reasonable fees
and related expenses of one or more professionals selected from time to
time by the Executive pursuant to Section 7(a) shall be paid, or
reimbursed to the Executive if paid by the Executive, either in
accordance
-12-
<PAGE> 13
with the terms of such trust agreements, or, if not so provided, on a
regular, periodic basis upon presentation by the Executive to the
trustee of a statement or statements prepared by such professional in
accordance with its customary practices. Any failure by the Company to
satisfy any of its obligations under this Section 7(b) shall not limit
the rights of the Executive hereunder. Upon the earlier to occur of (i)
a Change of a Control or (ii) a declaration by the Board that a Change
in Control is imminent, the Company shall promptly to the extent it has
not previously done so, and in any event within five business days:
(A) transfer to trustees of such trust agreements to
be added to the principal of the trusts a sum equal to (I) the
present value on the date of the Change in Control (or on such
fifth business day if the Board has declared a Change in
Control to be imminent) of the payments to be made to the
Executive under the provisions of Sections 4 and 5 hereof,
such present value to be computed using the assumptions set
forth on Annex B, less (II) the balance in the Executive's
accounts provided for in such trust agreements as of the most
recent completed valuation thereof, as certified by the
trustee under each trust agreement; provided, however, that if
the trustee under any trust agreement, respectively, does not
so certify by the end of the fourth business day after the
earlier of such Change in Control or declaration, then the
balance of such respective account shall be deemed to be zero.
Any payments of severance compensation or other benefits
hereunder by the trustee pursuant to any trust agreement
shall, to the extent thereof, discharge the Company's
obligation to pay severance compensation and other benefits
hereunder, it being the intent of the Company that assets in
such trusts be held as security for the Company's obligation
to pay severance compensation and other benefits under this
Agreement; and
(B) transfer to the trustees to be added to the
principal of the trusts under the trust agreements the sum of
FIVE HUNDRED THOUSAND DOLLARS ($500,000) less any principal in
such trusts on such fifth business day dedicated to the
payment of the Company's obligations under Section 7(a)
hereto. Any payments of the Executive's reasonable
professional fees and related expenses by the trustees
pursuant to the trust agreements shall, to the extent thereof,
discharge the Company's obligation hereunder, it being the
intent of the Company that assets in such trust be held as
security for the Company's obligation under Section 7(a)
hereof. The Executive understands and acknowledges that the
corpus of the trust, or separate portion thereof, dedicated to
the payment of the Company's obligations under Section 7(a)
hereto will be $500,000 and that such amount will be available
to discharge not only the obligations of the Company to the
Executive under Section 7(a) hereof, but also similar
obligations of the Company to other executives and employees
under similar provisions of other agreements.
(c) Subject to the foregoing, the Executive shall have the
status of a general unsecured creditor of the Company and shall have no
right to, or security interest in, any assets of the Company or any
Subsidiary.
-13-
<PAGE> 14
8. COMPETITIVE ACTIVITY. During a period ending three (3)
years following the Termination Date, if the Executive shall have received or
shall be receiving benefits under Section 4, the Executive shall not, without
the prior written consent of the Company, which consent shall not be
unreasonably withheld, engage in any Competitive Activity.
9. EMPLOYMENT RIGHTS. Nothing expressed or implied in this
Agreement will create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control. Any termination of
employment of the Executive or the removal of the Executive from the office or
position in the Company or any Subsidiary following the commencement of any
action by or discussion with a third person that ultimately results in a Change
in Control shall be deemed to be a termination or removal of the Executive after
a Change in Control for purposes of this Agreement entitling the Executive to
severance benefits provided by Section 4.
10. RELEASE. Payment of the severance compensation set forth
in Section 4 hereto is conditioned upon the Executive executing and delivering a
release (the "Release") substantially in the form provided in Annex C.
11. WITHHOLDING OF TAXES. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
the Company is required to withhold pursuant to any law or government regulation
or ruling.
12. SUCCESSORS AND BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business or assets of the
Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required to
perform if no such succession had taken place. This Agreement will be
binding upon and inure to the benefit of the Company and any successor
to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or
assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor shall thereafter be
deemed the "Company" for the purposes of this Agreement), but will not
otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and
legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 12(a) and 12(b).
Without limiting the generality or effect of the foregoing, the
Executive's right to receive payments hereunder will not be assignable,
transferable or delegable, whether by pledge,
-14-
<PAGE> 15
creation of a security interest, or otherwise, other than by a transfer
by Executive's will or by the laws of descent and distribution and, in
the event of any attempted assignment or transfer contrary to this
Section 12(c), the Company shall have no liability to pay any amount so
attempted to be assigned, transferred or delegated.
13. NOTICES. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
five business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or three business
days after having been sent by a nationally recognized overnight courier service
such as Federal Express, UPS, or Purolator, addressed to the Company (to the
attention of the Secretary of the Company) at its principal executive office and
to the Executive at his principal residence, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of changes of address shall be effective only upon receipt.
14. GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement will be governed by and construed in
accordance with the substantive laws of the State of Ohio, without giving effect
to the principles of conflict of laws of such State.
15. VALIDITY. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
16. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by
such other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same agreement.
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<PAGE> 16
18. PRIOR AGREEMENT. This Agreement amends and restates the
Severance Agreement, dated as of June 7, 1996 (the "Prior Agreement"), between
the Company and the Executive, which Prior Agreement shall, without further
action, be superseded as of the date first above written.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
/S/ Nathaniel J. Mass
-----------------------------------------
Nathaniel J. Mass
GENCORP INC.
By: /s/ John B. Yasinsky
-------------------------------------
John B. Yasinsky
Chairman and Chief Executive Officer
By: /S/ Edward R. Dye
-------------------------------------
Edward R. Dye
Secretary
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<PAGE> 17
Annex A
-------
Severance Compensation
----------------------
1. BASE PAY AND ANNUAL BONUS. A lump sum payment in an amount
equal to (a) any unpaid Base Pay through the date of the Executive's termination
of employment and (b) any annual bonus payable in the year in which the
Executive's termination of employment occurs, determined in accordance with the
provisions of the Executive Incentive Compensation Program.
2. SEVERANCE PAY. A lump sum payment in an amount equal to
three (3) times the sum of (A) Base Pay (at the highest rate in effect for any
period prior to the Termination Date), plus (B) Incentive Pay (determined in
accordance with the standards set forth in Section 1(h)), but not less than 375%
of Base Pay (at the highest rate in effect for any period prior to the
Termination Date). If the Executive is entitled to a severance payment under
this Agreement and termination pay under his Employment Agreement dated May 10,
1996, due to the termination of his employment after a Change in Control, then
the severance payment described in the preceding sentence will be reduced by the
total amount of the termination pay which is paid or payable to the Executive
under the Employment Agreement as a result of such termination.
3. PERFORMANCE AWARDS: Upon an Executive's termination of
employment pursuant to Section 3(b), all performance awards under the GenCorp
Inc. Long-Term Incentive Program, if any, will be paid in accordance with the
provisions of such Program.
4. HEALTH AND LIFE BENEFITS. For a period of 36 months
following the Termination Date (the "Continuation Period"), the Company will
arrange to provide the Executive with Employee Benefits that provide health and
life benefits (but not disability, stock option, performance share, performance
unit, stock purchase, stock appreciation or similar compensatory benefits)
substantially similar to those that the Executive was receiving or entitled to
receive immediately prior to the Termination Date (or, if greater, immediately
prior to the reduction, termination, or denial described in Section 3(b)(ii)),
except that the level of any such Employee Benefits to be provided to the
Executive may be reduced in the event of a corresponding reduction generally
applicable to all recipients of or participants in such Employee Benefits. If
and to the extent that any benefit described in this Paragraph 4 is not or
cannot be paid or provided under any policy, plan, program or arrangement of the
Company or any Subsidiary, as the case may be, then the Company will itself pay
or provide for the payment to the Executive, his dependents and beneficiaries,
of such Employee Benefits. Employee Benefits otherwise receivable by the
Executive pursuant to this Paragraph 4 will be reduced to the extent comparable
welfare benefits are actually received by the Executive from another employer
during the Continuation Period following the Executive's Termination Date, and
any such benefits actually received by the Executive shall be reported by the
Executive to the Company.
<PAGE> 18
5. RETIREMENT BENEFITS. Retirement benefits under the
applicable qualified pension plan sponsored by the Company or Subsidiary and the
Benefits Restoration Plan for Salaried Employees of GenCorp Inc. and Certain
Subsidiary Companies ("Benefits Restoration Plan") that are accrued but not
vested at the time of the Executive's termination of employment will be vested
in accordance with the provisions of the Benefits Restoration Plan.
6. OUTPLACEMENT SERVICES. Outplacement services for a period
of up to twelve months by a firm selected by the Executive, at the expense of
the Company in an amount up to 20% of the Executive's Base Pay.
7. FINANCIAL COUNSELING. Financial counseling for the
Continuation Period as defined in Paragraph (4) of this Annex A in a manner
similar to that provided to executive officers prior to a Change in Control.
A-2
<PAGE> 19
Annex B
-------
Funding Assumptions
-------------------
In calculating the present value of payments to be made to the Executive under
Sections 4 and 5 of the Agreement, as required by Section 7(b)(B) of the
Agreement, the Company shall
(1) Assume that all payments to be made to the Executive shall be
paid on a date which is six (6) months following the date of
the Change in Control; and
(2) Apply a discount factor which is equal to the yield to
maturity, as reported in the Midwest Edition of THE WALL
STREET JOURNAL, of the 26-week Treasury Bill most recently
issued as of the date of the Change in Control.
<PAGE> 20
Annex C
-------
Form of Release
---------------
WHEREAS, the Executive's employment has been terminated in
accordance with Section 3(a) (other than as described in Section 3(a)(i), (ii)
or (iii)) or (b) of the Severance Agreement dated as of __________________,
1997, by and between __________________(the "Executive") and GenCorp Inc. (the
"Agreement").
WHEREAS, the Executive is required to sign this Release in
order to receive the Severance Compensation as described in Annex A of the
Agreement and the other benefits described in the Agreement.
NOW THEREFORE, in consideration of the promises and agreements
contained herein and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, and intending to be legally bound, the
Executive agrees as follows:
1. This Release is effective on the date hereof and will continue in
effect as provided herein.
2. In consideration of the payments to be made and the benefits to be
received by the Executive pursuant to the Agreement, which the Executive
acknowledges are in addition to payments and benefits which the Executive would
be entitled to receive absent the Agreement, the Executive, for himself and his
dependents, successors, assigns, heirs, executors and administrators (and his
and their legal representatives of every kind), hereby releases, dismisses,
remises and forever discharges GenCorp Inc., its predecessors, parents,
subsidiaries, divisions, related or affiliated companies, officers, directors,
stockholders, members, employees, heirs, successors, assigns, representatives,
agents and counsel (the "Company") from any and all arbitrations, claims,
including claims for attorney's fees, demands, damages, suits, proceedings,
actions and/or causes of action of any kind and every description, whether known
or unknown, which Executive now has or may have had for, upon, or by reason of
any cause whatsoever ("claims"), against the Company, including but not limited
to:
(a) any and all claims arising out of or relating to
Executive's employment by or service with the Company and his
termination from the Company;
(b) any and all claims of discrimination, including but not
limited to claims of discrimination on the basis of sex, race, age,
national origin, marital status, religion or handicap, including,
specifically, but without limiting the generality of the foregoing, any
claims under the Age Discrimination in Employment Act, as amended,
Title VII of the Civil Rights Act of 1964, as amended, the Americans
with Disabilities Act, Ohio Revised Code Section 4101.17 and Ohio
Revised Code Chapter 4112, including Sections 4112.02 and 4112.99
thereof; and
(c) any and all claims of wrongful or unjust discharge or
breach of any contract or promise, express or implied.
<PAGE> 21
3. Executive understands and acknowledges that the Company does not
admit any violation of law, liability or invasion of any of his rights and that
any such violation, liability or invasion is expressly denied. The consideration
provided for this Release is made for the purpose of settling and extinguishing
all claims and rights (and every other similar or dissimilar matter) that
Executive ever had or now may have against the Company to the extent provided in
this Release. Executive further agrees and acknowledges that no representations,
promises or inducements have been made by the Company other than as appear in
the Agreement.
4. Executive further agrees and acknowledges that:
(a) The release provided for herein releases claims to and
including the date of this Release;
(b) He has been advised by the Company to consult with legal
counsel prior to executing this Release, has had an opportunity to
consult with and to be advised by legal counsel of his choice, fully
understands the terms of this Release, and enters into this Release
freely, voluntarily and intending to be bound;
(c) He has been given a period of 21 days to review and
consider the terms of this Release, prior to its execution and that he
may use as much of the 21 day period as he desires; and
(d) He may, within 7 days after execution, revoke this
Release. Revocation shall be made by delivering a written notice of
revocation to the Vice President of Human Resources at the Company. For
such revocation to be effective, written notice must be actually
received by the Vice President of Human Resources at the Company no
later than the close of business on the 7th day after Executive
executes this Release. If Executive does exercise his right to revoke
this Release, all of the terms and conditions of the Release shall be
of no force and effect and the Company shall not have any obligation to
make payments or provide benefits to Executive as set forth in Sections
4, 5 and 7 of the Agreement.
5. Executive agrees that he will never file a lawsuit or other
complaint asserting any claim that is released in this Release.
C-2
<PAGE> 22
6. Executive waives and releases any claim that he has or may have to
reemployment after __________________.
IN WITNESS WHEREOF, the Executive has executed and delivered
this Release on the date set forth below.
Dated:_____________________ ___________________________________
Executive
C-3
<PAGE> 1
EXHIBIT D
SEVERANCE AGREEMENT
-------------------
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this
"Agreement"), dated as of November 12, 1997, is made and entered by and between
GenCorp Inc., an Ohio corporation (the "Company"), and Robert A. Wolfe (the
"Executive").
WITNESSETH:
-----------
WHEREAS, the Executive is a senior executive or a key employee
of the Company or one or more of its Subsidiaries and has made and is expected
to continue to make major contributions to the short- and long-term
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most
publicly held companies, the possibility of a Change in Control (as defined
below) exists;
WHEREAS, the Company desires to assure itself of both present
and future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executives and key employees,
including the Executive, applicable in the event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior
executives and key employees are not practically disabled from discharging their
duties in respect of a proposed or actual transaction involving a Change in
Control; and
WHEREAS, the Company desires to provide additional inducement
for the Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as
follows:
1. CERTAIN DEFINED TERMS. In addition to terms defined
elsewhere herein, the following terms have the following meanings when used in
this Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a
rate not less than the Executive's annual fixed or base compensation as
in effect for Executive immediately prior to the occurrence of a Change
in Control or such higher rate as may be determined from time to time
by the Board or a committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to
Section 3(b), the Executive shall have committed:
<PAGE> 2
(i) a criminal violation involving fraud,
embezzlement or theft in connection with his duties or in the
course of his employment with the Company or any Subsidiary;
(ii) intentional wrongful damage to property of the
Company or any Subsidiary;
(iii) intentional wrongful disclosure of secret
processes or confidential information of the Company or any
Subsidiary; or
(iv) intentional wrongful engagement in any
Competitive Activity;
and any such act shall have been demonstrably and materially harmful to
the Company. For purposes of this Agreement, no act or failure to act
on the part of the Executive shall be deemed "intentional" if it was
due primarily to an error in judgment or negligence, but shall be
deemed "intentional" only if done or omitted to be done by the
Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for "Cause" hereunder unless and until there shall
have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the
Board then in office at a meeting of the Board called and held for such
purpose, after reasonable notice to the Executive and an opportunity
for the Executive, together with his counsel (if the Executive chooses
to have counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, the Executive had
committed an act constituting "Cause" as herein defined and specifying
the particulars thereof in detail. Nothing herein will limit the right
of the Executive or his beneficiaries to contest the validity or
propriety of any such determination.
(d) "Change in Control" means the occurrence during the Term
of any of the following events, subject to the provisions of Section
1(d)(v) hereof:
(i) All or substantially all of the assets of the
Company or Aerojet- General Corporation ("Aerojet") are sold
or transferred to another corporation or entity, or the
Company or Aerojet is merged, consolidated or reorganized into
or with another corporation or entity, with the result that
upon conclusion of the transaction less than 51% of the
outstanding securities entitled to vote generally in the
election of directors or other capital interests of the
acquiring corporation or entity are owned directly or
indirectly, by the shareholders of the Company generally prior
to the transaction; or
(ii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the
-2-
<PAGE> 3
Exchange Act, disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act (a "Person")) has become the beneficial owner (as
the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act (a "Beneficial Owner")) of securities representing 20% or
more of the combined voting power of the then-outstanding
voting securities of the Company; or
(iii) The individuals who, at the beginning of any
period of two consecutive calendar years, constituted the
Directors of the Company cease for any reason to constitute at
least a majority thereof unless the nomination for election by
the Company's stockholders of each new Director of the Company
was approved by a vote of at least two-thirds of the Directors
of the Company still in office who were Directors of the
Company at the beginning of any such period; or
(iv) The Board determines that (A) any particular
actual or proposed merger, consolidation, reorganization, sale
or transfer of assets, accumulation of shares or tender offer
for shares of the Company or Aerojet or other transaction or
event or series of transactions or events will, or is likely
to, if carried out, result in a Change in Control falling
within Section 1(d)(i), (ii) or (iii) and (B) it is in the
best interests of the Company and its shareholders, and will
serve the intended purposes of this Agreement, if this
Agreement shall thereupon become immediately operative.
(v) Notwithstanding the foregoing provisions of this
Section 1(d):
(A) If any such merger, consolidation,
reorganization, sale or transfer of assets, or tender
offer or other transaction or event or series of
transactions or events mentioned in Section 1(d)(iv)
shall be abandoned, or any such accumulations of
shares shall be dispersed or otherwise resolved, the
Board may, by notice to the Executive, nullify the
effect thereof and reinstate this Agreement as
previously in effect, but without prejudice to any
action that may have been taken prior to such
nullification.
(B) Unless otherwise determined in a
specific case by the Board, a "Change in Control"
shall not be deemed to have occurred for purposes of
Section (1)(d)(ii) solely because (X) the Company,
(Y) a Subsidiary, or (Z) any Company-sponsored
employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either
files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule
-3-
<PAGE> 4
14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing
Beneficial Ownership by it of shares of the
then-outstanding voting securities of the Company,
whether in excess of 20% or otherwise, or because the
Company reports that a change in control of the
Company has occurred or will occur in the future by
reason of such beneficial ownership.
(e) "Competitive Activity" means the Executive's
participation, without the written consent of an officer of the
Company, in the management of any business enterprise if such
enterprise engages in substantial and direct competition with the
Company and such enterprise's sales of any product or service
competitive with any product or service of the Company (or, if this
Agreement becomes operative upon a Change in Control of Aerojet, any
product or service of Aerojet) amounted to 25% of such enterprise's net
sales for its most recently completely fiscal year and if the Company's
(or Aerojet's) net sales of said product or service amounted to 25% of
the Company's net sales for its most recently completed fiscal year.
"Competitive Activity" will not include (i) the mere ownership of
securities in any such enterprise and the exercise of rights
appurtenant thereto or (ii) participation in the management of any such
enterprise other than in connection with the competitive operations of
such enterprise.
(f) "Employee Benefits" means the perquisites, benefits and
service credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which Executive is entitled to participate, including
without limitation any stock option, performance share, performance
unit, stock purchase, stock appreciation, savings, pension,
supplemental executive retirement, or other retirement income or
welfare benefit, deferred compensation, incentive compensation, group
or other life, health, medical/hospital or other insurance (whether
funded by actual insurance or self-insured by the Company), disability,
salary continuation, expense reimbursement and other employee benefit
policies, plans, programs or arrangements that may now exist or any
equivalent successor policies, plans, programs or arrangements that may
be adopted hereafter by the Company or a Subsidiary.
(g) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(h) "Incentive Pay" means an annual amount equal to not less
than the average of the annual bonus made or to be made in regard to
services rendered in any fiscal year during the three fiscal years
immediately preceding, or, if greater, 75% of the maximum bonus
opportunity for, the fiscal year in which the Change in Control occurs
pursuant to the Executive Incentive Compensation Program or similar
annual bonus plan, program or arrangement (whether or not funded) of
the Company, or any successor thereto.
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(i) "Severance Period" means the period of time commencing on
the date of the first occurrence of a Change in Control and continuing
until the earliest of (i) the third anniversary of the occurrence of
the Change in Control, (ii) the Executive's death, or (iii) the
Executive's attainment of age 65.
(j) "Subsidiary" means a corporation, company or other entity
(i) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors or other
managing authority) are, or (ii) which does not have outstanding shares
or securities (as may be the case in a partnership, joint venture or
unincorporated association), but more than 50% of whose ownership
interest representing the right generally to make decisions for such
other entity is, now or hereafter, owned or controlled, directly or
indirectly, by the Company except that for purposes of determining
whether any person may be a Participant for purposes of any grant of
incentive stock options, "Subsidiary" means any corporation in which at
the time the Company owns or controls, directly or indirectly, more
than 50% of the total combined voting power represented by all classes
of stock issued by such corporation.
(k) "Term" means the period commencing as of the date hereof
and expiring as of the later of (i) the close of business on December
31, 2000, or (ii) the expiration of the Severance Period; PROVIDED,
HOWEVER, that (A) commencing on January 1, 1999 and each January 1
thereafter, the term of this Agreement will automatically be extended
for an additional year unless, not later than September 30 of the
immediately preceding year, the Company or the Executive shall have
given notice that it or the Executive, as the case may be, does not
wish to have the Term extended and (B) subject to the last sentence of
Section 9, if, prior to a Change in Control, the Executive ceases for
any reason to be an employee of the Company and any Subsidiary,
thereupon without further action the Term shall be deemed to have
expired and this Agreement will immediately terminate and be of no
further effect. For purposes of this Section 1(k), the Executive shall
not be deemed to have ceased to be an employee of the Company and any
Subsidiary by reason of the transfer of Executive's employment between
the Company and any Subsidiary, or among any Subsidiaries.
(l) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date
of termination, or such other date that may be specified by the
Executive if the termination is pursuant to Section 3(b)).
2. OPERATION OF AGREEMENT. This Agreement will be effective
and binding immediately upon its execution, but, anything in this Agreement to
the contrary notwithstanding, this Agreement will not be operative unless and
until a Change in Control occurs. Upon the occurrence of a Change in Control at
any time during the Term, without further action, this Agreement shall become
immediately operative.
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3. TERMINATION FOLLOWING A CHANGE IN CONTROL.
(a) If the Executive's employment is terminated by the Company
or any Subsidiary during the Severance Period, the Executive shall be
entitled to the benefits provided by Section 4 unless such termination
is the result of the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled
within the meaning of, and begins actually to receive disability
benefits pursuant to, the long-term disability plan in effect for, or
applicable to, Executive immediately prior to the Change in Control; or
(iii) Cause.
(b) If the Executive terminates his employment with the
Company and its Subsidiaries during the Severance Period, the Executive
shall be entitled to the benefits provided by Section 4 if such
termination follows the occurrence of one or more of the following
events (regardless of whether any other reason, other than Cause as
hereinabove provided, for such termination exists or has occurred,
including without limitation other employment):
(i) Failure to elect or reelect or otherwise to
maintain the Executive in the office or the position, or a
substantially equivalent office or position, of or with the
Company and/or a Subsidiary, as the case may be, which the
Executive held immediately prior to a Change in Control, or
the failure to reelect or the removal of the Executive as a
Director of the Company (or any successor thereto) if the
Executive shall have been a Director of the Company
immediately prior to the Change in Control;
(ii) (A) A significant adverse change in the nature
or scope of the authorities, powers, functions,
responsibilities or duties attached to the position with the
Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, (B) a reduction in
the Executive's Base Pay, (C) a reduction in the Executive's
opportunities for Incentive Pay (including but not limited to
a reduction in target bonus percentage or target award
opportunity (whether measured by dollar amount or management
objectives)) provided by the Company, or (D) the termination
or denial of the Executive's rights to Employee Benefits or a
reduction in the scope or aggregate value thereof, any of
which is not remedied by the Company within ten calendar days
after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the
case may be;
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<PAGE> 7
(iii) A determination by the Executive (which
determination will be conclusive and binding upon the parties
hereto provided it has been made in good faith and in all
events will be presumed to have been made in good faith unless
otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred
following a Change in Control, including, without limitation,
a change in the scope of the business or other activities for
which the Executive was responsible immediately prior to the
Change in Control, which has rendered the Executive
substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer
a substantial reduction in, any of the authorities, powers,
functions, responsibilities or duties attached to the position
held by the Executive immediately prior to the Change in
Control, which situation is not remedied within ten calendar
days after written notice to the Company from the Executive of
such determination;
(iv) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or Aerojet or
transfer of all or substantially all of the business and/or
asset of the Company or Aerojet, unless the successor or
successors (by liquidation, merger, consolidation,
reorganization, transfer or otherwise) to which all or
substantially all of such business and/or assets have been
transferred (directly or by operation of law) assumed all
duties and obligations of the Company under this Agreement
pursuant to Section 12(a);
(v) The Company or Aerojet relocates its principal
executive offices, or requires the Executive to have his
principal location of work changed, to any location that is in
excess of thirty miles from the location thereof immediately
prior to the Change in Control, or requires the Executive to
travel away from his office in the course of discharging his
responsibilities or duties of his employment more than
fourteen consecutive calendar days or an aggregate of more
than ninety calendar days in any consecutive 365 calendar-day
period, without, in either case, his prior written consent; or
(vi) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the
Company or any successor thereto which is not remedied by the
Company within ten calendar days after receipt by the Company
of written notice from the Executive of such breach.
(c) A termination by the Company pursuant to Section 3(a)
(other than as described in Section 3(a)(i), (ii) or (iii)) or by the
Executive pursuant to Section 3(b) will not affect any rights that the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company or Aerojet providing Employee Benefits,
which rights shall be governed by the terms thereof.
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4. SEVERANCE COMPENSATION.
(a) Severance benefits to which the Executive is entitled
pursuant to Section 3 are described on Annex A. The Company will pay to
the Executive the amounts described in Paragraphs (1), (2) and (3) of
Annex A within five business days after the Termination Date or, if
later, upon the expiration of the revocation period provided for in
Annex C. The benefits and perquisites described in Paragraphs (4), (5),
(6) and (7) of Annex A will be provided to the Executive as described
therein.
(b) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit
required to be made or provided hereunder on a timely basis, the
Company will pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime
rate" as quoted from time to time during the relevant period in the
Midwest Edition of THE WALL STREET JOURNAL. Such interest will be
payable as it accrues on demand. Any change in such prime rate will be
effective on and as of the date of such change.
(c) Notwithstanding any provision of this Agreement to the
contrary, the parties' respective rights and obligations under this
Section 4 and under Sections 5 and 7 will survive any termination or
expiration of this Agreement or the termination of the Executive's
employment following a Change in Control for any reason whatsoever.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that this Agreement shall become
operative and it shall be determined (as hereafter provided) that any
payment or distribution by the Company or any of its affiliates to or
for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any stock
option, performance share, performance unit, stock appreciation right
or similar right, or the lapse or termination of any restriction on, or
the vesting or exercisability of, any of the foregoing (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any
successor provision thereto) by reason of being considered "contingent
on a change in ownership or control" of the Company, within the meaning
of Section 280G of the Code (or any successor provision thereto) or to
any similar tax imposed by state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with
any such interest and penalties, being hereafter collectively referred
to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment or payments (collectively, a "Gross-Up
Payment"); PROVIDED, HOWEVER, that no Gross-up Payment shall be made
with respect to the Excise Tax, if any, attributable to (i) any
incentive stock option, as defined by Section 422 of the Code ("ISO")
granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in
tandem with any ISO described in clause (i). The Gross-Up Payment shall
be in an amount such that, after payment by the Executive of all taxes
(including any interest or penalties imposed
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<PAGE> 9
with respect to such taxes), including any Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all
determinations required to be made under this Section 5, including
whether an Excise Tax is payable by the Executive and the amount of
such Excise Tax and whether a Gross-Up Payment is required to be paid
by the Company to the Executive and the amount of such Gross-Up
Payment, if any, shall be made by a nationally recognized accounting
firm (the "Accounting Firm") selected by the Executive in his sole
discretion. The Executive shall direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the
Company and the Executive within 30 calendar days after the Termination
Date, if applicable, and any such other time or times as may be
requested by the Company or the Executive. If the Accounting Firm
determines that any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-Up Payment to the Executive within five
business days after receipt of such determination and calculations with
respect to any Payment to the Executive. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall, at
the same time as it makes such determination, furnish the Company and
the Executive an opinion that the Executive has substantial authority
not to report any Excise Tax on his federal, state or local income or
other tax return. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local
tax law at the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts or fails to pursue its remedies
pursuant to Section 5(f) and the Executive thereafter is required to
make a payment of any Excise Tax, the Executive shall direct the
Accounting Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting
calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment shall be promptly paid by the Company
to, or for the benefit of, the Executive within five business days
after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or the Executive, as the
case may be, reasonably requested by the Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with the preparation
and issuance of the determinations and calculations contemplated by
Section 5(b). Any determination by the Accounting Firm as to the amount
of the Gross-Up Payment shall be binding upon the Company and the
Executive.
(d) The federal, state and local income or other tax returns
filed by the Executive shall be prepared and filed on a consistent
basis with the determination of the Accounting Firm with respect to the
Excise Tax payable by the Executive. The Executive shall make proper
payment of the amount of any Excise Payment, and at the request of
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the Company, provide to the Company true and correct copies (with any
amendments) of his federal income tax return as filed with the Internal
Revenue Service and corresponding state and local tax returns, if
relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment.
If prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting
Firm determines that the amount of the Gross-Up Payment should be
reduced, the Executive shall within five business days pay to the
Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by Section 5(b) shall be borne by the Company. If such
fees and expenses are initially paid by the Executive, the Company
shall reimburse the Executive the full amount of such fees and expenses
within five business days after receipt from the Executive of a
statement therefor and reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service or any other taxing authority
that, if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as promptly as
practicable but no later than ten business days after the Executive
actually receives notice of such claim and the Executive shall further
apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid (in each case, to the extent known
by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the thirty calendar-day period
following the date on which he gives such notice to the Company and
(ii) the date that any payment of amount with respect to such claim is
due. If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the
Executive shall:
(i) provide the Company with any written records or
documents in his possession relating to such claim reasonably
requested by the Company;
(ii) 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
competent in respect of the subject matter and reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) 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 interest and penalties) incurred in
connection with such contest and shall
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<PAGE> 11
indemnify and hold harmless the Executive, on an after-tax basis, for
and against 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 limiting the
foregoing provisions of this Section 5(f), the Company shall control
all proceedings taken in connection with the contest of any claim
contemplated by this Section 5(f) and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
(provided, however, that the Executive may participate therein at his
own cost and expense) and may, at its option, either direct the
Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive 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; PROVIDED, HOWEVER, that if the Company
directs the Executive to pay the tax claimed and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income or other
tax, including interest or penalties with respect thereto, imposed with
respect to such advance; and PROVIDED FURTHER, HOWEVER, that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which the
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such
contested claim shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive 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.
(g) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), the Executive
receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section
5(f)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after any taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 5(f), a determination is made that
the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its
intent to contest such denial or refund prior to the expiration of
thirty calendar days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of
any such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid by the Company to the Executive
pursuant to this Section 5.
6. NO MITIGATION OBLIGATION. The Company hereby acknowledges
that it will be difficult and may be impossible for the Executive to find
reasonably comparable employment following the Termination Date and that the
non-competition covenant contained in Section 8 will further limit the
employment opportunities for the Executive. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not provide for mitigation, offset or reduction of any severance
payment received thereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in
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accordance with the terms of this Agreement is hereby acknowledged by the
Company to be reasonable, and the Executive will not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in the last sentences of Paragraphs (2) and (4) of Annex A.
7. FUNDING; PROFESSIONAL FEES AND EXPENSES.
(a) It is the intent of the Company that the Executive not be
required to incur fees and related expenses for the retention of
attorneys, accountants, actuaries, consultants, and/or other
professionals ("professionals") in connection with the interpretation,
enforcement or defense of Executive's rights under this Agreement by
litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the
Executive hereunder. Accordingly, if it should appear to the Executive
that the Company has failed to comply with any of its obligations under
this Agreement or in the event that the Company or any other person
takes or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, the Executive the
benefits provided or intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive from time
to time to retain one or more professionals of the Executive's choice,
at the expense of the Company as hereafter provided, to advise and
represent the Executive in connection with any such interpretation,
enforcement or defense, including without limitation the initiation or
defense of any litigation or other legal action, whether by or against
the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any
existing or prior relationship between the Company and such
professional, the Company irrevocably consents to the Executive's
entering into a relationship with any such professional, and in that
connection the Company and the Executive agree that a confidential
relationship shall exist between the Executive and any such
professional. Without respect to whether the Executive prevails, in
whole or in part, in connection with any of the foregoing, the Company
will pay and be solely financially responsible for any and all
reasonable fees and related expenses incurred by the Executive in
connection with any of the foregoing.
(b) Without limiting the obligations of the Company pursuant
to this Agreement, in the event a Change in Control occurs, the
performance of the Company's obligations under this Agreement shall be
secured by amounts deposited or to be deposited in trust pursuant to
certain trust agreements to which the Company shall be a party,
providing, among other things for the payment of severance compensation
to the Executive pursuant to Section 4, and the Gross-Up Payment to the
Executive pursuant to Section 5, and providing that the reasonable fees
and related expenses of one or more professionals selected from time to
time by the Executive pursuant to Section 7(a) shall be paid, or
reimbursed to the Executive if paid by the Executive, either in
accordance with the terms of such trust agreements, or, if not so
provided, on a regular, periodic basis upon presentation by the
Executive to the trustee of a statement or statements prepared by
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such professional in accordance with its customary practices. Any
failure by the Company to satisfy any of its obligations under this
Section 7(b) shall not limit the rights of the Executive hereunder.
Upon the earlier to occur of (i) a Change of a Control or (ii) a
declaration by the Board that a Change in Control is imminent, the
Company shall promptly to the extent it has not previously done so, and
in any event within five business days:
(A) transfer to trustees of such trust agreements to
be added to the principal of the trusts a sum equal to (I) the
present value on the date of the Change in Control (or on such
fifth business day if the Board has declared a Change in
Control to be imminent) of the payments to be made to the
Executive under the provisions of Sections 4 and 5 hereof,
such present value to be computed using the assumptions set
forth on Annex B, less (II) the balance in the Executive's
accounts provided for in such trust agreements as of the most
recent completed valuation thereof, as certified by the
trustee under each trust agreement; provided, however, that if
the trustee under any trust agreement, respectively, does not
so certify by the end of the fourth business day after the
earlier of such Change in Control or declaration, then the
balance of such respective account shall be deemed to be zero.
Any payments of severance compensation or other benefits
hereunder by the trustee pursuant to any trust agreement
shall, to the extent thereof, discharge the Company's
obligation to pay severance compensation and other benefits
hereunder, it being the intent of the Company that assets in
such trusts be held as security for the Company's obligation
to pay severance compensation and other benefits under this
Agreement; and
(B) transfer to the trustees to be added to the
principal of the trusts under the trust agreements the sum of
FIVE HUNDRED THOUSAND DOLLARS ($500,000) less any principal in
such trusts on such fifth business day dedicated to the
payment of the Company's obligations under Section 7(a)
hereto. Any payments of the Executive's reasonable
professional fees and related expenses by the trustees
pursuant to the trust agreements shall, to the extent thereof,
discharge the Company's obligation hereunder, it being the
intent of the Company that assets in such trust be held as
security for the Company's obligation under Section 7(a)
hereof. The Executive understands and acknowledges that the
corpus of the trust, or separate portion thereof, dedicated to
the payment of the Company's obligations under Section 7(a)
hereto will be $500,000 and that such amount will be available
to discharge not only the obligations of the Company to the
Executive under Section 7(a) hereof, but also similar
obligations of the Company to other executives and employees
under similar provisions of other agreements.
(c) Subject to the foregoing, the Executive shall have the
status of a general unsecured creditor of the Company and shall have no
right to, or security interest in, any assets of the Company or any
Subsidiary.
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8. COMPETITIVE ACTIVITY. During a period ending two (2) years
following the Termination Date, if the Executive shall have received or shall be
receiving benefits under Section 4, the Executive shall not, without the prior
written consent of the Company, which consent shall not be unreasonably
withheld, engage in any Competitive Activity.
9. EMPLOYMENT RIGHTS. Nothing expressed or implied in this
Agreement will create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control. Any termination of
employment of the Executive or the removal of the Executive from the office or
position in the Company or any Subsidiary following the commencement of any
action by or discussion with a third person that ultimately results in a Change
in Control shall be deemed to be a termination or removal of the Executive after
a Change in Control for purposes of this Agreement entitling the Executive to
severance benefits provided by Section 4.
10. RELEASE. Payment of the severance compensation set forth
in Section 4 hereto is conditioned upon the Executive executing and delivering a
release (the "Release") substantially in the form provided in Annex C.
11. WITHHOLDING OF TAXES. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
the Company is required to withhold pursuant to any law or government regulation
or ruling.
12. SUCCESSORS AND BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business or assets of the
Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required to
perform if no such succession had taken place. This Agreement will be
binding upon and inure to the benefit of the Company and any successor
to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or
assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor shall thereafter be
deemed the "Company" for the purposes of this Agreement), but will not
otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and
legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 12(a) and 12(b).
Without limiting the generality or effect of the foregoing, the
Executive's right to receive payments hereunder will not be assignable,
transferable or delegable, whether by pledge,
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<PAGE> 15
creation of a security interest, or otherwise, other than by a transfer
by Executive's will or by the laws of descent and distribution and, in
the event of any attempted assignment or transfer contrary to this
Section 12(c), the Company shall have no liability to pay any amount so
attempted to be assigned, transferred or delegated.
13. NOTICES. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
five business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or three business
days after having been sent by a nationally recognized overnight courier service
such as Federal Express, UPS, or Purolator, addressed to the Company (to the
attention of the Secretary of the Company) at its principal executive office and
to the Executive at his principal residence, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of changes of address shall be effective only upon receipt.
14. GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement will be governed by and construed in
accordance with the substantive laws of the State of Ohio, without giving effect
to the principles of conflict of laws of such State.
15. VALIDITY. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
16. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by
such other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same agreement.
-15-
<PAGE> 16
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
/s/ Robert A. Wolfe
----------------------------------------
Robert A. Wolfe
GENCORP INC.
By: /s/ John B. Yasinsky
------------------------------------
John B. Yasinsky
Chairman and Chief Executive Officer
By: /s/ Edward R. Dye
------------------------------------
Edward R. Dye
Secretary
</TABLE>
-16-
<PAGE> 17
Annex A
-------
Severance Compensation
----------------------
1. BASE PAY AND ANNUAL BONUS. A lump sum payment in an amount
equal to (a) any unpaid Base Pay through the date of the Executive's termination
of employment and (b) any annual bonus payable in the year in which the
Executive's termination of employment occurs, determined in accordance with the
provisions of the Executive Incentive Compensation Program.
2. SEVERANCE PAY. A lump sum payment in an amount equal to two
(2) times the sum of (A) Base Pay (at the highest rate in effect for any period
prior to the Termination Date), plus (B) Incentive Pay (determined in accordance
with the standards set forth in Section 1(h)), but not less than 375% of Base
Pay (at the highest rate in effect for any period prior to the Termination
Date).
3. PERFORMANCE AWARDS: Upon an Executive's termination of
employment pursuant to Section 3(b), all performance awards under the GenCorp
Inc. Long-Term Incentive Program, if any, will be paid in accordance with the
provisions of such Program.
4. HEALTH AND LIFE BENEFITS. For a period of 24 months
following the Termination Date (the "Continuation Period"), the Company will
arrange to provide the Executive with Employee Benefits that provide health and
life benefits (but not disability, stock option, performance share, performance
unit, stock purchase, stock appreciation or similar compensatory benefits)
substantially similar to those that the Executive was receiving or entitled to
receive immediately prior to the Termination Date (or, if greater, immediately
prior to the reduction, termination, or denial described in Section 3(b)(ii)),
except that the level of any such Employee Benefits to be provided to the
Executive may be reduced in the event of a corresponding reduction generally
applicable to all recipients of or participants in such Employee Benefits. If
and to the extent that any benefit described in this Paragraph 4 is not or
cannot be paid or provided under any policy, plan, program or arrangement of the
Company or any Subsidiary, as the case may be, then the Company will itself pay
or provide for the payment to the Executive, his dependents and beneficiaries,
of such Employee Benefits. Employee Benefits otherwise receivable by the
Executive pursuant to this Paragraph 4 will be reduced to the extent comparable
welfare benefits are actually received by the Executive from another employer
during the Continuation Period following the Executive's Termination Date, and
any such benefits actually received by the Executive shall be reported by the
Executive to the Company.
5. RETIREMENT BENEFITS. Retirement benefits under the
applicable qualified pension plan sponsored by the Company or Subsidiary and the
Benefits Restoration Plan for Salaried Employees of GenCorp Inc. and Certain
Subsidiary Companies ("Benefits Restoration Plan") that are accrued but not
vested at the time of the Executive's termination of employment will be vested
in accordance with the provisions of the Benefits Restoration Plan.
<PAGE> 18
6. OUTPLACEMENT SERVICES. Outplacement services for a period
of up to twelve months by a firm selected by the Executive, at the expense of
the Company in an amount up to 20% of the Executive's Base Pay.
7. FINANCIAL COUNSELING. Financial counseling for the
Continuation Period as defined in Paragraph (4) of this Annex A in a manner
similar to that provided to executive officers prior to a Change in Control.
A-2
<PAGE> 19
Annex B
-------
Funding Assumptions
-------------------
In calculating the present value of payments to be made to the Executive under
Sections 4 and 5 of the Agreement, as required by Section 7(b)(B) of the
Agreement, the Company shall
(1) Assume that all payments to be made to the Executive shall be
paid on a date which is six (6) months following the date of
the Change in Control; and
(2) Apply a discount factor which is equal to the yield to
maturity, as reported in the Midwest Edition of THE WALL
STREET JOURNAL, of the 26-week Treasury Bill most recently
issued as of the date of the Change in Control.
<PAGE> 20
Annex C
-------
Form of Release
---------------
WHEREAS, the Executive's employment has been terminated in
accordance with Section 3(a) (other than as described in Section 3(a)(i), (ii)
or (iii)) or (b) of the Severance Agreement dated as of ________________, 1997,
by and between ___________________ (the "Executive") and GenCorp Inc. (the
"Agreement").
WHEREAS, the Executive is required to sign this Release in
order to receive the Severance Compensation as described in Annex A of the
Agreement and the other benefits described in the Agreement.
NOW THEREFORE, in consideration of the promises and agreements
contained herein and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, and intending to be legally bound, the
Executive agrees as follows:
1. This Release is effective on the date hereof and will continue in
effect as provided herein.
2. In consideration of the payments to be made and the benefits to be
received by the Executive pursuant to the Agreement, which the Executive
acknowledges are in addition to payments and benefits which the Executive would
be entitled to receive absent the Agreement, the Executive, for himself and his
dependents, successors, assigns, heirs, executors and administrators (and his
and their legal representatives of every kind), hereby releases, dismisses,
remises and forever discharges GenCorp Inc., its predecessors, parents,
subsidiaries, divisions, related or affiliated companies, officers, directors,
stockholders, members, employees, heirs, successors, assigns, representatives,
agents and counsel (the "Company") from any and all arbitrations, claims,
including claims for attorney's fees, demands, damages, suits, proceedings,
actions and/or causes of action of any kind and every description, whether known
or unknown, which Executive now has or may have had for, upon, or by reason of
any cause whatsoever ("claims"), against the Company, including but not limited
to:
(a) any and all claims arising out of or relating to
Executive's employment by or service with the Company and his
termination from the Company;
(b) any and all claims of discrimination, including but not
limited to claims of discrimination on the basis of sex, race, age,
national origin, marital status, religion or handicap, including,
specifically, but without limiting the generality of the foregoing, any
claims under the Age Discrimination in Employment Act, as amended,
Title VII of the Civil Rights Act of 1964, as amended, the Americans
with Disabilities Act, Ohio Revised Code Section 4101.17 and Ohio
Revised Code Chapter 4112, including Sections 4112.02 and 4112.99
thereof; and
(c) any and all claims of wrongful or unjust discharge or
breach of any contract or promise, express or implied.
<PAGE> 21
3. Executive understands and acknowledges that the Company does not
admit any violation of law, liability or invasion of any of his rights and that
any such violation, liability or invasion is expressly denied. The consideration
provided for this Release is made for the purpose of settling and extinguishing
all claims and rights (and every other similar or dissimilar matter) that
Executive ever had or now may have against the Company to the extent provided in
this Release. Executive further agrees and acknowledges that no representations,
promises or inducements have been made by the Company other than as appear in
the Agreement.
4. Executive further agrees and acknowledges that:
(a) The release provided for herein releases claims to and
including the date of this Release;
(b) He has been advised by the Company to consult with legal
counsel prior to executing this Release, has had an opportunity to
consult with and to be advised by legal counsel of his choice, fully
understands the terms of this Release, and enters into this Release
freely, voluntarily and intending to be bound;
(c) He has been given a period of 21 days to review and
consider the terms of this Release, prior to its execution and that he
may use as much of the 21 day period as he desires; and
(d) He may, within 7 days after execution, revoke this
Release. Revocation shall be made by delivering a written notice of
revocation to the Vice President of Human Resources at the Company. For
such revocation to be effective, written notice must be actually
received by the Vice President of Human Resources at the Company no
later than the close of business on the 7th day after Executive
executes this Release. If Executive does exercise his right to revoke
this Release, all of the terms and conditions of the Release shall be
of no force and effect and the Company shall not have any obligation to
make payments or provide benefits to Executive as set forth in Sections
4, 5 and 7 of the Agreement.
5. Executive agrees that he will never file a lawsuit or other
complaint asserting any claim that is released in this Release.
C-2
<PAGE> 22
6. Executive waives and releases any claim that he has or may have to
reemployment after __________________.
IN WITNESS WHEREOF, the Executive has executed and delivered
this Release on the date set forth below.
Dated:_____________________ ___________________________________
Executive
C-3
<PAGE> 1
EXHIBIT E
SEVERANCE AGREEMENT
-------------------
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this
"Agreement"), dated as of November 12, 1997, is made and entered by and between
GenCorp Inc., an Ohio corporation (the "Company"), and ______________________
(the "Executive").
WITNESSETH:
----------
WHEREAS, the Executive is a senior executive or a key employee
of the Company or one or more of its Subsidiaries and has made and is expected
to continue to make major contributions to the short- and long-term
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most
publicly held companies, the possibility of a Change in Control (as defined
below) exists;
WHEREAS, the Company desires to assure itself of both present
and future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executives and key employees,
including the Executive, applicable in the event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior
executives and key employees are not practically disabled from discharging their
duties in respect of a proposed or actual transaction involving a Change in
Control; and
WHEREAS, the Company desires to provide additional inducement
for the Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as
follows:
1. CERTAIN DEFINED TERMS. In addition to terms defined
elsewhere herein, the following terms have the following meanings when used in
this Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a
rate not less than the Executive's annual fixed or base compensation as
in effect for Executive immediately prior to the occurrence of a Change
in Control or such higher rate as may be determined from time to time
by the Board or a committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to
Section 3(b), the Executive shall have committed:
<PAGE> 2
(i) a criminal violation involving fraud,
embezzlement or theft in connection with his duties or in the
course of his employment with the Company or any Subsidiary;
(ii) intentional wrongful damage to property of the
Company or any Subsidiary;
(iii) intentional wrongful disclosure of secret
processes or confidential information of the Company or any
Subsidiary; or
(iv) intentional wrongful engagement in any
Competitive Activity;
and any such act shall have been demonstrably and materially harmful to
the Company. For purposes of this Agreement, no act or failure to act
on the part of the Executive shall be deemed "intentional" if it was
due primarily to an error in judgment or negligence, but shall be
deemed "intentional" only if done or omitted to be done by the
Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for "Cause" hereunder unless and until there shall
have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the
Board then in office at a meeting of the Board called and held for such
purpose, after reasonable notice to the Executive and an opportunity
for the Executive, together with his counsel (if the Executive chooses
to have counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, the Executive had
committed an act constituting "Cause" as herein defined and specifying
the particulars thereof in detail. Nothing herein will limit the right
of the Executive or his beneficiaries to contest the validity or
propriety of any such determination.
(d) "Change in Control" means the occurrence during the Term
of any of the following events, subject to the provisions of Section
1(d)(v) hereof:
(i) All or substantially all of the assets of the
Company are sold or transferred to another corporation or
entity, or the Company is merged, consolidated or reorganized
into or with another corporation or entity, with the result
that upon conclusion of the transaction less than 51% of the
outstanding securities entitled to vote generally in the
election of directors or other capital interests of the
acquiring corporation or entity are owned directly or
indirectly, by the shareholders of the Company generally prior
to the transaction; or
(ii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the
-2-
<PAGE> 3
Exchange Act, disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act (a "Person")) has become the beneficial owner (as
the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act (a "Beneficial Owner")) of securities representing 20% or
more of the combined voting power of the then-outstanding
voting securities of the Company; or
(iii) The individuals who, at the beginning of any
period of two consecutive calendar years, constituted the
Directors of the Company cease for any reason to constitute at
least a majority thereof unless the nomination for election by
the Company's stockholders of each new Director of the Company
was approved by a vote of at least two-thirds of the Directors
of the Company still in office who were Directors of the
Company at the beginning of any such period; or
(iv) The Board determines that (A) any particular
actual or proposed merger, consolidation, reorganization, sale
or transfer of assets, accumulation of shares or tender offer
for shares of the Company or other transaction or event or
series of transactions or events will, or is likely to, if
carried out, result in a Change in Control falling within
Section 1(d)(i), (ii) or (iii) and (B) it is in the best
interests of the Company and its shareholders, and will serve
the intended purposes of this Agreement, if this Agreement
shall thereupon become immediately operative.
(v) Notwithstanding the foregoing provisions of this
Section 1(d):
(A) If any such merger, consolidation,
reorganization, sale or transfer of assets, or tender
offer or other transaction or event or series of
transactions or events mentioned in Section 1(d)(iv)
shall be abandoned, or any such accumulations of
shares shall be dispersed or otherwise resolved, the
Board may, by notice to the Executive, nullify the
effect thereof and reinstate this Agreement as
previously in effect, but without prejudice to any
action that may have been taken prior to such
nullification.
(B) Unless otherwise determined in a
specific case by the Board, a "Change in Control"
shall not be deemed to have occurred for purposes of
Section (1)(d)(ii) solely because (X) the Company,
(Y) a Subsidiary, or (Z) any Company-sponsored
employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either
files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule
-3-
<PAGE> 4
14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing
Beneficial Ownership by it of shares of the
then-outstanding voting securities of the Company,
whether in excess of 20% or otherwise, or because the
Company reports that a change in control of the
Company has occurred or will occur in the future by
reason of such beneficial ownership.
(e) "Competitive Activity" means the Executive's
participation, without the written consent of an officer of the
Company, in the management of any business enterprise if such
enterprise engages in substantial and direct competition with the
Company and such enterprise's sales of any product or service
competitive with any product or service of the Company amounted to 25%
of such enterprise's net sales for its most recently completely fiscal
year and if the Company's net sales of said product or service amounted
to 25% of the Company's net sales for its most recently completed
fiscal year. "Competitive Activity" will not include (i) the mere
ownership of securities in any such enterprise and the exercise of
rights appurtenant thereto or (ii) participation in the management of
any such enterprise other than in connection with the competitive
operations of such enterprise.
(f) "Employee Benefits" means the perquisites, benefits and
service credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which Executive is entitled to participate, including
without limitation any stock option, performance share, performance
unit, stock purchase, stock appreciation, savings, pension,
supplemental executive retirement, or other retirement income or
welfare benefit, deferred compensation, incentive compensation, group
or other life, health, medical/hospital or other insurance (whether
funded by actual insurance or self-insured by the Company), disability,
salary continuation, expense reimbursement and other employee benefit
policies, plans, programs or arrangements that may now exist or any
equivalent successor policies, plans, programs or arrangements that may
be adopted hereafter by the Company or a Subsidiary.
(g) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(h) "Incentive Pay" means an annual amount equal to not less
than the average of the annual bonus made or to be made in regard to
services rendered in any fiscal year during the three fiscal years
immediately preceding, or, if greater, 75% of the maximum bonus
opportunity for, the fiscal year in which the Change in Control occurs
pursuant to the Executive Incentive Compensation Program or similar
annual bonus plan, program or arrangement (whether or not funded) of
the Company, or any successor thereto.
-4-
<PAGE> 5
(i) "Severance Period" means the period of time commencing on
the date of the first occurrence of a Change in Control and continuing
until the earliest of (i) the third anniversary of the occurrence of
the Change in Control, (ii) the Executive's death, or (iii) the
Executive's attainment of age 65.
(j) "Subsidiary" means a corporation, company or other entity
(i) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors or other
managing authority) are, or (ii) which does not have outstanding shares
or securities (as may be the case in a partnership, joint venture or
unincorporated association), but more than 50% of whose ownership
interest representing the right generally to make decisions for such
other entity is, now or hereafter, owned or controlled, directly or
indirectly, by the Company except that for purposes of determining
whether any person may be a Participant for purposes of any grant of
incentive stock options, "Subsidiary" means any corporation in which at
the time the Company owns or controls, directly or indirectly, more
than 50% of the total combined voting power represented by all classes
of stock issued by such corporation.
(k) "Term" means the period commencing as of the date hereof
and expiring as of the later of (i) the close of business on December
31, 2000, or (ii) the expiration of the Severance Period; PROVIDED,
HOWEVER, that (A) commencing on January 1, 1999 and each January 1
thereafter, the term of this Agreement will automatically be extended
for an additional year unless, not later than September 30 of the
immediately preceding year, the Company or the Executive shall have
given notice that it or the Executive, as the case may be, does not
wish to have the Term extended and (B) subject to the last sentence of
Section 9, if, prior to a Change in Control, the Executive ceases for
any reason to be an employee of the Company and any Subsidiary,
thereupon without further action the Term shall be deemed to have
expired and this Agreement will immediately terminate and be of no
further effect. For purposes of this Section 1(k), the Executive shall
not be deemed to have ceased to be an employee of the Company and any
Subsidiary by reason of the transfer of Executive's employment between
the Company and any Subsidiary, or among any Subsidiaries.
(l) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date
of termination, or such other date that may be specified by the
Executive if the termination is pursuant to Section 3(b)).
2. OPERATION OF AGREEMENT. This Agreement will be effective
and binding immediately upon its execution, but, anything in this Agreement to
the contrary notwithstanding, this Agreement will not be operative unless and
until a Change in Control occurs. Upon the occurrence of a Change in Control at
any time during the Term, without further action, this Agreement shall become
immediately operative.
-5-
<PAGE> 6
3. TERMINATION FOLLOWING A CHANGE IN CONTROL.
(a) If the Executive's employment is terminated by the Company
or any Subsidiary during the Severance Period, the Executive shall be
entitled to the benefits provided by Section 4 unless such termination
is the result of the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled
within the meaning of, and begins actually to receive disability
benefits pursuant to, the long-term disability plan in effect for, or
applicable to, Executive immediately prior to the Change in Control; or
(iii) Cause.
(b) If the Executive terminates his employment with the
Company and its Subsidiaries during the Severance Period, the Executive
shall be entitled to the benefits provided by Section 4 if such
termination follows the occurrence of one or more of the following
events (regardless of whether any other reason, other than Cause as
hereinabove provided, for such termination exists or has occurred,
including without limitation other employment):
(i) Failure to elect or reelect or otherwise to
maintain the Executive in the office or the position, or a
substantially equivalent office or position, of or with the
Company and/or a Subsidiary, as the case may be, which the
Executive held immediately prior to a Change in Control, or
the failure to reelect or the removal of the Executive as a
Director of the Company (or any successor thereto) if the
Executive shall have been a Director of the Company
immediately prior to the Change in Control;
(ii) (A) A significant adverse change in the nature
or scope of the authorities, powers, functions,
responsibilities or duties attached to the position with the
Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, (B) a reduction in
the Executive's Base Pay, (C) a reduction in the Executive's
opportunities for Incentive Pay (including but not limited to
a reduction in target bonus percentage or target award
opportunity (whether measured by dollar amount or management
objectives)) provided by the Company, or (D) the termination
or denial of the Executive's rights to Employee Benefits or a
reduction in the scope or aggregate value thereof, any of
which is not remedied by the Company within ten calendar days
after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the
case may be;
-6-
<PAGE> 7
(iii) A determination by the Executive (which
determination will be conclusive and binding upon the parties
hereto provided it has been made in good faith and in all
events will be presumed to have been made in good faith unless
otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred
following a Change in Control, including, without limitation,
a change in the scope of the business or other activities for
which the Executive was responsible immediately prior to the
Change in Control, which has rendered the Executive
substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer
a substantial reduction in, any of the authorities, powers,
functions, responsibilities or duties attached to the position
held by the Executive immediately prior to the Change in
Control, which situation is not remedied within ten calendar
days after written notice to the Company from the Executive of
such determination;
(iv) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or transfer of
all or substantially all of its business and/or assets, unless
the successor or successors (by liquidation, merger,
consolidation, reorganization, transfer or otherwise) to which
all or substantially all of its business and/or assets have
been transferred (directly or by operation of law) assumed all
duties and obligations of the Company under this Agreement
pursuant to Section 12(a);
(v) The Company relocates its principal executive
offices, or requires the Executive to have his principal
location of work changed, to any location that is in excess of
thirty miles from the location thereof immediately prior to
the Change in Control, or requires the Executive to travel
away from his office in the course of discharging his
responsibilities or duties of his employment more than
fourteen consecutive calendar days or an aggregate of more
than ninety calendar days in any consecutive 365 calendar-day
period, without, in either case, his prior written consent; or
(vi) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the
Company or any successor thereto which is not remedied by the
Company within ten calendar days after receipt by the Company
of written notice from the Executive of such breach.
(c) A termination by the Company pursuant to Section 3(a)
(other than as described in Section 3(a)(i), (ii) or (iii)) or by the
Executive pursuant to Section 3(b) will not affect any rights that the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights
shall be governed by the terms thereof.
4. SEVERANCE COMPENSATION.
(a) Severance benefits to which the Executive is entitled
pursuant to Section 3 are described on Annex A. The Company will pay to
the Executive the amounts
-7-
<PAGE> 8
described in Paragraphs (1), (2) and (3) of Annex A within five
business days after the Termination Date or, if later, upon the
expiration of the revocation period provided for in Annex C. The
benefits and perquisites described in Paragraphs (4), (5), (6) and (7)
of Annex A will be provided to the Executive as described therein.
(b) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit
required to be made or provided hereunder on a timely basis, the
Company will pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime
rate" as quoted from time to time during the relevant period in the
Midwest Edition of THE WALL STREET JOURNAL. Such interest will be
payable as it accrues on demand. Any change in such prime rate will be
effective on and as of the date of such change.
(c) Notwithstanding any provision of this Agreement to the
contrary, the parties' respective rights and obligations under this
Section 4 and under Sections 5 and 7 will survive any termination or
expiration of this Agreement or the termination of the Executive's
employment following a Change in Control for any reason whatsoever.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that this Agreement shall become
operative and it shall be determined (as hereafter provided) that any
payment or distribution by the Company or any of its affiliates to or
for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any stock
option, performance share, performance unit, stock appreciation right
or similar right, or the lapse or termination of any restriction on, or
the vesting or exercisability of, any of the foregoing (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any
successor provision thereto) by reason of being considered "contingent
on a change in ownership or control" of the Company, within the meaning
of Section 280G of the Code (or any successor provision thereto) or to
any similar tax imposed by state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with
any such interest and penalties, being hereafter collectively referred
to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment or payments (collectively, a "Gross-Up
Payment"); PROVIDED, HOWEVER, that no Gross-up Payment shall be made
with respect to the Excise Tax, if any, attributable to (i) any
incentive stock option, as defined by Section 422 of the Code ("ISO")
granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in
tandem with any ISO described in clause (i). The Gross-Up Payment shall
be in an amount such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such
taxes), including any Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.
-8-
<PAGE> 9
(b) Subject to the provisions of Section 5(f), all
determinations required to be made under this Section 5, including
whether an Excise Tax is payable by the Executive and the amount of
such Excise Tax and whether a Gross-Up Payment is required to be paid
by the Company to the Executive and the amount of such Gross-Up
Payment, if any, shall be made by a nationally recognized accounting
firm (the "Accounting Firm") selected by the Executive in his sole
discretion. The Executive shall direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the
Company and the Executive within 30 calendar days after the Termination
Date, if applicable, and any such other time or times as may be
requested by the Company or the Executive. If the Accounting Firm
determines that any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-Up Payment to the Executive within five
business days after receipt of such determination and calculations with
respect to any Payment to the Executive. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall, at
the same time as it makes such determination, furnish the Company and
the Executive an opinion that the Executive has substantial authority
not to report any Excise Tax on his federal, state or local income or
other tax return. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local
tax law at the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts or fails to pursue its remedies
pursuant to Section 5(f) and the Executive thereafter is required to
make a payment of any Excise Tax, the Executive shall direct the
Accounting Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting
calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment shall be promptly paid by the Company
to, or for the benefit of, the Executive within five business days
after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or the Executive, as the
case may be, reasonably requested by the Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with the preparation
and issuance of the determinations and calculations contemplated by
Section 5(b). Any determination by the Accounting Firm as to the amount
of the Gross-Up Payment shall be binding upon the Company and the
Executive.
(d) The federal, state and local income or other tax returns
filed by the Executive shall be prepared and filed on a consistent
basis with the determination of the Accounting Firm with respect to the
Excise Tax payable by the Executive. The Executive shall make proper
payment of the amount of any Excise Payment, and at the request of the
Company, provide to the Company true and correct copies (with any
amendments) of his federal income tax return as filed with the Internal
Revenue Service and corresponding state and local tax returns, if
relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing
-9-
<PAGE> 10
such payment. If prior to the filing of the Executive's federal income
tax return, or corresponding state or local tax return, if relevant,
the Accounting Firm determines that the amount of the Gross-Up Payment
should be reduced, the Executive shall within five business days pay to
the Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by Section 5(b) shall be borne by the Company. If such
fees and expenses are initially paid by the Executive, the Company
shall reimburse the Executive the full amount of such fees and expenses
within five business days after receipt from the Executive of a
statement therefor and reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service or any other taxing authority
that, if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as promptly as
practicable but no later than ten business days after the Executive
actually receives notice of such claim and the Executive shall further
apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid (in each case, to the extent known
by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the thirty calendar-day period
following the date on which he gives such notice to the Company and
(ii) the date that any payment of amount with respect to such claim is
due. If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the
Executive shall:
(i) provide the Company with any written records or
documents in his possession relating to such claim reasonably
requested by the Company;
(ii) 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
competent in respect of the subject matter and reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) 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 interest and penalties) incurred in
connection with such contest and shall indemnify and hold harmless the
Executive, on an after-tax basis, for and against 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 limiting the foregoing provisions of this Section
5(f), the Company shall control all proceedings
-10-
<PAGE> 11
taken in connection with the contest of any claim contemplated by this
Section 5(f) and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim (provided, however, that the
Executive may participate therein at his own cost and expense) and may,
at its option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and
the Executive 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;
PROVIDED, HOWEVER, that if the Company directs the Executive to pay the
tax claimed and sue for a refund, the Company shall advance the amount
of such payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income or other tax, including interest or penalties
with respect thereto, imposed with respect to such advance; and
PROVIDED FURTHER, HOWEVER, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the
Company's control of any such contested claim shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive 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.
(g) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), the Executive
receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section
5(f)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after any taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 5(f), a determination is made that
the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its
intent to contest such denial or refund prior to the expiration of
thirty calendar days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of
any such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid by the Company to the Executive
pursuant to this Section 5.
6. NO MITIGATION OBLIGATION. The Company hereby acknowledges
that it will be difficult and may be impossible for the Executive to find
reasonably comparable employment following the Termination Date and that the
non-competition covenant contained in Section 8 will further limit the
employment opportunities for the Executive. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not provide for mitigation, offset or reduction of any severance
payment received thereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable, and the
Executive will not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor will any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset,
-11-
<PAGE> 12
reduction or any other obligation on the part of the Executive hereunder or
otherwise, except as expressly provided in the last sentences of Paragraphs (2)
and (4) of Annex A.
7. FUNDING; PROFESSIONAL FEES AND EXPENSES.
(a) It is the intent of the Company that the Executive not be
required to incur fees and related expenses for the retention of
attorneys, accountants, actuaries, consultants, and/or other
professionals ("professionals") in connection with the interpretation,
enforcement or defense of Executive's rights under this Agreement by
litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the
Executive hereunder. Accordingly, if it should appear to the Executive
that the Company has failed to comply with any of its obligations under
this Agreement or in the event that the Company or any other person
takes or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, the Executive the
benefits provided or intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive from time
to time to retain one or more professionals of the Executive's choice,
at the expense of the Company as hereafter provided, to advise and
represent the Executive in connection with any such interpretation,
enforcement or defense, including without limitation the initiation or
defense of any litigation or other legal action, whether by or against
the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any
existing or prior relationship between the Company and such
professional, the Company irrevocably consents to the Executive's
entering into a relationship with any such professional, and in that
connection the Company and the Executive agree that a confidential
relationship shall exist between the Executive and any such
professional. Without respect to whether the Executive prevails, in
whole or in part, in connection with any of the foregoing, the Company
will pay and be solely financially responsible for any and all
reasonable fees and related expenses incurred by the Executive in
connection with any of the foregoing.
(b) Without limiting the obligations of the Company pursuant
to this Agreement, in the event a Change in Control occurs, the
performance of the Company's obligations under this Agreement shall be
secured by amounts deposited or to be deposited in trust pursuant to
certain trust agreements to which the Company shall be a party,
providing, among other things for the payment of severance compensation
to the Executive pursuant to Section 4, and the Gross-Up Payment to the
Executive pursuant to Section 5, and providing that the reasonable fees
and related expenses of one or more professionals selected from time to
time by the Executive pursuant to Section 7(a) shall be paid, or
reimbursed to the Executive if paid by the Executive, either in
accordance with the terms of such trust agreements, or, if not so
provided, on a regular, periodic basis upon presentation by the
Executive to the trustee of a statement or statements prepared by such
professional in accordance with its customary practices. Any failure by
the Company to satisfy any of its obligations under this Section 7(b)
shall not limit the rights of the Executive hereunder. Upon the earlier
to occur of (i) a Change of a Control or (ii) a declaration by the
Board that a Change in Control is imminent, the Company shall
-12-
<PAGE> 13
promptly to the extent it has not previously done so, and in any event
within five business days:
(A) transfer to trustees of such trust agreements to
be added to the principal of the trusts a sum equal to (I) the
present value on the date of the Change in Control (or on such
fifth business day if the Board has declared a Change in
Control to be imminent) of the payments to be made to the
Executive under the provisions of Sections 4 and 5 hereof,
such present value to be computed using the assumptions set
forth on Annex B, less (II) the balance in the Executive's
accounts provided for in such trust agreements as of the most
recent completed valuation thereof, as certified by the
trustee under each trust agreement; provided, however, that if
the trustee under any trust agreement, respectively, does not
so certify by the end of the fourth business day after the
earlier of such Change in Control or declaration, then the
balance of such respective account shall be deemed to be zero.
Any payments of severance compensation or other benefits
hereunder by the trustee pursuant to any trust agreement
shall, to the extent thereof, discharge the Company's
obligation to pay severance compensation and other benefits
hereunder, it being the intent of the Company that assets in
such trusts be held as security for the Company's obligation
to pay severance compensation and other benefits under this
Agreement; and
(B) transfer to the trustees to be added to the
principal of the trusts under the trust agreements the sum of
FIVE HUNDRED THOUSAND DOLLARS ($500,000) less any principal in
such trusts on such fifth business day dedicated to the
payment of the Company's obligations under Section 7(a)
hereto. Any payments of the Executive's reasonable
professional fees and related expenses by the trustees
pursuant to the trust agreements shall, to the extent thereof,
discharge the Company's obligation hereunder, it being the
intent of the Company that assets in such trust be held as
security for the Company's obligation under Section 7(a)
hereof. The Executive understands and acknowledges that the
corpus of the trust, or separate portion thereof, dedicated to
the payment of the Company's obligations under Section 7(a)
hereto will be $500,000 and that such amount will be available
to discharge not only the obligations of the Company to the
Executive under Section 7(a) hereof, but also similar
obligations of the Company to other executives and employees
under similar provisions of other agreements.
(c) Subject to the foregoing, the Executive shall have the
status of a general unsecured creditor of the Company and shall have no
right to, or security interest in, any assets of the Company or any
Subsidiary.
8. COMPETITIVE ACTIVITY. During a period ending [THREE (3)/TWO
(2)] years following the Termination Date, if the Executive shall have received
or shall be receiving benefits under Section 4, the Executive shall not, without
the prior written consent of the Company, which consent shall not be
unreasonably withheld, engage in any Competitive Activity.
-13-
<PAGE> 14
9. EMPLOYMENT RIGHTS. Nothing expressed or implied in this
Agreement will create any right or duty on the part of the Company or the
Executive to have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control. Any termination of
employment of the Executive or the removal of the Executive from the office or
position in the Company or any Subsidiary following the commencement of any
action by or discussion with a third person that ultimately results in a Change
in Control shall be deemed to be a termination or removal of the Executive after
a Change in Control for purposes of this Agreement entitling the Executive to
severance benefits provided by Section 4.
10. RELEASE. Payment of the severance compensation set forth
in Section 4 hereto is conditioned upon the Executive executing and delivering a
release (the "Release") substantially in the form provided in Annex C.
11. WITHHOLDING OF TAXES. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
the Company is required to withhold pursuant to any law or government regulation
or ruling.
12. SUCCESSORS AND BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business or assets of the
Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required to
perform if no such succession had taken place. This Agreement will be
binding upon and inure to the benefit of the Company and any successor
to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or
assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor shall thereafter be
deemed the "Company" for the purposes of this Agreement), but will not
otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and
legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 12(a) and 12(b).
Without limiting the generality or effect of the foregoing, the
Executive's right to receive payments hereunder will not be assignable,
transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive's will or
by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 12(c), the
Company shall have no liability to pay any amount so attempted to be
assigned, transferred or delegated.
-14-
<PAGE> 15
13. NOTICES. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
five business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or three business
days after having been sent by a nationally recognized overnight courier service
such as Federal Express, UPS, or Purolator, addressed to the Company (to the
attention of the Secretary of the Company) at its principal executive office and
to the Executive at his principal residence, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of changes of address shall be effective only upon receipt.
14. GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement will be governed by and construed in
accordance with the substantive laws of the State of Ohio, without giving effect
to the principles of conflict of laws of such State.
15. VALIDITY. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
16. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by
such other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same agreement.
18. PRIOR AGREEMENT. This Agreement amends and restates the
Severance Agreement, dated as of _________, ____ (the "Prior Agreement"),
between the Company and the Executive, which Prior Agreement shall, without
further action, be superseded as of the date first above written.
-15-
<PAGE> 16
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
-------------------------------
Executive
GENCORP INC.
By:
-------------------------------
John B. Yasinsky
Chairman and Chief Executive Officer
By:
-------------------------------
Edward R. Dye
Secretary
-16-
<PAGE> 17
Annex A
-------
Severance Compensation
----------------------
1. BASE PAY AND ANNUAL BONUS. A lump sum payment in an amount
equal to (a) any unpaid Base Pay through the date of the Executive's termination
of employment and (b) any annual bonus payable in the year in which the
Executive's termination of employment occurs, determined in accordance with the
provisions of the Executive Incentive Compensation Program.
2. SEVERANCE PAY. A lump sum payment in an amount equal to
[THREE (3)/TWO (2)] times the sum of (A) Base Pay (at the highest rate in effect
for any period prior to the Termination Date), plus (B) Incentive Pay
(determined in accordance with the standards set forth in Section 1(h)) [, BUT
IN THE EVENT THE EXECUTIVE HAD A SEVERANCE AGREEMENT IN EFFECT ON THE DAY BEFORE
THE DATE OF THIS AGREEMENT, NOT LESS THAN 375% OF BASE PAY (AT THE HIGHEST RATE
IN EFFECT FOR ANY PERIOD PRIOR TO THE TERMINATION DATE)].
3. PERFORMANCE AWARDS: Upon an Executive's termination of
employment pursuant to Section 3(b), all performance awards under the GenCorp
Inc. Long-Term Incentive Program, if any, will be paid in accordance with the
provisions of such Program.
4. HEALTH AND LIFE BENEFITS. For a period of [36/24] months
following the Termination Date (the "Continuation Period"), the Company will
arrange to provide the Executive with Employee Benefits that provide health and
life benefits (but not disability, stock option, performance share, performance
unit, stock purchase, stock appreciation or similar compensatory benefits)
substantially similar to those that the Executive was receiving or entitled to
receive immediately prior to the Termination Date (or, if greater, immediately
prior to the reduction, termination, or denial described in Section 3(b)(ii)),
except that the level of any such Employee Benefits to be provided to the
Executive may be reduced in the event of a corresponding reduction generally
applicable to all recipients of or participants in such Employee Benefits. If
and to the extent that any benefit described in this Paragraph 4 is not or
cannot be paid or provided under any policy, plan, program or arrangement of the
Company or any Subsidiary, as the case may be, then the Company will itself pay
or provide for the payment to the Executive, his dependents and beneficiaries,
of such Employee Benefits. Employee Benefits otherwise receivable by the
Executive pursuant to this Paragraph 4 will be reduced to the extent comparable
welfare benefits are actually received by the Executive from another employer
during the Continuation Period following the Executive's Termination Date, and
any such benefits actually received by the Executive shall be reported by the
Executive to the Company.
5. RETIREMENT BENEFITS. Retirement benefits under the
applicable qualified pension plan sponsored by the Company or Subsidiary and the
Benefits Restoration Plan for Salaried Employees of GenCorp Inc. and Certain
Subsidiary Companies ("Benefits Restoration Plan") that are accrued but not
vested at the time of the Executive's termination of employment will be vested
in accordance with the provisions of the Benefits Restoration Plan.
<PAGE> 18
6. OUTPLACEMENT SERVICES. Outplacement services for a period
of up to twelve months by a firm selected by the Executive, at the expense of
the Company in an amount up to 20% of the Executive's Base Pay.
7. FINANCIAL COUNSELING. Financial counseling for the
Continuation Period as defined in Paragraph (4) of this Annex A in a manner
similar to that provided to executive officers prior to a Change in Control.
A-2
<PAGE> 19
Annex B
-------
Funding Assumptions
-------------------
In calculating the present value of payments to be made to the Executive under
Sections 4 and 5 of the Agreement, as required by Section 7(b)(B) of the
Agreement, the Company shall
(1) Assume that all payments to be made to the Executive shall be
paid on a date which is six (6) months following the date of
the Change in Control; and
(2) Apply a discount factor which is equal to the yield to
maturity, as reported in the Midwest Edition of THE WALL
STREET JOURNAL, of the 26-week Treasury Bill most recently
issued as of the date of the Change in Control.
<PAGE> 20
Annex C
-------
Form of Release
---------------
WHEREAS, the Executive's employment has been terminated in
accordance with Section 3(a) (other than as described in Section 3(a)(i), (ii)
or (iii)) or (b) of the Severance Agreement dated as of ___________________,
1997, by and between _____________________(the "Executive") and GenCorp Inc.
(the "Agreement").
WHEREAS, the Executive is required to sign this Release in
order to receive the Severance Compensation as described in Annex A of the
Agreement and the other benefits described in the Agreement.
NOW THEREFORE, in consideration of the promises and agreements
contained herein and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, and intending to be legally bound, the
Executive agrees as follows:
1. This Release is effective on the date hereof and will continue in
effect as provided herein.
2. In consideration of the payments to be made and the benefits to be
received by the Executive pursuant to the Agreement, which the Executive
acknowledges are in addition to payments and benefits which the Executive would
be entitled to receive absent the Agreement, the Executive, for himself and his
dependents, successors, assigns, heirs, executors and administrators (and his
and their legal representatives of every kind), hereby releases, dismisses,
remises and forever discharges GenCorp Inc., its predecessors, parents,
subsidiaries, divisions, related or affiliated companies, officers, directors,
stockholders, members, employees, heirs, successors, assigns, representatives,
agents and counsel (the "Company") from any and all arbitrations, claims,
including claims for attorney's fees, demands, damages, suits, proceedings,
actions and/or causes of action of any kind and every description, whether known
or unknown, which Executive now has or may have had for, upon, or by reason of
any cause whatsoever ("claims"), against the Company, including but not limited
to:
(a) any and all claims arising out of or relating to
Executive's employment by or service with the Company and his
termination from the Company;
(b) any and all claims of discrimination, including but not
limited to claims of discrimination on the basis of sex, race, age,
national origin, marital status, religion or handicap, including,
specifically, but without limiting the generality of the foregoing, any
claims under the Age Discrimination in Employment Act, as amended,
Title VII of the Civil Rights Act of 1964, as amended, the Americans
with Disabilities Act, Ohio Revised Code Section 4101.17 and Ohio
Revised Code Chapter 4112, including Sections 4112.02 and 4112.99
thereof; and
(c) any and all claims of wrongful or unjust discharge or
breach of any contract or promise, express or implied.
<PAGE> 21
3. Executive understands and acknowledges that the Company does not
admit any violation of law, liability or invasion of any of his rights and that
any such violation, liability or invasion is expressly denied. The consideration
provided for this Release is made for the purpose of settling and extinguishing
all claims and rights (and every other similar or dissimilar matter) that
Executive ever had or now may have against the Company to the extent provided in
this Release. Executive further agrees and acknowledges that no representations,
promises or inducements have been made by the Company other than as appear in
the Agreement.
4. Executive further agrees and acknowledges that:
(a) The release provided for herein releases claims to and
including the date of this Release;
(b) He has been advised by the Company to consult with legal
counsel prior to executing this Release, has had an opportunity to
consult with and to be advised by legal counsel of his choice, fully
understands the terms of this Release, and enters into this Release
freely, voluntarily and intending to be bound;
(c) He has been given a period of 21 days to review and
consider the terms of this Release, prior to its execution and that he
may use as much of the 21 day period as he desires; and
(d) He may, within 7 days after execution, revoke this
Release. Revocation shall be made by delivering a written notice of
revocation to the Vice President of Human Resources at the Company. For
such revocation to be effective, written notice must be actually
received by the Vice President of Human Resources at the Company no
later than the close of business on the 7th day after Executive
executes this Release. If Executive does exercise his right to revoke
this Release, all of the terms and conditions of the Release shall be
of no force and effect and the Company shall not have any obligation to
make payments or provide benefits to Executive as set forth in Sections
4, 5 and 7 of the Agreement.
5. Executive agrees that he will never file a lawsuit or other
complaint asserting any claim that is released in this Release.
C-2
<PAGE> 22
6. Executive waives and releases any claim that he has or may have to
reemployment after __________________.
IN WITNESS WHEREOF, the Executive has executed and delivered
this Release on the date set forth below.
Dated:_____________________ ___________________________________
Executive
C-3
<PAGE> 1
EXHIBIT F
GENCORP INC.
DEFERRED COMPENSATION PLAN
FOR NONEMPLOYEE DIRECTORS
(Effective January 1, 1992)
as adopted by the Board of Directors
November 13, 1991
Approved by Shareholders
March 25, 1992
and
as last amended by the Board of Directors
January 30, 1998
<PAGE> 2
GENCORP INC.
DEFERRED COMPENSATION PLAN
FOR NONEMPLOYEE DIRECTORS
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Article Section Page
- ------- ------- ----
<S> <C>
1 Establishment of Plan 1
---------------------
2 Definitions and Construction
----------------------------
2.1 Definitions 1
2.2 Construction 5
3 Eligibility and Participation 5
-----------------------------
4 Deferral of Director Fees
-------------------------
4.1 Deferral Election 5
4.2 Irrevocability 7
5 Investment Programs
-------------------
5.1 Individual Accounts 8
5.2 No Trust Fund 8
5.3 Description of Investment
Programs 8
5.4 Responsibility for Investment
Choices 11
6 Distribution of Deferred Amounts
--------------------------------
6.1 Distribution 11
6.2 Survivor Benefits 12
6.3 Conflict of Interest 12
6.4 Change in Control 13
6.5 Conversion and Adjustment in
Event of Recapitalization 13
7 Miscellaneous
-------------
7.1 Finality of Determinations 15
7.2 Plan Administration 15
7.3 Amendment, Suspension or
Termination of the Plan 15
7.4 Limitations on Transfer 16
7.5 Governing Law 16
7.6 Expenses of Administration 16
</TABLE>
<PAGE> 3
GENCORP INC.
DEFERRED COMPENSATION PLAN
FOR NONEMPLOYEE DIRECTORS
Article 1
Establishment of Plan
---------------------
GenCorp Inc. ("Company"), hereby adopts the deferred compensation plan
set forth herein, effective as of January 1, 1992, provided that the provisions
for the GenCorp Stock Fund shall be effective only upon approval by the
Company's shareholders. The purpose of the Plan is to provide the Company's
Nonemployee Directors with the opportunity to defer the receipt of Director Fees
on a pre-tax basis and to earn investment income on the amount of their deferred
fees.
Article 2
Definitions and Construction
----------------------------
2.1 DEFINITIONS. The following capitalized words and phrases when used
in the text of the Plan shall have the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Calendar Year" means each consecutive twelve-month period
commencing January l and ending December 31.
(c) CHANGE IN CONTROL: The occurrence of any of the following
events, subject to the provisions of paragraph (5) hereof:
<PAGE> 4
(1) All or substantially all of the assets of the Company
are sold or transferred to another corporation or
entity, or the Company is merged, consolidated or
reorganized into or with another corporation or
entity, with the result that upon conclusion of the
transaction less than 51% of the outstanding
securities entitled to vote generally in the election
of directors or other capital interests of the
acquiring corporation or entity are owned directly or
indirectly, by the shareholders of the Company
generally prior to the transaction; or
(2) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the Exchange Act,
disclosing that any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act (a "Person")) has become the beneficial
owner (as the term "beneficial owner" is defined
under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act (a "Beneficial
Owner")) of securities representing 20% or more of
the combined voting power of the then-outstanding
voting securities of the Company; or
(3) The individuals who, at the beginning of any period
of two consecutive calendar years, constituted the
Directors of the Company cease for any reason to
constitute at least a majority thereof unless the
nomination for election by the Company's stockholders
of each new Director of the Company was approved by
<PAGE> 5
a vote of at least two-thirds of the Directors of
the Company still in office who were Directors of
the Company at the beginning of any such period; or
(4) The Board determines that (A) any particular actual
or proposed merger, consolidation, reorganization,
sale or transfer of assets, accumulation of shares or
tender offer for shares of the Company or other
transaction or event or series of transactions or
events will, or is likely to, if carried out, result
in a Change in Control falling within paragraph (1),
(2) or (3) hereof and (B) it is in the best interests
of the Company and its shareholders, and will serve
the intended purposes of the Change in Control
provisions of this Program and other compensation and
benefit programs, plans and agreements of the
Company, if a Change in Control shall be deemed to
have occurred.
(5) Notwithstanding the foregoing provisions of this
Section 2.1(c):
(A) If any such merger, consolidation,
reorganization, sale or transfer of assets,
or tender offer or other transaction or
event or series of transactions or events
mentioned in paragraph (iv) hereof shall be
abandoned, or any such accumulations of
shares shall be dispersed or otherwise
resolved, the Board may determine that a
Change in Control has not occurred and, by
notice to the Executive, nullify the effect
thereof, but without prejudice to any action
that may have been taken prior to such
nullification.
<PAGE> 6
(B) Unless otherwise determined in a specific
case by the Board, a Change in Control shall
not be deemed to have occurred for purposes
of paragraph (2) hereof solely because (i)
the Company, (ii) a subsidiary of the
Company, or (iii) any Company-sponsored
employee stock ownership plan or any other
employee benefit plan of the Company or any
subsidiary of the Company either files or
becomes obligated to file a report or a proxy
statement under or in response to Schedule
13D, Schedule 14D-1, Form 8-K or Schedule 14A
(or any successor schedule, form or report or
item therein) under the Exchange Act
disclosing Beneficial Ownership by it of
shares of the then-outstanding voting
securities of the Company, whether in excess
of 20% or otherwise, or because the Company
reports that a change in control of the
Company has occurred or will occur in the
future by reason of such beneficial
ownership.
(c) "Company" means GenCorp Inc.
(d) "Deferral Dates" means the dates on which Director Fees are paid,
namely January 15, April 15, July 15 and October 15.
(e) "Director" means a member of the Board.
(f) "Director Fees" means the aggregate compensation payable by the
Company to a Director, including annual retainer, chairman's fee
and meeting attendance fees.
<PAGE> 7
- 3 -
(g) "Effective Date" means January 1, 1992 (except the provisions for
the GenCorp Stock Fund which will become effective upon approval
of the Plan by the Company's shareholders).
(h) "Market Value" means
(1) in the case of shares of GenCorp Common Stock (except as
otherwise provided in Section 6.4 hereof), the closing
price (or if no trading occurs on any trading day, the mean
between the closing bid and asked prices) as quoted in the
New York Stock Exchange Composite Transactions as published
in the Wall Street Journal (or, if not so listed, as quoted
on such other exchange on which such securities shall then
be listed, or if unlisted, the mean average between the
over-the-counter high bid and low asked quotation) on the
day for which the determination is to be made, or if such
day is not a trading day, the trading day immediately
preceding such day, and as used in Section 6.5 hereof, in
the event of a Recapitalization, the weighted average of
the trading prices on the day (or the weighted average of
such trading prices on such trading days) following the
occurrence thereof as determined by the Organization and
Compensation Committee of the Board in its discretion, or
in the event of an issuer tender offer in connection with a
Recapitalization, the weighted average of the trading
prices on the trading day immediately following the
termination date of
<PAGE> 8
- 4 -
such issuer tender offer, or any extensions thereof (or the
weighted average of such trading prices on the five trading
days immediately following such termination date) as
determined by the Organization and Compensation Committee
in its discretion, and
(2) in the case of shares of the Designated Equity Fund (i) for
a bank commingled fund, the closing price of a share as
determined by the trustee of such fund, (ii) for a
closed-end fund, the closing price of a share on the New
York Stock Exchange, or (iii) for an open-end mutual fund,
the net asset value per share of a share as determined by
such fund, on the date for which the determination is to be
made, or if such date is not a trading day, the trading day
immediately preceding such determination date.
(i) "Nonemployee Director" means a Director who is not an employee of
the Company.
(j) "Participant" means a Nonemployee Director who elects to defer all
or a portion of his Director Fees in accordance with Article 4.
(k) "Plan" means the GenCorp Inc. Deferred Compensation Plan for
Nonemployee Directors described in this document, as approved by
the Board on November 13, 1991 and as amended from time to time.
(l) "Recapitalization" means a significant change in the capital
structure of the Company (which may include an issuer tender offer
made to all of the Company's shareholders to purchase outstanding
shares of the
<PAGE> 9
- 5 -
Company's Common Stock), as determined in the discretion of the
Board as constituted immediately prior to the occurrence thereof.
2.2 CONSTRUCTION. Whenever any word is used herein in the singular
form, it shall be construed as though it were also used in the plural form in
all cases where it would so apply. Headings of articles and sections are
inserted for convenience and reference, and they constitute no part of the Plan.
Except where otherwise indicated by the context, any masculine terminology
herein shall include the feminine and neuter.
Article 3
Eligibility and Participation
-----------------------------
Any Nonemployee Director shall be eligible to participate in the Plan.
A Nonemployee Director may become a Participant in the Plan by electing to defer
all or a portion of his Director Fees in accordance with Article 4.
Article 4
Deferral of Director Fees
-------------------------
4.1 DEFERRAL ELECTION. By written notice to the Secretary of the
Company which is either received by the Secretary or postmarked not later than
December 31 preceding the beginning of a Calendar Year, any Nonemployee Director
may elect to defer all or a portion of the Director Fees which may be payable to
him for services
<PAGE> 10
- 6 -
rendered during such Calendar Year and to have such deferred Director Fees held
for his benefit under the terms of this Plan. Any election made by a Participant
pursuant to this Section 4.1 must specify his amount of deferral, investment
choice[s] and time and manner of distribution, as described in subsections (a),
(b) and (c) below:
(a) AMOUNT OF DEFERRAL. Subject to a minimum annual deferral of
$5,000, a Participant must specify the amount of his deferral as
(1) his total Director Fees for the Calendar Year,
(2) a percentage of his total Director Fees for the Calendar
Year, or
(3) a flat annual dollar amount not in excess of his total
Director Fees for the Calendar Year.
If a Participant elects to defer less than 100 percent of his
Director Fees, deferrals pursuant to paragraphs (2) or (3) will be
deducted by the Company on a pro rata basis from the regular
quarterly payments of Director Fees. Notwithstanding any other
provisions hereof, a Participant may not defer any portion of his
Director Fees which is attributable to attendance at meetings held
prior to the Effective Date.
(b) INVESTMENT CHOICES. A Participant must specify the amount or
percentage of his deferred Director Fees to be applied to one or
more of the following investment programs as further described in
Article 5:
(1) GenCorp Stock Fund;
(2) Designated Equity Fund;
(3) Cash Deposit Fund.
<PAGE> 11
- 7 -
(c) DISTRIBUTION. A Participant must elect to receive the cash value
of his deferred Director Fees, plus earnings thereon,
(1) in either (i) a single payment, or (ii) in two or more
approximately equal annual installments, not to exceed ten;
and
(2) commencing, at his election, (i) 30 days following the date
he ceases to be a Director, (ii) on a fixed future date
specified in the written election notice, or (iii) upon the
Participant's attainment of an age specified by him in the
written election notice.
In addition, a Participant may elect to have the cash value of his
deferred Director Fees, plus earnings thereon, distributed as a
single payment within 60 days in the event of his death or
termination of service on the Board due to physical or mental
disability, notwithstanding any election made by the Participant
pursuant to paragraphs (1) and (2) above.
4.2 IRREVOCABILITY. Deferral elections made under this Plan with respect
to any Calendar Year will be final and, after commencement of such Calendar
Year, cannot be amended or revoked in respect of Director Fees for services
rendered during such Calendar Year.
<PAGE> 12
- 8 -
Article 5
Investment Programs
-------------------
5.1 INDIVIDUAL ACCOUNTS. When a Participant has made a deferral election
pursuant to Section 4.1, the Company shall establish an account on its books in
his name and shall, in the case of the investment programs described in Sections
5.3(a) and (b), cause to be credited to such account as of each Deferral Date
the number of full and fractional phantom shares which could be purchased with
the amount deferred on such Deferral Date and, in the case of the investment
program described in Section 5.3(c), cause to be credited to such account as of
each Deferral Date the dollar amount deferred on such Deferral Date.
5.2 NO TRUST FUND. The Company shall not be required to reserve or
otherwise set aside funds for the payment of any amounts credited to any account
created hereunder. In addition, the Company shall not, and shall not be required
to, actually purchase any stock, security or mutual fund units described in
Sections 5.3 (a) and (b).
5.3 DESCRIPTION OF INVESTMENT PROGRAMS.
(a) GENCORP STOCK FUND. Under this program, the Participant's account
shall be credited with the number of full and fractional phantom
shares of GenCorp Common Stock which would be purchasable at the
Market Value on the Deferral Date with the deferred amount
designated for this investment program.
(1) In the event that the shares of GenCorp Common Stock shall
be increased or decreased or changed into or exchanged for
a
<PAGE> 13
- 9 -
different number or kind of shares of stock or other
securities of the Company or of another corporation,
whether through reorganization, merger, consolidation,
recapitalization, stock split-up, combination of shares,
stock offerings, spin-off or otherwise, such number of
phantom shares of GenCorp Common Stock as shall be credited
to the account of any Participant as of the record date for
such action shall be proportionately or appropriately
adjusted as of the payment or effective date to reflect
such action. If any such adjustment shall result in a
fractional share, such fractional phantom share shall also
be credited to the account of the Participant.
(2) The Participant's account shall further be credited with
the number of phantom shares, including fractions, which
would be purchasable at the Market Value on the date a
dividend is paid on GenCorp Common Stock, with an aggregate
amount equal to any dividend or the value of any other
distribution (other than a distribution for which an
adjustment in the number of phantom shares in the account
is made pursuant to paragraph (1)) paid on that number of
shares of GenCorp Common Stock which is equivalent to the
number of phantom shares credited to the Participant's
account on the record date of such dividend or other
distribution.
<PAGE> 14
- 10 -
(b) Designated Equity Fund.
----------------------
(1) The Designated Equity Fund initially shall be the Bankers
Trust Company BT Pyramid Commingled S&P 500 Equity Index
Fund, a bank commingled fund, which is designed to match
the performance of and changes in Standard and Poor's 500
Index. The Designated Equity Fund may be changed from time
to time by action of the Board, except that such change
shall be only for future application and shall not affect
the phantom shares previously credited to the account of
any Participant.
(2) Under this program, the Participant's account is credited
with the number of full and fractional phantom shares of
the Designated Equity Fund, which could be purchased at the
Market Value on the Deferral Date with the deferred amount
designated for this investment program.
(3) If and when any dividend is declared and paid, the
Participant's account shall further be credited with the
number of phantom shares, including fractions, which could
be purchased at the Market Value on the dividend payment
date with an aggregate amount equal to any ordinary or
capital cash dividend paid on that number of shares of the
Designated Equity Fund which is equivalent to the number of
phantom shares credited to the Participant's account on the
dividend record date.
<PAGE> 15
- 11 -
(c) CASH DEPOSIT FUND. Under this program, the Participant's account
is credited on the Deferral Date with that deferred dollar amount
designated for this investment program. After the end of each
Calendar Year quarter, there shall further be credited to each
Participant's account an amount equal to three months' interest on
the average balance credited to such account during such quarter
computed at the prime interest rate payable by the Company at the
beginning of each such quarter as determined by the Treasurer of
the Company.
5.4 RESPONSIBILITY FOR INVESTMENT CHOICES. Each Nonemployee Director is
solely responsible for his decision to participate in the Plan and accepts all
investment risks entailed by his participation and/or selection of an investment
program, including the risk of loss of and a decrease in the value of his
deferred Director Fees.
Article 6
Distribution of Deferred Amounts
--------------------------------
6.1 DISTRIBUTION. Subject to the terms of Sections 6.2, 6.3, 6.4 and
6.5, a Participant's interests in the Plan shall be distributed to him in
accordance with his elections made pursuant to Section 4.1(c). All amounts shall
be distributed in cash.
In the case of phantom shares credited to a Participant's account in
the GenCorp Stock Fund or Designated Equity Fund of the Plan, the value of a
Participant's interest on any distribution date elected by a Participant,
whether such
<PAGE> 16
- 12 -
distribution is to be made in a single payment or in annual installments, will
be the product of the pro rata portion of the Participant's phantom shares which
is to be distributed on such date multiplied by the Market Value of GenCorp
Common Stock or shares of the Designated Equity Fund, as the case may be, on
such distribution date. In the case of annual installments, the value of a
Participant's interest on each annual distribution date after the initial
distribution will be calculated in a like manner based upon the applicable
Market Value on each subsequent distribution date.
In the case of the Cash Deposit Fund, if a single payment has been
elected, the entire cash value of a Participant's account on the distribution
date will be paid in a single payment. Where annual installments have been
elected, the cash value of the pro rata portion of the Participant's account
balance to be distributed on such date (plus accrued interest thereon), shall be
paid to the Participant on each annual installment distribution date.
6.2 SURVIVOR BENEFITS. If a Participant dies before all or any portion of
his interests under the Plan have been distributed to him, the interests
remaining to be paid shall be distributed, on the date or dates and in the
manner specified in such Participant's written deferral elections, to such
beneficiary or beneficiaries as the Participant may have designated in writing
to the Company or, in the absence of any such designation to his estate or to,
or as directed by, his legal representatives.
6.3 CONFLICT OF INTEREST. Notwithstanding any election made by a
Participant, in the event that a Participant terminates his service on the Board
due to a conflict of interest resulting from such Participant becoming a
proprietor, director, officer, partner, employee, or otherwise becoming
affiliated with any business that is in
<PAGE> 17
- 13 -
competition with the Company or any of its subsidiaries, directly or indirectly,
or becoming employed by any governmental agency having jurisdiction over the
activities of the Company or any of its subsidiaries, the entire balance of his
deferred Director Fees, including earnings thereon, shall be paid immediately to
him in a single payment.
6.4 CHANGE IN CONTROL.
(a) Notwithstanding any other provisions of the Plan, in the event a
director's service on the Board is terminated involuntarily within
three years following a Change in Control, each Participant shall
be immediately paid, in a single payment, the sum of (1) the Cash
Value of his GenCorp Stock Fund account, (2) the Market Value of
his Designated Equity Fund account and (3) the cash value of his
Cash Deposit Fund account.
(b) For purposes of this Section 6.4, the Cash Value of a
Participant's GenCorp Stock Fund account shall be determined using
as a conversion price the greater of (1) the tender offer or
exchange offer price (if any), or (2) the highest market value of
GenCorp Common Stock (or other security for which GenCorp Common
Stock may have been exchanged pursuant to Section 5.3(a)(1))
during the ninety-day period preceding the Change in Control.
6.5 CONVERSION AND ADJUSTMENT IN EVENT OF RECAPITALIZATION.
Notwithstanding any other provisions of the Plan, upon the occurrence
of a Recapitalization, all shares credited to the Participant's account in the
GenCorp Stock Fund ("Shares") shall first be adjusted to a Cash Value either (x)
in the event of
<PAGE> 18
- 14 -
a Recapitalization not occurring in connection with an issuer tender offer, by
multiplying the aggregate number of Shares by an amount, on a per share basis,
equal to the prorated value as determined by the Organization and Compensation
Committee of the Board of the (A) Cash and Market Value of any security or
property distributed to shareholders in connection with the Recapitalization,
(B) Cash and Market Value of any security or property paid to shareholders in
exchange for GenCorp Common Stock in connection with the Recapitalization, and
(C) Market Value of GenCorp Common Stock (or its successor), or (y) in the event
of a Recapitalization occurring in connection with an issuer tender offer, by
determining the sum of A + B obtained pursuant to the following calculations:
Tender Offer
Aggregate X Proration X Tender = A
Shares Rate Offer Price
and
Tender Offer
Aggregate X one - Proration X Market = B
Shares Rate Value
For purposes of the foregoing calculations, the term Tender Offer
Proration Rate shall mean the ratio (excluding consideration of any odd lot
shares tendered or repurchased) of the number of shares repurchased by the
Company in an issuer tender offer to the number of shares tendered to the
Company in connection with such offer.
The Cash Value of Shares determined in (x) or (y) above, together with
the aggregate Market Value of the Participant's interests, if any, in the
Designated Equity Fund, and the cash value, if any, of the Participant's
interests in the Cash Deposit
<PAGE> 19
- 15 -
Fund shall be payable to the Participant in a single payment within thirty days
thereafter.
Article 7
Miscellaneous
-------------
7.1 FINALITY OF DETERMINATIONS. Authority to determine contested issues
or claims arising under the Plan shall be vested in the GenCorp Administrative
Committee, and any determination by the Administrative Committee pursuant to
such authority shall be final and binding for all purposes and upon all
interested persons and their heirs, successors, and personal representatives.
7.2 PLAN ADMINISTRATION. Authority and responsibility for
administration of the Plan, including maintenance of Participants' accounts
hereunder and preparation and delivery of individual annual account statements
to Participants, shall be vested in the GenCorp Administrative Committee.
Responsibility for oversight of investment programs, and reporting on the
performance thereof to the Board, shall be vested in the GenCorp Benefits
Management Committee.
7.3 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. The Board may
amend, suspend or terminate the Plan in whole or in part at any time, provided
that such amendment, suspension or termination shall not adversely affect rights
or obligations with respect to funds or interests previously credited to the
account of any Participant.
<PAGE> 20
- 16 -
7.4 LIMITATIONS ON TRANSFER. Participants shall have no rights to any
funds or interests credited to their accounts except as set forth in this Plan.
Such rights may not be anticipated, assigned, alienated or transferred, except
in writing to a designated beneficiary or beneficiaries or by will or by the
laws of descent and distribution. Any attempt to alienate, sell, exchange,
transfer, assign, pledge, hypothecate or otherwise encumber or dispose of any
such funds or interests by a Participant shall be void and of no effect. The
foregoing limitations shall apply with equal force and effect to any beneficiary
or beneficiaries designated by a Participant hereunder.
7.5 GOVERNING LAW. The Plan shall be governed by the laws of the State
of Ohio. The Plan is not governed by the Employee Retirement Income Security Act
of 1974.
7.6 EXPENSES OF ADMINISTRATION. All costs and expenses incurred in the
operation and administration of this Plan shall be borne by the Company.
<PAGE> 1
EXHIBIT G
RETIREMENT PLAN FOR NONEMPLOYEE DIRECTORS
OF GENCORP INC.
AS AMENDED JANUARY 30, 1998
Section 1. PURPOSE
The purpose of the Plan is to provide nonemployee directors of the
Company with additional compensation for their services on the Board and to
assist the Company in attracting and retaining qualified individuals to serve as
directors.
Section 2. DEFINITIONS
"Change in Control" shall mean the occurrence of any of the following
events, subject to the provisions of paragraph (v) hereof:
(i) All or substantially all of the assets of the
Company are sold or transferred to another corporation or
entity, or the Company is merged, consolidated or reorganized
into or with another corporation or entity, with the result
that upon conclusion of the transaction less than 51% of the
outstanding securities entitled to vote generally in the
election of directors or other capital interests of the
acquiring corporation or entity are owned directly or
indirectly, by the shareholders of the Company generally prior
to the transaction; or
(ii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the Exchange Act, disclosing
that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act (a "Person"))
has become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act (a "Beneficial
Owner")) of securities representing 20% or more of the
combined voting power of the then-outstanding voting
securities of the Company; or
(iii) The individuals who, at the beginning of any
period of two consecutive calendar years, constituted the
Directors of the Company cease for any reason to constitute at
least a majority thereof unless the nomination
<PAGE> 2
for election by the Company's stockholders of each new
Director of the Company was approved by a vote of at least
two-thirds of the Directors of the Company still in office who
were Directors of the Company at the beginning of any such
period; or
(iv) The Board determines that (A) any particular
actual or proposed merger, consolidation, reorganization, sale
or transfer of assets, accumulation of shares or tender offer
for shares of the Company or other transaction or event or
series of transactions or events will, or is likely to, if
carried out, result in a Change in Control falling within
paragraph (i), (ii) or (iii) hereof and (B) it is in the best
interests of the Company and its shareholders, and will serve
the intended purposes of the Change in Control provisions of
this Program and other compensation and benefit programs,
plans and agreements of the Company, if a Change in Control
shall be deemed to have occurred.
(v) Notwithstanding the foregoing provisions of this
Section 2.1(d):
(A) If any such merger, consolidation,
reorganization, sale or transfer of assets, or tender
offer or other transaction or event or series of
transactions or events mentioned in paragraph (iv)
hereof shall be abandoned, or any such accumulations
of shares shall be dispersed or otherwise resolved,
the Board may determine that a Change in Control has
not occurred and, by notice to the Executive, nullify
the effect thereof, but without prejudice to any
action that may have been taken prior to such
nullification.
(B) Unless otherwise determined in a
specific case by the Board, a Change in Control shall
not be deemed to have occurred for purposes of
paragraph (ii) hereof solely because (1) the Company,
(2) a subsidiary of the Company, or (3) any
Company-sponsored employee stock ownership plan or
any other employee benefit plan of the Company or any
subsidiary of the Company either files or becomes
obligated to file a report or a proxy statement under
or in response to Schedule 13D, Schedule 14D-1, Form
8-K or Schedule 14A (or any successor schedule, form
or report or item therein) under the Exchange Act
disclosing Beneficial Ownership by it of shares of
the then-outstanding voting securities of the
Company, whether in excess of 20% or otherwise, or
because the Company reports that a change in control
of the Company has occurred or will occur in the
future by reason of such beneficial ownership.
-2-
<PAGE> 3
"Company" shall mean GenCorp Inc.
"Credited Service" shall mean all service as a director of the Company,
including service as a director prior to the Effective Date.
"Director" shall mean a member or former member of the Board of
Directors of the Company who is not and has never been an employee of the
Company or any of its subsidiaries.
"Effective Date" of the Plan, as amended by the Board of Directors on
January 21, 1987 and March 24, 1987, shall be March 31, 1987.
"Plan" shall mean the Retirement Plan for Nonemployee Directors of
GenCorp Inc.
"Plan Administrator" shall mean the Secretary of the Company or any
other officer designated by the Chairman.
"Retainer" shall mean the fee established by the Board of Directors of
the Company and paid for service as a director, but excluding meeting fees,
committee fees and expense reimbursement.
Section 3. PARTICIPATION
All persons who were directors on and after the Effective Date shall be
eligible to participate in the Plan.
Section 4. ELIGIBILITY FOR BENEFITS
Only those directors whose service on the Board of Directors of the
Company terminates after 60 whole or partial months of Credited Service
following his first election or appointment to the Board shall be entitled to
benefits under the Plan.
Section 5. AMOUNT OF BENEFITS
The benefit hereunder shall be an annual amount equal to the Retainer
in effect on the date the director's service terminates, payable in consecutive
monthly installments until the number thereof equals the lesser of (a) the total
number of calendar months (including any partial months) of service by the
individual as a director or (b) 120 monthly installments, commencing in the
month following his or her termination of service as a director or age 65,
whichever is later.
-3-
<PAGE> 4
Section 6. PAYMENT OF BENEFITS
(A) MONTHLY INSTALLMENTS.
(i) The normal form of benefit payments hereunder
shall be monthly installments continuing during the life of
the former director until the number thereof equals the lesser
of (a) the total number of calendar months (including any
partial months) of service by the individual as a director or
(b) 120 monthly installments hereunder.
(ii) If a former director, whose service as a
director terminates on or after 31 March 1987, dies prior to
receipt of the applicable maximum number of monthly
installments specified in paragraph (A)(i) of this Section 6,
the aggregate amount of such unpaid monthly installments shall
be paid, in a lump sum, to the surviving spouse of or other
beneficiary designated by such former director or, if neither
survive the former director, then the former director's
estate.
(B) CHANGE IN CONTROL. In the event a director's service on
the Board is terminated involuntarily within three years following a
Change in Control, (i) such director will be fully vested in and
eligible to receive benefits based upon the number of whole or partial
months of Credited Service actually completed, even if he or she has
not completed at least 60 whole or partial months of Credited Service,
and (ii) all benefits accrued for such director under this Plan will be
immediately paid in a single payment, calculated using a discount
factor which is equal to the yield to maturity, as reported in the
Midwest Edition of The Wall Street Journal, of the 30-year Treasury
Bond most recently issued as of the date of the Change in Control, plus
50 basis points.
Section 7. SUSPENSION OF BENEFITS
If a former director who is receiving benefits hereunder returns to
service as a director, payment thereof shall be suspended during such service
and shall commence again on the last day of the month following the month in
which such subsequent service terminates. The amount of each monthly payment
following such termination shall be equal to one-twelfth of the Retainer in
effect at the time of such subsequent termination. Other provisions hereof
notwithstanding, the total number of monthly benefit payments hereunder to a
former director and/or his or her spouse, beneficiary or estate, including
payments both before and after a period of subsequent service, shall not exceed
the applicable maximum number specified in Section 6 above.
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Section 8. EMPLOYMENT BY THE COMPANY
If a director or former director becomes an employee of the Company or
any of its subsidiaries, benefit payments under the Plan shall cease and such
individual will have no right to any further benefits under the Plan.
Section 9. FUNDING
No promise under this Plan shall be secured by any specific assets of
the Company, nor shall any assets of the Company be designated as attributable
or allocated to the satisfaction of such promises. Benefit payments shall be
made from the Company's treasury.
Section 10. ADMINISTRATION
The Plan Administrator shall have full power and authority to
administer the Plan including the power to promulgate rules of Plan
administration, the power to settle any disputes as to rights or benefits
arising from the Plan, the power to appoint agents and delegate its duties, and
the power to make such decisions or take such action as the Plan Administrator,
in its sole discretion, deems necessary or advisable to aid in the proper
administration of the Plan. The Treasurer of the Company shall provide the Plan
Administrator with such assistance as is requested by the Plan Administrator
with regard to the administration of the Plan.
Section 11. ALIENATION OF BENEFITS
No benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge; and any attempt thereat shall be void. No such benefit shall, prior to
receipt thereof by an individual, be in any manner liable for or subject to such
individual's debts, contracts, liabilities, engagements, or torts.
Section 12. WITHHOLDING TAXES
The Company shall deduct from the amount of any payments hereunder, all
taxes required to be withheld by applicable laws.
Section 13. GOVERNING LAW
This Plan shall be governed and construed by the laws of the State of
Ohio.
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Section 14. AMENDMENT, MODIFICATION, OR TERMINATION OF THE PLAN
The Board of Directors at any time may terminate and in any respect,
amend or modify the Plan.
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<PAGE> 1
EXHIBIT H
GENCORP INC.
LONG-TERM INCENTIVE PROGRAM
Effective January 27, 1993
And As Last Amended
November 12, 1997
<PAGE> 2
GENCORP INC.
LONG-TERM INCENTIVE PROGRAM
Table of Contents
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Article 1 Establishment, Purpose and Duration of Program ................ 1
1.1 Establishment ................................................. 1
1.2 Purpose......................................................... 1
1.3 Effective Date.................................................. 1
1.4 Duration of Program............................................. 1
Article 2 Definitions and Interpretation.................................. 2
2.1 Definitions..................................................... 2
2.2 Gender and Number............................................... 8
2.3 Time of Exercise................................................ 8
2.4 Amendments...................................................... 8
2.5 Severability.................................................... 8
Article 3 Overview of Program............................................. 9
Article 4 Performance Awards................................................ 9
4.1 Eligibility for Performance Awards.............................. 9
4.2 Performance Criteria............................................ 9
4.3 Performance Goals............................................... 9
4.4 Amounts of Performance Awards............................... 11
Article 5 Performance Periods............................................. 11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Article 6 Payment of Awards............................................... 12
6.1 Payment of Awards............................................... 12
6.2 Nontransferability.............................................. 13
6.3 Tax Withholding................................................. 13
Article 7 Rights to Performance Awards After
Termination of Employment....................................... 13
Article 8 Beneficiary Designation......................................... 14
8.1 Designation..................................................... 14
8.2 Effectiveness................................................... 14
8.3 Revocation...................................................... 15
Article 9 Rights of Employees............................................. 15
9.1 Participation................................................... 15
9.2 Employment...................................................... 15
9.3 Transfer........................................................ 15
9.4 Compensation.................................................... 15
Article 10 Administration.................................................... 16
10.1 Committee....................................................... 16
10.2 Power of the Committee.......................................... 16
10.3 Committee Decisions............................................. 16
10.4 Delegation...................................................... 16
Article 11 Disputes.......................................................... 16
11.1 Disputes........................................................ 16
11.2 Notice.......................................................... 16
11.3 Decision........................................................ 17
11.4 Lawsuit......................................................... 17
Article 12 Amendment and Termination......................................... 18
12.1 Amendment and Termination....................................... 18
12.2 Performance Awards.............................................. 18
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Article 13 Indemnification................................................... 18
13.1 Indemnity....................................................... 18
13.2 Additional Right................................................ 18
Article 14 Miscellaneous.................................................... 19
14.1 Unfunded Program................................................ 19
14.2 Costs of Program................................................ 19
14.3 Governing Law................................................... 19
</TABLE>
iii
<PAGE> 5
GENCORP INC.
LONG-TERM INCENTIVE PROGRAM
(As Amended November 12, 1997)
1. ESTABLISHMENT, PURPOSE AND DURATION OF PROGRAM
1.1 ESTABLISHMENT: GenCorp Inc. hereby establishes a long-term incentive
program, as set forth herein, which will be called "GenCorp Inc. Long-Term
Incentive Program".
1.2 PURPOSE: The purpose of the program is to promote the success and
enhance the value of the Company by linking the personal interests of
Participants to the interests of the Company's shareholders and providing to
Participants an incentive for outstanding performance. The program also is
intended to provide to the Company flexibility in its ability to hire, motivate,
and retain the services of Participants whose judgment, interest and efforts
contribute significantly to the successful conduct of the Company's business.
1.3 EFFECTIVE DATE: When approved by the Company's Board, the program
will become effective on the Effective Date, January 27, 1993.
1.4 DURATION OF PROGRAM: The program will commence on the Effective Date
and will remain in effect until terminated by the Board in accordance with
Section 12.1
<PAGE> 6
2. DEFINITIONS AND INTERPRETATION
2.1 DEFINITIONS: Whenever used in the program, the following words shall
have the meanings set forth in this Section 2.1 and, when such meaning is
intended, the initial letter of the word will be capitalized.
(a) ANNUAL COMPENSATION: The sum of (i) the base salary paid to a
Participant during a Fiscal Year while the Participant is designated as a
Participant in the Plan, and (ii) that portion of the Participant's
payment (including any part paid in Shares) for such Fiscal Year under
the Executive Incentive Compensation Program which is determined by the
Committee to be attributable to the Participant's period of participation
in the Plan.
(b) AVERAGE ANNUAL COMPENSATION: If a Performance Period includes
two or more Fiscal Years, the sum of a Participant's Annual Compensation
in each such Fiscal Year, divided by the number of such Fiscal Years
(even if the Participant did not have Annual Compensation in all Fiscal
Years in the Performance Period).
(c) BENEFICIARY: The person or persons determined in accordance
with Article 7.
(d) CHANGE IN CONTROL: The occurrence of any of the following
events, subject to the provisions of paragraph (v) hereof:
(i) All or substantially all of the assets of the Company
are sold or transferred to another corporation or entity, or the
Company is merged, consolidated or reorganized into or with
another corporation or entity, with the
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<PAGE> 7
result that upon conclusion of the transaction less than 51% of the outstanding
securities entitled to vote generally in the election of directors or other
capital interests of the acquiring corporation or entity are owned directly or
indirectly, by the shareholders of the Company generally prior to the
transaction; or
(ii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Exchange Act, disclosing that any
person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act (a "Person")) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act (a "Beneficial Owner")) of securities
representing 20% or more of the combined voting power of the
then-outstanding voting securities of the Company; or
(iii) The individuals who, at the beginning of any period
of two consecutive calendar years, constituted the Directors of
the Company cease for any reason to constitute at least a majority
thereof unless the nomination for election by the Company's
stockholders of each new Director of the Company was approved by a
vote of at least two-thirds of the Directors of the Company still
in office who were Directors of the Company at the beginning of
any such period; or
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<PAGE> 8
(iv) The Board determines that (A) any particular actual or
proposed merger, consolidation, reorganization, sale or transfer
of assets, accumulation of shares or tender offer for shares of
the Company or other transaction or event or series of
transactions or events will, or is likely to, if carried out,
result in a Change in Control falling within paragraph (i), (ii)
or (iii) hereof and (B) it is in the best interests of the Company
and its shareholders, and will serve the intended purposes of the
Change in Control provisions of this Program and other
compensation and benefit programs, plans and agreements of the
Company, if a Change in Control shall be deemed to have occurred.
(v) Notwithstanding the foregoing provisions of this
Section 2.1(d):
(A) If any such merger, consolidation,
reorganization, sale or transfer of assets, or tender offer
or other transaction or event or series of transactions or
events mentioned in paragraph (iv) hereof shall be
abandoned, or any such accumulations of shares shall be
dispersed or otherwise resolved, the Board may determine
that a Change in Control has not occurred and, by notice to
the Executive, nullify the effect thereof, but without
prejudice to any action that may have been taken prior to
such nullification.
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<PAGE> 9
(B) Unless otherwise determined in a specific case
by the Board, a Change in Control shall not be deemed to
have occurred for purposes of paragraph (ii) hereof solely
because (1) the Company, (2) a subsidiary of the Company,
or (3) any Company-sponsored employee stock ownership plan
or any other employee benefit plan of the Company or any
subsidiary of the Company either files or becomes obligated
to file a report or a proxy statement under or in response
to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A
(or any successor schedule, form or report or item therein)
under the Exchange Act disclosing Beneficial Ownership by
it of shares of the then-outstanding voting securities of
the Company, whether in excess of 20% or otherwise, or
because the Company reports that a change in control of the
Company has occurred or will occur in the future by reason
of such beneficial ownership.
(e) CODE: The Internal Revenue Code of 1986.
(f) COMMITTEE: The Organization and Compensation Committee of the
Board or such other committee of Outside Directors appointed annually by
the Board.
(g) COMPANY: GenCorp Inc., an Ohio corporation having its
registered offices at 175 Ghent Road, Fairlawn, Ohio 44333-3300.
(h) BOARD: The Board of Directors of the Company.
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<PAGE> 10
(i) DISABILITY: A permanent and total disability, physical or
mental, as defined in the GenCorp Long-Term Disability program and as
determined by the Committee.
(j) EMPLOYEE: Each full-time salaried employee (including, without
limitation, a Director who also is an employee) of the Company or a
Participating Subsidiary, who is not in a bargaining unit represented by
a labor organization.
(k) FISCAL YEAR: The Company's fiscal year which is the annually
recurring period of twelve (12) consecutive calendar months, commencing
on December 1 and ending on November 30.
(l) PROGRAM: The GenCorp Inc. Long-Term Incentive Program, as
described in this document.
(m) PARTICIPANT: With respect to any Performance Period, an
Employee who, at the beginning of the Performance Period, is (i)
designated by the Board as a Participant for such Performance Period, and
(ii) presented with a grant certificate setting forth the terms of his
participation. In addition, the Chief Executive Officer shall have
discretion to designate new Participants with respect to any Performance
Period only during the first Fiscal Year of such Performance Period.
(n) PARTICIPATING SUBSIDIARY: Any domestic corporation in which
the Company owns directly, or indirectly through a subsidiary, at least
fifty percent (50%) of the total combined voting power of all classes of
stock and whose
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<PAGE> 11
directors adopt and ratify the Program in a manner determined by the
Committee.
(o) PERFORMANCE AWARD: A dollar amount determined pursuant to
Article 4 and paid to a Participant in Shares pursuant to Article 6.
(p) PERFORMANCE CRITERIA: The measures of economic achievement
selected by the Board for a specific Performance Period and set forth in
Part B of the Appendix for that Performance Period in accordance with
Section 4.2.
(q) PERFORMANCE GOALS: The specified levels of economic
achievement, based on the selected Performance Criteria, established by
the Board and set forth in Part C of the Appendix for each Performance
Period in accordance with Section 4.3.
(r) PERFORMANCE PERIOD: A period of three consecutive Fiscal Years
authorized by the Board in accordance with Section 5.1.
(s) OUTSIDE DIRECTOR: A member of the Board who
(i) is not a current employee of the Company or a
Participating Subsidiary;
(ii) is not a former employee of the Company or a
Participating Subsidiary who receives compensation for prior
services (other than benefits under a tax-qualified retirement
plan) during the Fiscal Year;
(iii) has not been an officer of the Company; and
(iv) does not receive remuneration from the Company or a
participating Subsidiary in any capacity other than as a director.
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<PAGE> 12
(t) SHARE: A share of the voting common stock of the Company.
(u) MARKET VALUE: The closing price for Shares as reported in the
New York Stock Exchange Composite Transactions in the WALL STREET JOURNAL
or similar publication selected by the Committee for the relevant date if
Shares were traded on such day or, if none were then traded, the last
prior day on which Shares were so traded.
2.2 GENDER AND NUMBER: Except as otherwise indicated by the context, any
masculine term used herein also includes the feminine; any singular term
includes the plural thereof; and any plural term includes the singular thereof.
2.3 TIME OF EXERCISE: Any action or right specified in the Program may be
taken or exercised at any time and from time to time unless a specific time is
designated herein for the taking or exercise thereof.
2.4 AMENDMENTS: The Program and each law and/or regulation mentioned
herein will be deemed to include each and every amendment thereof.
2.5 SEVERABILITY: If any provision of the Program is held illegal or
invalid for any reason, the illegal or invalid provision will be severed and, to
the extent possible, the remaining provisions of the program will be enforced as
if such illegal or invalid provision had not been included herein.
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<PAGE> 13
3. OVERVIEW OF THE PROGRAM
The Program is designed to allow Participants to earn Performance Awards
based upon attainment by the Company and/or the appropriate Participating
Subsidiary or division of specific Performance Goals established by the Board
for each Performance Period. For each Performance Period, the Board shall set
forth in an Appendix hereto (i) the Employees designated as Participants in the
Program, (ii) Performance Criteria (Section 4.2), (iii) Performance Goals and a
description of how the relative attainment of Performance Goals by the Company
and the operating divisions affect the Performance Award for each Participant
(Section 4.3), and (iv) a schedule of Participants' eligibility for Performance
Awards based upon the degree of attainment of Performance Goals (Section 4.4).
4. PERFORMANCE AWARDS
4.1 ELIGIBILITY FOR PERFORMANCE AWARDS: Upon attainment and satisfaction
of the Performance Goals and other specific terms and conditions established in
accordance with this Article 4, each Participant shall be entitled to receive a
Performance Award following the conclusion of the applicable Performance Period.
A Performance Award shall constitute a dollar amount calculated as a percentage
of the Participant's Average Annual Compensation in accordance with Section 4.4,
and shall be paid in Shares in accordance with Section 6.1.
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<PAGE> 14
4.2 PERFORMANCE CRITERIA: For the purpose of setting Performance Goals,
the Board shall establish Performance Criteria for each Performance Period. The
Board may use such measures as return on total capital, return on assets
employed, return on equity, earnings growth, revenue growth, cash flow,
comparisons to peer companies or such other measure or measures of performance
in such manner as the Board deem appropriate. Different Performance Criteria may
be established for each operating division and for the Company as a whole. The
Performance Criteria established by the Board for each Performance Period shall
be set forth in Part B of the Appendix applicable to that Performance Period.
4.3 PERFORMANCE GOALS: Based upon the Performance Criteria chosen for a
Performance Period, the Outside Directors shall establish precise measures of
achievement as specified Performance Goals for that Performance Period.
(a) The Outside Directors may specify different Performance Goals
for each division, and for the Company as a whole and may determine
separately the applicability and relative weighting of such different
Performance Goals for each Participant.
(b) The Outside Directors shall establish Performance Goals for
any Performance Period in two steps: (i) for the first Fiscal Year
thereof, within the first 90 days of such Fiscal Year and based upon
management's Annual Operating Plan for such Fiscal Year, and (ii) for the
entire Performance Period, within the first nine months thereof and based
upon both the preestablished
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<PAGE> 15
Performance Goals for the first Fiscal Year and management's Strategic
Plan for the entire Performance Period.
(c) Such Performance Goals and the application and weighting of
such Performance Goals for each Participant shall be set forth in Part C
of the Appendix for each Performance Period.
4.4 AMOUNTS OF PERFORMANCE AWARDS: The amount of a Participant's
Performance Award, if any, shall be determined in accordance with a schedule set
forth in Part D of the Appendix for each Performance Period. Such schedule will
be determined by the Board for each Performance Period, and generally will
provide a Performance Award payable as either (i) a specified percentage of the
Participant's Average Annual Compensation for attainment of the threshold,
target or maximum Performance Goal established by the Board, (ii) a prorated
percentage of the Participant's Average Annual Compensation upon attainment of a
level of economic achievement greater than the threshold Performance Goal but
less than the target Performance Goal, or (iii) a prorated percentage of the
Participant's Average Annual Compensation upon attainment of a level of economic
achievement greater than the target Performance Goal but less than the maximum
Performance Goal.
5. PERFORMANCE PERIODS
5.1 PERFORMANCE PERIOD: Subject to the Board's adoption of Performance
Criteria and Performance Goals pursuant to Article 4, there shall be successive
and
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<PAGE> 16
overlapping Performance Periods having a duration of three fiscal years
each. The First Performance Period shall commence on December 1, 1992 and
terminate on November 30, 1995.
6. PAYMENT OF AWARDS
6.1 PAYMENT OF AWARDS: Following the conclusion of a Performance Period,
payment in settlement of a Participant's Performance Award, if any, for such
Performance Period shall be made in Shares, subject to the following conditions:
(a) Prior to converting the dollar amount of the Participant's
Performance Award into Shares, the Company shall first deduct and pay
over to the applicable taxing authority any federal, state or local taxes
of any kind required by law to be withheld with respect to such payments.
(b) The net dollar amount of the Participant's Performance Award
after withholding of taxes in accordance with subsection (a) shall be
converted into a number of Shares having a Market Value, on the date
determined by the Committee, equal to the amount of the payment to be
made.
(c) Shares payable to a Participant in respect of a Performance
Award shall be issued in the name of the Participant on one stock
certificate, and such stock certificate shall be delivered to the
Participant.
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6.2 NONTRANSFERABILITY: All rights to payment under Performance Awards
shall be nontransferable other than by will or by the laws of descent and
distribution in accordance with Article 6 hereof.
6.3 TAX WITHHOLDING: The Company shall have the right to deduct from any
payment made under the program any federal, state or local taxes of any kind
required by law to be withheld with respect to such payments or to take such
other action as may be necessary in the opinion of the Company to satisfy all
obligation for the payment of such taxes.
7. RIGHTS TO PERFORMANCE AWARDS AFTER TERMINATION OF EMPLOYMENT
7.1 IN GENERAL: Except in the event of a Change in Control as
described in Section 7.2, a Participant's right to receive Performance
Awards following any termination of employment shall be determined
pursuant to this Section 7.1. Upon termination of a Participant's
employment with the Company or a Participating Subsidiary for any
reason, the Participant shall be entitled to receive, at such times as
normally payable, any Performance Award due to him for any Performance
Period already completed. However, a Participant shall not be entitled
to receive a Performance Award for any Performance Period which has not
been completed at the Participant's termination date, except that the
Chief Executive Officer shall have discretion to pay a partial
Performance Award to a terminated Participant for significant individual
contributions.
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7.2 CHANGE IN CONTROL: In the event a Participant's employment
with the Company or a Participating Subsidiary is terminated within
three years following a Change in Control either involuntarily (other
than for death, disability or cause) or voluntarily pursuant to Section
3(b) of a Severance Agreement between the Participant and the
Company, the Participant shall be entitled to immediate payment of (a)
any Performance Award due to him at the time of his termination for any
Performance Period already completed, and (b) a prorated Performance
Award for each Performance Period which has not been completed at the
time of his termination, calculated using the greater of actual or
"target" attainment of Performance Goals for that portion of any
Performance Period not completed.
8. BENEFICIARY DESIGNATION
8.1 DESIGNATION: A Participant may name any Beneficiary (contingently or
successively) to whom any benefit under the Program is to be paid if the
Participant dies before receiving such benefit. Absent such designation, any
benefit which is due but not paid to a Participant under the program during his
lifetime will be payable to the Participant's estate.
8.2 EFFECTIVENESS: The designation of a Beneficiary will be effective
only when the Participant designates his Beneficiary in the form prescribed by
the Company and delivers it to the Company's Secretary during the Participant's
lifetime.
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8.3 REVOCATION: The designation of a Beneficiary as herein provided will
revoke each prior designation of a Beneficiary by the Participant.
9. RIGHTS OF EMPLOYEES
9.1 PARTICIPATION: Except as provided in Article 4, no Employee will have
the right to participate in the Program or, having been a Participant for any
Performance Period, to continue to be a Participant in any subsequent
Performance Period.
9.2 EMPLOYMENT: Nothing in the Program will interfere with or limit the
right of the Company or a Participating Subsidiary to terminate any
Participant's employment, nor confer to any Participant any right to continue in
the employ of the Company or a Participating Subsidiary.
9.3 TRANSFER: For purposes of the program, transfer of a Participant's
employment between the Company and a Participating Subsidiary or between
Participating Subsidiaries will not be deemed a termination of employment.
9.4 COMPENSATION: No benefit or other amount paid to a Participant
pursuant to the Program will be included in the Participant's compensation or
earnings for purposes of any pension or other employee benefit program of the
Company or any Participating Subsidiary.
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<PAGE> 20
10. ADMINISTRATION
10.1 COMMITTEE: The Committee will administer the Program.
10.2 POWER OF THE COMMITTEE: The Committee will have full authority and
power to (i) interpret and construe the Program; and (ii) establish, amend
and/or waive rules and regulations for the Program's administration.
10.3 COMMITTEE DECISIONS: The Committee will make all determinations and
decisions hereunder by not less than a majority of its members. The Committee
may act or take action by written instrument or vote at a meeting convened after
reasonable notice. The Committee's determinations and decisions hereunder, and
related orders or resolutions of the Board, will be final, binding and
conclusive on all persons, including the Company, its stockholders,
Participating Subsidiaries, employees, Participants and Beneficiaries.
10.4 DELEGATION: The Committee may delegate any authority or power
conferred to it under the Program as and to the extent permitted by law.
11. DISPUTES
11.1 DISPUTES: The Committee will have full and exclusive authority to
determine all disputes and controversies concerning the interpretation of the
Program to the fullest extent permitted by law.
11.2 NOTICE: If any Participant disputes any decision or determination
by the Committee, the Company or any Participating Subsidiary concerning the
administration
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<PAGE> 21
of the Program or any provision of the Program, the Participant must give
written notice to the Committee as to such dispute at least ninety (90) days
prior to commencing any lawsuit or legal proceeding in connection therewith. The
Participant must give such notice of dispute by delivering to the Company's
Secretary written notice which identifies the dispute and any provision of the
Program in question. Such notice will be a condition of participation in the
Program and failure to satisfy such condition will extinguish all rights of the
Participant to any payment pursuant to the Program.
11.3 DECISION: Promptly (but within seventy-five (75) days after notice
of dispute), the Committee will review and decide the dispute and give the
Participant written notice of its decision. Except as provided in Section 11.4,
the Committee's decision will be final and binding on the Company, the Company's
shareholders, Participating Subsidiaries, and the Participant (including his
Beneficiary).
11.4 LAWSUIT: A Participant may institute a lawsuit in connection with
the Committee's decision involving his rights under the Program within one
hundred and eighty (180) days after receiving the Committee's decision, but such
lawsuit will be limited to whether the Committee acted in good faith and its
decision was reasonable under the circumstances and in light of the information
available to and considered by the Committee.
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<PAGE> 22
12. AMENDMENT AND TERMINATION
12.1 AMENDMENT AND TERMINATION: The Board may terminate, amend, or modify
the Program at any time or for any reason.
12.2 PERFORMANCE AWARDS: No termination, amendment, or modification of
the Program will in any manner adversely affect any Participant's rights to
receive a Performance Award previously earned under the Program.
13. INDEMNIFICATION
13.1 INDEMNITY: The Company will defend and indemnify each person who is
or has been a member of the Committee in respect of any claim which is asserted
against him and is based on his action or failure to take action under or in
connection with the program or any agreement related to the Program; provided
that such person gives the Company notice of such claim, cooperates with the
Company in defense of such claim, permits the Company to control the defense of
such claim prior to his undertaking any defense on his own behalf and confers to
the Company full authority to compromise and settle the claim.
13.2 ADDITIONAL RIGHT: The indemnity provided under Section 13.1 will be
in addition to, and not in lieu of, any other right of indemnification to which
such person may be entitled under the Company's Code of Regulations, as a matter
of law or otherwise, and will not exclude any other power that the Company may
have to defend and indemnify him.
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14. MISCELLANEOUS
14.1 UNFUNDED PROGRAM: The Program shall be unfunded and the Company
shall not be required to segregate any assets that may at any time be
represented by Performance Awards under the program. Any liability of the
Company to any person with respect to any Performance Award under the Program
shall be based solely upon any contractual obligations that may be effected
pursuant to the Program. No such obligation of the Company shall be deemed to be
secured by any pledge of, or other encumbrance on, any property of the Company.
14.2 COSTS OF PROGRAM: The costs and expenses of administering the
Program shall be borne by the Company.
14.3 GOVERNING LAW: To the extent not preempted by federal law, the
Program and all agreements hereunder will be governed by and interpreted in
accordance with the laws of the State of Ohio.
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<PAGE> 1
EXHIBIT I
GENCORP INC.
EXECUTIVE INCENTIVE COMPENSATION PROGRAM
As Amended January 30, 1998
<PAGE> 2
<TABLE>
<CAPTION>
GENCORP INC.
EXECUTIVE INCENTIVE COMPENSATION PROGRAM
Table of Contents
<S> <C>
Page
----
1. Establishment, Purpose and Duration of Program.............................. 1
1.1 Establishment................................................. 1
1.2 Purpose....................................................... 1
1.3 Effective Date................................................ 1
1.4 Duration of Program........................................... 1
2. Definitions and Interpretation.............................................. 2
2.1 Definitions................................................... 2
2.2 Gender and Number............................................. 8
2.3 Time of Exercise.............................................. 8
2.4 Amendments.................................................... 8
2.5 Severability.................................................. 8
3. Overview of the Program..................................................... 9
4. Incentive Bonus............................................................. 9
4.1 Eligibility for Incentive Bonus............................... 9
4.2 Performance Objectives........................................ 9
4.3 Incentive Opportunity......................................... 10
4.4 Amount of Incentive Bonus..................................... 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5. Payment of Incentive Bonus.................................................. 11
5.1 Payment of Incentive Bonus.................................... 11
5.2 Nontransferability............................................ 12
5.3 Tax Withholding............................................... 12
6. Rights to Incentive Bonus After Death, Disability,
Retirement or Other Termination of Employment ...........................12
6.1 Death......................................................... 12
6.2 Disability.................................................... 13
6.3 Retirement.................................................... 13
6.4 Involuntary Termination....................................... 13
6.5 Termination for Other Reasons................................. 14
6.6 Change in Control............................................. 14
7. Beneficiary Designation..................................................... 15
7.1 Designation................................................... 15
7.2 Effectiveness................................................. 15
7.3 Revocation.................................................... 15
8. Rights of Employees......................................................... 15
8.1 Participation................................................. 15
8.2 Employment.................................................... 16
8.3 Transfer...................................................... 16
9. Administration.............................................................. 16
9.1 Committee..................................................... 16
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
9.2 Power of the Committee........................................ 16
9.3 Committee Decisions........................................... 16
9.4 Delegation.................................................... 17
10. Disputes................................................................... 17
10.1 Disputes...................................................... 17
10.2 Notice........................................................ 17
10.3 Decision...................................................... 18
10.4 Lawsuit....................................................... 18
11. Amendment and Termination.................................................. 18
11.1 Amendment and Termination..................................... 18
11.2 Amendment..................................................... 18
12. Indemnification............................................................ 19
12.1 Indemnity..................................................... 19
12.2 Additional Right.............................................. 19
13. Miscellaneous.............................................................. 19
13.1 Unfunded Program.............................................. 19
13.2 Costs of Program.............................................. 20
13.3 Governing Law................................................. 20
</TABLE>
iii
<PAGE> 5
GENCORP INC.
EXECUTIVE INCENTIVE COMPENSATION PROGRAM
1. ESTABLISHMENT, PURPOSE AND DURATION OF PROGRAM
1.1 ESTABLISHMENT: GenCorp Inc. hereby establishes a bonus program, as
set forth herein, which will be called the "GenCorp Inc. Executive Incentive
Compensation Program."
1.2 PURPOSE: The purpose of the Program is to motivate Participants to
achieve key team and individual performance targets, to reward Participants for
outstanding performance, and to enhance the value of the Company by linking the
personal interests of Participants to the interests of the Company's
shareholders. The Program also is intended to provide to the Company flexibility
in its ability to hire, motivate, and retain the services of Participants whose
judgment, interest and efforts contribute significantly to the successful
conduct of the Company's business.
1.3 EFFECTIVE DATE: The Program was adopted effective December 1, 1994.
The provisions of the Program requiring partial payment of bonuses in Shares
became effective for Fiscal Years commencing on or after December 1, 1995.
1.4 DURATION OF PROGRAM: The Program will remain in effect until
terminated by the Committee in accordance with Section 11.1.
-1-
<PAGE> 6
2. DEFINITIONS AND INTERPRETATION
2.1 DEFINITIONS: Whenever used in the Program, the following words shall
have the meanings set forth in this Section 2.1 and, when such meaning is
intended, the initial letter of the word will be capitalized.
(a) BASE PAY: An amount equal to the annual base salary (excluding
bonus, commissions, expense reimbursements, employee benefits, and all
other non-base salary amounts) paid to a Participant in a Fiscal Year.
(b) BENEFICIARY: The person or persons determined in accordance
with Article 8.
(c) BOARD: The Board of Directors of the Company.
(d) CHANGE IN CONTROL: The occurrence of any of the following
events, subject to the provisions of paragraph (v) hereof:
(i) All or substantially all of the assets of the Company
are sold or transferred to another corporation or entity, or the
Company is merged, consolidated or reorganized into or with
another corporation or entity, with the result that upon
conclusion of the transaction less than 51% of the outstanding
securities entitled to vote generally in the election of directors
or other capital interests of the acquiring corporation or entity
are owned directly or indirectly, by the shareholders of the
Company generally prior to the transaction; or
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<PAGE> 7
(ii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Exchange Act, disclosing that any
person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act (a "Person")) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act (a "Beneficial Owner")) of securities
representing 20% or more of the combined voting power of the
then-outstanding voting securities of the Company; or
(iii) The individuals who, at the beginning of any period
of two consecutive calendar years, constituted the Directors of
the Company cease for any reason to constitute at least a majority
thereof unless the nomination for election by the Company's
stockholders of each new Director of the Company was approved by a
vote of at least two-thirds of the Directors of the Company still
in office who were Directors of the Company at the beginning of
any such period; or
(iv) The Board determines that (A) any particular actual or
proposed merger, consolidation, reorganization, sale or transfer
of assets, accumulation of shares or tender offer for shares of
the Company or other transaction or event or series of
transactions or events will, or is likely to, if carried out,
result in a Change in Control falling within paragraph (i), (ii)
or (iii) hereof and (B) it is in the best interests of the Company
and its
-3-
<PAGE> 8
shareholders, and will serve the intended purposes of the Change
in Control provisions of this Program and other compensation and
benefit programs, plans and agreements of the Company, if a Change
in Control shall be deemed to have occurred.
(v) Notwithstanding the foregoing provisions of this
Section 2.1(d):
(A) If any such merger, consolidation,
reorganization, sale or transfer of assets, or tender offer
or other transaction or event or series of transactions or
events mentioned in paragraph (iv) hereof shall be
abandoned, or any such accumulations of shares shall be
dispersed or otherwise resolved, the Board may determine
that a Change in Control has not occurred and, by notice to
the Executive, nullify the effect thereof, but without
prejudice to any action that may have been taken prior to
such nullification.
(B) Unless otherwise determined in a specific case
by the Board, a Change in Control shall not be deemed to
have occurred for purposes of paragraph (ii) hereof solely
because (1) the Company, (2) a subsidiary of the Company,
or (3) any Company- sponsored employee stock ownership plan
or any other employee benefit plan of the Company or any
subsidiary of the Company either files or becomes obligated
to file a report or a proxy statement under or in response
to Schedule 13D, Schedule 14D-1,
-4-
<PAGE> 9
Form 8-K or Schedule 14A (or any successor schedule, form
or report or item therein) under the Exchange Act
disclosing Beneficial Ownership by it of shares of the
then-outstanding voting securities of the Company, whether
in excess of 20% or otherwise, or because the Company
reports that a change in control of the Company has
occurred or will occur in the future by reason of such
beneficial ownership.
(e) CHIEF EXECUTIVE OFFICER: The Chief Executive Officer of the
Company.
(f) CODE: The Internal Revenue Code of 1986.
(g) COMMITTEE: The Organization and Compensation Committee of the
Board, or such other committee of Outside Directors appointed annually by
the Board.
(h) COMPANY: GenCorp Inc., an Ohio corporation, having its
registered offices at 175 Ghent Road, Fairlawn, Ohio 44333-3300.
(i) EFFECTIVE DATE: December 1, 1994, except as otherwise provided
herein.
(j) EMPLOYEE: A full-time salaried employee (including, without
limitation, a director who also is an employee) of the Company or a
Participating Subsidiary, who is not in a bargaining unit represented by
a labor organization.
-5-
<PAGE> 10
(k) FISCAL YEAR: The Company's fiscal year which is the annually
recurring period of twelve (12) consecutive calendar months, commencing
on December 1 and ending on November 30.
(l) INCENTIVE BONUS: A dollar amount determined pursuant to
Article 4 and paid to a Participant pursuant to Article 5.
(m) INCENTIVE OPPORTUNITY: An amount expressed as a percentage of
a Participant's Base Pay which shall be determined by the Chief Executive
Officer, with the approval of the Committee, for each Participant for
each Fiscal Year as the maximum Incentive Bonus for which the Participant
shall be eligible for the Fiscal Year.
(n) MARKET VALUE: The closing price for Shares as reported in the
New York Stock Exchange Composite Transactions in the WALL STREET JOURNAL
or similar publication selected by the Committee for the relevant date if
Shares were traded on such day or, if none were then traded, the last
prior day on which Shares were so traded.
(o) NET BONUS: The amount of a Participant's Incentive Bonus,
after deduction of (i) any pre-tax contribution pursuant to any election
which the Participant may have in effect under the terms of any employee
benefit plan of the Company, (ii) any federal, state or local taxes of
any kind required by law to be withheld, and (iii) any after-tax
contribution pursuant to any election which the Participant may have in
effect under the terms of any employee benefit plan of the Company.
-6-
<PAGE> 11
(p) OUTSIDE DIRECTOR: A member of the Board who
(i) is not a current employee of the Company or a
Participating Subsidiary;
(ii) is not a former employee of the Company or a
Participating Subsidiary who receives compensation for prior
services (other than benefits under a tax-qualified retirement
plan) during the Fiscal Year;
(iii) has not been an officer of the Company; and
(iv) does not receive remuneration from the Company or a
Participating Subsidiary in any capacity other than as a director.
(q) PROGRAM: The GenCorp Inc. Executive Incentive Compensation
Program, as described in this document.
(r) PARTICIPANT: An Employee who is employed, during a Fiscal
Year, in a position determined by the Chief Executive Officer to have
sufficient scope, authority and impact on the Company's performance to
qualify for participation in the Program.
(s) PARTICIPATING SUBSIDIARY: Any domestic corporation in which
the Company owns directly, or indirectly through a subsidiary, at least
fifty percent (50%) of the total combined voting power of all classes of
stock and whose directors adopt and ratify the Program in a manner
determined by the Committee.
(t) PERFORMANCE OBJECTIVES: The measures of achievement in the
categories of Financial Results, Continuous Improvement, Special
Objectives
-7-
<PAGE> 12
and Leadership determined by the Chief Executive Officer to apply to a
Participant for a specific Fiscal Year and set forth in the Performance
Objectives Worksheet for that Fiscal Year in accordance with Section 4.2.
(u) SHARE: A share of the Company's ten-cent (10(cent)) par-value
common stock.
2.2 GENDER AND NUMBER: Except as otherwise indicated by the context, any
masculine term used herein also includes the feminine; any singular term
includes the plural thereof; and any plural term includes the singular thereof.
2.3 TIME OF EXERCISE: Any action or right specified in the Program may be
taken or exercised at any time and from time to time unless a specific time is
designated herein for the taking or exercise thereof.
2.4 AMENDMENTS: The Program and each law and/or regulation mentioned
herein will be deemed to include each and every amendment thereof.
2.5 SEVERABILITY: If any provision of the Program is held illegal or
invalid for any reason, the illegal or invalid provision will be severed and, to
the extent possible, the remaining provisions of the Program will be enforced as
if such illegal or invalid provision had not been included herein.
-8-
<PAGE> 13
3. OVERVIEW OF THE PROGRAM
The Program is designed to allow a Participant to earn an Incentive Bonus
based upon attainment by the Company and/or the Participant of specific
Performance Objectives. Each Fiscal Year, the Chief Executive Officer, with the
approval of the Committee, will determine for each Participant (i) the
Performance Objectives, (ii) the Incentive Opportunity, (iii) the degree to
which the Performance Objectives are achieved, and (iv) the amount of the
Incentive Bonus. Under certain conditions as set forth in Section 5.1, each
Participant who is a member of the GenCorp Leadership Council will have part of
his Incentive Bonus paid in the form of Shares.
4. INCENTIVE BONUS
4.1 ELIGIBILITY FOR INCENTIVE BONUS: Upon a determination by the
Committee that the applicable Performance Objectives and other specific terms
and conditions established in accordance with this Article 4 have been achieved,
each Participant shall be eligible to receive an Incentive Bonus following the
conclusion of the applicable Fiscal Year.
4.2 PERFORMANCE OBJECTIVES: Within a reasonable period after the
beginning of each Fiscal Year, the Chief Executive Officer, with the approval of
the Committee, shall determine and communicate to each Participant the
Performance Objectives for the
-9-
<PAGE> 14
Participant for such Fiscal Year in the categories of Financial Results,
Continuous Improvement, Special Objectives and Leadership. Different Performance
Objectives may be established for each Participant. Performance Objectives for
each Participant for each Fiscal Year shall be set forth in the Participant's
Performance Objectives Worksheet.
4.3 INCENTIVE OPPORTUNITY: Within a reasonable period after the
beginning of each Fiscal Year, the Chief Executive Officer, with the approval of
the Committee, shall determine and communicate to each Participant the Incentive
Opportunity for the Participant for such Fiscal Year, expressed as a percentage
of a Participant's Base Pay for the Fiscal Year. Each Participant's aggregate
Incentive Opportunity for a Fiscal Year may be the sum of separate percentages
specified for the Performance Objective categories of Financial Results,
Continuous Improvement, Special Objectives and Leadership. The Incentive
Opportunity for each Participant for each Fiscal Year shall be set forth in the
Participant's Performance Objectives Worksheet.
4.4 AMOUNT OF INCENTIVE BONUS: The amount of Incentive Bonus that may
be paid to a Participant for any Fiscal Year shall be determined as a dollar
amount for each Participant by the Committee within 90 days after the end of
such Fiscal Year.
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<PAGE> 15
5. PAYMENT OF INCENTIVE BONUS
5.1 PAYMENT OF INCENTIVE BONUS: Following the conclusion of a Fiscal
Year, payment in settlement of a Participant's Incentive Bonus, if any, for such
Fiscal Year shall be made in cash, except as provided hereafter in this Section
5.1. Effective for Fiscal Years commencing on or after December 1, 1996, if a
Participant is an elected officer of the Company who is subject to the Company's
Common Stock Ownership Guidelines, 20% of the Participant's Incentive Bonus
shall be paid in Shares, subject to the following conditions:
(a) Prior to converting any portion of the Participant's Incentive
Bonus into Shares, the Company shall, with respect to the entire dollar
amount of the Participant's Incentive Bonus, first (i) deduct any pre-tax
contribution pursuant to any election which the Participant may have in
effect under the terms of any employee benefit plan of the Company, (ii)
deduct and pay over to the applicable taxing authority any federal, state
or local taxes of any kind required by law to be withheld, and (iii)
deduct any after-tax contribution pursuant to any election which the
Participant may have in effect under the terms of any employee benefit
plan of the Company. The amount remaining after the foregoing deductions
shall be the Participant's "Net Bonus."
(b) A Participant's Net Bonus shall be divided into two parts --
(i) an amount to be paid in cash, equal to 80% of the Participant's Net
Bonus, and (ii) an amount, equal to 20% of the Participant's Net Bonus,
to be converted to a
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<PAGE> 16
number of Shares having a Market Value, on the date determined by the
Committee, equal to such amount.
(c) Shares payable to a Participant in respect of an Incentive
Bonus for any Fiscal Year shall be issued in the name of the Participant
on one stock certificate, and such stock certificate shall be delivered
to the Participant.
5.2 NONTRANSFERABILITY: All rights to payment under an Incentive Bonus
shall be nontransferable other than by will or by the laws of descent and
distribution in accordance with Article 6 hereof.
5.3 TAX WITHHOLDING: The Company shall have the right to deduct from any
payment made under the Program any federal, state or local taxes of any kind
required by law to be withheld with respect to such payments or to take such
other action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes.
6. RIGHTS TO INCENTIVE BONUS AFTER DEATH, DISABILITY,
RETIREMENT OR OTHER TERMINATION OF EMPLOYMENT
6.1 DEATH: If a Participant's employment with the Company or a
Participating Subsidiary terminates by reason of death, the Participant's
Beneficiary shall be entitled to receive, at such times as normally payable, (i)
any Incentive Bonus due to the Participant at the time of his death for any
Fiscal Year already completed, and (ii) a
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<PAGE> 17
prorated Incentive Bonus for any Fiscal Year which has not been completed at the
time of his death.
6.2 DISABILITY: If a Participant's employment with the Company or a
Participating Subsidiary terminates by reason of disability, the Participant
shall be entitled to receive, at such times as normally payable, (i) any
Incentive Bonus due to the Participant at the time of his employment termination
for any Fiscal Year already completed, and (ii) a prorated Incentive Bonus for
any Fiscal Year which has not been completed at the time of his employment
termination.
6.3 RETIREMENT: Subject to Section 6.6, if a Participant's employment
with the Company or a Participating Subsidiary terminates by reason of
retirement, the Participant shall be entitled to receive, at such times as
normally payable, (i) any Incentive Bonus due to the Participant at the time of
his retirement for any Fiscal Year already completed, and (ii) a prorated
Incentive Bonus for any Fiscal Year which has not been completed at the time of
his retirement.
6.4 INVOLUNTARY TERMINATION: Subject to Section 6.6, if a Participant's
employment with the Company or a Participating Subsidiary is involuntarily
terminated due to action by the Company or the Participating Subsidiary, the
Participant shall be
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<PAGE> 18
entitled to receive, at such times as normally payable, any Incentive Bonus due
to the Participant at the time of his termination for any Fiscal Year already
completed.
6.5 TERMINATION FOR OTHER REASONS: Subject to Section 6.6, upon
termination of a Participant's employment with the Company or a Participating
Subsidiary for any reason other than those specified in Sections 6.1 through 6.4
above, the Participant shall not be entitled to receive any Incentive Bonus for
any Fiscal Year already completed or for any current Fiscal Year.
6.6 CHANGE IN CONTROL: Notwithstanding the foregoing provisions of this
Article 6, in the event a Participant's employment with the Company or a
Participating Subsidiary is terminated within three years following a Change in
Control either involuntarily (other than for death, disability or cause) or
voluntarily pursuant to Section 3(b) of a Severance Agreement between the
Participant and the Company, the Participant shall be entitled to immediate
payment of (a) any Incentive Bonus due to him at the time of his termination for
any Fiscal Year already completed, and (b) an Incentive Bonus for any Fiscal
Year which has not been completed at the time of his termination, in an amount
equal to the greater of (i) an amount determined under the Program on the basis
of actual performance during such Fiscal Year, or (ii) 75% of such Participant's
annualized Base Pay for such Fiscal Year as if such Fiscal Year had been
completed.
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<PAGE> 19
7. BENEFICIARY DESIGNATION
7.1 DESIGNATION: A Participant may name any Beneficiary (contingently or
successively) to whom any benefit under the Program is to be paid if the
Participant dies before receiving such benefit. Absent such designation, any
benefit which is due but not paid to a Participant under the Program during his
lifetime will be payable to the Participant's estate.
7.2 EFFECTIVENESS: The designation of a Beneficiary will be effective
only when the Participant designates his Beneficiary in the form prescribed by
the Company and delivers it to the Company's Secretary during the Participant's
lifetime.
7.3 REVOCATION: The designation of a Beneficiary as herein provided will
revoke each prior designation of a Beneficiary by the Participant.
8. RIGHTS OF EMPLOYEES
8.1 PARTICIPATION: Except as provided in Article 4, no Employee will have
the right to participate in the Program or, having been a Participant for any
Fiscal Year, to continue to be a Participant in any subsequent Fiscal Year.
-15-
<PAGE> 20
8.2 EMPLOYMENT: Nothing in the Program will interfere with or limit the
right of the Company or a Participating Subsidiary to terminate any
Participant's employment, nor confer to any Participant any right to continue in
the employ of the Company or a Participating Subsidiary.
8.3 TRANSFER: For purposes of the Program, transfer of a Participant's
employment between the Company and a Participating Subsidiary or between
Participating Subsidiaries will not be deemed a termination of employment.
9. ADMINISTRATION
9.1 COMMITTEE: The Compensation Committee of the Board will administer
the Program. No member of the Committee may be an Employee.
9.2 POWER OF THE COMMITTEE: The Committee will have full authority and
power to (i) interpret and construe the Program; and (ii) establish, amend
and/or waive rules and regulations for the Program's administration.
9.3 COMMITTEE DECISIONS: The Committee will make all determinations and
decisions hereunder by not less than a majority of its members. The Committee
may act or take action by written instrument or vote at a meeting convened after
reasonable notice. The Committee's determinations and decisions hereunder, and
related orders
-16-
<PAGE> 21
or resolutions of the Board, will be final, binding and conclusive on all
persons, including the Company, its stockholders, Participating Subsidiaries,
employees, Participants and Beneficiaries.
9.4 DELEGATION: The Committee may delegate any authority or power
conferred to it under the Program as and to the extent permitted by law.
10. DISPUTES
10.1 DISPUTES: The Committee will have full and exclusive authority to
determine all disputes and controversies concerning the interpretation of the
Program to the fullest extent permitted by law.
10.2 NOTICE: If any Participant disputes any decision or determination
by the Committee, the Company or any Participating Subsidiary concerning the
administration of the Program or any provision of the Program, the Participant
must give written notice to the Committee as to such dispute at least ninety
(90) days prior to commencing any lawsuit or legal proceeding in connection
therewith. The Participant must give such notice of dispute by delivering to the
Company's Secretary written notice which identifies the dispute and any
provision of the Program in question. Such notice will be a condition of
participation in the Program, and failure to satisfy such condition will
extinguish all rights of the Participant to any payment pursuant to the Program.
-17-
<PAGE> 22
10.3 DECISION: Promptly (but within seventy-five (75) days after notice
of dispute), the Committee will review and decide the dispute and give the
Participant written notice of its decision. Except as provided in Section 11.4,
the Committee's decision will be final and binding on the Company, the Company's
stockholders Participating Subsidiaries, and the Participant (including his
Beneficiary).
10.4 LAWSUIT: A Participant may institute a lawsuit in connection with
the Committee's decision involving his rights under the Program within one
hundred and eighty (180) days after receiving the Committee's decision, but such
lawsuit will be limited to whether the Committee acted in good faith and whether
its decision was reasonable under the circumstances and in light of the
information available to and considered by the Committee.
11. AMENDMENT AND TERMINATION
11.1 AMENDMENT AND TERMINATION: The Committee may terminate, amend or
modify the Program at any time or for any reason.
11.2 INCENTIVE BONUSES: No termination, amendment, or modification of
the Program will in any manner adversely affect any Participant's rights to
receive an Incentive Bonus previously earned under the Program.
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<PAGE> 23
12. INDEMNIFICATION
12.1 INDEMNITY: The Company will defend and indemnify each person who
is or has been a member of the Committee in respect of any claim which is
asserted against him and is based on his action or failure to take action under
or in connection with the Program or any agreement related to the Program;
provided that such person gives the Company notice of such claim, cooperates
with the Company in defense of such claim, permits the Company to control the
defense of such claim prior to his undertaking any defense on his own behalf and
confers to the Company full authority to compromise and settle the claim.
12.2 ADDITIONAL RIGHT: The indemnity provided under Section 12.1 will
be in addition to, and not in lieu of, any other right of indemnification to
which such person may be entitled under the Company's Code of Regulations, as a
matter of law or otherwise, and will not exclude any other power that the
Company may have to defend and indemnify him.
13. MISCELLANEOUS
13.1 UNFUNDED PROGRAM: The Program shall be unfunded and the Company
shall not be required to segregate any assets that may at any time be
represented by Incentive Bonuses under the Program. Any liability of the Company
to any person with
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<PAGE> 24
respect to any Incentive Bonus under the Program shall be based solely upon any
contractual obligations that may be effected pursuant to the Program. No such
obligation of the Company shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of the Company.
13.2 COSTS OF PROGRAM: The costs and expenses of administering the
Program shall be borne by the Company or the Participating Subsidiary.
13.3 GOVERNING LAW: To the extent not preempted by federal law, the
Program and all agreements hereunder will be governed by and interpreted in
accordance with the laws of the State of Ohio.
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<PAGE> 1
EXHIBIT J
GENCORP INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
EARNINGS (Dollars in Millions)
Net Income for Primary Earnings Per Share........................ $137.4 $ 41.7 $ 38.3
Tax Affected Interest Expense Applicable to 8% Convertible
Subordinated Debentures........................................ 3.1 5.5 5.5
------ ------ ------
Net Income for Fully Diluted Earnings Per Share.................. $140.5 $ 47.2 $ 43.8
====== ====== ======
SHARES (In Thousands)
Weighted Average Number of Common Shares Outstanding for Primary
Earnings Per Share............................................. 37,807 33,672 32,814
Additional Shares Issuable Under Stock Options for Fully Diluted
Earnings Per Share............................................. 158 428 --
Additional Shares Due to Assuming the Conversion of the 8%
Convertible Subordinated Debentures Occurred at the Beginning
of the Year.................................................... 3,854 7,158 7,158
------ ------ ------
Weighted Average Number of Common Shares Outstanding for Fully
Diluted Earnings Per Share..................................... 41,819 41,258 39,972
====== ====== =======
EARNINGS PER SHARE
Primary Earnings Per Share....................................... $ 3.63 $ 1.24 $ 1.17
====== ====== =======
Fully Diluted Earnings Per Share................................. $ 3.36 $ 1.15 $ 1.10
====== ====== =======
</TABLE>
<PAGE> 1
EXHIBIT K
LISTING OF GENCORP INC. SUBSIDIARIES(1)
<TABLE>
<CAPTION>
STATE OR PERCENTAGE
JURISDICTION OF OF VOTING
INCORPORATION OWNERSHIP
--------------- ----------
<S> <C> <C>
Aerojet-General Corporation(2)..................................... Ohio 100.
Aerojet Ordnance Tennessee, Inc.................................... Tennessee 100.
Aerojet Services Co................................................ Ohio 100.
Chemical Construction Corporation.................................. Delaware 100.
Genco Insurance Limited............................................ Bermuda 100.
GenCorp Canada Inc................................................. Canada 100.
GenCorp Export Corporation......................................... Virgin Islands 100.
GenCorp Investment Management, Inc................................. Ohio 100.
GenCorp Overseas Inc............................................... Ohio 100.
GenCorp Polymer Products S.A.R.L................................... France 100.
General Applied Science Laboratories, Inc.......................... New York 100.
HENNIGES Elastomer- und Kunststofftechnik GmbH & Co. KG............ Germany 100.
Penn Europe GmbH................................................... Germany 100.
Penn International Inc............................................. Ohio 100.
Penn Nominal Holdings Inc.......................................... Ohio 100.
Penn Racquet Sports Co. (Ireland).................................. Ireland 100.
RKO General, Inc................................................... Delaware 100.
</TABLE>
- ---------------
(1) GenCorp Inc. conducts business using the names GenCorp, GenCorp Automotive
and GenCorp Polymer Products.
(2) Aerojet-General Corporation conducts business using the names Aerojet ASRM
Division, Aerojet Electronics Division and Aerojet Propulsion Division.
<PAGE> 1
EXHIBIT L
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
GenCorp Inc. hereby constitutes and appoints W. R. Phillips and E. R. Dye, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 1997 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 1998.
/s/ C. A. Corry
-------------------------------------
C. A. Corry, Director
Dated: January 30, 1998
-----------------------------------
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
GenCorp Inc. hereby constitutes and appoints W. R. Phillips and E. R. Dye, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 1997 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 1998.
/s/ W. K. Hall
-------------------------------------
W. K. Hall, Director
Dated: January 30, 1998
-----------------------------------
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
GenCorp Inc. hereby constitutes and appoints W. R. Phillips and E. R. Dye, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 1997 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 1998.
/s/ R. K. Jaedicke
-------------------------------------
R. K. Jaedicke, Director
Dated: January 30, 1998
-----------------------------------
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
GenCorp Inc. hereby constitutes and appoints W. R. Phillips and E. R. Dye, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 1997 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 1998.
/s/ P. X. Kelley
-------------------------------------
P. X. Kelley, Director
Dated: January 30, 1998
-----------------------------------
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
GenCorp Inc. hereby constitutes and appoints W. R. Phillips and E. R. Dye, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 1997 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 1998.
/s/ R. D. Kunisch
-------------------------------------
R. D. Kunisch, Director
Dated: January 30, 1998
-----------------------------------
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
GenCorp Inc. hereby constitutes and appoints W. R. Phillips and E. R. Dye, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 1997 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 1998.
/s/ D. E. McGarry
-------------------------------------
D. E. McGarry, Director
Dated: January 30, 1998
-----------------------------------
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
GenCorp Inc. hereby constitutes and appoints W. R. Phillips and E. R. Dye, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 1997 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 1998.
/s/ J. M. Osterhoff
-------------------------------------
J. M. Osterhoff, Director
Dated: January 30, 1998
-----------------------------------
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
GenCorp Inc. hereby constitutes and appoints W. R. Phillips and E. R. Dye, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 1997 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 1998.
/s/ S. W. Percy
-------------------------------------
S. W. Percy, Director
Dated: February 3, 1998
-------------------------------------
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
GenCorp Inc. hereby constitutes and appoints W. R. Phillips and E. R. Dye, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 1997 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 1998.
/s/ P. J. Phoenix
-------------------------------------
P. J. Phoenix, Director
Dated: January 30, 1998
-----------------------------------
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of
GenCorp Inc. hereby constitutes and appoints W. R. Phillips and E. R. Dye, and
each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 1997 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 1, 1998.
/s/ R. B. Pipes
-------------------------------------
R. B. Pipes, Director
Dated: January 30, 1998
-----------------------------------
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> NOV-30-1997
<CASH> 18,000
<SECURITIES> 0
<RECEIVABLES> 252,000
<ALLOWANCES> 0
<INVENTORY> 157,000
<CURRENT-ASSETS> 484,000
<PP&E> 1,121,000
<DEPRECIATION> 711,000
<TOTAL-ASSETS> 1,432,000
<CURRENT-LIABILITIES> 390,000
<BONDS> 0
0
0
<COMMON> 4,000
<OTHER-SE> 277,000
<TOTAL-LIABILITY-AND-EQUITY> 1,432,000
<SALES> 1,568,000
<TOTAL-REVENUES> 1,568,000
<CGS> 1,243,000
<TOTAL-COSTS> 1,446,000
<OTHER-EXPENSES> (12,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,000
<INCOME-PRETAX> 118,000
<INCOME-TAX> (19,000)
<INCOME-CONTINUING> 137,000
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<NET-INCOME> 137,000
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